VRS Pty Ltd v Buttigieg - [2020] SASC 200

SUPREME COURT OF SOUTH AUSTRALIA
(Civil)
VRS PTY LTD v BUTTIGIEG & ORS
[2020] SASC 200
Judgment of Judge Dart a Master of the Supreme Court
16 October 2020
PROCEDURE - CIVIL PROCEEDINGS IN STATE AND TERRITORY COURTS - ENDING PROCEEDINGS EARLY - DEFAULT JUDGMENT - JUDGMENT IN DEFAULT OF OTHER REQUIRED STEP
Matter listed for trial - applicant is second registered mortgagee - seeks to enforce mortgage - also seeks to enforce guarantees - respondents ordered to file trial affidavits on four occasions - no compliance - trial imminent - applicant seeks judgment in default of compliance with orders - application allowed in part.
Held:
1. Applicant entitled to order for possession of real property.
2. Trial vacated.
3. Balance of issues stood over for further consideration.
Uniform Civil Rules 2020 (SA) r 3.1, r 146.1; Supreme Court Civil Rules 2006 (SA) r 4, r 228(1), referred to.
Testel Australia Pty Ltd v KRG Electrics Pty Ltd & Anor [2013] SASC 91; AON Risk Services Australia Ltd v Australian National University [2009] HCA 27, considered.

VRS PTY LTD v BUTTIGIEG & ORS
[2020] SASC 200
JUDGE DART:

These reasons deal with an application to have the Court enter a default judgment against the respondents. The default is comprised of a persistent failure to comply with interlocutory orders to prepare the matter for trial. The application is allowed in part.
Background
The applicant lent monies to the first, second and third respondents pursuant to written terms of loan dated 19 April 2017. The loan was in the amount of $300,000 and the term of the loan was for six months, to expire on 20 October 2017. The fourth and fifth respondents gave guarantees in respect of the loan obligations of the borrowers.
The first and second respondents are the registered proprietors of land at Eight Mile Creek and also at Racecourse Bay. They gave a mortgage over the land as security for the loan. The loan expired and the principal sum was not, and has not, been repaid. Default notices were served on or about 8 February 2018. The first and second respondents did not comply with the default notices. These proceedings were commenced on 5 April 2018.
The applicant seeks possession of the two properties pursuant to its rights as mortgagee. It is the second registered mortgagee. Westpac has a registered first mortgage. Separately, the applicant seeks judgment in a dollar amount against all of the respondents, including the guarantors.
The applicant, by interlocutory application FDN 43 filed on 24 September 2020, sought default judgment in the matter. The matter was listed for trial before me for three days commencing on 20 October 2020.
On 6 April 2020 orders were made requiring the applicant to file its trial affidavits within 28 days. It did so. At the same time, the respondents were ordered to file their trial affidavits within 21 days of receipt of the applicant’s documents. Accordingly, the affidavits of the respondents should have been filed by late May.
The matter came back before the Court for directions on 17 June 2020. At that time no trial affidavits had been filed by the respondents. A further order was made extending the time for the respondents to file their trial affidavits to 14 July 2020. The matter was again before the Court on 17 July 2020. The respondents had still not filed their trial affidavits. An order was made providing a further 14 days within which to do so. The matter was listed for trial on that occasion. No further interlocutory hearings were anticipated.
The matter was called on, on 28 September 2020, as a result of the filing of the interlocutory application by the applicant. The interlocutory application sought judgment in default of compliance with the orders of the Court. On that day, the applicant was prepared to stand over the application to allow one further opportunity for the respondents to file their affidavits. An order was made allowing the respondents until 7 October 2020 to file their trial affidavits. The matter came on again on 9 October 2020. There were still no trial affidavits filed on behalf of the respondents.
The first respondent is an undisclosed bankrupt and the trustee did not oppose the orders sought. A possession order was previously made against the first respondent’s interest in the two properties. It is only the second and fourth respondents that are defending the claim.
The solicitor acting for the second and fourth respondents is embarrassed. He has not been able to procure his clients to file the affidavits. The applicant pressed the Court to deal with application FDN 43. The matter was stood over from last Friday. The respondents’ solicitor has now advised the Court that affidavits might be forthcoming if further time was allowed. The Court can have no confidence in that.
The application
The application seeks a wide range of default orders finalising the matter. The primary relief is for possession of land as a mortgagee. The relevant rule is rule 146.1:[1]
[1]    Uniform Civil Rules 2020.
146.1—Judgment in default of compliance
(1) If a party—
(a)     commits serious or persistent breaches of these Rules or an order of the Court which seriously prejudice the proper and expeditious conduct of an action;
(b)     fails to file a substitute originating process, pleading or affidavit within the time specified by the terms of leave granted under rule 70.3, 85.1 or 87.1; or
(c)     manifests an inability or unwillingness to prosecute or defend an action with due diligence,
another party may apply for default judgment against that party.
(2) An application for default judgment must be made by filing an interlocutory application and supporting affidavit in accordance with rule 102.1.
(3) If the party in default is an applicant in an action, the Court may—
(a)     stay the action until the non-compliance is rectified;
(b)     grant judgment dismissing the action;
(c)     list the matter for an early trial or hearing; or
(d)     make any other or further order as it thinks fit.
(4) If the party in default is a respondent or an interested party in an action, the Court may—
(a)     grant judgment in favour of the applicant for some or all of the relief sought;
(b)     grant judgment in favour of the applicant for damages or relief to be assessed;
(c)     order that an interested party be removed as a party to the action;
(d)     list the matter for an early trial or hearing; or
(e)     make any other or further order as it thinks fit.
It is subrules 146.1(1)(a) and (c) that are applicable on the facts of this matter. The second and fourth respondents have committed serious and/or persistent breaches of an order of the Court which seriously prejudices the proper conduct of the action by failing to file their trial affidavits. They have had the applicant’s trial affidavits for five months. They have been ordered on four occasions to file the affidavits. They have not done so. There is no affidavit before the Court explaining the failure. The matter is listed for trial next week.
The applicant says that, if affidavits are received in the next few days, it will be seriously prejudiced and that the trial would need to be vacated. The second and fourth respondents have manifested an unwillingness to defend the action with due diligence. It is clear that both provisions apply.
The critical question is what the Court should do in the circumstances. By subrule 146.1(4) the Court is given a power to enter judgment for some or all of the relief sought. That is the power the applicant seeks to have the Court exercise. The jurisdiction is enlivened. The question is whether it should be exercised and what would be the most appropriate way to exercise it.
The Supreme Court Civil Rules 2006 contained a similar provision.[2] That rule provided that, if a party committed a procedural irregularity that seriously prejudiced the proper and expeditious conduct of an action, the Court could enter a default judgment. Procedural irregularity was defined in those rules as including a failure to comply with an order.[3] In Testel Australia Pty Ltd v KRG Electrics Pty Ltd & Anor[4] Blue J said in relation to that rule:
[29] While the power conferred by r 228 should only be exercised as a last resort, given the extent and importance of the failures by the defendants to comply with their obligations over a prolonged period coupled with their failure to take any active part in the action after 17 September 2012, it is appropriate that I exercise my discretion under r 228 and proceed to consider the relief to which Testel is entitled in accordance with the approach identified at [11]–[16] above.
[2] Rule 228(1).
[3] Supreme Court Civil Rules 2006 rule 4.
[4] [2013] SASC 91.
In AON Risk Services Australia Ltd v Australian National University[5] the High Court was considering the exercise of a discretion to allow an amendment of a pleading at a late stage. In that case, French CJ said:
[5] In the proper exercise of the primary judge's discretion, the applications for adjournment and amendment were not to be considered solely by reference to whether any prejudice to Aon could be compensated by costs. Both the primary judge and the Court of Appeal should have taken into account that, whatever costs are ordered, there is an irreparable element of unfair prejudice in unnecessarily delaying proceedings. Moreover, the time of the court is a publicly funded resource. Inefficiencies in the use of that resource, arising from the vacation or adjournment of trials, are to be taken into account. So too is the need to maintain public confidence in the judicial system. Given its nature, the circumstances in which it was sought, and the lack of a satisfactory explanation for seeking it, the amendment to ANU's statement of claim should not have been allowed. The discretion of the primary judge miscarried.
[5] [2009] HCA 27.
The considerations raised by French CJ are applicable here. It is also important to note that the present rules impose overarching obligations on parties in the conduct of litigation. Relevantly, the rule provides:[6]
[6]    Uniform Civil Rules 2020.
3.1—Overarching obligations
(1) A party must in relation to a proceeding or an appellate proceeding—
(a)     act honestly;
(b)     not engage in misleading conduct;
(c)     not take a step that is frivolous, vexatious or an abuse of process;
(d)     not make an assertion or response to an assertion for which they do not, on the material available at the time, have a proper basis;
(e)     not take a step unless they reasonably believe that it is necessary to facilitate the resolution or determination of the proceeding;
(f)      cooperate with the other parties and with the Court in relation to the conduct of the proceeding;
(g)     use reasonable endeavours to resolve, or alternatively narrow the scope of, a dispute in or the subject of the proceeding by agreement;
(h)     use reasonable endeavours to ensure that the time and costs incurred are reasonable and proportionate to—
(i) the importance and value of the subject matter of the proceeding or step in the proceeding;
(ii) the complexity of the issues in the proceeding or step in the proceeding;
(i)      comply with these Rules and orders made by the Court;
(j)      be prepared for and ready to proceed with a hearing, directions hearing or trial at the appointed time; and
(k)     use reasonable endeavours to act promptly and minimise delay.
The second and fourth respondents have breached some of their obligations to the Court. In particular, it would seem that rules 3.1(1)(i) and (j) have not been complied with.
What is apparent is that the power given by rule 146 should be exercised cautiously and only as a last resort. The AON case shows that, in exercising discretions in relation to the conduct of proceedings, the Court should have regard to broader considerations than merely the respective interests of the parties to the litigation. The purposes of rule 146.1 might be described as allowing the Court:
1.To protect the integrity of its processes;
2.To do justice between the parties;
3.To maintain public confidence in the judicial system; and
4.To ensure the efficient use of publicly funded resources.
In any given matter, it might be that one or other of the purposes becomes the major consideration, but all four of the purposes are relevant to the exercise of the discretion.
The second and fourth respondents have not complied with their obligations under the rules and, more concerningly, have not complied with direct orders of the Court to prepare the matter for trial. That conduct seriously prejudices the proper and expeditious of an action. The matter would most likely need to be adjourned if affidavits were provided at this late stage. The question of maintaining public confidence in the judicial systems arises, as does the issue of the efficient use of publicly funded resources. It is appropriate to make orders on the application.
In considering what orders to make pursuant to rule 146, the Court should do the minimum necessary to rectify the prejudice caused by the failure of the respondents to comply with orders of the Court. The principal relief sought by the applicant is an order for possession of the two properties. Other orders are sought on the guarantees and a judgment for a monetary sum is also sought. The justice of the situation is met by making the order for possession and standing over the balance of the issues. Once the properties are sold, it may be that, if the debt is repaid in full, the other issues will fall away.