Woolf v Sharma
[2024] WADC 68
•15 AUGUST 2024
JURISDICTION : DISTRICT COURT OF WESTERN AUSTRALIA
IN CIVIL
LOCATION: PERTH
CITATION: WOOLF -v- SHARMA [2024] WADC 68
CORAM: CURWOOD DCJ
HEARD: 15 AUGUST 2024
DELIVERED : 15 AUGUST 2024
FILE NO/S: CIV 4540 of 2022
BETWEEN: MAREE JOAN WOOLF
Plaintiff
AND
HEMANT SHARMA
First Defendant
ARUNDHATI RAO PUSKOOR
Second Defendant
Catchwords:
Appeal from Deputy Registrar's order setting aside default judgment - Default judgment irregular - Second defendant raised good defence on the merits - Whether plaintiff's claim is beyond the jurisdiction of the District Court
Legislation:
District Court Rules 2005 (WA)
Rules of the Supreme Court 1971 (WA)
Trustees Act 1962 (WA)
Result:
Appeal dismissed
Representation:
Counsel:
| Plaintiff | : | Dr C K Edwards |
| First Defendant | : | No appearance |
| Second Defendant | : | Ms K M Woods |
Solicitors:
| Plaintiff | : | Delta Legal |
| First Defendant | : | Not applicable |
| Second Defendant | : | Michael Paterson & Associates |
Case(s) referred to in decision(s):
ABB Service Pty Ltd (formerly known as ABB Engineering Constructions Pty Ltd) v Hetherington [2001] WASCA 235
Barrymores Pty Ltd v Harris Scarfe Ltd (Administrators Appointed) (Receivers & Managers Appointed) [2001] WASC 210
Belgravia Nominees Pty Ltd v Lowe Pty Ltd [No 3] [2015] WASC 442
Browning v Australia and New Zealand Banking Group Ltd [2014] QCA 43
Chianti Pty Ltd v Leume Pty Ltd [2007] WASCA 270; (2007) 35 WAR 488
Kamath v Allight Sykes, Landsdale [2019] WADC 98
Murray v Mydomaine Pty Ltd [2016] WADC 109
Ogbonna v Programmed Integrated Workforce Ltd [No 2] [2022] WASCA 79
RT Co Pty Ltd v Minister of State for the Interior (1957) 98 CLR 168
Starrs v Retravision (WA) Ltd [2012] WASCA 67
Stone James v Pioneer Concrete (WA) Pty Ltd [1985] WAR 233
TSW Analytical Pty Ltd v The University of Western Australia [2017] WASCA 67
Woolf v Sharma [2024] WADC 27
CURWOOD DCJ:
[This judgment was delivered extemporaneously on 15 August 2024 and has been edited from the transcript.]
Introduction and Overview
This is an appeal against an order of Deputy Registrar Harman (Deputy Registrar) made on 11 April 2024 in which the Deputy Registrar allowed an application by the second defendant to set aside a default judgment which was entered on 21 September 2023.
The Deputy Registrar concluded that the default judgment that was entered was irregular and accordingly should be set aside.
As a consequence of the Deputy Registrar concluding that the default judgment was irregularly entered, no consideration was undertaken of the second defendant's defence to the claim. However, for the hearing before the Deputy Registrar both parties put on affidavit material. For the reasons I will shortly outline, I consider that the affidavit material disclosed that the second defendant had a reasonably arguable defence on the merits to the plaintiff's claim. Further, that the affidavit evidence relied upon by the second defendant was not inherently credible.
On 19 April 2024, the plaintiff filed a notice of appeal of the Deputy Registrar's decision. By the appeal notice, the plaintiff seeks an order that the second defendant's application to set aside the default judgment be dismissed, with costs. Since the appeal was filed, the plaintiff has filed a statement of claim, and the second defendant has filed a defence to the statement of claim. For reasons which I will shortly turn to, the defence appears to me to raise triable issues, namely a reasonably arguable defence.
For the reasons that follow, I consider that the appeal should be dismissed. I consider that the Deputy Registrar was entitled to conclude that the judgment entered was irregular. Moreover, the second defendant has raised a reasonably arguable defence on the merits to the plaintiff's claim and the case should proceed through the normal pre-trial processes to a trial, if it cannot be resolved informally.
Nature of irregular default judgment
In broad terms, for a default judgment to be regular, it must strictly comply with the court's rules and be for the relief, to which the plaintiff is entitled on the face of an indorsement of claim or any pleading. The record must show the plaintiff to have a right to judgment, and the judgment entered must follow the relief claimed. If these requirements are not met, the judgment is irregular, and it will be set aside.[1] Almost any failure to comply with the court's rules renders a default judgment irregular.
[1] Cairns B, Australian Civil Procedure (12th ed, 2020) [13.290]: RT Co Pty Ltd v Minister of State for the Interior (1957) 98 CLR 168.
Where a default judgment is irregularly entered, the judgment 'ought not be on the records of the court and if a judgment in default of appearance that has been entered irregularly, it will be set aside as of right ex debito justitiae' regardless of a defence on the merits.[2]
[2] Starrs v Retravision (WA) Ltd [2012] WASCA 67; Browning v Australia and New Zealand Banking Group Ltd [2014] QCA 43 [23] - [30].
The Deputy Registrar concluded that there were four reasons why the default judgment entered was irregular:
1.The indorsement of claim contained on the amended writ of summons was deficient in that it failed to properly identify a cause of action against the second defendant.[3]
2.The orders made by the court on 6 June 2023 for substituted service did not extend the time of 10 days for the second defendant to enter an appearance in accordance with the writ, failing to accommodate the period between the date of posting the writ by way of substituted service and delivery or receipt of the writ after posting. As such, because the writ was deemed to be served on the date of its posting, the time in which the second defendant had to appear by filing an appearance to the writ at the District Court abridged the 10-day period allowed for the entry of an appearance.[4]
In this respect, the wording of a substituted service order made 6 June 2023 did not:[5]
(i)establish effective service of the writ on the second defendant for the purposes of compliance with O 9 of the Rules of the Supreme Court 1971 (WA) (RSC) by failing to specify that service in accordance with the orders would be 'good and sufficient' service of the writ of summons on the defendant;
(ii)dispense with the requirement under O 9 r 1(4) of the RSC which requires an indorsement on the writ within three business days of service.
3.The orders of 6 June 2023 were varied by a later order of 8 August 2023. Until the second dependant had been informed of the later order, the plaintiff could not establish a default of appearance.[6]
4.The plaintiff or her solicitor did not comply with the requirement under O 9 r 1(4) and endorse on the writ, details of service.
[3] Woolf v Sharma [2024] WADC 27 (Primary reasons) [14] ‑ [16].
[4] Primary reasons [17] - [20].
[5] See Primary reasons [22] - [24].
[6] Primary reasons [25] - [27].
To say that there are technical arguments about the entry of judgment is somewhat of an understatement. Of some concern to me is the fact that this appeal is being heard more than four months after the order setting aside the judgment was made. The appeal is being heard in a context where the proceedings have progressed. A statement of claim has been filed. The second defendant has filed a defence. That defence is largely in terms of the affidavit evidence filed by the second defendant in her application to set aside the judgment, which set out her defence on the merits, is also a matter of some concern.
Procedural history - issue of proceedings and entry of judgment
On 18 October 2022, the plaintiff filed her writ of summons. Three days later, the plaintiff filed an amended writ. The amendments did not substantially change the content of the writ, but rather amended the first defendant's name to include other alias', as well as amending a minor grammatical error.
On 19 May 2023, the plaintiff filed a summons seeking leave for substituted service. A supporting affidavit of the plaintiff's solicitor, Mr Edwards, was also filed stating that AAC Process Servers and Investigators attempted to serve the second defendant six times between 16 November 2022 - 10 January 2023, however they were unable to locate her.
On 6 June 2023, a registrar granted leave for substituted service against both defendants by allowing service of the writ and orders made through registered post and by advertisement in The West Australian and The Australian newspapers.
On 5 July 2023, the plaintiff's solicitors wrote to the court requesting clarification of the requirement to advertise the writ and orders made. The plaintiff noted that to advertise the entirety of the writ and orders made would be of great expense and impracticality, and queried whether the orders may be amended to display a notice sufficient to identify the writ. A summons and supporting affidavit were filed shortly after requesting those amendments to the orders.
On 8 August 2023, a registrar amended the orders to dispense with the requirement to advertise the notice in the newspapers.
On 22 August 2023, the plaintiff applied for a default judgment against the defendants. The application was supported by an affidavit of the plaintiff's solicitor. In this respect, the plaintiff's position was that the writ and orders were sent by registered post.
Annexed to the supporting affidavit of 22 August 2023 was the writ, with the indorsement as to service being left blank.
On 18 September 2023, the plaintiff filed two further affidavits of her solicitor of substituted service, supporting the entry of the default judgment against the defendants. In this, the plaintiff accepts that although being aware of the terms of O 9 r 1(1) of the RSC, the plaintiff still had some uncertainty on how indorsement of service was to occur, given that the service was substituted and effected by the orders made by the registrar. The plaintiff provides that the indorsement of service was completed on 8 August 2023 being the same day the registrar dispensed the requirement to publish a notice of writ in the newspapers.
The indorsement of service was seemingly signed in court when the order by the registrar was made. Annexed to the affidavit includes an indorsement of service that was completed on 8 August 2024, and provides a note stating 'being the first date of which all steps for substituted service were complete'.
Default judgment was entered against the second defendant on 21 September 2023. The judgment entered was for unliquidated damages, whereby the second defendant pay the plaintiff the value of the damages to be assessed.
Events after judgment was entered
On 4 October 2023, the plaintiff filed a chamber summons and supporting affidavit seeking leave for substituted service of the judgment against the first and second defendants.
On 3 November 2023, a registrar dismissed the plaintiff's chamber summons for substituted service of the judgment.
On 12 December 2023, the plaintiff then filed a letter requesting a directions hearing for the assessment of damages pursuant to O 13 r 3(a) of the RSC be listed. The letter to the court explained that the process server had notified the plaintiff that they served the default judgment upon the second defendant. There was no documentary evidence for this.
Second defendant applies to set aside default judgment
On 18 January 2024, the second defendant filed a summons for orders to set aside the default judgment made on 21 September 2023. This was filed together with a certificate of conferral, and affidavits of Arundhati Rao Puskoor, the second defendant, and her brother Vijaykumar Maknoor Roa (Mr Vijay Roa).
The second defendant deposed that she was unaware of the proceedings against her until she was handed a copy of the order for the entry of default judgment on 22 December 2023 by a process server.[7] She further deposed that between 6 November 2022 and 4 February 2023, the time in which the process servers were attempting to contact her, she was in Melbourne visiting her son. She deposed that there were no documents left for her when she returned to her home address.[8] The plaintiff claims two envelopes were sent by post, however the second defendant was unable to obtain confirmation from Australia Post as to whether the envelopes were delivered and denies ever receiving any envelope containing the writ.[9]
[7] Affidavit of Arundhati Rao Puskoor, par 5.
[8] Affidavit of Arundhati Rao Puskoor, pars 8 - 14.
[9] Affidavit of Arundhati Rao Puskoor, pars 14 - 18.
Based upon these matters, that would be an appropriate explanation for the delay in filing an appearance to the writ for the purposes of an application to set aside default judgment. Upon becoming aware of the proceedings, the second defendant promptly engaged and instructed lawyers to apply to set aside the judgment. I accept that she was not aware of the proceedings before 22 December 2023. With respect to the merits of the proceedings, the second defendant also deposed to a number of matters.
In her affidavit, the second defendant deposes with respect to the merits of her defence the following:
1.Her brother, Mr Vijay Roa, informed her of a person known as Hemant Sharma, also known as Kuvera Sharma and Venn Sharma in 2012 or early 2013, and that Hemant Sharma was a property developer.
2.She was told various other matters about Mr Sharma by her brother including that Sharma's grandmother, both his parents and other family members live in Perth and follow the Hindu religion and that she believed that Hemant Sharma's family members are God-fearing people.[10]
[10] Affidavit of Arundhati Rao Puskoor, pars 21 - 25.
3.Sometime in 2014 Mr Vijay Roa told the second defendant that Hemant Sharma:
(a)had discussed with Mr Vijay Roa an investment opportunity;
(b)was buying a large block of land at 39 Gerard Street East Cannington;
(c)planned to subdivide that land;
(d)had told him that he was already working closely with a few investors including Hemant Sharma's other family members, parents, brother-in-law and his sister, to fund the purchase of the land and the subdivision;
(e)had asked Mr Vijay Roa to invest as well because he had a shortfall of $450,000; and
(f)had told Mr Vijay Roa that he would get a 30% return within 6 - 12 months.
4.Further, in early August 2014 Mr Vijay Roa told the second defendant that Hemant Sharma had come to see him crying and pleading and advising that he had fallen out with a couple of his investors and he would lose a deposit of $150,000 for the purchase of the land if he could not raise what was left to pay, being $450,000, to allow him to proceed to settlement for the land.[11]
5.The second defendant decided to help Hemant Sharma and invest in the project. Mr Vijay Roa showed to the second defendant a copy of the contract of sale of land for $1,450,000 which is Attachment E to the affidavit. That document is the face page of a standard contract for sale of land by offer and acceptance. It shows the named purchaser as being 'Kuvera Sharma on behalf of Prosperity Property Pty Ltd'.[12]
6.The second defendant deposes that she agreed to invest in the purchase and development of the land so that Hemant Sharma would not lose his deposit, and in doing so relied on the information about Hemant Sharma and his family replacing the money within 6 - 12 months.[13]
7.On 5 August 2024 the second defendant transferred $450,000 from her Westpac bank account to the trust account of a law firm, Westmont Legal.
8.On 23 April 2024 a sale date was entered for the property at 39 Gerard Street, East Cannington with the purchaser being Australian Land Development Pty Ltd.[14]
9.In September 2014 the second defendant, after her brother Mr Vijay Roa arranged for her to do so, signed a Deed of Appointment of Trustee to be co-trustee with Hemant Sharma of the Prosperity Property Unit Trust. The second defendant deposes that Mr Vijay Roa told her that he believed that her being appointed as a co-trustee would secure her interest in the investment. The Deed of Appointment was prepared by Mr Gavin Jahn from Westmont Legal and the second defendant does not have a copy of it.[15]
10.The second defendant further deposed that she does not understand what it means to be a co-trustee, that she has never signed any documents in her capacity as co-trustee, has never met or even heard of the plaintiff until being named as a defendant to the action.
[11] Affidavit of Arundhati Rao Puskoor, par 26.
[12] The name is illegible.
[13] Affidavit of Arundhati Rao Puskoor, par 32.
[14] Affidavit of Arundhati Rao Puskoor, par 37 and Attachment G, page 34, albeit Attachment G does not record the identity of the owner from my reading.
[15] Affidavit of Arundhati Rao Puskoor, pars 38 - 40.
An affidavit was also filed on behalf of the second defendant by her brother Mr Vijay Rao, which was sworn on 18 January 2024. In effect, Mr Vijay Rao confirms the matters that the second defendant says that he informed her of, and which are referred to in her affidavit. Most notably:
1.Mr Vijay Roa deposes that the first page of the contract for the sale of land refers to the purchaser being Mr Sharma on behalf of Prosperity Pty Ltd for a sum of $1,450,000 with the settlement date of 1 August 2014.
2.The second defendant paid on 5 August 2014, $450,000 to the trust account of Westmont Legal.
3.Around two weeks after the money was transferred, the solicitor Mr Gavin Jahn said it would take four to six weeks to transfer the title to the unit trust but a later title search disclosed, and he discovered after that time, that Australian Land Development Pty Ltd purchased the land for $1,100,000.
4.A deed of appointment of the second defendant as co-trustee was prepared by Westmont Legal and signed by the second defendant.
5.He has not had any updates from Mr Sharma after 2016 or 2017.
6.The property has been sold for $600,000 in 2023.
In response to the application to set aside the default judgment, the plaintiff swore an affidavit on 16 February 2024 which attaches a number of documents. Relevantly in that affidavit Ms Woolf deposes that:
1.She first met the first defendant, Mr Sharma, on or around June 2014, she had a number of meetings and communications with him in which he convinced her to take out a loan for $140,000 in order to invest in a unit trust. Mr Sharma promised her that she would receive a 30% return after six months on whatever amount she invested.[16]
2.On 18 August Mr Sharma emailed a sample Unit Trust Deed for the Prosperity Property Unit Trust.
3.On 20 August 2014 Mr Sharma sent a draft deed which misspelt her name as Marie.[17]
4.On 21 August 2014 she received an email from Mr Sharma forwarding the correct deed in which he asked her to sign and return page 39 which she did.[18]
5.On 21 August 2014 she deposited $140,000 to Sharma's bank account. In this respect Attachment 1 to the affidavit (at page 5) records a NAB account of Kuvera Sharma ending in 9380. That accords with the receipt at page 109 of the affidavit.
[16] Affidavit of Maree Joan Woolf, par 4.
[17] Affidavit of Maree Joan Woolf, par 7.
[18] Affidavit of Maree Joan Woolf, par 9 and pages 106 ‑ 107.
Based upon this affidavit evidence, there seems to be a number of issues which would give rise to a good defence on the merits:
1.Whether the $140,000 paid by the plaintiff became an asset of the Prosperity Property Unit Trust at all.
2.Closely aligned to 1 above, did the first defendant receive the $140,000 from the plaintiff in his personal capacity or as trustee of the Prosperity Property Unit Trust?
3.Whether the Gerard Street property became a trust asset, whether in its own right, or through owing shares in the company Australian Land Development Pty Ltd.
4.If at the time the Deed of Appointment of Trustee was executed, purportedly appointing the second defendant as a co- trustee of the Prosperity Property Unit Trust, whether the trust subsisted and, if so, what assets it owned or had control of.
5.If the second defendant became a co-trustee of the Prosperity Property Unit Trust, what assets, if any, did the trustees of that trust hold as at the date of the second defendant's appointment of co‑trustee of that trust in circumstances that:
(a)the property purchase seems to have been purchased in the name of Australian Land Development Pty Ltd; and
(b)there is also no indication that the first defendant acquired the property, as the only available indication of the contract is that a company called Prosperity Property Pty Ltd was named as the buyer.
It seems to me that these are factual issues which could only be determined at trial.
The pleadings filed by the parties since the default judgment was set aside
As I have noted, since the Deputy Registrar's orders on 11 April 2024 were made, the parties have filed pleadings. In the next paragraphs, I outline the substance of the plaintiff's statement of claim and the second defendant's defence.
In summary the plaintiff's claim is as follows:
1.On 21 August 2014 the plaintiff paid $140,000 to a bank account nominated by the first defendant.
2.Before making the payment of $140,000 the plaintiff had had discussions with the first defendant and had exchanged emails. According to her statement of claim the plaintiff says that the first defendant made representations to her about an investment in a unit trust known as the Prosperity Property Unit Trust and that if she invested money in that trust she would receive a 30% return after six months on whatever amount she invested.
3.Further in return for her investment the first defendant would purchase and develop a property at 39 Gerard Street, East Cannington and that a company associated with the first defendant, Australia Land Development Pty Ltd, would become the registered title holder of the land.
4.Within six months of that purchase, by about 6 February 2015 the plaintiff would receive a refund of her $140,000 plus 30% profit.
5.On 20 August 2014 the first defendant sent the plaintiff a draft deed for the Prosperity Property Unit Trust and on 21 August 2014 in reliance upon the representations made, the plaintiff entered into an agreement by way of a deed for investment as a unit holder in that unit trust.[19]
[19] Statement of claim, pars 8 and 9.
6.Paragraph 11 of the statement of claim then pleads that the first defendant's representation to the plaintiff resulted in the plaintiff's entry into a contract with the first defendant (personally) in which the plaintiff borrowed money to invest as a unit holder in the unit trust of which the first defendant was a trustee.
7.It was then pleaded that in February 2015 the first defendant failed to meet the six‑month deadline and the first defendant and plaintiff agreed to extend the agreement by extending the payment.[20] Further, in or around July 2018 it is pleaded that the plaintiff refused to extend the contract further and demanded the return of her investment which the first defendant failed and refused to pay.
[20] Statement of claim, par 12.
8.Paragraph 15 then pleads that the second defendant was appointed in or around August 2014 as a second trustee of the unit trust by signing a deed of appointment of trustee in accordance with the unit trust.
9.It is then pleaded, as an alternative claim that the second defendant commenced acting as a 'trustee de son tort' and that:
(a)she began from that time representing herself to unit holders of the trust in conversation and in writing;
(b)conducting business on behalf of the trust in the capacity as trustee;
(c)signing documents in correspondence on behalf of the trust including the title trustee; and
(d)enabling and cooperating with the activities of the first defendant as joint activities including correspondence to unit holders and allocation of certificates to unit holders.
10.The statement of claim also alleges that between 1 August and 4 August 2014 the first defendant informed the second defendant that the primary investment plan by the trust was to purchase, subdivide and develop a large block of land at 39 Gerard Street, East Cannington.[21] Between 2014 and 2018 the first defendant informed the second defendant that there had been numerous delays in the development and by 2018 the development was abandoned by the trust.[22]
11.From 2018, the second defendant was aware or ought to have been aware that no further development of the land was being conducted by the unit trust. Further, at no time did she take steps to fulfil her 'fiduciary obligations' either as trustee expressly appointed or as trustee de son tort, in good faith nor in the interests of the plaintiff.[23] Various acts or omissions are then pleaded in par 21 of the statement of claim as to alleged breaches of fiduciary duty.
12.The statement of claim then pleads that the second defendant made no attempt to inform unit holders that she was not exercising her fiduciary duties, and such omission was in effect a breach of trust and good faith. In substance the plaintiff contends, as I understand the statement of claim, the second defendant's omissions enabled a breach of duties by the first defendant. The statement of claim concludes by pleading that the plaintiff has not recovered any portion of her investment and has not received an accounting of her funds invested.
[21] Statement of claim, par 18.
[22] Statement of claim, par 19.
[23] Statement of claim, par 21.
The second defendant filed a defence on 10 June 2024. With respect to the defendants' defence, there appears to me to be clearly triable issues. These could be summarised as follows:
1.Has the purported unit trust been properly constituted? In this respect the only document available is unsigned and undated and neither the plaintiff nor the second defendant has a signed copy of the unit trust deed. The second defendant also says that she has been induced into allegedly investing in the property development by the first defendant. She further says that the alleged trustees of the purported trust did not purchase the land the subject of the plaintiff and second defendant's alleged investment, but rather the land was purchased by a corporate entity known as Australian Land Development Pty Ltd. Further that between 29 May and 13 October 2014 the sole director and shareholder of that company was Jon Davidson.
2.The next issue is whether the plaintiff is a unit holder of the purported trust. On the claim as pleaded, for the second defendant to owe the plaintiff any duties in any capacity of a trustee of the unit trust, the plaintiff must be a unit holder. No documentary evidence has been produced of a unit certificate being issued in the plaintiff's name or that the plaintiff holds units in the unit trust. The second defendant says that the plaintiff relies seemingly on a course of conduct to establish her interest in the trust. Those would necessarily be questions of fact to be properly established at trial.[24]
3.Next, the second defendant disputes that she was validly appointed as a trustee of the unit trust herself so as to give rise to the alleged duties. There is no complete copy of an executed appointment deed. An appointment deed attached to an affidavit of the plaintiff's solicitor filed on 16 February 2024 is incomplete. It relates to an apparent trust established on 30 May 2014 and there has been no unit holders' resolution appointing the second defendant as a co‑trustee.
[24] See for example Barrymores Pty Ltd v Harris Scarfe Ltd (Administrators Appointed)(Receivers & Managers Appointed) [2001] WASC 210.
Legal principles with respect to setting aside a default judgment
Leaving to one side whether the judgment is regularly entered or was irregularly entered, a key issue for determination is whether the second defendant has disclosed a defence on the merits. The principles in this respect are clear.
A defendant should only be denied the opportunity to proceed to trial in the ordinary way, and after taking advantage of the usual interlocutory processes, if there is a high degree of certainty about what the outcome would be, should the matter go to trial.[25]
[25] Starrs v Retravision (WA) Ltd [51].
Whilst the question of whether a judgment was regularly or irregularly entered may hold significance, the court may nevertheless set aside or vary any judgment in default of appearance on such terms as it thinks just.
It is not for the court to attempt to resolve factual issues but, provided the defendant's case is not inherently incredible, the question is whether, if the defendant's evidence were accepted at trial, the defendant would have a real prospect of success. That is, whether on that basis, the defence is reasonably arguable. That is not a high threshold.[26]
[26] TSW Analytical Pty Ltd v The University of Western Australia [2017] WASCA 67 [46].
Statutory and regulatory context
The statutory and regulatory context of the issues for determination in this application rely on provisions of the RSC and the District Court Rules 2005 (WA) (DCR).
Order 6 r 1 of the RSC provides:
1.Before a writ is issued it must be indorsed with a concise statement of the nature of the claim made, and of the relief or remedy required in the action.
2.In case of non-compliance with subrule (1) the defendant may apply before appearance to set aside or amend the writ or for particulars.
Order 9 r 1 of the RSC provides:
1.Service of writ: general provisions
(1)Subject to the provisions of any Act and these rules, a writ must be served personally on each defendant by the plaintiff or his agent.
(2)Where a defendant's solicitor indorses on the writ a statement that he accepts service of the writ on behalf of that defendant, the writ shall be deemed to have been duly served on that defendant and to have been so served on the date on which the indorsement was made.
(3)Where a writ is not duly served on a defendant but he enters an unconditional appearance in the action begun by the writ, the writ shall be deemed to be duly served on him and to have been so served on the date on which he entered the appearance.
(4)Where a writ is served on a defendant otherwise than by virtue of subrule (2) or (3) or Order 10 Division 4, the plaintiff in the action begun by the writ is not entitled to enter judgment against the defendant in default of appearance or in default of defence unless, within 3 days after service, the person serving it indorses on the sealed copy of the writ the following particulars -
(a)the day of the week and date on which it was served;
(b)where it was served;
(c)the person on whom it was served;
(d)if the person on whom it was served is not the defendant - the capacity in which the person was served - …
…
Part 2 r 15 of the DCR provides, relevantly:
15.Appeal lies from registrar to judge
(1)If a party is dissatisfied with a decision of a registrar the party may appeal to a judge.
…
(3)The appeal must be commenced by filing and serving a notice that -
(a)sets out the particulars of the registrar's decision or that part of it to which the appeal relates; and
(b)sets out the final orders that it is proposed the Court should make on the appeal.
…
(5)The appeal does not operate as a stay of proceedings unless a judge or legally qualified registrar orders otherwise.
(6)The appeal is to be by way of a new hearing of the matter that was before the registrar.
Principles of appellate review
The principles of appellate review pursuant to r 15(6) of the DCR are conveniently summarised in the commentary on that rule in Civil Procedure Western Australia which were approved by the Court of Appeal in Ogbonna v Programmed Integrated Workforce Ltd [No 2]:[27]
The appeal is by way of a new hearing of the matter that came before the registrar: DCR r 15(6). It involves a complete de novo review.
The judge hearing the appeal is to treat the application as if it was before the court for the first time, save that the party appealing has the right as well as the obligation to open the appeal. … There is no requirement on the appellant to show that the registrar made an error of law or principle in the decision under appeal: …
As the appeal is by way of a new hearing of the matter that came before the registrar, the parties are not confined to the evidence presented to the registrar, and the court should ordinarily allow the parties to rely on additional evidence, subject to a discretion to exclude.
(citations omitted)
[27] LexisNexis, Civil Procedure Western Australia, vol 2 (193) [16,065.5]; Ogbonna v Programmed Integrated Workforce Ltd [No 2] [2022] WASCA 79 [98] (Ogbonna).
Was the Deputy Registrar correct in concluding that the default judgment entered was irregular?
As I have mentioned, the Deputy Registrar concluded that the judgment was irregular for four reasons. Those can be distilled into two limbs, the first being that the indorsement of claim was deficient, and the second being that service of the writ did not comply with the court's rules, notwithstanding the order for substituted service.
Was the indorsement of claim deficient?
The Deputy Registrar held that the indorsement of the amended writ was deficient.[28]
[28] Primary reasons [16].
Order 6 r (1)(1) of the RSC provides that a writ must be a concise statement of the nature of the claim made, and of the relief or remedy required in the action. The rule will not be complied with if the indorsement does not put the facts into a recognisable legal framework demonstrating how the claims arise, and the relationship between the claim and the loss.[29]
[29] ABB Service Pty Ltd (formerly known as ABB Engineering Constructions Pty Ltd) v Hetherington [2001] WASCA 235 [14]; Kamath v Allight Sykes, Landsdale [2019] WADC 98 [36].
Having said that, an indorsement may cover a narrower factual field and be of a greater level of generality than a statement of claim.[30] Further, the indorsement itself must not be read narrowly.[31]
[30] Belgravia Nominees Pty Ltd v Lowe Pty Ltd [No 3] [2015] WASC 442 [15].
[31] Stone James v Pioneer Concrete (WA) Pty Ltd [1985] WAR 233, 239.
The Deputy Registrar noted that the only cause of action put against the second defendant was that, the second defendant as a trustee of the unit trust did not act in good faith and in the best interests of the plaintiff as a beneficiary.
The indorsement on the writ read relevantly as follows:
In or around August 2014 the Plaintiff and Mr Sharma agreed that the Plaintiff would invest the Principal ($140,000) into a unit of the Prosperity Property Unit Trust (Unit Trust) with the view to develop the Property[32] by subdividing it. The Principal was paid by the Plaintiff to Mr Sharma as the Trustee in or around August 2014. The Second Defendant (Puskoor) was the Unit Trust's joint Trustee. The Defendants breached trustees duties to the Plaintiff by failing to act in good faith and in the best interest of the beneficiary, namely the Plaintiff AND as to the Defendants jointly or severally, the Plaintiff claims:
•$140,000 principal
•Interest from February 2015
[32] Property was defined earlier in the writ as being the property known as 39 Jarrod Street, East Cannington Western Australia.
The primary decision considered that the wording of the writ was insufficient as it did not detail how the second defendant would be accountable for failing to act in good faith and in the best interests of the plaintiff. The Deputy Registrar found that the second defendant could not be liable for some unspecified context in which she failed to act in good faith for.[33]
[33] Primary reasons [14] - [15].
There is a clear issue with distilling the plaintiff's claim against the second defendant as simply failing to act in good faith. The way the claim is formulated does not adequately explain the relationship of failing to act in good faith, and the loss of $140,000.
The indorsement fails to put the facts in a recognisable legal framework showing how the plaintiff's claim arises. In my opinion, the indorsement in so far as the claim was made against the second defendant, failed to fulfill the functions required by an indorsement to a writ in that there was no factual information in the indorsement which would enable the identification of any cause of action, being the factual situation which would entitle a claim to relief.[34] A defendant would be left to speculate as to how the plaintiff has a claim for damages against the second defendant for a breach of trustee duties. There are a number of possible permutations and links which could theoretically give rise to the claim of breach, as the actions of the second defendant have not been stated.
[34] See Ogbonna [101].
The plaintiff should have identified what actions the second defendant undertook, and how those actions were connected to the loss suffered by the plaintiff in order to make a sufficient legal and factual link.
The Deputy Registrar was correct to conclude that judgment entered against the second defendant on the basis of the indorsement on a writ was an irregular judgment. For these reasons, I am of the opinion that the indorsement of the writ does not comply with the RSC and the Deputy Registrar's decision was correct.
Was the service of the writ effected in compliance with the Rules of the Supreme Court?
Having already considered that the indorsement was not a proper indorsement and thereby the default judgment was irregular, I will only briefly deal with the other matters considered by the Deputy Registrar to conclude the judgment was irregular. The Deputy Registrar held that there were three ways that service was not effected properly.
The first was that the RSC provided the second defendant with a period of 10 days from the date of service of the writ to comply with the command the writ of summons expressed pursuant to O 5 r 11(1) of the RSC. The Deputy Registrar held that posting the writ by mail would inevitably precede the date of delivery by a number of days. The order of 6 June 2023 was not extended to accommodate the period between the dates of posting and the delivery date, intruding on the period specified for compliance.
Further, the amendment of the substituted service order on 8 August 2023 should have been communicated to the defendants. The Deputy Registrar held that the significance of the lack of communication was that it was open to consider whether the second defendant would have waited for notice of the writ to be published in the newspapers before considering that the period for compliance for filing an appearance would have commenced.
The Deputy Registrar also held that the failure of the substituted service order to specify that service in accordance with the order would be 'good and sufficient' service of the writ on the second defendant, did not establish 'good and sufficient' service of the writ on the second defendant for the purposes of compliance with O 9 of the RSC. The order of 6 June 2023 was not expressed in terms that compliance with the order would establish effective service of the writ.
The other subsidiary limb to this issue is that the indorsement of service was insufficient compliance of O 9 r 1(4), as nothing about the process of service was included, and the plaintiff relied on an indorsement nine weeks beyond the time specified in the RSC.
I generally agree with the analysis of the Deputy Registrar, but as I have noted, it is not strictly necessary for me to reach any final conclusions on these matters.
Nevertheless, I agree with the Deputy Registrar's analysis that:
1.The wording of the substituted service order should have included express wording that service in accordance with the order would be 'good and sufficient service of the writ on the defendant'.[35]
2.There was no proper indorsement of the service of the writ in accordance with O 9 r 1(4) which requires the writ to be indorsed within three business days of service.
[35] See generally forms 15, 16 and 17 of the Supreme Court Common Forms.
For all of these reasons, the Deputy Registrar was correct in finding that the default judgment entered by the plaintiff against the defendant was irregularly entered.
Is a defence on the merits disclosed by the second defendant?
It was not necessary for the Deputy Registrar to reach any final views about the terms of the merits, but because this appeal has been commenced, I will consider them. In my opinion, there is a defence on the merits disclosed by the second defendant which cannot and should not be resolved on an interlocutory basis. I have indicated the factual and legal issues that would need to be determined at trial earlier in my reasons. In summary, those factual issues are:
(a)whether the payment by the plaintiff to the first defendant was in his capacity as trustee of a trust or simply in his own individual capacity;
(b)whether the trust of which the first defendant was contended to be a trustee ever subsisted;
(c)if such a trust did subsist, whether the second defendant became a co-trustee with the first defendant and, if so, on what date she became a co-trustee;
(d)if the second defendant did become a co-trustee with the first defendant, what assets did the trustees control and what did the trust's assets comprise of from the date she became co-trustee; and
(e)if the unit trust was indeed formed and did so subsist with the second defendant as a co-trustee with the first defendant, whether the second defendant undertook any act or omission in breach of the terms of the trust. In this respect, are s 70 of the Trustees Act 1962 (WA) or cl 25.1 of the trust deed engaged and do they limit any liability?
In this respect s 70 of the Trustees Act, which is common in trustee legislation around Australia, provides in substance, that a trustee is answerable and accountable only for her or his own acts, receipts, neglects or defaults and not for those of any other trustee except where the latter occurs, through that trustee's own wilful default. I also note that cl 25.1 of the trust deed provides protection of trustees and limited liability whereby a trustee is only liable for its own fraud, wilful default, negligence or breach of trust and is not liable if it acted in good faith. The applicability of s 70 and cl 25.1 would only apply if the plaintiff succeeds in proving that the money she advanced to the first defendant became an asset of the Prosperity Property Unit Trust and that at the time the second defendant became a co-trustee, her investment either in cash or in some substituted form, formed part of the property of that trust. The availability of a defence based upon s 70 of the Trustees Act or cl 25.1 of the trust deed is an issue that would require full argument and a determination at trial once all disputed facts had been determined by a trial judge.
Does the District Court have jurisdiction to determine the plaintiff's claim against the second defendant?
Although this part of the case was not argued by the parties, I have significant concerns about whether the action the plaintiff brings against the second defendant is a 'personal action' over which this court has jurisdiction. I will leave this issue for the parties to confer about further. I do note, however, that an action for damages for breach of fiduciary duties has been held to not be a personal action at law.[36] In this respect, the District Court has jurisdiction in relation to all personal actions but does not have a wider equitable jurisdiction if the action is not a personal action.[37]
[36] See Murray v Mydomaine Pty Ltd [2016] WADC 109 [74] - [81].
[37] See generally, Chianti Pty Ltd v Leume Pty Ltd [2007] WASCA 270; (2007) 35 WAR 488 [50] ‑ [56], [75] ‑ [78].
With respect to the claim whereby the plaintiff alleges that the second defendant has acted as a trustee de son tort, a trustee de son tort is a person, who is not a trustee, who takes it upon himself or herself to intermeddle with trust matters or to do acts characteristic of the office of trustee whereby those acts make him or her what the law calls a trustee of his own or her own wrong ie: a trustee de son tort. Such a claim is not only very complicated, but of its nature, one which applies as a purely equitable claim in which the remedy is the imposition of a constructive trust over the trust assets (or proceeds of trust assets) that the wrongdoer has intermeddled.
Conclusion and final orders
I consider that the Deputy Registrar was correct in holding that the default judgment entered was irregular.
Notwithstanding, I consider that there are clearly issues which must be determined at trial about whether the second defendant was a trustee of the Prosperity Property Unit Trust, whether that trust held assets at material times and what duties, if any, the second defendant owed to the plaintiff if she is found to be a trustee of the trust. I consider that the second defendant has provided a proper and frank explanation for allowing the default judgment to be entered, there was little or no delay in making an application to set aside the judgment and it is difficult to see what prejudice, if any, the plaintiff would suffer if the default judgment is set aside in circumstances where there has been deposed a good defence on the merits.
Accordingly, as a matter of substance, there is no basis to allow a default judgment to stand at least in circumstances where I have now determined there are triable issue that needs to be determined between the parties, potentially in the Supreme Court rather than the District Court and, further, the parties have both advanced the proceedings whilst this appeal was on foot. The defences raised by the second defendant cannot be said to hold no merit. The defence is reasonably arguable.
In all the circumstances the plaintiff's appeal is dismissed, with costs.
I certify that the preceding paragraph(s) comprise the reasons for decision of the District Court of Western Australia.
LM
Associate to Judge Curwood
20 AUGUST 2024
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