Tomlinex P/L v Candoura P/L

[1992] FCA 640

Re: TOMLINEX PTY LIMITED
And: CANDOURA PTY LIMITED and ORS.
No. SG72 of 1989
FED No. 640
Practice and Procedure

COURT

IN THE FEDERAL COURT OF AUSTRALIA

SOUTH AUSTRALIAN DISTRICT REGISTRY
GENERAL DIVISION
O'Loughlin J.(1)

CATCHWORDS

Practice and Procedure - application to set aside judgment after judgment entered - was judgment regularly or irregularly obtained - five respondents - whether all respondents should be treated alike.

HEARING

ADELAIDE

#DATE 27:8:1992

Counsel for the Applicants: Dr R.J. Baxter on 31.7.92
on the Notice of Motion Mr N.J.T. Swan on 18.8.92 and

27.8.92

Solicitors for the Applicants: Finlaysons
on the Notice of Motion

Counsel for the Respondents: Peter Scragg
on the Notice of Motion

Solicitors for the Respondents: Mr R.W. Evans
on the Notice of Motion

ORDER

The Court orders that:

1. The application by Candoura Pty. Limited and Bullock Mountain Mining Pty. Limited to set aside the judgment and orders of this court pronounced on 5 March 1992 is dismissed.

2. The judgment and orders of this court pronounced on 5 March 1992 against John Clive Collins, Iris May Collins and Margaret Irene Howell are set aside.

3. Candoura Pty. Limited and Bullock Mining Pty. Limited pay to Tomlinex Pty. Limited its costs of and incidental to this motion and this order to be taxed in default of agreement.

4. The costs incurred by John Clive Collins, Iris May Collins and Margaret Irene Howell be costs in the cause.

Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.

JUDGE1

In these proceedings the applicant, Tomlinex Pty Limited, claimed damages from the respondents, alleging that it was induced to enter into certain contractual commitments by reason of the false or misleading statements of the respondents. It was said that those statements had been made by the respondents agent, the third respondent, John Clive Collins. The respondents filed a common defence, the effect of which was to deny the making of any relevant representations.

1. The matter proceeded very slowly. The application in the matter was filed as long ago as 7 June 1989, and it was 12 months later before the defence was filed. The matter continued at about the same pace, until a directions hearing on 27 November 1991. On that date the applicant and all respondents were represented by their solicitors at a directions hearing before von Doussa J., and the matter was adjourned over for a further directions hearing on 3 February 1992. However, on that date the solicitors who had previously acted for the respondents filed a notice that they were no longer acting; the respondents were not otherwise represented or present at that directions hearing.

2. On 7 February 1992 von Doussa J. ordered that the trial of the action take place on affidavit evidence. The matter was listed for trial to commence on 5 March, and the applicant was directed to serve the orders made that day upon each of the respondents by prepaid post. When the case was called on for hearing, there was no appearance of any of the respondents, and so on 5 March the trial proceeded in their absence, concluding with von Doussa J. entering judgment for the applicant against all respondents in the sum of $400,940 plus costs.

3. The order of von Doussa J. of 7 February 1992, so far as it is material to the matter which I must consider, was in these terms:
   

"3. Copies of this order be served on each of the

respondents by prepaid post despatched within 7 days,

addressed in the case of the first and second respondents, to their registered offices, in the case of the third and fourth respondents, to Blue Hills Road, Glen Innes, New

South Wales, and in the case of the fifth respondent, to 2 Inverness Road, Riverstone, New South Wales."

1. The first and second respondents are Candoura Pty Limited and Bullock Mounting Mining Pty Limited. The third and fourth respondent are husband and wife, John Clive Collins and Iris May Collins. The fifth respondent, Margaret Irene Howell, is the daughter of Mr and Mrs Collins.

2. The evidence of Lee Tory, a clerk employed by Mr Peter Scragg, the solicitor for the applicants, has satisfied me that within the time stipulated by the order of von Doussa J. she despatched copies of the order of the court to the first and second respondents in envelopes addressed to them at their registered office. Her affidavit of 16 July 1992 exhibits company searches showing that in each case the registered office of each corporate respondent was care of a firm of accountants, Cameron, Kirk, Rose and Partners, 305 Grey Street, Glen Innes, New South Wales 2370. I accept that those envelopes carried on the outer portion of them an endorsement for return to Mr Scragg's office at 224 Grote Street, Adelaide, in the event of the same being unclaimed.

3. I further accept the evidence of Ms Tory that she also posted copies of the order of the court in similar envelopes to the third, fourth and fifth respondents, and that those envelopes were addressed to the addresses stipulated in the order of the court. I am likewise satisfied that those envelopes contained similar "return to sender" endorsements.

4. The affidavit of John Clive Collins, sworn on 14 July 1992, deposes in these terms:
   

"2. My present residential address is Thomas Street, Glen Innes. I (together with my wife, Iris Collins) having moved from my former residential address of Blue Hills Road, Glen Innes in 1989.

"3. My daughter, Margaret Howell, who is also a respondent herein, formerly lived in Inverness Road, Riverstone, which I understand is an outer suburb of Sydney, I am informed and verily believe, until 1977 when she moved to Malaysia with her husband and family. She moved from Malaysia to Glen

Innes in 1981. In these circumstances she has not lived at Riverstone since 1977."

1. Mr Collins was cross-examined on the contents of his various affidavits that had been filed in this matter but his evidence about his, his wife's and his daughter's present addresses were not challenged. I find, therefore, that accepting Ms Tory's evidence and accepting the section of Mr Collins' evidence that is quoted above, the orders of the court were addressed to the third, fourth and fifth respondents at addresses which used to be but are not now their current addresses.

2. By a motion filed on 1 June 1992 in this court, all respondents sought to have the judgment pronounced by von Doussa J. set aside. That judgment had been entered and sealed and had been the genesis of a Bankruptcy Notice that had been served on Mrs Howell. The court's power to entertain such a motion is to be found in order 35 rule 7. Sub-rule 7(1) states that "(t)he Court may vary or set aside a judgment or order before it has been entered". That does not apply in this case. Sub-rule 7(2) applies by stating that the court may, if it thinks fit, set aside a judgment or order after the order has been entered where:
   

"(a) the order has been made in the absence of a

party, whether or not the absent party is in

default of appearance or otherwise in default

and whether or not the absent party had notice

of the motion for the order..."

1. Where a judgment has been irregularly obtained it must be set aside. Where a judgment has been regularly obtained, it is a matter for the court to determine in the exercise of its discretion whether particular circumstances affecting the case warrant the setting aside of the judgment.

2. Before I turn to the circumstances of this case, I should make it clear that there being five respondents in this action I know of no principle or mandate which requires me to deal with all five respondents in an identical fashion. On the contrary, I am of the opinion that if there is a variant in any material factual circumstance, that variant may well require separate and individual treatment being given to a particular respondent. The practical exemplification of what I have just said amounts to this; accepting, as I do, without qualification the evidence of Ms Tory and also the evidence of Mr Scragg, it is clear that the order of the court of 7 February 1992 was forwarded, by pre-paid post in accordance with the terms of the order, to the registered offices of the two corporate respondents, Candoura Pty Limited and Bullock Mountain Mining Pty Limited.

3. The corporate respondents relied upon the affidavits of Mr Wood and Ms Fraser, a partner and clerk respectively of Cameron Kirk and Rose in support of their application to set aside the judgment but I find them of no assistance. Mr Wood in his affidavit of 14 July 1992 explained that his firm's practice is to have a junior clerk collect correspondence daily between 11 am and 12 noon. That correspondence is then handed to a senior secretary for sorting into five classifications. If the mail is addressed to the firm it is opened by the secretary and dealt with. If it is addressed to a partner it is handed to that partner. If it is addressed to a client but it is clearly from the Taxation Office or from the Australian Securities Commission, then in each of those two classifications it is opened by the secretary and dealt with. However, the fifth classification is the one which is of importance to this case - if it is addressed to a client, then it is immediately readdressed and forwarded to the client.

4. Mr Wood and Ms Fraser each said in their separate affidavits that he and she did not recall receiving any notice addressed to either of the corporate respondents of a hearing to take place in regard to the proceedings in this matter. That was to be expected. They would not have received nor read any such notice of any such hearing because such mail would, in accordance with the procedures of the office, fall within the fifth category and be immediately readdressed and forwarded to the relevant client. I hold, therefore, that in all respects the first two corporate respondents were properly served with the order of the court of 7 February 1992.

5. The position with respect to the three natural persons who are also respondents differs in a material sense from that of the two corporate respondents. Unlike the two corporate respondents I am unable to make a finding that the order of the court was enveloped and addressed to the actual addresses at which the natural persons were residing or carrying on business - this is particularly obvious in the case of Mrs Howell who had not resided at Riverstone since 1977. The position is further exacerbated, so far as the two ladies are concerned, by virtue of their respective affidavits that they had left all matters and decisions relating to these proceedings to their husband and father, Mr Collins. It leaves me in a state of uncertainty about these ladies having received the copy of the order of the court of 7 February.

6. In White v Weston (1968) 2 QB 647, a finding of fact was made to the effect that the relevant summons had never been served. As a result of not knowing that a hearing was listed, the defendant suffered a judgment by default. The Court of Appeal held that the defendant had a right ex debito justitiae to have the judgment set aside. Russell L.J. said at page 659:
   

"The defect is in my judgment so fundamental as to entitle the defendant as of right ex debito justitiae to have the

judgment avoided and set aside."

1. As I have said, that was a case where the summons was never served. In this case, I have expressed my uncertainty and, hence, my dissatisfaction as to whether the two ladies were, or were not, served with a copy of the order of 7 February. Drawing on the principle in White v Weston, which was quoted and followed by Bollen J. of the Supreme Court of South Australia in Ford v Gray (1988) 50 SASR 425 at 431, I have come to the conclusion that, insofar as the two ladies are concerned, service of the order not having been proved, the judgment was irregularly obtained and must therefore be set aside.

2. In Ford v Gray, the plaintiff, acting for herself, had obtained a self-executing order against the defendant because of his failure to make discovery. The magistrate had made an order in these terms:
   

"Should defendant herein not make discovery within seven

days of notice to him of this order, then plaintiff is to be at liberty to enter judgment..." (p 427)

1. The plaintiff, sent a copy of that order to the defendant at his address as shown on the court file. However, the letter was returned unclaimed and was found by the plaintiff in her letter box. Nevertheless, she attended at the office of the court, spoke to a clerk, explaining the truth of the matter, and obtained her judgment. On appeal Bollen J. set the judgment aside, concluding that the judgment had been irregularly obtained.

2. I am left then to consider the position of Mr Collins. It was put to me that Glen Innes is a small town of 6000 people, that his present address is no more than a quarter of a mile from his former address and that I should accept the likelihood that the local postal authorities would have re-directed the envelope to his correct address. It was also put to me that he was the particular client to whom Cameron, Kirk and Rose would have forwarded the envelopes addressed to Candoura Pty. Limited and Bullock Mountain Mining Pty Limited. It was also put to me that there was the affidavit of his Sydney solicitor, Mr Farrego, informing him that because of his non-payment of fees his solicitors were no longer acting. Mr Collins denied receiving any advice to that effect. It was submitted that there were just too many coincidences about the failure of Mr Collins to receive mail. However, as a result of my finding that the use of the incorrect addresses, so far as the two ladies are concerned, constitutes a judgment irregularly obtained, I have come to the conclusion that logic and consistency requires me to come to the same decision with respect to Mr Collins. I therefore find it unnecessary to investigate the challenges to his credit which were so strenuously made.

3. On the other hand, I cannot come to the same conclusion so far as the two corporate respondents are concerned. In my opinion, they were properly served with the orders of the court. There was nothing irregular and the principles which I have applied for the benefit of the three natural persons are not available to corporate respondents.

4. It remains for me to consider the alternative argument that even though the judgment might have been regularly obtained, the court should exercise its discretion in favour of all five respondents, both corporate and natural, and set aside the judgment on discretionary grounds.

5. The circumstances when this will be done were extensively canvassed by the South Australian Full Court in Watson v Anderson (1976) 13 SASR 329, and more recently by Andrews S.P.J., of the Supreme Court of Queensland in Surfers Paradise International Convention Centre Pty Limited v National Mutual Life Association of Australia Limited (1984) 2 Qd R 447.

6. For present purposes, it is sufficient to say that one can extract from these authorities a series of propositions which the court should take into consideration when examining whether the discretionary powers should be exercised favourably to the respondents. For example, the first of these matters is an assessment of the reasons advanced for the default. Why was it that the respondents failed to attend at the hearing? In this case I have been met with claims by all five respondents that they did not know of the hearing. As to the two corporate respondents I have rejected that explanation. As to the two ladies I have accepted it, and as to Mr Collins I have given him the benefit of the doubt as a matter of consistency.

7. The next matter to consider is whether the setting aside of the judgment would cause what Bray C.J. described as prejudice to the plaintiff in Watson v Anderson at p 334, or what Andrews S.P.J. referred to as irreparable wrong in Surfers Paradise. Nothing was advanced by the applicant to point to prejudice or irreparable wrong, and that, of course, is a factor which militates in favour of the respondents. There are then the questions of the quality of the alleged defence and whether the respondents have established a bona fide intention of defending.

8. As to that latter point, the presence of Mr Collins here in Adelaide to give evidence in support of the respondents' application is in itself some indication of his bona fides with respect to the intention to defend. The merits of the defence is, however, a far more difficult matter to assess in this particular case because the gravamen of the applicant's case rests in oral statements allegedly made by Mr Collins at a meeting at the office of a firm of solicitors on 18 June 1988. Witnesses for the applicant will be produced who will say that Mr Collins said words to the effect of X. Mr Collins will deny that he said X. It is a classic jury case. It is one where it is impossible to assess the merits of the defence other than to say that, if believed, the defence could be successful.

9. There is an added factor in this case and that is that counsel for the respondents has strongly argued that, in any event, this was one of those cases where if the representations were made (and that is denied), then clearly no reliance was placed by the applicant on those representations. All in all, because of the fact that it will be a question of credibility, one has to lean favourably towards the respondents on the question of merits. The final matter to be considered is whether there has been undue and unexplained delay in the bringing of the current application. I am satisfied from the affidavits that have been filed from the New South Wales solicitors and from the respondents that there has been an adequate explanation of the period of time passing from the pronouncement of judgment to 1 June 1992 when the application to set aside the judgment and order was filed.

10. The conclusion that I have therefore reached is to this effect; that so far as the corporate respondents are concerned I would not exercise my discretion in their favour because I am not satisfied with their explanation for their default. In fact, I have rejected the explanation. As to the three natural persons, I have accepted their explanation primarily because of the incorrect addresses, but I have been aided by the fact that no prejudice has been established to the applicant. Their action in bringing the application to set aside the judgment was prompt. There are, arguably, merits in their defence. In the case of the two ladies, unlike Mr Collins, there are subsidiary arguments that neither of the ladies might be held responsible for such representations as are sheeted home to Mr Collins.

11. In all of those circumstances, therefore, the judgment of the court is that the application by Candoura Pty Limited and Bullock Mountain Mining Pty Limited to set aside the judgment and orders of this court pronounced on 5 March 1992 is dismissed. As to the application of John Clive Collins, Iris May Collins and Margaret Irene Howell, there will be an order setting aside the judgment and order of the court of 5 March 1992. I will hear the parties on consequential matters including costs.