Tuff Trade Pty Ltd ATF TNT Family Trust v Canningvale Properties (WA) Pty Ltd (in liq) - [2018] WASC 362

JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
IN CHAMBERS

CITATION:   TUFF TRADE PTY LTD ATF TNT FAMILY TRUST -v- CANNINGVALE PROPERTIES (WA) PTY LTD (in liq) [2018] WASC 362
CORAM:   VAUGHAN J
HEARD:   9 NOVEMBER 2018
DELIVERED          :   9 NOVEMBER 2018
PUBLISHED           :   22 NOVEMBER 2018
FILE NO/S:   CIV 2688 of 2017
BETWEEN:   TUFF TRADE PTY LTD ATF TNT FAMILY TRUST
Plaintiff
AND
CANNINGVALE PROPERTIES (WA) PTY LTD (in liq)
First Defendant
GREGORY BRUCE DUDLEY as liquidator of CANNINGVALE PROPERTIES (WA) PTY LTD
Second Defendant
PIETRO TILLI
Third Defendant
JOSEPH TILLI
Fourth Defendant

Catchwords:

Practice and procedure - Consent orders - Application to set aside judgment made by consent of three of five parties - Where minute of consent orders not signed by third or fourth defendants - Irregularity - Procedural fairness

Legislation:

Rules of the Supreme Court 1971 (WA), O 2 r 1, O 2 r 2, O 13 r 9, O 42 r 8, O 43 r 16

Result:

Application granted

Representation:

Counsel:

Plaintiff	:	R Young
First Defendant	:	No appearance
Second Defendant	:	No appearance
Third Defendant	:	D O'Haire
Fourth Defendant	:	D O'Haire

Solicitors:

Plaintiff	:	Valenti Lawyers
First Defendant	:	No appearance
Second Defendant	:	No appearance
Third Defendant	:	Forbes Kirby
Fourth Defendant	:	Forbes Kirby

Case(s) referred to in decision(s):

Bass v Permanent Trustee Co Ltd [1999] HCA 9; (1999) 198 CLR 334
Cameron v Cole [1944] HCA 5; (1944) 68 CLR 571
Commonwealth v Albany Port Authority [2006] WASCA 185
Geneva Finance Ltd v Judge (Unreported, WASC, Library No 960591, 24 October 1995)
In re F (Mental Patient Sterilisation) [1990] 2 AC 1
Lashansky v Legal Practitioners Complaints Committee [2005] WASCA 217
Moller v Roy [1975] HCA 31; (1975) 132 CLR 622
Pilbara Infrastructure Pty Ltd v BGC Contracting Pty Ltd [2007] WASCA 257; (2007) 35 WAR 412
Taylor v Taylor [1979] HCA 38; (1979) 143 CLR 1

VAUGHAN J:

(These reasons were delivered orally at the conclusion of the hearing. They have been edited to correct matters of grammar and infelicity of expression. Authorities and other references have also been footnoted rather than appearing in the body of the reasons.)

Overview

On 18 January 2018 Master Sanderson made orders by consent by way of a declaration. The orders followed submission of a minute of consent orders said to be pursuant to O 43 r 16 of the Rules of the Supreme Court 1971 (WA) signed on behalf of the plaintiff, the first defendant and the second defendant. The minute was not signed on behalf of the third or fourth defendants.
The plaintiff now contends, in substance, that the 18 January 2018 orders bind the third and fourth defendants.
The third and fourth defendants applied by chamber summons dated 5 October 2018 to set aside the orders made 18 January 2018. Two grounds are relied on. First, invoking O 2 r 1(2) of the Rules of the Supreme Court 1971 (WA), it is said that the orders are irregular and should be set aside. Second, it is said that the orders were made without according the third and fourth defendants procedural fairness in circumstances where the orders materially affect their interests.
For the reasons that follow I am satisfied that the 18 January 2018 orders should be set aside. However, I would only do so on the ground that the orders adversely affect the interests of the third and fourth defendants in circumstances where they were not afforded a reasonable opportunity to appear and present their case against the making of the orders.

The parties' pleaded cases

Before turning to the background facts it is necessary to first summarise the parties' pleaded cases.
The plaintiff commenced proceedings on 6 October 2017 with a writ indorsed with a statement of claim. The writ named as first defendant a company in liquidation pursuant to a winding up order made 21 March 2017. The second defendant is the liquidator. The third and fourth defendants were and are the directors of the first defendant.
The plaintiff pleads that the first defendant is the registered proprietor of a property referred to as Lot 21. It is said that on 24 February 2016 the plaintiff and the first defendant entered into an agreement described as the 'Cash Back Agreement' and a contract to purchase Lot 21 off the plan. The purchase price was $525,000. A deposit of $410,000 was payable. Settlement was to occur when a certificate of title for Lot 21 issued. Under the Cash Back Agreement, subject to certain conditions which are not material, the first defendant was to pay the plaintiff $115,000 at settlement of the sale of Lot 21. Accordingly, the net effect of the documentation was that after payment of the so-called 'deposit' no further money would be payable at settlement.
The deposit was paid on 24 February 2016. The plaintiff pleads that in point of law:
(1)a resulting trust arose whereby the first defendant was required to hold the $410,000 as trustee for both the plaintiff and the first defendant pending settlement; and
(2)as trustee the first defendant owed the plaintiff a fiduciary duty to hold the $410,000 pending settlement or termination of the contract to purchase Lot 21.
By contrast, the third and fourth defendants say that, in addition to the contract to purchase and the Cash Back Agreement, the plaintiff and the first defendant entered into a loan agreement. They plead that the plaintiff agreed to lend $410,000 to the first defendant. On the third and fourth defendant's case the $410,000 was advanced to the first defendant to be applied for its purposes. Accordingly, the third and fourth defendants deny the trust as alleged by the plaintiff and that the first defendant owed the plaintiff a fiduciary duty to hold the $410,000 pending settlement or termination of the contract to purchase Lot 21.
Additionally, as to the loan agreement, the third and fourth defendants say that it contained an option. On their case the first defendant could repay the $410,000 with interest before the settlement date. Alternatively, the first defendant could transfer Lot 21 to the plaintiff pursuant to the contract to purchase Lot 21 and the Cash Back Agreement. That alternative would require no further payment on the part of the plaintiff or the first defendant.
In its reply the plaintiff denies that it executed the loan agreement. In affidavit evidence a director of the plaintiff, Margaret Lattimore, denies that her purported signature as appears on the loan agreement is in fact her signature.
Returning to the statement of claim, the plaintiff says that the certificate of title for Lot 21 was issued on 25 October 2016. The plaintiff did not become aware of that for some time. When the plaintiff became aware it nominated a settlement date. The first defendant did not attend settlement on the nominated date. Nevertheless, the plaintiff affirmed the contract to purchase Lot 21. It is pleaded that the plaintiff remains ready, willing and able to proceed the settlement. The third and fourth defendants deny any breach on the part of the first defendant, saying that the first defendant did not exercise the option to enliven the contract purchase.
On the third and fourth defendants' case the plaintiff has no more than a monetary claim against the first defendant.
The plaintiff pleads that, contrary to its duties and in breach of trust, the first defendant applied the $410,000. It is said that this caused loss and there is an obligation on the part of the first defendant to make good the trust estate. All of this is denied by the third and fourth defendants. They say that there was no trust and that the $410,000 was received by the first defendant for its own use.
As to the third and fourth defendants, the plaintiff then pleads as follows:
Pursuant to section 197 of the Corporations Act 2001 (Cth) the Third and Fourth defendants, as directors of the First Defendant at the time when the Debt to the beneficiaries of the Trust arose, are liable individually and jointly with the First Defendant to make good the Trust Estate for the benefit of the Beneficiaries.[1]
[1] Statement of Claim dated 6 October 2017 par 26.
Among other things, in its prayer for relief the plaintiff seeks a declaration that Lot 21 is held by the first defendant on trust for the plaintiff. It also seeks a declaration that the $410,000 was held on trust by the plaintiff and the transfer of the $410,000 constituted a breach of the first defendant's fiduciary duty. As to the third and fourth defendants, two things are sought. First, a declaration that they are jointly and separately liable to pay any shortfall in the liquidation of the first defendant in order to make good the $410,000. Second, in the alternative, the plaintiff seeks an order that the third and fourth defendants pay $410,000 to the plaintiff.
The third and fourth defendants deny the existence of any trust as to the $410,000. Accordingly, they deny that there was any breach of trust to enliven the operation of s 197 of the Corporations Act 2001 (Cth). On that basis they deny any liability to the plaintiff.
Accordingly, as between the plaintiff and the third and fourth defendants there are material issues as to whether:
(1)the $410,000 was held by the first defendant on trust for the plaintiff pending settlement or termination of the contract to purchase Lot 21; and
(2) the application of the $410,000 constituted a breach of the first defendant's duty as trustee of the trust.

Background to the application

After the writ was issued and served the first and second defendants did not enter an appearance. That is unsurprising; the first defendant is in liquidation and the second defendant is its liquidator. It appears that Lot 21 is heavily encumbered. In a practical sense the main avenue of potential recovery will be against the third and fourth defendants.
On 27 October 2017, the first defendant and the second defendant not having entered an appearance, the plaintiff applied for default judgment.
The plaintiff did so by filing a document styled as a 'Default Judgment for Liquidated Demand'. The form adopted is reflective of Form 32. Accordingly, it ought to be inferred that the plaintiff sought to invoke O 13 r 2 of the Rules of the Supreme Court 1971 (WA). Self‑evidently, however, when the body of the terms of the proposed default judgment are considered the application was not one within O 13 r 2. The plaintiff did not seek judgment against the first defendant for a liquidated amount. Instead a variety of orders were sought, including orders in the nature of declaratory relief.
For example, the plaintiff sought orders that:
A.… [Lot 21] is held by the First Defendant on trust for the Plaintiff.
…
C.… the Deposit was held on trust by the First Defendant for the Plaintiff and that the transfer of the Deposit funds to third parties constituted a breach of the First Defendant's fiduciary duty as Trustee of the Trust.[2]
[2] Statement of Claim dated 6 October 2017 prayer for relief pars A, C.
The plaintiff should have made an application under O 13 r 9 Rules of the Supreme Court 1971 (WA). This necessitates applying to the court on motion for judgment. It should be noted that O 13 r 9(1)(b) contemplates that despite such an application the plaintiff is to proceed with the action against defendants who have not entered an appearance.
Due, no doubt, to the irregularity in the application for a default judgment, the application was referred to the master. Master Sanderson was not prepared to enter judgment without hearing from the plaintiff. Accordingly, the master made arrangements for the application to be listed before him in chambers on 7 November 2017.
On 7 November 2017 a solicitor for the plaintiff explained the nature of the application. Midway through the hearing there was an appearance for the third and fourth defendants by their solicitor. That solicitor, Paul Holmes of Holborn Lenhoff Massey, informed the court that:
·he had only become aware of the application that morning;
·while the application 'had nothing to do with me or my clients' he could assist the court; and
·there was a loan agreement which would be part of the third and fourth defendant's defence. Thus, in his submission, 'the waters are muddied a little bit more than what the plaintiff suggests, and that will be elicited and set out in our defence'.[3]
[3] ts 14.
The solicitor for the third and fourth defendants did not inform the master that there was, based on the loan agreement, a dispute as to the existence of a trust or whether there was a breach of trust. As will appear, it would not have been obvious that there was a need to do so. Mr Holmes was unaware of the orders that the plaintiff was seeking. Moreover, the master was himself originally under the impression that there was no claim made against the third and fourth defendants in the statement of claim.
The solicitor for the plaintiff said that the loan agreement could be in dispute. It was also submitted that this could not affect the consent default judgment against the first and second defendants. With respect, it is difficult to understand how that contention could be made. In any event, the master reserved his decision, in part so he could consider the loan agreement.
After the hearing on 7 November 2017 Mr Holmes requested a copy of the plaintiff's application. Based on that, and the fact that Mr Holmes was unaware of the hearing before the morning of 7 November 2017, I infer that Mr Holmes was unaware of the orders sought by the default judgment. That, in my view, explains and informs Mr Holmes' suggestion that the application before the master had nothing to do with the third and fourth defendants. Had Mr Holmes seen the terms on which default judgment was sought it ought to have been apparent that the proposed orders might have substantial consequences for his clients. Accordingly, the off‑the‑cuff observation that the application had nothing to do with the third and fourth defendants was, in my view, uninformed and unjustified. No weight should be afforded to it.
Master Sanderson delivered oral reasons on 13 November 2017, notice thereof having been given on 9 November 2017. Despite that notice Mr Holmes did not appear for the third and fourth defendants. The master stated that as there were unusual aspects to the proceedings he was not prepared to enter default judgment. The master went on, however, to state:
I would be prepared to give the plaintiff the opportunity to list the matter for hearing on an undefended basis and produce all of the evidence necessary to establish the cause of action. I would want to be satisfied if that was to be done, that the liquidator was given notice of the proceedings even though he has not appeared.
On 6 December 2017 the solicitors for the plaintiff submitted a minute of proposed orders to program the matter to a hearing. They did so by email. The email was copied to Mr Holmes as the solicitor for the third and fourth defendants. The minute was described as the 'Plaintiff's Minute of Proposed Orders' and provided for the plaintiff to file and serve affidavits by 15 December 2017, to file and serve submissions by 15 December 2017, and for the matter to be listed for a special appointment on 18 January 2018.
Later that day the master's associate provided a record as to programming orders being made in those terms. That email was copied to Mr Holmes.
I would emphasise that the orders sought and made provided for the affidavits and submissions to be filed and served.
After the programming orders were made Mr Holmes contacted the plaintiff's solicitors. His email, sent in the afternoon of 6 December 2017, stated:
We act for the third and fourth defendants in the above-mentioned matter.
Would you please provide a copy of any orders arising from the decision of Master Sanderson on 13 November 2017. I was of the view that the matter would proceed on a non-contested basis.
Upon filing the affidavits, and submissions as per the proposed orders, would you please provide a copy by email to [Mr Holmes' email address provided].
The affidavit sworn on behalf of the plaintiff in opposition to the present application records that Mr Holmes' 6 December 2017 email went unanswered. Why that is so was unexplained. More significantly, despite Mr Holmes' request, and the terms of the orders made on 6 December 2017, the materials were not served on the third and fourth defendants.
In that respect I acknowledge counsel for the plaintiff's submissions that the order of 6 December 2017 did not require service on the third and fourth defendants. I reject that submission. Documents as filed should be served on all active parties. The orders of 6 December 2017 cannot, in my view, be read as being confined to service on the first and second defendants only. In any event the third and fourth defendants' interest in the materials was made abundantly clear by Mr Holmes' email. Materials filed pursuant to the programming orders of 6 December 2017 should have been filed and served on the solicitors for the third and fourth defendants.
The plaintiff filed affidavits and its submissions on 15 December 2017. The loan agreement, described as the 'Purported Loan Agreement' was included in the affidavit material (attachment MDL‑6 pages 66 to 71). However, no reference to the loan agreement appears in the submissions. Nor do the submissions address: (1) the position of the third and fourth defendants; (2) the implications of the orders sought for the claim advanced against the third and fourth defendants; or (3) the intention not to serve the materials on the third and fourth defendants despite the request on the part of Mr Holmes that they be so served.
Nor did the submissions draw the master's attention to the words of Lord Goff endorsed by the plurality in Bass v Permanent Trustee Co Ltd:[4]
A declaration will not be granted where the question under consideration is not a real question, nor where the person seeking the declaration has no real interest in it, nor where the declaration is sought without proper argument, for example, in default of defence or on admissions or by consent.[5] (emphasis added)
[4] Bass v Permanent Trustee Co Ltd [1999] HCA 9; (1999) 198 CLR 334 [47].
[5] In re F (Mental Patient: Sterilisation) [1990] 2 AC 1, 82.
The materials were served on the first and second defendants. As I have mentioned, they were not served on the third and fourth defendants. In the plaintiff's affidavit and submissions in opposition to the present application the point is made that the third and fourth defendants' solicitors could have accessed the materials through the court's e‑court portal. In my opinion that does not excuse the non‑service. A party should not itself have to hunt out and find documents that should have been served. In the circumstances, in the absence of service, the third and fourth defendants, by their solicitors, were justified in believing that no documents were filed pursuant to the 6 December 2017 programming orders.
The hearing programmed for 18 January 2018 never occurred.
On 17 January 2018 one of the plaintiff's solicitors spoke to an employee of the liquidator of the first defendant. The plaintiff's solicitor was informed that the first defendant and second defendant were prepared to consent to an order in respect of the application for judgment. A minute of proposed consent orders was prepared. It is headed 'Minute of Consent Orders pursuant to O 43 r 16'. The chapeau to the minute provides that '[p]ursuant to O 43 r 16 the plaintiff, first defendant and second defendant hereby consent to orders in the following terms'. Spaces were provided for signatures on behalf of the plaintiff and the first and second defendants.

In the course of 17 January 2018 the minute was signed on behalf of the plaintiff and the first and second defendants. It was submitted to the master's associate by email at 12.01 am on 18 January 2018.
At no time was the minute referred to the solicitors for the third and fourth defendants. The third and fourth defendants were not included as proposed signatories to the minute. Nor, when the solicitors for the plaintiff corresponded with the master's chambers, were the emails as to the agreement reached and the minute signed copied to the solicitors for the third and fourth defendants. That was a material omission. Ordinarily, subject to minor exceptions which are presently immaterial, there should be no communications with chambers in connection with proceedings without the prior knowledge and consent of all active parties to the proceedings. Indeed, it is generally insufficient that communication be merely copied to the other parties at the same time as they are sent to chambers. Prior consent to the communication is required.
Here there was not just a failure to obtain prior consent. There was a failure to even include the solicitors for the third and fourth defendants as a party to the communications. That failure was compounded by the failure to draw the court's attention to the circumstance that the email was being sent without the third and fourth defendants' knowledge or consent.
In circumstances where, due to the shortcomings in the minute and the communications with the court, it appeared that the orders sought were uncontroversial, the master proceeded to deal with the matter administratively and without any hearing. On 18 January 2018 at 8.50 am the master's associate sent an email stating:
[P]lease be advised the Master has made orders in terms of the Memo of Consent Orders date [sic] 17 January 2018.
The special appointment listed at NB10.00AM has been vacated and appearances are not required.
That email was not copied to the solicitors for the third and fourth defendants. No doubt that was because they had not been included as addressees in the plaintiff's solicitor's earlier emails to the associate. The third and fourth defendants received no notification of the making of the orders or the vacation of the hearing scheduled for 18 January 2018.
The orders as made record that they are made pursuant to the application of the default judgment dated 27 October 2017 and pursuant to O 43 r 16. They are in slightly different terms to the orders as sought by the document filed 27 October 2017. They provide for orders that:
(1)Lot 21 ... is held by the first defendant on trust for the plaintiff, subject to the following interests and encumbrances noted on the Register of Titles …
(2)The deposit of $410,000 (Deposit) paid by the plaintiff to the first defendant on 24 February 2016 was held on trust (Trust) by the first defendant for the plaintiff pending transfer of the land to the plaintiff pursuant to a contract for sale of the Land in writing between the plaintiff as buyer and the first defendant as seller dated 24 February 2016, and the transfer of the Deposit funds to third parties constituted a breach of the first defendant's fiduciary duties as trustee of the Trust.
The third and fourth defendants became aware of the 18 January 2018 orders by no later than 12 April 2018 when served with an affidavit that included the orders. That affidavit was filed in support of the plaintiff's application for summary judgment against the third and fourth defendants. On 18 June 2018 the third and fourth defendants, by their solicitors, foreshadowed making an application to set aside the orders. However, the application was not made until 5 October 2018. In the interim, a summary judgment application having been dismissed after Master Sanderson heard argument on 17 July 2018, the third and fourth defendants filed and served a defence on 22 August 2018.
It is plain that the plaintiff relies on the orders made 18 January 2018 as answering the third and fourth defendants' defence based on the loan agreement. As to the invocation of the loan agreement, the suggestion that the $410,000 was paid to the first defendant for its own use and there was no trust and associated breach of fiduciary duty, the plaintiff pleads in its reply dated 28 September 2018 as follows:
6.As to paragraphs 7.3, 7.4, 7.10, 8.2, 9, 10 and 11 of the Defence, the plaintiff joins issue and says further that:
(a)the matters raised by those paragraphs of the Defence seek to relitigate issues which were finally determined by the Supreme Court of Western Australia on 18 January 2018, when Master Sanderson made a declaration that $410,000, as paid by the plaintiff to the first defendant on 24 February 2016, was held on trust by the first defendant for the plaintiff pending transfer of land to the plaintiff pursuant to the Contract for Sale;
Particulars of issues already determined
(i)Whether the payment of $410,000 by the plaintiff to the first defendant on 24 February 2016 was a deposit for the purchase of Lot 21 (as opposed to being advanced pursuant to the purported Loan Agreement);
(ii)Whether the payment of $410,000 was held on trust by the first defendant for the plaintiff pending transfer of Lot 21 to the plaintiff;
(iii)Whether the plaintiff was entitled to elect to proceed with the Contract of Sale.
(b)success by reason of those pleas in the Defence would contradict the outcome of the Supreme Court on 18 January 2018.
7.By reason of the circumstances pleaded in paragraph 6 of this Reply:
(a)the third and fourth defendants are estopped from relitigating the issues already determined by the Supreme Court on 18 January 2018;
(b)further and alternatively, the third and fourth defendants' pleas in paragraphs 7.3, 7.4, 7.10, 8.2, 9, 10 and 11 of the Defence amount to an abuse of process.

Disposition

Application based on O 2 r 1

The third and fourth defendants contend that the orders of 18 January 2018 should be set aside as an irregularity. To that extent the application is grounded on O 2 r 1(2) of the Rules of the Supreme Court 1971 (WA). As to irregularity, it is argued that, in the circumstances I have recounted, there was no compliance with O 42 r 8 of the Rules.
On the face of O 42 r 8, that is so. Order 42 r 8 reads:
Where the defendant has not appeared or has appeared in person, no such order shall be made unless the defendant attends before a judge and gives his consent in person, or unless his written consent is attested by a solicitor acting on his behalf, except in cases where the defendant is a barrister, or solicitor.
The 'no such order' relates back to O 42 r 7. It is an order for entering judgment.
Counsel for the plaintiff contended that there was no relevant 'judgment'. Counsel relied on a passage from Moller v Roy to the effect that the accepted legal meaning of the word 'judgment' is the formal order of the court which disposes of and deals with the proceedings then before it.[6] That passage was not said in the same context as that which is now raised before me. There was no suggestion that an order partially disposing of proceedings was not a judgment. In my opinion there can be a 'judgment' although the order does not finally determine the proceedings. For example, it is well-established that judgment can be given on admissions in respect of part only of a claim.[7]
[6] Moller v Roy [1975] HCA 31; (1975) 132 CLR 622, 639.
[7] See M Gething, R Joseph and M Curwood, Civil Procedure: Western Australia [30.3.1].
The ambitious nature of the submission is all the more evident when it is recalled that: (1) the orders were made on the plaintiff's application for default judgment; and (2) in its reply the plaintiff characterises the orders, correctly in my view, as declarations made by way of being final determinations.
While, in my view, there is prima facie an irregular judgment, there is a difficulty in the third and fourth defendants' application so far as it is based on O 2 r 1(2) of the Rules of the Supreme Court 1971 (WA). Any such application must observe the requirements of O 2 r 2(1). That rule provides:
An application to set aside for irregularity any proceedings and any step taken in any proceedings or any document, judgment or order therein shall not be allowed unless it is made within a reasonable time and before the party applying has taken any fresh step after becoming aware of the irregularity. (emphasis added)
Counsel for the plaintiff contended that the application had not been brought within a reasonable time. I do not need to assess that argument. O 2 r 2(1) conditions allowance of an application to set aside for irregularity on a particular circumstance, namely, that the application has been made before the party has taken any 'fresh step' after becoming aware of the irregularity. That did not occur in the present case.
The third and fourth defendants became aware of the 18 January 2018 orders in April 2018. They were certainly aware of the irregularity by no later than 18 June 2018 when their solicitor foreshadowed applying to set aside the judgment. However, before making the present application, on 5 October 2018, the third and fourth defendants filed a defence. There is authority in this court that the filing of a defence is a fresh step in the action.[8] It might be that the third and fourth defendants could seek leave to withdraw their defence. There has, however, been no such application. In any case, as matters stand, the third and fourth defendants have taken a fresh step in the proceedings after becoming aware of the irregularity. On that basis, given the express terms in O 2 r 2(1), the application is not to be allowed so far as it is grounded on O 2 r 1(2).
[8] Geneva Finance Ltd v Judge (Unreported, WASC, Library No 960591, 24 October 1995) 4.
I acknowledge that there is authority to the effect that the court may exercise the discretionary powers conferred by O 2 r 1(2) of its own motion.[9] Were I to do that perhaps the strictures of O 2 r 2(1) would not apply. I do, however, have concerns about permitting by the back door that which is not permitted by the express terms of O 2 r 2(1). Accordingly, I will not rely on the power under O 2 r 1.
[9] Pilbara Infrastructure Pty Ltd v BGC Contracting Pty Ltd [2007] WASCA 257; (2007) 35 WAR 412 [52].
There is, however, ample general power to address the orders made on 18 January 2018 without relying on O 2 r 1.

Application based on a lack of procedural fairness

Counsel for the plaintiff did not cavil with the proposition that the court has an inherent jurisdiction to set aside any determination affecting a person, without the necessity of appeal, where he or she has not been given a reasonable opportunity of appearing and presenting his or her case.
Counsel was correct to do so. Nothing in the language of O 2 of the Rules of the Supreme Court 1971 (WA) detracts from the unconditional general law right of a litigant, who has not been afforded a reasonable opportunity to appear and present his or her case, to have an order or judgment that affects his or her interests to be set aside. The authorities confirm the existence of this aspect of the court's inherent jurisdiction.
In Cameron v Cole a debtor was not informed of the date of an adjourned hearing of a bankruptcy petition.[10] A sequestration order was made in his absence. When in due course a later appeal reached the High Court, Rich J explained:
It is a fundamental principle of natural justice, applicable to all courts whether superior or inferior, that a person against whom a claim or charge is made must be given a reasonable opportunity of appearing and presenting his case. If this principle be not observed, the person affected is entitled, ex debito justitiae, to have any determination which affects him set aside; and a court which finds that it has been led to determine a matter in which there has been a failure to observe the principle has inherent jurisdiction to set its determination aside.
In such a case there has been no valid trial at all. The setting aside of the invalid determination lays the ghost of the simulacrum of a trial, and leaves the field open for a real trial.[11] (citations omitted)
[10] Cameron v Cole [1944] HCA 5; (1944) 68 CLR 571.
[11] Cameron v Cole (589).
That passage was cited with approval by Gibbs J in Taylor v Taylor.[12] His Honour added:
It is clear that the majority of the court in Cameron v Cole accepted that a court, whether superior or inferior, has an inherent power to set aside an order made against a person who did not have a reasonable opportunity to appear and present his case.[13]
[12] Taylor v Taylor [1979] HCA 38; (1979) 143 CLR 1, 8.
[13] Taylor v Taylor (8).
Stephen J agreed with Gibbs J. See also the observations of Mason J[14] with whom Aickin J agreed. Aickin J made the following additional observation:
The principle that parties to litigation are entitled to be present and heard, either in person or by a duly authorized legal representative, is of fundamental importance and involves the consequence that, where through no fault of his own, a party is deprived of that entitlement, prima facie any order of the court made against him may be set aside by that court.[15]
[14] Taylor v Taylor (16).
[15] Taylor v Taylor (22).
In this court the Court of Appeal has recognised this aspect of the court's inherent jurisdiction, referring to both Cameron v Cole and Taylor v Taylor, in decisions referred to by counsel for the plaintiff.[16]
[16] See Lashansky v Legal Practitioners Complaints Committee [2005] WASCA 217 [136] ‑ [137]; Commonwealth v Albany Port Authority [2006] WASCA 185 [25].
I raised with counsel whether, in considering the exercise of this inherent jurisdiction, it would be preferable for the matter to go back before Master Sanderson. That would avoid the appearance of one judicial officer of coordinate jurisdiction potentially setting aside the order of another. Both counsel accepted that, while in the past such an approach might more often than not have been applied, this was a matter of comity only. It was accepted that I could so exercise the court's inherent jurisdiction, although I was not the judicial officer who made the orders of 18 January 2018.
I accept that in exercising this jurisdiction I must do so cautiously. I must not take on an appellate jurisdiction where none exists. I must also be conscious of the accepted principle that procedural fairness requires only that a party be given a reasonable opportunity to present his or her case. It is not the function of a court to ensure that the party takes the best advantage of that opportunity. Nevertheless, it is inherent in the nature of the court that it should afford the parties procedural fairness. Accordingly, the court possesses a power to rectify a failure to hear a party where that failure has not been attributable to any fault on the part of the party.
Counsel for the plaintiff made two broad submissions insofar as the third and fourth defendants contend that the 18 January 2018 orders were made without affording them procedural fairness:
(1)First, it was said that the orders are not made as between the plaintiff and the third and fourth defendants; it was said that the orders are made as between the plaintiff and the first and second defendants and not against the third and fourth defendants. Accordingly, it was argued that the court did not need to hear from the third and fourth defendants before making the orders.
(2)Second, it was said that the third and fourth defendants were given a reasonable opportunity to present their case. The plaintiff contended that the third and fourth defendants engaged in the process to the extent that they wished to do so.
The first submission fails. Once regard is had to the use the plaintiff now seeks to make of the 18 January 2018 orders it cannot be doubted that the third and fourth defendants had a material interest in the making of those orders. The third and fourth defendants ought to have been afforded a reasonable opportunity of appearing and presenting their case against the declaratory relief as agreed by the other parties. That is, I consider, self‑evident insofar as the plaintiff now contends in substance that the third and fourth defendants are bound by the orders made on 18 January 2018.
The third and fourth defendants' defence to the plaintiff's claim is that the $410,000 was advanced to the first defendant pursuant to the alleged loan agreement and those funds were thus available to the first defendant for its immediate use. They contend that: (1) the funds were not held on trust; and (2) the application of the funds did not constitute a breach of trust. As the plaintiff's reply notes, those issues are already purportedly finally determined by the declaratory orders made 18 January 2018.
The suggestion that the orders are made as between the plaintiff and the first and second defendants only, not as against the third and fourth defendants, ignores the use that the plaintiff seeks to make of the orders. On the plaintiff's case the third and fourth defendants are to be shut out from litigating the defence they seek to advance by reason of the orders of the court made 18 January 2018. The plaintiff invokes both the concept of issue estoppel and abuse of process. To the extent that the plea is based in estoppel it must be contended that the third and fourth defendants are either a party to the orders of 18 January 2018 or are the privies of a party to the orders. In any case the suggestion that the orders are 'not against' the third and fourth defendants is hollow.
On the plaintiff's pleaded case the orders made on 18 January 2018 affect the rights of the third and fourth defendants. Accordingly, they should have been provided with a reasonable opportunity to appear and present a case against the making of the orders.
That brings me to the plaintiff's second submission. Ought it be accepted, as the plaintiff contends through counsel, that the third and fourth defendants were given a reasonable opportunity to present their case? Was there, as counsel puts it, fairness in terms of a hearing?
In my opinion the answer to that question is a resounding: 'No'. Relevantly:
(1)Despite the programming orders of 6 December 2018 and their solicitor's email of the same day, the third and fourth defendants were never served with affidavits and submissions which the plaintiff filed. For the reasons I have given that ought to have occurred.
(2)The third and fourth defendants were not consulted on the terms of the minute of proposed order pursuant to O 43 r 16. They should have been. A consent order under O 43 r 16 is to be filed by 'the parties to proceedings'. The third and fourth defendants were parties to the proceedings.
(3)The third and fourth defendants were not consulted on the terms of the email sent to the associate to the master which attached the minute and, in substance, sought that the hearing listed for 18 January 2018 be vacated.
(4) Due to the course followed by the solicitors for the plaintiff the hearing as listed for 18 January 2018 never proceeded. There was, in fact, no opportunity to be heard on the making of the orders. The orders were made without any apprehension on the part of the third and fourth defendants that there had been agreement by the other parties and submission of the minute to the court.
It is not to the point to say that the third and fourth defendants' solicitors knew of the 18 January 2018 hearing date. They also knew of the orders programming the filing and service of materials and their own request for service of the materials. Nothing was received. In the absence of materials being received it would be unsurprising that the hearing did not proceed. Indeed, most solicitors would have had that expectation. The master had already refused the application for default judgment and it would be expected that the same outcome would prevail in the absence of additional materials. There not having been service of the additional materials, the third and fourth defendants, by their solicitors, were justified in not following up and querying what, if anything, was occurring as to the 18 January 2018 hearing.

The plaintiff made the further submission that there was no evidence from which it could reasonably be inferred that the third and fourth defendants would have participated in any hearing or that their participation would have made a difference.
The difficulty with that submission is that it assumes that the third and fourth defendants had access to the material filed in support of the application. They did not. The failure to provide the materials was entirely due to the non‑compliance on the part of the plaintiff's solicitors. Had the materials been served there is a reasonable likelihood that the third and fourth defendants, properly advised, would have understood the possible consequences of the application for their defence and sought to be heard.
As to whether, had the third and fourth defendants sought to be heard, their participation would have made a difference, that will be a question for another day. Given the orders I am to make the issue will in due course be determined on its merits. The field should be left open for a real trial. The gravamen of this aspect of the inherent jurisdiction is that, having been denied natural justice, the third and fourth defendants ought now be afforded a reasonable opportunity to appear and present their case.
I am satisfied that, through no fault of their own, the third and fourth defendants have been deprived of a reasonable opportunity to appear and be heard against the making of the 18 January 2018 orders. Accordingly, I will make orders setting aside those orders of the court.

Conclusion and orders

I will order that:
(1)the orders of the court made 18 January 2018 are set aside; and
(2) the plaintiff's application for default judgment is otherwise listed for mention at the next directions hearing of this matter in the CMC List.
I will hear the parties as to costs.

I certify that the preceding paragraph(s) comprise the reasons for decision of the Supreme Court of Western Australia.
CC
RESEARCH ASSOCIATE TO THE HONOURABLE JUSTICE VAUGHAN
22 NOVEMBER 2018