STELLEC Pty Ltd v Carnegie Capital Pty Ltd
[2004] WASCA 268
•18 NOVEMBER 2004
STELLEC PTY LTD & ORS -v- CARNEGIE CAPITAL PTY LTD [2004] WASCA 268
| SUPREME COURT OF WESTERN AUSTRALIA | Citation No: | [2004] WASCA 268 | |
| THE FULL COURT (WA) | |||
| Case No: | FUL:60/2004 | 15 SEPTEMBER 2004 | |
| Coram: | MCLURE J SIMMONDS J | 18/11/04 | |
| 11 | Judgment Part: | 1 of 1 | |
| Result: | Leave to appeal granted Appeal upheld | ||
| B | |||
| PDF Version |
| Parties: | STELLEC PTY LTD (ACN 068 359 188) CLAYTON RAMSAY TRACY RAMSAY CARNEGIE CAPITAL PTY LTD (ACN 079 552 051) |
Catchwords: | Practice and procedure Failure to file defence Application for an extension of time to file defence Application to set aside judgment in default of defence Turns on own facts |
Legislation: | Supreme Court Rules, O 22 r 7(1A) Trade Practices Act 1974 (Cth), s 52, s 75B |
Case References: | Yorke v Lucas (1985) 158 CLR 661 Australian Coal and Shale Employees' Federation v Commonwealth (1953) 94 CLR 621 Carr v Finance Corporation of Australia Ltd (1981) 147 CLR 246 Evans v Bartlam [1937] AC 473 Jacob v Booth's Distillery Co (1901) 85 LT 262 Johnson Tiles Pty Ltd v Esso Australia Ltd [2000] FCA 1572 Parker v Transfield Pty Ltd v Anor [2000] WASCA 382 Rolland & Anor v Bank of Western Australia Ltd, unreported; FCt SCt of WA; Library No 980498A; 3 September 1998 Termijtelen v Van Arkel [1974] 1 NSWLR 525 Webster v Lampard (1993) 177 CLR 598 Western Australia v Bond Corporation Holdings Ltd (1991) 5 WAR 40 Wilson v Metaxas [1989] WAR 285 |
JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA TITLE OF COURT : THE FULL COURT (WA) CITATION : STELLEC PTY LTD & ORS -v- CARNEGIE CAPITAL PTY LTD [2004] WASCA 268 CORAM : MCLURE J
- SIMMONDS J
- First Applicant (Second Defendant)
CLAYTON RAMSAY
TRACY RAMSAY
Second Applicants (Third Defendants)
AND
CARNEGIE CAPITAL PTY LTD (ACN 079 552 051)
Respondent (Plaintiff)
ON APPEAL FROM:
Jurisdiction : SUPREME COURT OF WESTERN AUSTRALIA
Coram : MASTER SANDERSON
Citation : CARNEGIE CAPITAL PTY LTD -v- INTERSTYLE BUILDING PTY LTD & ORS [2004] WASC 65
File No : CIV 1943 of 2001
(Page 2)
Catchwords:
Practice and procedure - Failure to file defence - Application for an extension of time to file defence - Application to set aside judgment in default of defence - Turns on own facts
Legislation:
Supreme Court Rules, O 22 r 7(1A)
Trade Practices Act 1974 (Cth), s 52, s 75B
Result:
Leave to appeal granted
Appeal upheld
Category: B
Representation:
Counsel:
First Applicant (Second Defendant) : Mr M J Hawkins
Second Applicants (Third Defendants) : Mr M J Hawkins
Respondent (Plaintiff) : Mr M L Bennett
Solicitors:
First Applicant (Second Defendant) : Hammond Worthington
Second Applicants (Third Defendants) : Hammond Worthington
Respondent (Plaintiff) : Bennett & Co
Case(s) referred to in judgment(s):
Yorke v Lucas (1985) 158 CLR 661
(Page 3)
Case(s) also cited:
Australian Coal and Shale Employees' Federation v Commonwealth (1953) 94 CLR 621
Carr v Finance Corporation of Australia Ltd (1981) 147 CLR 246
Evans v Bartlam [1937] AC 473
Jacob v Booth's Distillery Co (1901) 85 LT 262
Johnson Tiles Pty Ltd v Esso Australia Ltd [2000] FCA 1572
Parker v Transfield Pty Ltd v Anor [2000] WASCA 382
Rolland & Anor v Bank of Western Australia Ltd, unreported; FCt SCt of WA; Library No 980498A; 3 September 1998
Termijtelen v Van Arkel [1974] 1 NSWLR 525
Webster v Lampard (1993) 177 CLR 598
Western Australia v Bond Corporation Holdings Ltd (1991) 5 WAR 40
Wilson v Metaxas [1989] WAR 285
(Page 4)
1 MCLURE J: The applicants apply for leave to appeal from orders made by Master Sanderson on 7 April 2004 dismissing the first applicant's application for an extension of time within which to file a defence, granting the respondent's application for judgment against the first applicant and refusing the second applicants' application to set aside judgment in default of defence.
2 The background is as follows. In 2001 the respondent (plaintiff) commenced this action against Interstyle Building Pty Ltd ("Interstyle") for breach of a building contract. Interstyle agreed to construct a building on the plaintiff's land at Eagle Bay.
3 The first applicant (Stellec Pty Ltd) and the second applicants were joined as second and third defendants respectively in September 2003. The first-named second applicant, Clayton Ramsay, was at all material times a director and shareholder of Interstyle. The second-named second applicant, named as Tracy Ramsay, but whose surname is Eldridge, was at all material times the secretary of Interstyle. Mr Ramsay and Ms Eldridge were at all material times directors and shareholders of the second defendant. From August 2000, the second defendant was the registered owner of land in Windlemere Estate in Dunsborough ("Dunsborough land").
4 At the time of the joinder of the second and third defendants, the plaintiff was given leave to amend its statement of claim. Interstyle was given leave to amend its defence by 23 October 2003.
5 The second and third defendants entered an appearance in the action on 9 October 2003. They were required by the Supreme Court Rules to serve their defence by 24 October 2003. They did not do so.
6 On 8 October 2003 the defendants' solicitors wrote to the plaintiff's solicitors requesting an extension of time for Interstyle to file an amended defence. The letter makes no reference to the second and third defendants, no doubt because they had not yet been served or entered an appearance. The plaintiff's solicitors refused to agree to an extension.
7 The plaintiff's solicitors, without notice to the defendants' solicitors, entered judgment in default of defence against the third defendants on 5 November 2003. As the plaintiff's claim against the second defendant was not for a liquidated sum, the plaintiff applied for leave to enter judgment. By the first return date of that application, the second defendant had filed a defence.
(Page 5)
8 The plaintiff's application for leave to enter judgment against the second defendant, the second defendant's application for an extension of time within which to file a defence and the third defendants' application to set aside default judgment were before the Master. He was not satisfied that the second and third defendants had a defence to the plaintiff's claim and concluded that their solicitors had failed to adequately explain the delay in filing the defences. The applications of the second and third defendants were dismissed and the Master declared that judgment be entered against the second defendant, that the plaintiff hold an equitable charge on the Dunsborough land and that the plaintiff apply for an order for the taking of an account by the second defendant of the costs incurred by it in the construction of any buildings on the Dunsborough land.
9 By any measure, the amendments to the statement of claim approved by the Court in September 2003 were very extensive. What had for two years been a document of around 14 paragraphs of less than 12 pages became a document of some 161 paragraphs and 69 pages. The nature and scope of the plaintiff's claim against Interstyle was very greatly enlarged and overlapped, in part, with the claims made against the second and third defendants. The original and amended claim relates to an oral cost plus building contract ("oral building contract") made in March 2000 and performed until replaced by a written cost plus contract dated 19 June 2001 ("written building contract") which was terminated by agreement in writing between the plaintiff and the first defendant some 10 days later on 29 June 2001 ("termination agreement"). The original claim was confined to an alleged breach of the termination agreement by Interstyle failing to deliver to the plaintiff all documents in its possession relating to the written building contract and breach of that contract by failing to construct the building in a workmanlike manner.
10 The amendments plead breaches of implied terms of the oral and written building contracts concerning the maintenance and retention of records and their provision to the plaintiff. The plaintiff complains of Interstyle's failure to supply invoices from Interstyle's subcontractors for the full costs charged by Interstyle to the plaintiff. The plaintiff also pleads numerous breaches of s 52 of the Trade Practices Act 1974 (Cth) in respect of representations allegedly contained in all or some of the invoices from Interstyle to the plaintiff, as well as claims in negligence and fraud. The claims are factually detailed and extend to the inclusion of the GST component of invoices from subcontractors.
11 The claims against the second and third defendants are a subset of the wider claims made against Interstyle. The pleaded claim against the
(Page 6)
- second defendant is that it received goods and services paid for by the plaintiff in the construction of a building on the Dunsborough land. The value of the claim is around $8000, plus the value of a brickwork claim. In the brickwork claim the plaintiff alleges that Interstyle invoiced the plaintiff for:
(a) 71,091 bricks at a cost of $40,845.86 for a total area exceeding 2952 square metres;
(b) $75,222.50 for bricklaying; and
(c) $100,431.96 for concrete and formwork.
(a) approximately 1997 square metres of bricks were used, at an estimated cost of $28,000;
(b) the cost of bricklaying was only in the order of between $40,000 and $50,000; and
(c) only 231 cubic metres of concrete at an approximate cost of $54,000 was used.
13 There is also an alternative claim in negligence. The second defendant is alleged to be the beneficiary of Interstyle's breach in that the cost of bricks and related materials and services charged to the plaintiff were used in construction work on the Dunsborough land. As to the second defendant's alleged knowledge of Interstyle's conduct, the plaintiff relies on their common officeholders, namely, the third defendants. The plaintiff claims against the second defendant for a constructive trust, alternatively, for unjust enrichment. There is no specifically pleaded claim for an account.
14 The claim against the third defendants is confined to the bricks and brickwork. The pleading is short. It states:
"160 By reason of the matters and referred to in paragraphs 4 and 146, the Third Defendants were and each of them
(Page 7)
- was knowingly involved in the making of each of the representations referred to in paragraph 146 hereof.
- 161 Pursuant to section 75B of the Trade Practices Act the Third Defendants are jointly liable with the First Defendant for the loss and damage referred to paragraphs 152 or alternatively 153 hereof."
15 Paragraph 4 pleads that the third defendants were at all material times a director and secretary of the first defendant. Paragraph 146 is the plea of the representation relating to the bricks, bricklaying and concrete referred to above. Paragraphs 152 and 153 is the claim for loss and damage arising from that representation.
16 The pleading is defective in that it does not disclose a reasonable cause of action against the third defendants. It is alleged they were knowingly concerned in the making of the representations. However, a person will only be regarded as involved in a contravention sufficiently to invoke s 75B if the person intentionally participated in the contravention. Intentional participation requires knowledge of the essential matters that make up the contravention: Yorke v Lucas (1985) 158 CLR 661. In particular, the plaintiff must plead and prove that each of the third defendants had knowledge of the falsity of the representations and an intention to mislead or deceive. The person who makes the representation is liable without proof of knowledge or intention to mislead or deceive.
17 Each of the third defendants and the defendants' solicitor, Carol Bahemia, swore affidavits in support of the defendants' applications, the latter on the issue of delay. Mr Ramsay's evidence was to the effect that he and Interstyle had worked with Mr Glenn Wheeler, a director of the plaintiff, previously and had developed a close personal and working relationship over some years. He said Mr Wheeler had said to him words to the effect of "why don't you start to build on your block in Dunsborough and put your fee into the construction of that house?" to which Mr Ramsay agreed; that Mr Wheeler told him at the early stages of the construction of the Eagle Bay works that Mr Wheeler wanted the builder's fee to be absorbed as the works were progressing; and pursuant to the arrangements with Mr Wheeler, he put some invoices for costs he was incurring in the building at Dunsborough through invoices to the plaintiff for cost of the construction of the Eagle Bay works and submitted them to the plaintiff for payment instead of rendering a tax invoice for the builder's fee. According to Mr Ramsay, this arrangement applied in relation to identified parts of the bricklaying, concrete and formwork. The
(Page 8)
- effect of Mr Ramsay's evidence is that, by arrangement with Mr Wheeler, the invoices which were not referrable to costs incurred under the building contract were in partial satisfaction or reduction of the building fee payable by the plaintiff.
18 Mr Wheeler denied the alleged arrangement and produced a provisional opinion reached by quantity surveyors concerning the brickwork. Mr Ramsay notes in a supplementary affidavit that it is not apparent from the report what documents were relied on by the quantity surveyor in estimating the amount of materials involved in the brickwork and that there were significant variations to the original plans which increased the quantity of bricks, concrete and formwork used in the Eagle Bay works. Mr Wheeler queried the genuineness of invoices from contractors involved in the bricklaying and concreting. Affidavits from the contractors attest to their genuineness.
19 Ms Eldridge's evidence was that she was involved in the administrative aspects of the building contract. In the absence of a contract in writing, she acted on instructions from her husband, Mr Ramsay, which, on her evidence, followed his discussions with Mr Wheeler. The basis and timing of Interstyle's charges to the plaintiff changed over time. Her task was to obtain and receive payment for the Eagle Bay works on the basis that Mr Ramsay told her to co-ordinate the payment of the subcontractors' invoices. Her evidence was that she did not know that invoices rendered against the Eagle Bay works included amounts incurred in building works on the Dunsborough land until she was told at the end of June 2001, following which she did a reconciliation and credited the amounts as the builder's fee. Having regard to the respective roles of Mr Ramsay and Ms Eldridge, different challenges arise in proving the claims against each of them of intentional misleading and deceptive conduct based on representations in the invoices.
20 If Mr Ramsay's evidence of his arrangement with Mr Wheeler is accepted, all of the defendants would have a good defence to (at least) the overlapping claims. The Master described the arrangement as very curious. He noted that Mr Ramsay had not offered an explanation as to why he agreed to it and Mr Wheeler denied the arrangement. On that basis the Master concluded he could not be satisfied that the defence filed by the second defendant disclosed a defence to the plaintiff's claim.
21 As to the third defendants, the Master noted that Interstyle was continuing to defend all of the claims made against it, including the
(Page 9)
- overlapping claims, and that suggested to him the default judgment against the third defendants ought to be set aside. However, he continued:
"On the other hand, it is very difficult to see how, if the first defendant is liable under the Trade Practices Act to the plaintiff, the second defendants can avoid liability … But as the company acts through them, it would seem to follow that they must be liable if the first defendant is liable."
"If it were found that the plaintiff could not make out a case under the Trade Practices Act against the first defendant, then the judgment against the third defendants would be of no consequence."
23 I am satisfied that the Master erred in dismissing the second and third defendants' applications for the following reasons. Firstly, there is a conflict of evidence on affidavits as to facts which will affect the outcome of the overlapping claims. The allegations made against the second and third defendants are of serious misconduct. Conventional principles militate against the Court determining credibility issues in interlocutory matters conducted on affidavit evidence without good cause such as, for example, inconsistent contemporaneous documents or undisputed facts which undermine the credibility of the defence. I accept that there is material before the Court which suggests there may be potentially fruitful lines of cross-examination. However, it does not justify rejection at an interlocutory stage of the defendants' evidence in general or so much of it as relates to the narrower claims against the second and third defendants. The Master's failure to identify any benefit or purpose for what he described as a curious arrangement is insufficient cause, in circumstances where the broader context also has unusual features, including an oral building contract, a written building contract which is terminated shortly thereafter and a close personal and working relationship with a director of the plaintiff. Secondly, Interstyle is defending the overlapping claims which gives rise to the possibility of inconsistent judgments. Thirdly, for the reasons I have given, it is incorrect to say that the third defendants must be liable as (in effect) an accessory to a trade practices breach if the principal (Interstyle) is liable. Further, it is incorrect that a party against whom judgment is entered suffers no prejudice if a stay is ordered
(Page 10)
- pending the determination of the claim against the principal, particularly when the material facts of the claims are not identical and serious allegations are made.
24 The Master also concluded that the applicants had not provided an adequate explanation for the failure to file their defences within the prescribed time. That conclusion is not supported by the material before this Court. The plaintiff's case against Interstyle was significantly transformed in nature and scope by the September 2003 amendments. Having regard to the very significant factual detail the subject of the plaintiff's amendments, an extended period was necessary to allow Interstyle to provide a comprehensive and detailed response in its amended defence. The document which it filed is at a level of generality consistent with insufficient time for the task. The second and third defendants' position had to be considered and understood in the context of all of the claims against Interstyle. Further, although there is a considerable factual overlap, the legal position of the second and third defendants does not correspond in all material respects with that of Interstyle. In any event, the delay was insignificant in the context of the history of the action.
25 I am satisfied that the Master erred in the exercise of his discretion in dismissing the second defendant's application for an extension of time within which to file a defence and the third defendants' application to set aside judgment. To have judgment entered against a defendant is a serious matter and I am satisfied on the facts of this case that the applicants would suffer substantial injustice if the decisions are not reversed.
26 A number of matters remain for comment. Firstly, the applicants sought leave to tender further affidavits in support of their application for leave. The information in the affidavits does not materially assist the applicants or advance the interests of justice and I would refuse leave.
27 Secondly, the second defendant claimed the Master erred in entering judgment against it because it had filed a defence before the hearing and the applicants did not, and could not, produce a certificate under O 22 r 7(1A) of the Rules. This submission received little attention from the parties and in the circumstances it is unnecessary to rule on it.
28 Thirdly, the second defendant does not in its draft notice of appeal seek to set aside the order requiring it to account to the plaintiff in relation
(Page 11)
- to the cost of works carried out on the Dunsborough land. Counsel at the hearing did not resile from that position.
29 I would grant the applicants leave to appeal, allow the appeal, set aside the orders made by the Master on 7 April 2004, save for orders 3 and 4 and in lieu thereof order that:
(1) the respondent's (plaintiff's) application for judgment against the first applicant (second defendant) be dismissed;
(2) the first applicant (second defendant) have leave to file and serve a defence in the action;
(3) the judgment against the second applicants (third defendants) in the action be set aside;
(4) the second applicants (third defendants) have leave to file and serve a defence and any counterclaim within 14 days of the date of this order.
30 SIMMONDS J: I have had the advantage of reading the draft judgment of McLure J, and would, for the reasons her Honour gives, join in making the orders she proposes.
12
2