Westpac Banking Corporation v Garrett - [2004] SASC 265

SUPREME COURT OF SOUTH AUSTRALIA
(Applications Under Various Acts or Rules)
WESTPAC BANKING CORPORATION v GARRETT & ORS
Judgment of The Honourable Justice White
6 September 2004
PROCEDURE - JUDGMENTS AND ORDERS - AMENDING, VARYING AND SETTING ASIDE - ACTIONS TO REVIEW OR SET ASIDE JUDGMENT
Default judgment entered against defendants - Judgment was expressed to be entered against defendants in their personal capacities and in capacities as trustees - This constituted an irregularity in the judgment - Consideration of discretion to amend judgment to remove irregularity - Consideration of requirement that representative capacity be endorsed on the summons - A trustee acts in a personal capacity rather than representative capacity - Failure to endorse capacity as trustee on summons was not an irregularity - Defendant foreshadowed reasonably arguable defence on the merits - Default judgment set aside.
Supreme Court Rules 9.04, 23.04, 30.02, 53.10, 84.12; Trade Practices Act 1974, s 52, s 87, referred to.
Octavo Investments Pty Ltd v Knight (1979) 144 CLR 360; Watson v Anderson (1976) 13 SASR 329; Fairclough v Strathmont Haulage Pty Ltd (1981) 28 SASR 456, applied.
General Credits Ltd v Tawilla Pty Ltd [1984] 1 Qd R 388; Finnegan v Cementation Co Ltd [1953] 1 QB 688; Associated Japanese Bank (International) Ltd v Credit Du Nord SA [1989] 1 WLR 255; McRae v Commonwealth (1951) 84 CLR 377; Taylor v Johnson (1983) 151 CLR 422; Sargent v SAL Developments Ltd (1974) 131 CLR 634; Official Receiver v Feldman (1972) 4 SASR 246; Helvetic Investments Corp Pty Ltd v Knight (1984) 9 ACLR 773; Elders Trustee and Executor Co Ltd v E G Reeves Pty Ltd (1998) 78 ALR 193; ANZ Banking Group v Kostovski SC Vic, Chernov J, 2 July 1997, urep'd BC 9703266; CBA v Buffett (1993) 114 ALR 245; Gemini Property Investments v Woodards Investments [2000] SASC 210; ; Building Guarantee and Discount Company Ltd v Dolejsi [1967] VR 764; City Mutual Life Assurance Society Ltd v Giannarelli [1977] VR 463; ANZ Banking Group Ltd v Luck (1995) 4 Tas R 328; Cooper v Williams [1963] 2 QB 567; Woolworths (SA) Pty Ltd v Cauchi [2001] SASC 48; Metroinvest Anstalt v Commercial Union Assurance Co PLC [1985] 2 All ER 318; JW Carter "An Uncommon Mistake" (1991) 3 JCL 237, considered.

WESTPAC BANKING CORPORATION v GARRETT & ORS
[2004] SASC 265
WHITE J
Introduction and Background

The defendants apply, pursuant to SCR 23.04, to have the judgment entered against them in these proceedings in default of their appearance set aside.
Pursuant to an agreement entered into on 20 November 2002 (“the hire agreement”), the plaintiff (“Westpac”) agreed to hire specified equipment (“the equipment”) to Braidwood Operations Pty Ltd (“Braidwood”) in consideration, principally, of Braidwood paying to it 36 monthly payments of rental. Each of the defendants to these proceedings (along with others) provided guarantees to Westpac in respect of Braidwood’s obligations. The first defendant (Mr…

Grounds of appeal

[14] The appellant contends that the primary judge erred in finding that the respondent had discharged the onus of establishing the matters required under the relevant provision.

[15] It was submitted that his Honour failed to give adequate weight to the evidence of the second witness, and that the findings of fact were not reasonably open on the material before the Court.

[16] The respondent, for its part, submits that no error is disclosed, and that the conclusions reached were well within the range of outcomes available to the primary judge.

Consideration

[17] It is convenient to deal first with the question of construction, as the resolution of that issue informs the remaining grounds advanced by the appellant.

[18] For the reasons that follow, we are of the view that the appeal should be allowed in part and the matter remitted for further determination.

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Details

Case: [2004] SASC 265
Decision Date: 6 September 2004

CaseChat Overview and Summary

The case of Westpac Banking Corporation v Garrett involved a dispute where default judgment was entered against the defendants, including Mr Garrett in his personal capacity and as a trustee. The plaintiffs sought to set aside the default judgment on the grounds that it was entered irregularly. The key issues for the court were whether the judgment could be amended to correct the irregularity, and whether the requirement to endorse the representative capacity on the summons was necessary. The court found that while the inclusion of Mr Garrett as a trustee in the judgment was irregular, the failure to endorse the capacity as trustee on the summons was not. Furthermore, the defendants had foreshadowed a reasonably arguable defence on the merits. Consequently, the court exercised its discretion to set aside the default judgment to allow the defendants to defend the action.

The court examined the procedural aspects of the case, focusing on the nature of the irregularity in the judgment and the appropriate remedy. It noted that the entry of judgment against a defendant in their capacity as a trustee was an irregularity, as trustees generally act in a personal capacity rather than a representative one. However, the court found that the failure to specify the representative capacity on the summons did not constitute an irregularity. The court also considered the merits of the defence presented by the defendants, which included the argument that the trustee acted in a personal capacity. This argument was deemed reasonably arguable, influencing the court's decision to set aside the judgment.

In setting aside the default judgment, the court emphasised the importance of allowing the defendants to present their defence on the merits. The court recognised that the only identified prejudice to the plaintiffs was the potential for costs, which could be addressed by an order for costs. Therefore, setting aside the judgment was considered appropriate to ensure that the defendants could defend the action. The court's decision was based on the balance between correcting procedural irregularities and allowing a fair opportunity for the defendants to contest the claim.

The final orders of the court included setting aside the default judgment against the defendants, including Mr Garrett in his personal capacity and as a trustee. The court directed that the defendants be allowed to defend the action and that the matter proceed to trial. Additionally, the court considered making an order for costs in favour of the plaintiffs, but this was subject to the outcome of the defence. The setting aside of the judgment aimed to rectify the procedural irregularity and provide a fair opportunity for the defendants to address the plaintiffs' claims.

Orders

Orders of the court

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Background

Background to the litigation

It appears that Mr Garrett is the moving force in the two corporate defendants. In addition, Mrs Garrett deposed to having left the decision-making with respect to the litigation to her husband, and that she was accustomed to signing documents presented to her for signature relying on his intimation that it was in order to do so.Background Circumstances In about July 2002, Sunburst Properties Pty Ltd (“Sunburst Properties”), a member of a group of companies associated with Mr Garrett, leased a vineyard know as the Fernando Estate Vineyard from a Mr Victor Vallesi. A vineyard had, at that time, already been established on the property. At the same time, Braidwood (which was also a member of the group of companies associated with Mr Garrett) agreed to purchase the plant and equipment as well as the goodwill of the business conducted by Mr Vallesi on the Fernando Estate Vineyard. Having entered into those transactions, Braidwood sought to raise more capital. It retained a finance broker, Pacific Royal Finance Pty Ltd, for this purpose. Braidwood obtained two valuations to assist in the obtaining of finance. The first was dated 11 July 2002 and was a market valuation. The second was dated 9 November 2002 and was an estimated auction realisation valuation. Each valuation purported to be a valuation of the entire plant and equipment on the Fernando Estate Vineyard, including a large quantity of bird netting. The market valuation of the plant and equipment in July 2002 was $437,170. Of that valuation, the bird netting was valued at $175,000. The estimated auction realisation valuation of the plant and equipment was $257,240 of which the bird netting was valued at $80,000. An entity associated with Pacific Royal Finance Pty Ltd (Terrain Finance Pty Ltd) sought expressions of interest from various financiers including Westpac. The request for expression of interest stated that a facility was required “to assist with the purchase” of all the equipment specified in the two valuations, other than the bird netting. In respect of the latter, it was said that the facility was required “to assist with the finance of approximately 85 acres of double and single row bird netting”. It is unclear why this differentiation was made between the two forms of equipment. On 11 November 2002, Westpac offered “to fund by way of sale and hire purchase back the recent purchase of various plant and equipment associated with the purchase of the Fernando Estate Vineyard in the Yarra Valley”. It is plain that the Westpac proposal proceeded on the assumption that all of the equipment, including the netting, was to be the subject of the sale and hire purchase back. When Westpac wrote to Terrain Finance on 11 November 2002 offering the facility, it said that the facility was for the sum of $257,240 in respect of equipment described as “various plant and equipment as per valuation dated 7 November”. That is to say, the Westpac proposal did not differentiate between the equipment and the netting as had the request from Terrain Finance.

Evidence

Evidence Before The Court

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Decision

Reasons for decision

In the alternative, it was submitted that the defendant did have an arguable defence. That being so, as the only prejudice identified by Westpac to have been caused by the defendant’s delay was one which could be cured by an order for costs, it was submitted that it would be appropriate for the judgment to be set aside so that the plaintiff’s action might be defended.Judgment Against a Defendant in its Capacity as a Trustee In the request for expression of interest in providing a finance facility, Terrain Finance indicated that security was offered to the financier by a hire purchase over “the abovementioned equipment”[1] supported by guarantees from various persons and entities but including, relevantly, “Andrew Morton Garrett, Averil Gay Garrett, Andrew Morton Garrett and Averil Gay Garrett ATFT Andrew Garrett Family Trust, Andrew Garrett Wine Resorts Pty Ltd ATFT Springwood Park Unit Trust and Garrett International Investments Pty Ltd”.[1]As the Terrain Finance document distinguished between the equipment specified in s (a) and the netting specified in (b), it is possible that Terrain Finance was proposing that the netting should not have been part of the hire purchase arrangement, but that is not the way in which Westpac appears to have understood the request. In the Schedule to the Commercial Hire Purchase Agreement executed on 20 November 2002, the same persons were named as guarantors, and described in the same way as in the Terrain Finance request, but the address for each was also shown. That address, in each case, was “Main House, Springwood Park, Mount Barker Road, Leawood Gardens, South Australia 5150”. The execution page of the guarantee made provision for separate signatures by Mr and Mrs Garrett and each placed their signature in the appropriate place. The execution page also made provision for signature by Mr Garrett as trustee for the Andrew Garrett Family Trust. Mr Garrett entered a separate signature on the execution page in his capacity as trustee of that Trust. Likewise, the execution page contained a separate space for signature by Mrs Garrett in her capacity as trustee for the Andrew Garrett Family Trust. Mrs Garrett entered her signature in the appropriate place on the execution page for signature in that capacity. Mr Garrett also signed on behalf of Andrew Garrett Wine Resorts Pty Ltd but there was nothing on the execution page to indicate that Andrew Garrett Wine Resorts Pty Ltd was signing both in its own capacity and as trustee for Springwood Park Unit Trust. Finally, Mr Garrett signed the guarantee on behalf of Garrett International Investments Pty Ltd. In General Credits Ltd v Tawilla Pty Ltd [1984] 1 Qd R 388, McPherson J declined to enter a judgment by consent against two defendants who were named twice in the draft judgment. The second statement of the name of these two defendants was followed by the words “as trustee of [a named] family trust”. The words “as trustee of …” were found by McPherson J to be intended to give the judgment creditor direct access to the trust assets. A judgment giving such access ought not to be given, it was held, because of the principle that a creditor has no direct right of recourse against trust assets. Whether or not the trustee is entitled to be indemnified from the trust assets depended upon a number of factors which had not been established at the time the judgment was to be entered, eg, whether the incurring of the liability by the trustee was authorised or properly incurred and whether, through some misapplication of trust assets, the trustee was in debit in the trust accounts, and so on. Therefore it was held that the addition of the words “as trustee of the [named] trust” was not a proper method of ordering that satisfaction of the judgment be made from the trust assets.

Ratio Decidendi

Legal Principle Established

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