Surdex Steel Pty Ltd v Buck
[1999] VSC 521
•2 December 1999
SUPREME COURT OF VICTORIA
PRACTICE COURT Do not Send for Reporting Not Restricted
No. 7672 of 1999
| SURDEX STEEL PTY. LTD. | Plaintiff |
| v. | |
| RAYMOND FRANCIS BUCK AND ANOTHER | Defendants |
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JUDGE: | BEACH, J. | |
WHERE HELD: | MELBOURNE | |
DATE OF HEARING: | 2 DECEMBER 1999 | |
DATE OF JUDGMENT: | 2 DECEMBER 1999 | |
CASE MAY BE CITED AS: | SURDEX STEEL PTY. LTD. v. BUCK & ANOR. | |
MEDIA NEUTRAL CITATION: | [1999] VSC 521 | |
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CATCHWORDS: Practice and procedure – Judgment entered in default of appearance – No acceptable explanation by defendant for delay in making application to set it aside – No arguable defence.
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APPEARANCES: | Counsel | Solicitors |
For the Plaintiff | M.J. Corrigan | White Cleland Pty. |
| For the Defendants | J. Paterson | George Schifter Johannson & Co. |
HIS HONOUR:
I have before me an application for leave to appeal from an order made by a Master of the County Court on 22 November 1999 whereby the Master ordered that the judgment entered against the defendants, Raymond Francis Buck and Janis Mary Buck, on 19 April 1999 be set aside. I should say the application for leave to appeal is only pursued by the plaintiff against the first-named defendant, Raymond Francis Buck.
The background to the application may be summarized as follows: The plaintiff Surdex Steel Pty Ltd is the supplier of steel products. In August of 1997 the first-named defendant filled out a credit application addressed to the plaintiff in respect of the supply by the plaintiff of steel products to a company called Fitworks Pty Ltd. The credit application signed by the first-named defendant describes the first-named defendant as a director of that company.
The material before me demonstrates that Fitworks was registered on 26 June 1989 but was deregistered on 2 September 1994. According to the historical company extract in relation to Fitworks, the directors of the company at that time were the defendants, Raymond Francis Buck and Janis Mary Buck.
At all events, having submitted the credit application to the plaintiff, between September 1998 and January 1999 the plaintiff supplied to the first-named defendant or Fitworks, steel products to a value of $112,987.28.
The defendant failed to make payment to the plaintiff in respect of that sum and on 24 February 1999 the plaintiff's solicitors wrote the following letter to the defendants demanding payment of the outstanding debt. The letter is addressed to Mr Raymond Buck and Mrs Janis Buck and reads:
"Dear Sir and Madam, Debt Surdex Steel Pty Ltd. We act for Surdex Steel Pty Ltd. We are instructed that in August 1997 you completed a credit application with our client in which you stated you were directors of a company, Fitworks Pty Ltd, which sought a credit facility from our client. Each of you personally guaranteed to our client payment of any debts unpaid by Fitworks Pty Ltd. Our client instructs us that there is currently an outstanding debt of $112,987.28. At one point you purported to pay $28,383.67 of this sum, however, that cheque was dishonoured. Our client instructed us to take action for the recovery of the debt. We conducted a search of Fitworks Pty Ltd and note from the records held by the Australian Securities and Investment Commission that the company was deregistered in September 1994, some three years prior to your application for credit with our client. We are advising our client in relation to this matter. In the meantime, we advise that unless payment of the full debt of $112,987.28 together with our legal costs of $170, being $113,157.28 is received by 12 noon Monday 1 March 1999, we will be issuing court proceedings against each of you personally for the outstanding debt without further delay or notice. Yours faithfully."
The plaintiff's solicitors received no response to the letter of demand and on 2 March 1999 a writ was filed on the plaintiff's behalf in the County Court at Melbourne naming as defendants Raymond Francis Buck and Janis Mary Buck, and seeking to recover the sum of $112,987.28.
The relevant paragraph in the plaintiff's statement of claim reads:
"The defendants are indebted to the plaintiff in the sum of $112,987.28 together with interest to same pursuant to statute for goods sold and delivered by the plaintiff to the defendants at the request of and on behalf of the defendants during the period September 1998 to January 1999."
The writ was served on each of the defendants personally on 1 April 1999. The defendants did not enter an appearance to the writ and on 19 April 1999 a default judgment in respect of the amount claimed by the plaintiff was entered against them.
By letter of 21 April 1999 the plaintiff's solicitors advised the defendants of the judgment details and requested that the defendants contact them within seven days to discuss repayment of the outstanding debt.
Before any response had been received by the plaintiff's solicitors, and on 26 April 1999 a representative of the plaintiff informed the plaintiff's solicitors that a further sum of $10,000 had been paid to the plaintiff on 5 March 1999 in respect of the debt. That same day the plaintiff's solicitors wrote a letter to the defendants informing them that the debt would now be reduced by the sum of $10,000.
On 29 April 1999 the plaintiff's solicitors received a letter on the letterhead of Fitworks Pty Ltd and signed by one Peter Adams who described himself in the letter as office manager. The letter reads:
"Dear Mr White, Surdex Steel Pty Ltd. I acknowledge a debt to Surdex Pty Ltd of 74,603.61 which we intend to repay as soon as possible. Would you please provide details of your claim that we owe $105,812.89. My reconciliation of the account is attached. Your early reply would be appreciated."
On 28 April the plaintiff's solicitors had issued out of the County Court a summons whereby they sought to have the judgment entered against the defendants on 19 April amended. On 11 May 1999 an order was made by His Honour Judge Lewis amending the original judgment to the sum of $74,603.61 together with interest of $1216.85 and costs of $988.
On 20 May 1999 the first defendant telephoned the plaintiff's solicitor and proposed to him that the debt outstanding be paid by instalments, an instalment of $20,000 that week and by further weekly instalments of $15,000 thereafter. The first defendant advised the plaintiff's solicitor that he had a big job worth some $300,000 which was very close to completion and that once it was completed, his cash flow would improve dramatically.
By letter of 25 May 1999 the plaintiff's solicitors wrote to the first-named defendant confirming that the plaintiff would be prepared to accept the repayment schedule he had proposed on the basis that the initial sum of $20,000 was paid by 28 May 1999 and the balance by weekly instalments of $15,000. The letter further stated that in the event of a default the plaintiff reserved its position to issue bankruptcy proceedings against each of the defendants.
No further payments were made by the defendants and on 4 June 1999 the plaintiff's solicitors sent a further letter to the first-named defendant advising him that as no instalments had been received pursuant to the repayment schedule the parties had agreed upon, the plaintiff would now proceed with bankruptcy proceedings against each of the defendants.
On 8 June 1999 an appropriate bankruptcy notice was prepared and issued at the Insolvency and Trustee Service Australia. That bankruptcy notice was personally served on each defendant on 22 June 1999. As the plaintiff's solicitors received no response to the bankruptcy notice, on 27 July 1999 a creditors petition was filed in the Federal Court against the defendants. The petition was served on the first-named defendant on 9 August and on the second-named defendant on 11 August.
The bankruptcy proceedings came before the Federal Court on 14 September 1999. At that time counsel appeared on behalf of the defendants and sought an adjournment of the proceeding to enable him to obtain instructions from his clients. The hearing was then adjourned to 7 October 1999. Because of the late filing of documents in that proceeding when the matter came before the court on 7 October it was necessary to seek a further adjournment of the petition and it was adjourned to 6 December 1999.
However, on 6 October 1999 the solicitors for the defendants filed a summons in the County Court whereby they sought that the default judgment entered on 19 April 1999 and amended on 11 May 1999 be set aside.
The summons came before His Honour Judge Lewis on 28 October 1999 and was adjourned to 8 November to allow the defendants to file further affidavit material. The matter came back before the County Court Master on 8 November, who then adjourned the hearing of the summons to 15 November.
However, before the Master proceeded to adjourn the summons on 8 November he asked counsel for the defendants whether the defendants were alleging that the judgment had been entered irregularly. The affidavit material before me is to the effect that counsel for the defendants informed the Master that he accepted the regularity of the judgment. At all events, the Master heard argument in relation to the matter on 15 November and again on 22 November and then made the order the subject of the application which is presently before me.
The first-named defendant's explanation for his failure to defend the proceeding in the first place is set out in the affidavit sworn by him on 6 October 1999, the relevant paragraphs of which read:
"6.The reason I did not take any steps to defend the action taken by the plaintiff is that I handed the writ to the office manager. I have not been able to locate either copy of the writ since that time.
7.During the months of March 1999, April 1999 and May 1999 I was busy working on a number of building sites out at Bendigo. I spent a great deal of time in Leeton, New South Wales. There were a number of large pressing construction projects that I was working on. Further, at around that time my father who had lived in Dubbo died suddenly. I was even unable to attend his funeral because of the great pressure of work commitments.
8.The principal reason for me not following up this matter is the pressure of work which resulted in my overlooking what action the office manager had taken on my behalf."
When the matter was debated before Master Patkin, much was made of the fact that the original credit application had been in the name of Fitworks Pty Ltd, a company which, of course, at the relevant period of time, no longer existed, it having been deregistered in 1994.
However, it is interesting to note the following paragraphs in further affidavits sworn by the first-named defendant in relation to the matter.
"1.I have dealt with the plaintiff for some time. Initially I paid COD for goods and then I was given 30 days credit. There has been no bank account of Fitworks Pty Ltd since about 1994. The only bank account since that time has been in my name solely."
In the affidavit sworn by him on 19 November 1999 the first-named defendant has stated:
"8.I believed that the credit application was for the supply of steel to the business operated by Fitworks Pty Ltd.
9.In relation to paragraph 8 of my 12 November affidavit my relationship with Union Steel was the same as that with the plaintiff. Having now received legal advice, the conclusion expressed by me is incorrect given the fact that Fitworks Pty Ltd was operating the business.
10.In relation to paragraph 10 of my 12 November affidavit I managed the steel fabrication business operated on behalf of Fitworks Pty Ltd.
11. I believed I was the sole office holder of Fitworks Pty Ltd.
12.In relation to paragraph 11 of my 12 November affidavit I have dealt with the plaintiff as one of the representatives of the steel fabrication business operated by Fitworks Pty Ltd who have ordered steel from the plaintiff."
I note that the Master took the view that having regard to the credit application that was signed by the first-named defendant on behalf of Fitworks that the pleading relied upon by the plaintiff was defective and that really what the plaintiff should have done in the first instance was to sue the defendants pursuant to the guarantee given by them which appears in the credit application itself. That may well be so, but the question arises, was that sufficient justification for setting aside the default judgment entered against the first-named defendant. Other considerations applied in the case of the second-named defendant and we are here not concerned with them.
In my opinion, the answer to the question posed is no, that the Master was in error in setting aside the default judgment. In the circumstances of the case, if the Master took the view that the plaintiff had not pleaded its case properly he should have immediately given the plaintiff leave to then and there amend its statement of claim and in my opinion, should then have dismissed the application to set the judgment aside. Further there is no evidence before me that satisfies me that the first defendant has any defence to the plaintiff's claim.
The explanation of the first-named defendant for his failure to defend the proceeding and for failing to take steps to set the judgment aside until such time as a bankruptcy petition was presented against him in the Federal Court is totally unacceptable and in my opinion, no basis for setting the judgment aside. Further there is no evidence before me that satisfies me that the first defendant has any defence to the plaintiff's claim.
Accordingly, I propose to grant the plaintiff leave to appeal from the order of the Master. The appeal is heard instanta and allowed and insofar as the Master ordered that the judgment entered against the first-named defendant be set aside, I order that that order be quashed.
As to paragraph 2, 4, 7, 8 and 9, those orders are also quashed. Insofar as order 3 is concerned I order that insofar as that order relates to the first-named defendant it also be quashed. I order that the first-named defendant pay the costs of the application for leave to appeal and the appeal to this court. I grant to the first-named defendant a certificate pursuant to the Appeal Costs Act in respect of his costs of the appeal and the costs of the appeal he is required to pay the plaintiff.
(Discussion ensued.)
HIS HONOUR: I will leave paragraph 2 of the Master's order stand. I have set aside 3 insofar as it relates to the first defendant. I have set aside 4, 5. I have let 6 stand.
(Discussion ensued.)
HIS HONOUR: I further order that the first-named defendant pay the plaintiff's costs of the application to the Master to set aside the judgment. I have set aside 7, 8, 9. 10 remains. I direct that this order be prepared by the solicitors for the plaintiff and brought to me for authentication.
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