Thomas v Kendon

Case •

[2012] QDC 95

•

11 May 2012

DISTRICT COURT OF QUEENSLAND

CITATION:

Thomas & Anor v Kendon & Ors [2012] QDC 95

PARTIES:

KELLIE RENEE THOMAS
(plaintiff)

and

TIMOTHY PEARCE
(second plaintiff)

v

MICHAEL GRANT KENDON
(defendant)

and

TRADING POWER PTY LTD ACN 124 688 955
(second defendant)

and

MMTL PTY LTD ACN 113 855 299
(third defendant)

FILE NO/S:

535/11

PROCEEDING:

Application

ORIGINATING COURT:

District Court, Southport

DELIVERED ON:

11 May 2012

DELIVERED AT:

Southport

HEARING DATE:

16 April 2012

JUDGE:

Newton DCJ

ORDER:

1.          The judgment entered 4 January 2012 against the first and second and third defendants in the absence of the filing of a Notice of Intention to Defend be set aside;

2.          The first and second and third defendants to file and service a Notice of Intention to Defend within 14 days of the judgment identified in number 1 above being set aside; and

3.          The plaintiffs pay the costs of the defendants of and incidental to the application.

COUNSEL:

C. Garlick, for the first and second plaintiffs

D. Keane, for the first, second and third defendants

SOLICITORS:

Aitken & Wilson Lawyers for the first, second and third defendants

  1. This is an application to set aside the plaintiff’s default judgment obtained on 4 January 2012 pursuant to Rule 290 of the Uniform Civil Procedure Rules 1999 (Qld). The defendants apply to set aside the default judgment on three bases:

1.          that the default judgment was irregular;

2.          there was an agreement that the judgment be set aside by consent from which the plaintiffs have resiled; and

3.          there is a prima facie defence to the claim on the merits and the Court should set aside the judgment.

  1. The first defendant, Mr Kendon, is the sole director and shareholder of the second and third defendants.  He resides at Port Macquarie, New South Wales.  The registered offices of both the second and third defendants are also located in Port Macquarie, New South Wales.

  1. The plaintiffs claim that they gave money to the defendants based on promises that the money would be invested and available for return upon request.  It is alleged that Mr Kendon has ignored the plaintiffs’ requests for over a year to return the money.  Proceedings were filed in this Court on 28 November 2011.  The sealed Claims and Statements of Claim were forwarded to a process server in Port Macquarie who served them upon -

1.          the first defendant – personally at his place of employment;

2.          the second defendant – at its registered office which is also the residence of the first defendant;

3.          the third defendant – at its registered office which is also the residence of the first defendant.

  1. The plaintiffs assert that they were entitled to seek default judgment on 4 January 2012 as none of the defendants had filed a Notice of Intention to Defence, or Defence or otherwise sought to challenge the jurisdiction of the proceeding.

  1. The defendants contend that, as Mr Kendon does not reside within the State of Queensland, for service to be effective the plaintiffs must comply with the provisions of the Service and Execution of Process Act 1992 (Cth) (SEPA).  The defendants submit that service of the Claim pursuant to the SEPA was defective in that the Form 1 SEPA Notice had not been complete as required.

  1. Form 1 of the SEPA comprises a Notice to a Defendant where service of a process outside the State or Territory of issue is authorised by the SEPA.  It sets out the rights of a defendant and gives directions with respect to contesting the claim.  The Form 1 is required to be attached to the Claim and is in the following terms:

“Form 1
(Section 16)
Service and Execution of Process Act 1992

Notice to defendant1

Please read this notice and the attached document very carefully If you have any trouble understanding them you should get legal advice as soon as possible Attached to this notice is a [name of process] ("the attached process") issued out of the [issuing court]
Service of the attached process outside [State or Territory of issue]
is authorised by the Service and Execution of Process Act 1992.
Your rights
If a court of a State or Territory other than [State or Territory of issue] is the appropriate court to determine the claim against you set out in the attached process, you may be able to:
2have the proceeding stayed by applying to the [issuing court].
3apply to the Supreme Court in [State or Territory of issue] to have the proceeding transferred to another Supreme Court, or another superior court.
If you think the proceeding should be stayed or transferred you should get legal advice as soon as possible.
Contesting this claim
If you want to contest this claim, you must take any action set out in the attached process as being necessary to contest the claim.
4If you want to contest this claim, you must also file an appearance5 in the[issuing court]. You have only 216 days after receiving the attached process to do so.
The appearance5 must contain 7an address in Australia where documents can be left for you or sent to you.
8your address.
______________

1If the person to be served is not described in the process as a "defendant" substitute the correct description.
2Omit if the court of issue is a Supreme Court.
3Omit if court of issue is not a Supreme Court.
4If the defendant need not enter an appearance (as defined in section 14 of the Act) in order to contest the claim, omit this paragraph and the remainder of the form.
5If the document that must be filed is not called an appearance, substitute the correct name.
6If the issuing court has allowed a shorter period than 21 days for filing an appearance, substitute that shorter period and disregard the next paragraph.
If the law of the State or Territory of issue would allow a longer period than 21 days for filing an appearance in the case of service within the State or Territory, substitute that longer period. If that law would allow different periods for service within the State or Territory, depending on the place of service, and at least one of those periods would be longer than 21 days, substitute the longest of those periods.
NB: This note is a summary, for guidance only, of subsections 17 (1) and (1A) of the Act. The applicable period under those provisions must be stated.
7Omit if appearance is not required to set out an address for service.
8Omit if appearance is required to set out an address for service.”

  1. The plaintiffs contend that the Form 1 attached to the separate processes was in the prescribed form and was printed from the Commonwealth Government website.   Complaints by the defendants that there was a failure to insert the name of the process, the issuing Court and the State of issue cannot be sustained, the plaintiffs submit, for it is unequivocal that the reader is required to read both the Form 1 Notice, together with the attached documents, very carefully.

  1. This, in my view, rather misses the point because the defendants’ main complaint relates to the confusion as to the specified time limit in which the claim may be contested.  In the affidavit of Robert Cook Aitken, filed 29 February 2012, it is stated that:

“5b At the time he [Mr Kendon] was served with the proceedings, he had been involved in other court proceedings that were occupying most of his time.  He had intended to take steps to protect the defendants’ interests but the time quickly expired.  After reading the SEPA notice, he believed that he only had 21 days to respond to the Claim and Statement of Claim…”

This was confirmed in paragraph 3(k) and (l) of the affidavit of Michael Grant Kendon, filed by leave on 16 April 2012:

(k) ‘…the documents served were incomplete and confusing which led to me missing the deadline for lodging an appropriate defence to the claim.
(l) In addition I am involved in other litigation that is taking much of my time and focus, which has resulted in me not being able to meet the deadline for addressing the Plaintiffs’ claim’”

  1. The SEPA notice cannot be effective unless it is completed in accordance with the requirements of the Act.  In this case the advising of an incorrect period within which to file a defence was liable to confuse the defendants.  The evidence of Mr Kendon indicates that he was confused in this regard.  Confusion could easily have been avoided had the Form 1 been completed in an appropriate fashion rather than simply being downloaded from a website and attached to the processes with no attempt whatsoever being made to fill in the necessary fields.

  1. In Re Marlan Financial Services Pty Ltd v New England Agricultural Traders Pty Ltd (1999) 33 ACSR 259 at [11] Byrne J stated:

“There still remains the question of the non-compliance with the notice requirements of the Service and Execution of Process Act.  At common law service may not be effected outside the jurisdiction of this Court.  The right to service in New South Wales, therefore, must depend upon statute.  If the service does not comply with the requirement of that statute it cannot be said to be effective unless the recipient accepts it as such…  the notices required by the Service and Execution of Process Act contain information which a respondent is entitled to know.  The failure to attach these notices, therefore, means that service is not in accordance with the statutory mandate.”

  1. In my respectful opinion these comments apply equally to the failure to complete the fields in the Form 1 notice of the SEPA.  This must be done to attract the statutory power to derive jurisdiction of service outside the State of Queensland.  In my view the purported interstate service was defective and, accordingly, the default judgement is irregular.

  1. In reaching this conclusion I do not overlook the provisions of section 25(c) of the Acts Interpretation Act 1901 (Cth) which states that where an Act prescribes a form, then strict compliance with the form is not required and substantial compliance is sufficient. The difficulty for the plaintiffs is that, apart from attaching a downloaded copy of the Form 1 to the processes, there has been no compliance at all to complete the relevant fields within the form. There has not been substantial compliance in these circumstances.

  1. The defect complained of in this case was, in my view, objectively capable of misleading the defendants as to what was necessary for compliance with the notice.  There was clearly room for misunderstanding and a substantial injustice has been caused by that irregularity (See Ashdown v Kirk [1999] FCA 1263 per Dowsett J).

  1. Quite apart from the defective interstate service, the Claim and Statement of Claim are also defective.  The Claim purports to be a claim for a debt.  However, the Statement of Claim is based upon the plaintiffs investing money in the second and third defendants as managed investment funds.  As such the claim is not one for a debt but rather a claim for an account from a trustee.  Nor, in its present form, is the claim in respect of damages for breach of statutory duty notwithstanding reference to various provisions of the Corporations Act 2001, the Trade Practices Act 1974 and the Fair Trading Act 1989.

  1. I accept that the default judgment cannot stand as the Statement of Claim upon which it is based is defective.  The default judgment is, on this basis, irregular and should be set aside.

  1. Furthermore, the defendants have a prima facie defence to the action.  Mr Kendon states in his Affidavit filed by leave on 16 April 2012 at p.8 that he denies that the defendants owe any funds to the plaintiffs and that the plaintiffs have any monies invested with the second defendant.  A proposed Defence is annexed to his Affidavit.  Even were the default judgment regularly entered, the defendants should not be denied an opportunity of defending the claim where they have a good ground of defence.

  1. I am satisfied that there has been no significant delay in bringing the Application to Set Aside the Default Judgment.  It will be recalled that the plaintiffs filed for default judgment on 4 January 2012 and the defendants filed their Application to Set Aside the Default Judgment on 27 February 2012.  The defendants have explained why the Defence was not entered within the relevant time limit.  There is no irreparable prejudice likely to be suffered by the plaintiffs by having the default judgment set aside.

  1. The Order setting aside the default judgment would do no more than to reflect an agreement between the legal representatives of the respective parties to do precisely that.  On 2 March 2012 Mr Garlick, on behalf of the plaintiffs and Mr Aitken, the solicitor for the defendants, discussed setting aside the default judgment.  On that date Mr Garlick sent an email to Mr Aitken stating as follows:

“I am instructed that my clients shall agree to set aside the judgment in the proceedings premised on the defective Form 1 Notice pursuant to service.  My client shall amend the Claim and Statement of Claim in the proceedings and shall reissue the proceedings.  The Defendant [sic] agrees to costs in the cause.  Please provide a Consent Order for execution by me.”

  1. The proposed consent order forwarded to Mr Garlick in response to his request contained two orders, viz:

“1.        Judgment entered against the First, Second and Third

Defendants entered 4 January 2012 be set aside.

2.The costs of the application be the defendants’ costs in the

proceedings.”

  1. On 6 March 2012 Mr Garlick advised Mr Aitken by email, the consent order not having been executed by the plaintiffs, that he was now instructed “to defend any application you bring to set aside my clients’ judgment”.

  1. It is not necessary, in the circumstances, to determine whether the plaintiffs should be required to uphold the terms of the agreed consent order.  The orders I propose to make will reflect in any event the draft prepared by the solicitor for the defendants at the request of Mr Garlick (except in relation to costs).

  1. I make the following orders:

(1)        the judgment entered 4 January 2012 against the first and second and third defendants in the absence of the filing of a Notice of Intention to Defend be set aside;

(2)        the first and second and third defendants to file and service a Notice of Intention to Defend within 14 days of the judgment identified in number 1 above being set aside; and

(3)        the plaintiffs pay the costs of the defendants of and incidental to the application.

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