Yankee Doodles Pty Ltd v Blemvale Pty Ltd

[1999] QSC 134

IN THE SUPREME COURT

OF QUEENSLAND

Writ No 78 of 1998

Mackay District Registry

[Yankee Doodles P/L v Blemvale P/L]

BETWEEN:

YANKEE DOODLES PTY LTD
  (ACN 072 339 961)
  Applicant/Defendant
AND:

BLEMVALE PTY LTD
  (ACN 010 989 830)
  Respondent/Plaintiff

CATCHWORDS:     PROCEDURE - SUPREME COURT PROCEDURE - QUEENSLAND - PRACTICE UNDER RULES OF COURT - DEFAULT OF APPEARANCE - whether default judgment final or interlocutory

PROCEDURE - JUDGMENTS AND ORDERS - AMENDING, VARYING AND SETTING ASIDE - application to set aside default judgment - whether judgment irregularly entered - whether discretion should be exercised to set aside judgment - matters to be considered on application to set aside judgment - effect of delay in making application

Counsel:A E Lyons for the applicant

R W Morgan for the respondent

Solicitors:Macrossans Lawyers for the applicant

McKays Solicitors (Mackay) for the respondent

Hearing dates:   16 December 1998, 5 May 1999

REASONS FOR JUDGMENT - ATKINSON J

Judgment delivered 23 June 1999

1. This is an application to set aside all or part of a judgment entered against the defendant in default of appearance on 19 June 1998.  It was submitted that the judgment should be set aside firstly, because it was irregularly entered and secondly, if it was regularly entered, that it should be set aside in exercise of the discretion given under the Rules of the Supreme Court O.15 r.10 or the inherent jurisdiction.

2. The judgment entered was for recovery of possession of land, mesne profits and costs:

   “1.The plaintiff recover possession of the land in the endorsement of the Writ described as 85 Victoria Street, Mackay in the State of Queensland described as lots 4, 5 and 6 on registered plan number 70800 in the County of Carlisle and the Parish of Howard, Title Reference 21510189.

   2.The plaintiff recover against the defendant the sum of twenty-three thousand and thirty dollars and seventy-one cents ($23,030.71) for mesne profits.

   3.The plaintiff recover against the defendants [sic] the sum of seven hundred and eighty dollars and fifty cents ($780.50) for costs.”

   A writ of possession was issued by the Court on the same date.

3. The rules which are relevant to such a judgment being entered are found in O.15 where r.3 relevantly provides:

   “Liquidated demand endorsed
   3.  When the writ of summons is endorsed for a debt or liquidated demand only, whether by special endorsement or otherwise, and the defendant fails ... to appear thereto, the plaintiff may enter final judgment against such defendant for any sum not exceeding the sum endorsed on the writ, together with interest at the rate claimed by the endorsement as the rate agreed upon (if any) or, if no rate is claimed to have been agreed upon, at the rate of 10% per annum, to the date of the judgment, and costs as provided by order 6, rule 8.”

   However where the claim is not liquidated, an interlocutory judgment may be entered for damages to be assessed under O.15 r.5 which provides:

   “Interlocutory judgment for damages
   5.  If the claim endorsed on the writ is as against any defendant, for unliquidated damages only, and that defendant fails to appear, the plaintiff after filing a statement of claim or particulars may enter interlocutory judgment against the defendant for damages to be assessed and costs, and proceed with the action against the other defendants (if any).”

   Rules 8 and 9 specifically deal with the recovery of land and other claims.  They provide:

   “Recovery of land
   8.  In an action for the recovery of land, if no appearance is entered within the time limited by the writ for appearance, or if an appearance is entered but the defence is limited to part only of the land, the plaintiff may enter final judgment that the person whose title is asserted in the writ shall recover possession of the land, or of the part thereof to which the defence does not apply, with his or her costs, upon the production of a certificate by the solicitor for the plaintiff or, in the case of a plaintiff in person, of an affidavit that the action is not one to which order 6, rule 11B applies.

   Recovery of land and other claims

   9.  If the plaintiff in an action for the recovery of land has also endorsed upon the writ a claim for mesne profits, arrears of rent or double value or any other claim mentioned in rules 3 to 7, the plaintiff may enter judgment as provided in rule 8 with respect to the land; and may proceed as provided in the other preceding rules with respect to the plaintiff’s other claim so endorsed.”

   The provisions of O.6 r.11B do not apply to this case.
   Setting aside an irregularly entered judgment

4. The defendant argues that the judgment is irregular because it is inconsistent with the pleaded claim, because a final judgment was given rather than interlocutory judgment with damages to be assessed and because it was a final judgment based on hearsay evidence.

5. In the statement of claim attached to the special endorsed writ of summons the prayer for relief claims:

   “1.Recovery of possession of premises known as 85 Victoria Street, Mackay in the State of Queensland described as lots 4, 5 and 6 on Registered Plan Number 70800 in the county of Carlisle and Parish of Howard, title reference 21510189;

   2.Arrears of rent at $127,946.00 per year from 16 March 1998 to the date of service of the writ herein less the sum of $10,360.00 paid by the defendant;

   3.Mesne profits from the date of service of the writ herein until possession is delivered up;

   4.Interest pursuant to section 47 of the Supreme Court Act 1995 on the said arrears and the said mesne profits;

   5.Costs.”

6. The defendant submits that an interlocutory judgment with damages to be assessed should have been entered rather than final judgment for a specified amount of mesne profits being given.  It is submitted that a claim for mesne profits is a particular form of action for trespass and is based upon an injury to the plaintiff’s possession:[1]  by claiming mesne profits, the plaintiff is treating the defendant as a trespasser and, it was submitted, was in substance claiming damages for trespass.[2]  In these circumstances loss other than the loss of rent may be recovered.[3]  For judgment to be given for a specified amount it must be a liquidated amount.  A liquidated demand is one that is ascertained or is capable of being ascertained by calculation or formula.[4]  A claim for mesne profits may be liquidated or not.  A claim for mesne profits is liquidated if the claim specifies the rate of rent and if the profits are calculated as lost rent.  Where the rental value is higher than the actual rent the plaintiff may claim for profits at the higher rate.  That, however, is not a liquidated claim and an interlocutory judgment would have to be entered in default of appearance.[5]  The statement of claim endorsed upon the writ does not identify the basis upon which the plaintiff says that mesne profits should or may be calculated.  In particular, it does not specify that those mesne profits are claimed by reference to the pleaded rental rate.  Before an assessment is made, the defendant should be given a notice, failure to appear not depriving the defendant of the right to be heard on the assessment.[6]

   [1]Minister of State for the Interior v RT Co Pty Ltd (1962) 107 CLR 1 at 5 per Taylor J.

   [2]Wilson v Kelly (1957) VR 147 at 152.

   [3]Lee v Blakeney (1887) 8 LR (NSW) 141; but see Wilson v Kelly (supra).

   [4]Alexander v Ajax Insurance Co Ltd [1956] VLR 436 per Sholl J.

   [5]Cairns, B C “Australian Civil Procedure”, 3rd ed.  at 288.

   [6]Walsh v McMichael [1928] VLR 345; Producers’ Co-op Distributing Society Ltd v Ace Packing Co Pty Ltd [1961] VR 85 at 88.

7. The date of service of the writ is deposed to by the plaintiff’s solicitor who swears that on 9 June 1998 he served the defendant with a writ of summons by enclosing it in a letter sent by prepaid registered post to its registered office at 6 Laughlin Street, Mount Pleasant, at Mackay.  The defendant therefore submits that the maximum period for which any mesne profits has been pleaded is ten days that is between 9 June 1998 and 19 June 1998, the date of judgment.  The affidavit of debt upon which the judgment was founded shows that the sum claimed by the plaintiff in respect of the period from 8 (not 9) June 1998 to 19 June 1998 was only $3,865.71 being the rent payable in respect of that period.

8. Mesne profits are the damages for which the defendant is liable for the wrongful occupation of the plaintiff’s land.  The measure of loss is the profit which the plaintiff would have made if it had not been for the defendant’s wrongful occupation.[7]  They are calculated over the period for which the plaintiff can prove a right to possession.[8]  Mesne profits therefore cover the whole period of the defendant’s possession.  They are in this case quantified in terms of the rental value of the land and the premises for the period of the defendant’s wrongful occupation.[9]  A claim for mesne profits is liquidated if the claim specifies the rate of rent and if the profits are calculated as lost rent.  Where the rental value claimed is higher than the actual rent, the plaintiff’s claim would not be a liquidated claim and an interlocutory judgment would have to be entered in default of appearance.  That is not the case here.

   [7]The Laws of Australia 5.5 Chapter 2 - Part A Div. 2 - Judgment in Default of Appearance, subdiv. (iii) - Possession of Land and Mesne Profits [14].

   [8]Minister of State for the Interior v RT Co Pty Ltd (supra).

   [9]Anderson v Bowles (1951) 84 CLR 310 at 319 per Dixon, Williams Fullagar and Kitto JJ.

9. The judgment for unpaid rent until the date of service of the writ under para 2 of the prayer for relief and the claim for mesne profits under para 3 of the prayer for relief in the sum of $3,865.71 combined justify the claim of $23,030.71 for mesne profits, and judgment could properly have been given in this amount for mesne profits.  It is not inconsistent with the pleaded claim nor is it a claim for damages but rather it is a claim for a liquidated amount for which final judgment in default of appearance can be given.  If, contrary to what I have found, the judgment entered were irregular because of the description of debt as mesne profits rather than rent owing then I would be inclined to exercise my discretion to amend the judgment to so describe it.[10]

   [10]CML v Giannarelli [1977] VR 463 at 471; Rules of the Supreme Court O.93 r.17(2).

10. The final reason put forward by the defendant as to why a judgment was irregular was that it was the entry of final judgment founded on hearsay evidence.  Order 41 rule 3(1) of the Rules of the Supreme Court allows the use of hearsay affidavits in certain cases.  It provides that:

    “Affidavits shall be confined to facts to which the deponent is able to depose of his or her own knowledge, except in the cases specially provided for by the rules, and except in the case of affidavits used on interlocutory motions or applications, in which statements as to the belief of the deponent, giving the sources of the deponent’s information and the grounds of his or her belief, may be admitted.”

    Order 15 does not contain a specific provision permitting the use of hearsay in such material.  In entering judgment, the plaintiff relied upon an affidavit of debt sworn by solicitors upon information supplied by a director of the plaintiff.  However the entry of judgment is a proceeding for final relief [11] and the rules ought be strictly complied with.[12]  The affidavit of debt has only one paragraph sworn on information and belief and the affidavit would be sufficient if that paragraph were deleted so that ground would not be sufficient to have the judgment set aside ex debito justitiae.

    [11]Carr v Finance Corporation of Australia Limited (No 1) (1981) 147 CLR 246 at 248, 255 applied in Elders Finance Limited v Invaway Pty Ltd [1991] 2 Qd R 398 at 399; Barclays Bank Ltd v Piacun [1984] 2 Qd R 476 at 477-478; but see SA Repairs and Painting Pty Ltd v Trinka Pty Ltd, Supreme Court of South Australia, Mullighan J, 15 July 1993, unreported.

    [12]Watson Specialised Tooling Pty Ltd v Stevens [1991] 1 Qd R 85 at 91; Ezi-Frame Pty Ltd v Al-Cote (Australia) Pty Ltd [1982] Qd R 602 at 611; R v The Acting Police Magistrate at Cloncurry; ex parte Wright [1933] QSR 343.

11. In my view, the judgment should not be set aside on the ground that it was irregularly entered.

    Setting aside a regularly entered judgment

12. The defendant also argued that even if the judgment was regularly entered, it should be set aside in the exercise of the discretion of the court under O.15 r.10 or in the inherent jurisdiction of the court.  Order 15 r.10 provides:

    “Any judgment by default under this order may be set aside or varied by the Court or a Judge upon such terms as to costs or otherwise as the Court or Judge may think fit.”

13. The matters to be considered on an application to set aside a default judgment are whether the defendant has given a satisfactory explanation of the failure to defend; whether the defendant’s delay in making the application to set aside is not such as to preclude it from obtaining relief; and whether the defendant has a prima facie defence on the merits.[13]  The decision whether or not to set aside a default judgment is discretionary.[14]  An affidavit in support of an application to set aside judgment entered into in default of appearance to a writ of summons must set out all the defences on which the defendant intends to rely and briefly set out the facts by which the defendant seeks to establish such defences.[15]  A mere statement by the defendant that he or she has a good defence is not sufficient to justify a review of the exercise of judicial discretion.  The defendant must demonstrate “a very compelling reason” for the failure to appear and that it has a plausible defence either in law or in fact.  Before allowing a defendant to come in and defend, the court should have before it material which enables it to say how it came about that the defendant found itself bound by a judgment regularly entered; that the defendant genuinely desires to be allowed to come in and present its case; and that issues are raised in such a form as to require serious consideration of the defence put forward.[16]

    [13]Aboyne Pty Ltd v Dixon Homes Pty Ltd [1980] Qd R 142 at 143-144; National Mutual Life Association of Australasia Ltd v Oasis Developments Pty Ltd [1983] 2 Qd R 441 at 449-450; Bratic v Toohey [1988] 2 Qd R 140 at 146-147.

    [14]Evans v Bartlam [1937] AC 473 at 478, 481, 482; Bratic v Toohey (supra) at 145.

    [15]Sue Oclee Pty Ltd v Bak (1979) 29 ACTR 8.

    [16]Watson v Anderson (1976) 13 SASR 329.

14. The defendant here says it has a prima facie defence on the merits.  The defendant says that it has paid the moneys alleged to be outstanding in para 7 of the statement of claim and that the denial by Mr Higgins on behalf of the plaintiff simply raises an issue of credit that can only be resolved at trial.  However in order to satisfy the court that it ought to be allowed in to defend, the defendant must make more than a bare allegation of this kind.  The allegation must be supported by some reference to evidence to suggest that the defence is plausible and not just raised for the purpose of having default judgment set aside.  Indeed in this case, the defendant admits a failure to pay rent in a period before the writ of possession issued.  It appears from the defendant’s material that the business it was operating on the premises, a nightclub known variously as Paradise Nights Night Club, Paros Night Club, Glaciers or Yankee Doodles, had closed and it had failed to pay its rent before judgment was entered.

15. The defendant submits that the plaintiff sued it on the wrong lease.  At the plaintiff’s insistence, it submits, the lease made on 17 September 1996, referred to in paragraph 2 of the statement of claim, was replaced by another lease executed by the defendant on or about 5 December 1997.  The notice to remedy breach of covenant similarly refers to the wrong lease.  However the plaintiff claims there was merely an amendment to the lease requiring lease payments weekly in advance rather than monthly in advance.  No copy of the purported new lease was produced to the court by the defendant.  The plaintiff was able to produce the duly stamped amendment to the lease which contrary to the sworn evidence of Mr Domm on behalf of the defendant, merely amends para 8 of the lease dated 17 September 1996.

16. Significantly, the defendant did not exhibit or tender any proposed defence to the action and in its material said that it did not want to regain possession of the land.  It does not appear to have a plausible defence such as would cause the court to exercise its discretion to set aside the default judgment.

17. The defendant further submits that the various notices pleaded by the plaintiff did not come to the attention of the defendant.  Mr Domm says he did not see or otherwise learn of the documents being delivered to the premises and that they did not in fact come to his attention.  Lorretta Dwyer who worked for the defendant at the relevant time also says she did not see or otherwise learn of the notices which the plaintiff’s solicitor said it had delivered to the demised premises.  The plaintiff, it was submitted, did not tender evidence from a person saying that they actually served each notice.  It is simply evidence from the plaintiff’s solicitor that he had or caused it to be delivered.  The registered office said to have been used as the address for service of the defendant for the various notices and the writ of summons was the defendant’s registered office which was the personal residence of the individual who controlled the defendant prior to its takeover by Mr Domm in late 1997.  The plaintiff’s solicitors acted in relation to the company takeover and must have known that the address for service that they were using was such that documents sent there were not going to come to the attention of the defendant.  This is supported, it is submitted, by the plaintiff’s solicitor’s admission that the writ of summons was returned to his office marked “no longer at this address”.

18. The defendant therefore submitted that the explanation for the failure to appear is that it did not receive the writ of summons and was not otherwise aware of it.  The criterion of a satisfactory explanation for failure to appear will be satisfied “unless the failure to appear was in contumelious disregard of the process of the court”.[17]

    [17]Ryan, Weld and Lee, “Supreme Court Practice”, para [15.10.5].

19. The plaintiff applied for and was granted leave after the hearing to file further affidavit material with regard to service and the amendment to the leases.  An affidavit by Sonia Place demonstrates that she hand-delivered to the business premises of the defendant a notice to remedy breach of contract and a notice to remedy breach of covenant on 20 May 1998 and a letter terminating the lease on 2 June 1998.  The documents were also hand-delivered to the defendant’s registered address.

20. The writ of summons was served by prepaid registered post to the registered office of the defendant. Section 39A(1) of the Acts Interpretation Act 1954 provides that where an Act requires or permits a document to be served by post, service is taken to be effected at the time at which the letter would be delivered in the ordinary course of post, unless the contrary is proved. Service is effected by properly addressing, pre-paying and posting the document as a letter. A copy of the notice of remedy breach of covenant and the letter terminating the lease and the writ of summons were also sent to the defendant’s solicitors on 11 June 1998. The reply by them showed that the defendant had also received the documents. The submission as to lack of service cannot be sustained.

    Delay

1. The defendant submits that its delay should not be a reason for the court not setting aside the judgment.  They rely on their submission on a decision of this court in National Mutual Life Association of Australasia Limited v Oasis Developments.[18]

   [18][1983] 2 Qd R 441 at 449 per McPherson J citing Attwood v Chitchester (1878) 3 QBD 722 and Rosing v Ben Shemesh [1960] VR 173. See also Reid Murray Development Queensland Pty Ltd v Lynwood Holdings Pty Ltd [1964] QWN 1 at 3.

2. The defendant submits that the plaintiff has not suffered any prejudice by reason of the delay in making an application, as the defendant is not seeking recovery of possession so as to compromise the plaintiff’s post-termination use of the property.  On the other hand, the defendant says that it will suffer the substantial prejudice if the default judgment is allowed to stand as it will be faced with the verdict for moneys it has already paid and establishing the plaintiff’s entitlement to possession, thereby affecting the defendant’s capacity to claim damages arising out of what is it alleges is the plaintiff’s wrongful conduct repudiating its obligations under the lease by making false claims so as to obtain a writ for possession.

3. The defendant says that in the period since judgment was entered the defendant had to resolve its former solicitor’s claim to a lien in respect of the file, tried unsuccessfully to obtain its own records which were retained at the premises, on 15 July 1998 Mr Domm was involved in a motor vehicle accident which incapacitated him for a period of approximately six weeks and was under the misconception that delay of itself would prevent the defendant obtaining the relief now being sought.  A delay of effectively 13 months did not prevent an application being successful in Attwood v Chitchester.[19]

   [19](Supra).

4. In my view the delay of itself would not be sufficient to cause the court to set aside a judgment if the defendant has a bona fide defence on the merits,[20] which in this case it does not.

   [20]National Australia Bank Limited v Singh [1995] 1 Qd R 377 at 380 per Pincus JA.

   Conclusion

5. As the judgment was regularly entered and there is not an apparent good ground of defence, the application to set aside judgment should be dismissed.