Neta Tire Services and Sales Pty Ltd v Lee & Mitchell [2018] QDC 200 (5 October 2018)

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CITATION:	Neta Tire Services and Sales Pty Ltd v Lee & Mitchell [2018] QDC 200
PARTIES:	NETA TIRE SERVICES AND SALES PTY LTD ABN 28 010 610 858 (plaintiff) v RICHARD DANIEL LEE (first defendant) and BENJAMIN MITCHELL (second defendant)
FILE NO/S:	214/17
DIVISION:	Civil
PROCEEDING:	Application
ORIGINATING COURT:	District Court at Cairns
DELIVERED ON:	5 October 2018
DELIVERED AT:	Brisbane
HEARING DATE:	10 August 208
JUDGE:	Morzone QC DCJ
ORDER:	1. The second defendant’s application filed 13 July 2018 is allowed. 2. The plaintiff’s application filed 9 August 2018 is dismissed. 3. The default judgment against the second defendant entered on 4 May 2018 is set aside. 4. The enforcement warrant issued against the second defendant on 5 June 2018 is set aside. 5. The heading of the proceeding is amended to correct the Australian Business Number of the plaintiff to “ABN 28 010 610 858”. 6. The second defendant will file, and serve on the other parties, a Notice of Intention to Defend and Defence by 4:00 pm on 19 October 2018. 7. Within 7 days of this order, the plaintiff will take steps to notify the Land Titles Registrar of this order and to request the removal of the registration of Writ No. 718797863 from the title of Lot 12, SP 143223, Cairns. 8. The order that the second defendant will pay the plaintiff’s costs of the application filed 13 July 2018 is vacated and: *(a) The second defendant is to file and serve submissions on costs by 8 October 2018 at 4pm.* *(b) The plaintiff is to file and serve submissions in response by 10 October 2018 at 4pm.* *(c) The second defendant is to file and serve reply submissions by 12 October 2018 at 12pm.* 9. Each party will bear their own costs of the application filed 9 August 2018.
CATCHWORDS:	CIVIL PROCEDURE – APPLICATION – DEFAULT JUDGMENT – Application to set aside default judgment – cross application to amend judgment to remove the adjudged award of interest – whether judgment irregular because of over claimed interest and/or incorrect ABN of plaintiff’s company in the heading – whether there is satisfactory explanation for defendant’s failure to appear - whether there has been any delay in making the application – whether the defendant has a prima facie defence on the merits – costs. Legislation Uniform Civil Procedure Rules 1999 (Qld) rr 16, 144, 283, 290, 375, 430 Corporations Act 2001 (Cth), s 153 Cases Armitage v. Parsons [1907] 2 KB 410 Bolt & Nut Co. (Tipton) Ltd v. Rowlands, Nicholls & Co. Ltd [1964] 2 QB 10 Building Guarantee & Discount Co. Ltd v. Dolejsi [1967] VicRp 94; [1967] VR 764 Capital Finance Australia Limited v Edwards [2011] QSC 104 Cook v D A Manufacturing Co P/L & Anor [2004] QCA 52 Cusack v De Angelis [2007] QCA 313; [2008] 1 Qd R 344 Cusack v. De Angelis [2007] QCA 313 Frisch v. Bowman [1928] St R Qd. 242 Hughes v. Justin [1894] 1 Q.B. 667 Middleton v Laurel Springs Management Services Pty Ltd [2001] QDC 80 Muir v. Jenks [1913] 2 KB 412 National Mutual Life Association of Australasia Ltd v Oasis Developments Pty Ltd [1983] 2 Qd R 441 Palmer v Prince [1980] WAR 61 Prus-Butwilowicz v Moxey t/as NLM Auto Services [2002] QDC 166 RT Co Pty Ltd v Minister of State for the Interior [1957] HCA 39; (1957) 98 CLR 168 Sexton Developments Pty Ltd v Yarrawonga Pty Ltd [2003] QCA 173 Worldwide Products Pty Ltd v Hoffman [1982] Qd R 316 Yankee Doodles Pty Ltd v Blemvale Pty Ltd [1999] QSC 134
COUNSEL:	D Topp for the plaintiff B J Kabel for the second defendant
SOLICITORS:	Bridge Brideaux for the plaintiff J Seccull of John Secull Law for the first defendant Bevan & Co Lawyers & Conveyancers for the second defendant

[2] The second defendant applies to set aside the default judgment for $550,228.13 against the second defendant, which is contested by the plaintiff.

[3] The parties have provided detailed written outlines of argument, and made further oral and written submissions.

[4] By Claim and Statement of Claim filed in December 2017, the plaintiff claimed money due and owing pursuant to an agreement with the first defendant, and an associated claim against the second defendant in partnership.

[5] The first defendant filed a Notice of Intention to Defend and Defence on 25 January 2018.

[6] On 16 April 2018 the second defendant filed and served a Conditional Notice of Intention to Defend, but failed to apply for an order under r 16. The notice became unconditional,[1] and the second defendant failed to file a Defence by 2 May 2018.[2]

[7] The next day, on 3 May 2018, the plaintiff applied for default judgment, which was entered the following day.

[8] The second defendant was served with the default judgment on or about 30 May 2018.[3] He promptly instructed his now solicitors, who wrote to the plaintiff’s solicitor on the same day, notifying them of the second defendant’s intention to set aside the default judgment.[4] In the meantime, on 30 May 2018 the plaintiff issued an enforcement proceeding and an enforcement warrant issued by the registrar on 5 June 2018.

[9] The application and a supporting affidavit (including a draft defence) was filed on 13 July 2018, some 43 days after service of the default judgment. A later affidavit the second defendant’s solicitor swears on information from the second defendant and his belief that the contentions in the draft defence are true.[5]

[10] The power to set aside a default judgment is found in r 290 of the Uniform Civil Procedure Rules 1999 (Qld) (“UCPR”) which provides:

The court may set aside or amend a judgment by default under this division, and any enforcement of it, on terms, including terms about costs and the giving of security, the court considers appropriate.”

[11] Where a default judgment is obtained irregularly, the defendant is entitled to have it set aside as of right.[6] Otherwise, where a default judgment is regularly obtained, matters relevant to the exercise of the court’s discretion include the defendant’s delay leading up to judgment, any delay applying to set it aside and whether there is a meritorious defence.[7]

[12] In the proceeding, the defendant relies upon irregularity, or alternatively, seeks a favourable exercise of discretion to set aside the judgment.

[13] Irregularity may be characterised by some deficiency in the steps prerequisite to the entering of default judgment or an abuse of process or something akin to it resulting from the plaintiff’s obtaining a judgment to which the plaintiff knew or ought reasonably have known he or she was not entitled.[8] Irregularity may also be found where the judgment is entered for too much,[9] and for an amount not claimed in the statement of claim.[10]

[14] Here, the second defendant contends that the default judgment is irregular because it was entered for an additional amount for interest than as claimed.[11]

[15] Rule 283 of the UCPR provides an entitlement to interest in the default judgment “if interest is claimed”. The rule is in these terms:

(1) This rule applies if the plaintiff’s claim against the defendant in default is for a debt or liquidated demand, with or without interest.

(2) The plaintiff may file a request for judgment for an amount not more than the amount claimed, together with—

(a) if interest is claimed—interest calculated, to the date of judgment, at the rate specified in the claim or in a practice direction for the Civil Proceedings Act 2011, section 58; ...”

[16] The plaintiff’s only claim for interest is contained in the prayer of relief as “Interest of $31,296.27 as per Schedule A to this Statement of Claim”. Schedule A to the pleading sets out a calculation of interest up to 11 May 2016.

[17] The default judgment is for the total of $550,228.13 including $16,293.51 for interest from the date of filing to the day of default judgment. In this way, the total amount of the default judgment included both $31,296.27 as particularised in Schedule A of the Statement of Claim, and an additional $16,293.51 for unclaimed interest. It is not clear to me how the additional interest was calculated.

[18] It is not to the point, as contended by the plaintiff, that the interest projected beyond the end date in the schedule would have exceeded the amount of $16,293.51. The inescapable reality is that neither the Claim nor the Statement of Claim included any interest claim beyond 11 May 2016.

[19] In the circumstances the plaintiff is willing to simply excise the amount of $16,293.51, in essence confining its claim for interest under the judgment to 11 May 2016 only.[12]

[20] Accordingly, the defendant cross applies to the judgment pursuant to r 290. The power to amend is properly exercised “where the existence of the lesser debt is clearly established and there is no suggestion of a defence on the merits”.[13]

[21] In Cusack v. De Angelis,[14] the Court of Appeal upheld a decision to amend the judgment sum to reflect a contractual rate of 30 per cent, rather than relying on a 40 per cent default interest rate. The court acknowledged that rule 290 permits a default judgment to be varied, whether irregularly entered or not,[15] and affirmed the principle that in relation to a judgment in default exceeding that due to the plaintiff, if application to amend be duly made it may be right not to set the judgment aside but to reduce it to the proper sum.[16]

[22] Subject to my findings below, it seems to me that the judgment is remediable by amendment pursuant to r 290 of the UCPR.

[23] Further submissions were invited form the parties about the point taken in the proposed defence – that the ABN is incorrect in the description of the plaintiff’s name in the heading of the proceeding.[17]

[24] Companies are required to set out their name, and Australian Company Number or Australian Business Number in all public documents.[18] Here the plaintiff company’s Australian Business Number is misdescribed (in the last digit) as ABN 28 010 610 856, instead of ABN 28 010 610 858. The error has been perpetuated from commencement of the proceedings to the present.

[25] The plaintiff asserts that the heading may be amended as a mere slip and seeks leave to amend the heading. The second defendant argues that the heading Claim and Statement of Claim can and should be amended pursuant to r 375(3), with a cognate amendment of the default judgment under r 290 of the UCPR.

[26] While the ABN is required to accompany the company name (if not in the name itself), I do not accept that the ABN misdescription in the proceeding’s heading constitutes an irregularity in the default judgment, and I accept that it is remediable in any event.

[27] Relevant considerations in the exercise of the discretion to set aside a regularly obtained judgment include:[19]

1. Whether there is satisfactory explanation for the defendant’s failure to appear;

[28] The second defendant was initially served with the Claim and Statement of Claim on 2 March 2018.[20]

[29] On or about 16 April 2018, the second defendant, filed and served a Conditional Notice of Intention to Defend. His apparent ignorance of procedural matters is overlayed with emotional reaction, for example in paragraph 8 the second defendant’s alleges that the plaintiff was ‘delinquently speculative’, ‘manufacturing’ its ‘own financial cause’ and seeking ‘to procure an illegal financial gain’. The plaintiff’s conditional notice became unconditional because of the second defendant’s failure to apply for an order under r 16 within 14 days, in accordance with r 144(4) & (5)(a) of the UCPR. He later then failed to file a Defence due within a further 7 days on 2 May 2018.[21]

[30] The next day, on 3 May 2018, the plaintiff applied for default judgment, which was entered the following day.

[31] It seems to me that the material well indicates how it is that the second defendant came to be bound by the judgment of the court. It can be inferred that the second defendant was apparently ignorant about the procedural matters in the absence of any or timely legal advice; which can be gleaned from the content of the Conditional Notice of Intention to Defend. Whilst his lack of legal knowledge is undoubtedly a misfortune, it should not be seen as a privilege for a lay litigant, such as the second defendant is responsible for conducting his own litigation.

[32] Nevertheless, his conduct in failing to file a timely defence is explained by his circumstances.

[33] The second defendant contends that there has been little delay in bringing his application to set aside the default judgment.[22]

[34] The plaintiff is critical of the second defendant filing this application about four and a half months since service of the initiating Claim and Statement of Claim. That tends to conflate the delay leading up to judgment and inflates the relevant delay bringing the application.

[35] After the second defendant’s solicitor was served with the default judgment on or about 30 May 2018,[23] they gave notice to the plaintiff of the second defendant’s intention to have the judgment set aside.[24] The application and a supporting affidavit (including a draft defence) was filed on 13 July 2018, some 43 days after service of the default judgment.

[36] The second defendant’s solicitor provided timely notice of the intention to apply to set aside the default judgment. As is self evident from the nature and extent of the defendant’s material, significant effort was warranted to deal with historical matters and instructions for a competent application coupled with a draft defence.

[37] It seems to me that these circumstances provide a satisfactory explanation for the delay in making this application, and the plaintiff suffered no prejudice by the delay.

[38] This consideration has long been considered as the most cogent, and a defendant with a plausible defence, supported by an affidavit, may well succeed in an application despite lengthy delay provided that no irreparable prejudice is done to the plaintiff.[25]

[39] Rule 430(2) expressly permits a defaulting defendant to use an affidavit, in support of an application to set aside default judgment, containing statements based upon information and belief if the person making the statement states the sources of information and the grounds for the belief.[26] This in an exception to the general rule that an affidavit must be confined to the evidence the deponent could give in oral evidence.[27] But it is not enough for a solicitor to simply produce a proposed defence without also swearing that the contentions in the defence are true, based on information and belief, in compliance with r 430(2).[28]

[40] The plaintiff’s claim arises from an initial agreement with the first defendant on or about 3 October 2010 for the sale of tyres to the first defendant.[29] The plaintiff claims that the second defendant assumed liability under the agreement by:

2. By holding himself out to be in partnership with the first defendant;[31] or

4. By an implied sale contract between the plaintiff and the first and second defendants jointly;[33] or

5. For misleading and deceptive conduct by having represented himself and the defendant as being in partnership, which in turn had the effect of representing a “notional security” to the plaintiff, upon which it relied.[34]

[41] The second defendant contends that he has a prima facie defence and relies on a draft defence produced in affidavits of the second defendant’s solicitor filed on 13 July 2018 and 10 August 2018. In a later affidavit the second defendant’s solicitor swears that the contentions in the draft defence (reproduced) are true, based on information and belief, in belated compliance with r 430(2)as follows:[35]

“... I confirm that I am informed by the second defendant and verily believe that all allegations contained in the draft defence annexed to my previous affidavit in these proceedings sworn 11 July 2018, and now exhibited to this affidavit and marked NK1, are true and correct.”

[42] The draft defence is anchored in the following contentions about the nature and extent of the parties commercial relationships:

1. The second defendant operated a retail business of selling tyres, which was separate and distinct from the first defendant’s business as the sole trader of a mechanic business.[36]

2. On or about 11 November 2011, he entered into an oral consignment agreement with the plaintiff, whereby the plaintiff would supply tyres to the second defendant on a consignment basis and the second defendant would sell those tyres and pay the cost price of those tyres to the plaintiff within one month of their sale.[37]

3. Under a consignment agreement, the second defendant was obliged to pay for the tyres once sold, and the plaintiff’s sole remedy in respect of unsold tyres was for repossession of the tyres, which the plaintiff has already exercised.[38]

[43] These matters are barely supported by the solicitor’s deposition based on information and belief, which is confined to the draft pleading without further descension into a proof of evidence underlying facts and contentions. However, the plaintiff’s affidavit evidence also exposes uncertainty and apparent dispute about the genesis of the relationship exposing the second defendant to liability.[39] In the alternative, the second defendant alleges that any liability has been discharged if tyres were supplied pursuant to an alternative consignment agreement.[40] It is clear that the contentions in the draft pleading strike at the heart of the plaintiff’s multifaceted claims in reliance on the existence of some partnership or holding out,[41] or promise,[42] or implied contract; or misleading representations.

[44] In my view, the second defendant has demonstrated a prima facie defence on the merits.

[45] For these reasons, the second defendant’s application filed 13 July 2018 is allowed with appropriate directions, and the plaintiff’s application filed 9 August 2018 is dismissed. The defaulting second defendant ought pay the plaintiff’s costs of the defendant’s application to set aside the default judgment, and each party ought bear their own costs in respect of the plaintiff’s application.

3. The default judgment against the second defendant entered on 4 May 2018 is set aside.

4. The enforcement warrant issued against the second defendant on 5 June 2018 is set aside.

5. The heading of the proceeding is amended to correct the Australian Business Number of the plaintiff to “ABN 28 010 610 858”.

6. The second defendant will file, and serve on the other parties, a Notice of Intention to Defend and Defence by 4:00 pm on 19 October 2018.

7. Within 7 days of this order, the plaintiff will take steps to notify the Land Titles Registrar of this order and to request the removal of the registration of Writ No. 718797863 from the title of Lot 12, SP 143223, Cairns.

8. The order that the second defendant will pay the plaintiff’s costs of the application filed 13 July 2018 is vacated, and;

(a) The second defendant is to file and serve submissions on costs by 8 October 2018 at 4pm.

(b) The plaintiff is to file and serve submissions in response by 10 October 2018 at 4pm.

(c) The second defendant is to file and serve reply submissions by 12 October 2018 at 12pm.

9. Each party will bear their own costs of the application filed 9 August 2018.

^[12] Affidavit of M Holt 5.8.18, Doc. 26, para. 15 & Cross-Application 5.8.18, Doc. 25.

^[17] Affidavit of Kuster 10.8.18, Doc. 29 - Exhibit NK1 – Draft Defence, para. 1(a) and (b).

^[19] Cook v D A Manufacturing Co P/L & Anor [2004] QCA 52 at [16] & [19]. Applied in Capital Finance Australia Limited v Edwards [2011] QSC 104 at [17].

^[20] Plaintiff’s submissions at [58] – [60]; Affidavit of NJA Kuster 10.8. 18, Doc. 29 at Exhibit “NK2” p 2.

^[27] UCPR, r 430. As to the repealed court rules, see Worldwide Products Pty Ltd v Hoffman [1982] Qd R 316 per McPherson J; Palmer v Prince [1980] WAR 61 per Jackson CJ, Virtue and Burt JJ.

^[28] Middleton v Laurel Springs Management Services Pty Ltd [2001] QDC 80 at [11]–[14].

^[36] Affidavit of NJA Kuster 10.8.18, Doc. 29 - Exhibit NK1 – Draft Defence, para. 2 (i) - (iv). This is consistent with the first defendant defence.

^[37] Affidavit of NJA Kuster 10.8.18, Doc. 29 - Exhibit NK1 – Draft Defence, para. 3(g) & (h).

^[38] Affidavit of NJA Kuster 10.8.18, Doc. 29 - Exhibit NK1 – Draft Defence, para. 3(h)(v).

^[39] Affidavit of B McKay 6.8. 18, Doc. 24, paras. 6-11, 13, 14, 18; Affidavit of S Ebert 6.8.18, Doc. 23, paras. 3-4.

^[40] Affidavit of NJA Kuster 10.8.18, Doc. 29 - Exhibit NK1 – Draft Defence, para. 34.

^[41] Affidavit of NJA Kuster 10.8.18, Doc. 29 - Exhibit NK1 – Draft Defence, para. 2(i)-(iv).

^[42] Affidavit of NJA Kuster 10.8.18, Doc. 29 - Exhibit NK1 - Draft Defence, para. 10.

Queensland District Court Decisions

Neta Tire Services and Sales Pty Ltd v Lee & Mitchell [2018] QDC 200 (5 October 2018)