CSR Building Products Limited v Halstead [2018] QDC 241

DISTRICT COURT OF QUEENSLAND CITATION: CSR Building Products Limited v Halstead [2018] QDC 241 PARTIES: CSR Building Products Limited (ACN 008 631 356) (plaintiff/respondent) v Richard Halstead (defendant/applicant) FILE NO/S: 893/2018 DIVISION: Civil PROCEEDING: Application ORIGINATING COURT: District Court Brisbane DELIVERED ON: 22 October 2018 DELIVERED AT: Brisbane HEARING DATE: 22 October 2018 JUDGE: Everson DCJ ORDER: 1. The default judgment entered on 6 August 2018 is set aside; 2. The defendant pay the plaintiff’s costs of this application and the costs of obtaining judgment by default; and 3. The defendant file and serve a notice of intention to defend and defence by 4pm on 12 November 2018. CATCHWORDS: APPLICATION TO SET ASIDE DEFAULT JUDGMENT – whether default judgment was regularly or irregularly obtained – the extent to which rule 430 limits the use of statements based on information and belief – where the judgment was regularly entered – where the defendant never received the documentation the subject of the order for substituted service – where the defendant has not delayed in making the application to set aside default judgment – where there is no draft defence so no finding can be made as to prima facie defence Uniform Civil Procedure Rules 1999 (Qld) rr 116, 290, 430 Champion v Fay [1983] 2 Qd R 416 Deputy Commissioner of Taxation v Ahern (No.2) [1988] 2 Qd R 158 -- 1 of 4 -- 2 COUNSEL: A Messina for the plaintiff/respondent M Bland for the defendant/applicant SOLICITORS: Scoglio Law for the plaintiff/respondent QBM Lawyers for the defendant/applicant [1] This is an application pursuant to rule 290 of the Uniform Civil Procedure Rules 1999 (Qld) (“UCPR”) to set aside the default judgment dated 6 August 2018. [2] The first issue for determination is whether or not the default judgment was regularly or irregularly obtained. It is submitted by the applicant defendant that the default judgment was irregularly obtained as it was obtained as a consequence of an order of Porter QC DCJ on 21 June 2018 permitting substituted service pursuant to rule 116 of the UCPR. The supporting affidavit of Brendan John Reidy filed 18 June 2018 contained the following relevant paragraph: I am informed by the agent and verily believe that, the agent had the following conversation with the staff member at the Unit 7E complex: Agent: “Do you have any letterboxes here?” Staff member: “Yes, we do, but, they are in a secured area downstairs”. Agent: “I want to put an envelope in Richard Halstead’s letterbox. I think his apartment is 7E?” Staff member: “Yes, it is. If you leave it with me, I can put it into his letterbox”. [3] The order for substituted service was that personal service was to be effected on the defendant by posting the relevant documentation to the address referred to in the exchange I have just quoted. The defendant deposes to the fact that at the relevant time he was no longer living at this address and that he did not receive the documentation the subject of the order for substituted service. This is uncontentious. It is submitted on behalf of the defendant that the passage above in the affidavit in support of the application for substituted service resulted in an irregularly entered judgment. Reliance is placed upon the observations of Connolly J in Champion v Fay [1983] 2 Qd R 416 at 417, that as default proceedings are matters strictissimi juris and that when the plaintiff proceeds on default, every step in the proceedings must comply with the rules. [4] It is submitted that the affidavit to the extent quoted above did not comply with rule 430 of the UCPR, as that passage was effectively hearsay upon hearsay, containing statements going beyond the information and actual belief of the deponent. In support of this submission, passages from Deputy Commissioner of Taxation v Ahern (No. 2) [1988] 2 Qd R 158 at 163 and elsewhere are relied upon. There are two difficulties with this submission. Firstly, the affidavit merely supported the application for substituted service, which was ordered in a separate proceeding by another judge. It is not a matter that goes directly to the entry of the judgment itself. Effectively, it is a submission that the order for substituted service was irregular, and that is a matter -- 2 of 4 -- 3 which has already been the subject of a separate determination which has not been appealed. There is a difference between an irregular order of the court and an irregularly obtained judgment. [5] Secondly, it is unclear the extent to which rule 430 limits the use of statements based on information and belief. On the facts before me, a conversation with a person who ought to know the subject matter of the conversation has been identified, and the making of the conversation has been conveyed through the deponent of the affidavit. It is not clear to me that in these circumstances there has been a non-compliance with rule 430, although clearly a scenario which does not contemplate double hearsay is preferable when reliance is placed upon statements based on information and belief. [6] In all of the circumstances, I am unable to conclude that there is a clear non- compliance with rule 430 and that in any event, such a non-compliance is relevant in the context of an order for substituted service, not the entry of judgment. I am therefore not satisfied that the judgment itself was irregularly entered. [7] Turning to the application on the basis that the judgment was regularly entered, it is clear that there are three relevant considerations. The first is whether or not the defendant has given a satisfactory explanation for his failure to appear, and it is accepted by the plaintiff that he has, on the basis that he has deposed to never receiving the documentation the subject of the order for substituted service. The second matter is whether or not there has been any delay in bringing the application, and it is again accepted by the plaintiff that the defendant has not delayed in bringing the application upon becoming aware of this proceeding. The final and contentious matter for determination is whether or not the defendant has a prima facie defence on the merits to the claim on which the judgment is founded. [8] In this regard, the claim arose as a consequence of a fresh credit application submitted on behalf of a company called Pioneer Plasterers Pty Ltd (“Pioneer”). The defendant signed a guarantee, and it is upon this guarantee that he is being sued by the plaintiff. The defendant alleges that he received a telephone call on or about 1 August 2017 from a Ms Shortland, a credit manager for the plaintiff, and that she said that the guarantee was not accepted by the plaintiff because at that time the defendant was not a director of Pioneer. This is denied by Ms Shortland. In support of her denial, she has deposed to and produced contemporaneous notes. I am, however, unable to make any findings of credit in the absence of any oral testimony by either the defendant or Ms Shortland. [9] The defendant deposes that as a consequence of the telephone conversation with Ms Shortland, he proceeded on the basis that he did not give the personal guarantee of the debts of Pioneer and that the subsequent “management and decisions of Pioneer were made on the basis that there was no such obligation”. He subsequently asserts that he persevered with attempts to continue with a difficult and ultimately, it seems, disastrous business contract that led to the debt the subject of this proceeding in circumstances where he would not have been prepared to do so had he been personally at risk. It is submitted by the defendant that firstly, the communication of Ms Shortland was such as to indicate that the transactions giving rise to the debt the subject of this proceeding were part of a wider series of transactions pursuant to previous existing credit arrangements which were not the subject of the guarantee of the defendant, and secondly, if they were not, the respondent is estopped from relying upon its legal rights pursuant to the guarantee. -- 3 of 4 -- 4 [10] It may be suspected that such potential defences are convenient ones relying upon an alleged telephone conversation and unsupported by any collateral written evidence that has been placed before the court. The fact remains, however, that they are arguable defences and that the defendant has not had the opportunity of defending this proceeding, having only just become aware of it. The plaintiff submits that I should only permit the defendant to defend on terms which require the defendant to pay into court security calculated by reference to the interest it will accrue from today until a likely judgment. In circumstances where there is no draft defence before me, I am unable to make a finding that any defence is particularly shadowy where such a defence will largely turn on findings of credit, which, as I have indicated, I am completely unable to make at this point. [11] I nonetheless am of the view that the affidavit in support of the application for substituted service referred to above is such that the defendant has been less than cooperative in enabling service of the claim and associated documentation upon him. In particular, “BJR3” to the affidavit of Mr Reidy reveals numerous attempts to serve the defendant at numerous addresses, including the address set out in the guarantee without any success. The attempts at service began on 18 March 2018 and continued until 10 May 2018. The defendant has not deposed that he was out of the jurisdiction any time throughout this period. Pursuant to rule 290, the court may set aside judgment by default on terms including terms about costs the court considers appropriate. In my view, it is appropriate that the defendant pay the plaintiff’s costs of and incidental to the obtaining of judgment and the application to set aside judgment on the standard basis. I therefore make an order in terms of the amended draft, which I initial and place with the file. -- 4 of 4 --