Darling Downs Aviation Pty Ltd & Anor v Shaw & Ors [2013] QDC 300

Page 1 of 6 DISTRICT COURT OF QUEENSLAND CITATION: Darling Downs Aviation Pty Ltd & Anor v Shaw & Ors [2013] QDC 300 PARTIES: Darling Downs Aviation Pty Ltd ACN 010 320 582 (First Plaintiff / First Respondent) & Drifter Aircraft Pty Ltd ACN 118 955 196 (Second Plaintiff / Second Respondent) v Glen Barry Shaw (First Defendant) & Ross Michael Davis (Second Defendant / Applicant) & GB Shaw & Co Pty Ltd ACN 126 639 763 (Third Defendant) FILE NO/S: 2537/11 DIVISION: Civil PROCEEDING: Application ORIGINATING COURT: District Court in Brisbane DELIVERED ON: 3 December 2013 DELIVERED AT: Brisbane HEARING DATE: 22 November 2013 JUDGE: Kingham DCJ ORDERS: 1. The application is granted. 2. The judgment obtained by default on 5 September 2013 is set aside. -- 1 of 6 -- Page 2 of 6 3. Mr Davis must pay the plaintiffs’ costs thrown away in obtaining and serving judgment and their costs of and incidental to this application, to be assessed on the standard basis, if not agreed. CATCHWORDS: CIVIL – PROCEDURE – APPLICATION TO SET ASIDE DEFAULT JUDGMENT – where default judgment was entered for the plaintiffs against the second defendant – where the second defendant has applied to set aside the judgment – assuming the judgment was entered regularly, whether it should be set aside - where there was a short delay in filing the application – where the applicant claims that the plaintiffs made numerous representations that the claim would not be enforced against him – whether that provides a satisfactory explanation for his failure to defend – where the breach of contract alleged in the pleadings discloses a different factual basis to the breach articulated by the respondent’s counsel during the hearing – whether there is a prima facie defence to the claim on which judgment was obtained. Uniform Civil Procedure Rules 1999 (Qld), r 290. National Mutual Life Association of Australasia Ltd v Oasis Developments Pty Ltd [1983] 2 Qd R 441, cited. COUNSEL: Mr B. McGlade for the Applicant. Mr P. Travis for the Respondents. SOLICITORS: Bond & Co. Lawyers for the Applicant. Aden Lawyers for the Respondents. Background [1] This is an application by Mr Davis to set aside a judgment entered against him by the plaintiffs in default of his defence to their claim. The proceedings involve conduct alleged against Mr Shaw and Mr Davis relating to their employment as aircraft mechanics for Darling Downs Aviation Pty Ltd. [2] Mr Thomson is the controlling mind of both plaintiffs. In so far as the claim relates to Mr Davis, the case centres on work done on two aircraft; one owned by a friend of Mr Thomson, Graham McDermott, and one owned by Mr Shaw or his company, GB Shaw & Co Pty Ltd. The plaintiffs allege that parts taken from the engine of Mr McDermott’s plane were put into the Shaw aircraft and parts of lesser quality were substituted when Mr McDermott’s engine was rebuilt. -- 2 of 6 -- Page 3 of 6 [3] The plaintiffs’ case against Mr Shaw includes other allegations about breaches of aircraft regulations, but this is not maintained against Mr Davis. Judgment was entered against Mr Davis for breach of contract or conversion, with damages to be assessed. [4] The parties aired numerous arguments about whether the judgment was entered irregularly and, if it was entered regularly, whether it should be set aside. Having heard argument and considered the pleadings and proposed defence, I have concluded that, even if the judgment was regularly entered, Mr Davis should have the opportunity to defend the claim, at least as it is currently pleaded. Interesting though they are, in the interests of providing a prompt decision on this application, I have not addressed the arguments relating to whether the judgment was entered irregularly because it is not necessary for me to do so to dispose of the matter. Assuming the judgment was entered regularly, should it be set aside? [5] The court has an unfettered jurisdiction to set aside a default judgment that was entered regularly.1 Relevant considerations include: 1. The defendant’s reason for failing to appear or plead; 2. Whether there has been undue delay in applying to set aside the judgment; 3. Whether or not the defendant has a prima facie defence on the merits.2 (a) Was there undue delay in making this application? [6] I can dispose of the second consideration in short compass and will deal with it first. This application was filed nearly a month after judgment was obtained. That short delay would not prevent discretion being exercised in Mr Davis’ favour. (b) Has the defendant’s failure to defend been satisfactorily explained? [7] The claim was served on Mr Davis on 7 August 2011. Default judgment was entered on 5 September 2013, a little more than 2 years later. Mr Davis’ explanation was that he believed that the plaintiff would not enforce the claim against him and that he was only named in the proceedings in order for the plaintiffs to proceed against his co-defendant, Mr Shaw. [8] He relied on three representations as the basis for this belief.3 The first was a statement he said Mr Thomson, for the plaintiffs, made shortly after he was sentenced for related criminal offences, on about 2 April 2009. He recalls Mr Thomson telling him that he was satisfied with the sentence and that he did not want anything more from him. Although that conversation is more than 2 years 1 Rule 290 Uniform Civil Procedure Rules 1999 (Qld). 2 National Mutual Life Association of Australasia Ltd v Oasis Developments Pty Ltd [1983] 2 Qd R 441 at 449. 3 Affidavit of Ross Michael Davis, sworn 16 October 2013 - Exhibit RMD-2: Proposed Defence & Counterclaim, paragraphs [22] – [29]. -- 3 of 6 -- Page 4 of 6 before the claim was served, it does provide some context for Mr Davis’ state of mind when he was served. [9] The other two statements were not made to him but were said to have been made by Mr Thomson to others, in circumstances when he expected that would be communicated to Mr Davis, which they were. The first of these was a statement by Mr Thomson to Senior Constable Foo that, while the plaintiffs were going to sue Mr Davis, they were only doing this because they needed to do so to succeed against Mr Shaw. Further, it is alleged that Mr Thomson told the officer the plaintiffs had no intention of getting anything out of the suit against Mr Davis. The second was a statement allegedly made by Mr Thomson to Ms Davis to the same effect which occurred shortly after her husband was served with the claim. [10] Mr Davis says those representations led him to believe that he did not need to take action in the proceedings. [11] He formed that belief in the face of a number of indications to the contrary. Firstly, the claim itself contains a clear statement of the consequence of failure to defend. Secondly, Mr Riwoe, the plaintiffs’ solicitor, told Mr Davis on 18 August 2011, just 11 days after service, that he should obtain independent legal advice. Mr Davis conceded Mr Riwoe said so three or four times. Nevertheless, he said his confidence that the plaintiffs would not seek a judgment against him was unshaken. [12] That seems at odds with the evidence that on 23 August 2011, he called Mr Thomson twice. Mr Davis accepts Mr Thomson’s evidence regarding those calls is correct. Mr Davis called Mr Thomson to discuss the court documents, and then called back to say “it may not actually be a good idea to discuss it. I need to think more about it.” Mr Davis’s explanation for these calls was that he felt deflated and intimidated, and he just wanted some kind of re-assurance. [13] Given he did not get any reassurance from Mr Riwoe, Mr Thomson or anyone else, his continued belief that he need not defend the proceedings is foolhardy, if not heroic. It is also not reasonable. I am not satisfied that Mr Davis has satisfactorily explained his failure to defend. [14] That does not determine the matter. It is a grave matter to deny a defendant with an apparently good ground of defence the opportunity to defend the claim, even where there has been lengthy delay, provided there is no irreparable prejudice to the plaintiff.4 [15] The plaintiffs have not alleged any prejudice, other than the cost of prosecuting their claim on liability, if the judgment is set aside. The claim is for damages which will need to be assessed. The costs thrown away by setting aside judgment would be minimal and can be compensated in part by a costs order. 4 National Mutual Life Association of Australasia Ltd v Oasis Developments Pty Ltd [1983] 2 Qd R 441 at 449 – 50. -- 4 of 6 -- Page 5 of 6 The critical question, then, is whether Mr Davis has demonstrated he has a prima facie defence to the claim. (c) Is there a prima facie defence to the claim? [16] Before turning to the proposed defence and counterclaim, it is appropriate to consider the submissions made during the hearing by the plaintiff’s counsel about the terms of the Statement of Claim and the effect of the default judgment obtained against Mr Davis. [17] The Statement of Claim does not plead the fact of Mr Davis’ conviction for related criminal offences as founding an entitlement to relief. The only allegations made against Mr Davis appear at paragraphs 24 to 26 of the Statement of Claim. In essence, they allege that Mr Davis, in co-operation with Mr Shaw, fitted certain chattels into the Shaw aircraft, without the first plaintiff’s consent, knowing that Mr Shaw intended to conceal this from the first plaintiff and that he acted dishonestly in so doing. [18] Counsel for the plaintiffs advised the court that the allegations made against Mr Davis are derived from Mr Davis’ statements to police on 11 September and 21 December 2008. Paragraph 24 of the Statement of Claim pleads that Mr Davis fitted the items. That is not in accordance with Mr Davis’ statements to police. In essence, he says that he facilitated parts between two engines being swapped but does not admit that he fitted parts belonging to either plaintiff into the aircraft belonging to Mr Shaw. [19] It is appreciated that Mr Davis’ police statements were not obtained by the plaintiff’s lawyer until after the Claim and Statement of Claim were filed. However, they were to hand in October 2011, almost 2 years before the plaintiffs filed an Amended Statement of Claim obtained judgment against Mr Davis. [20] If the plaintiffs intended to allege only what Mr Davis admitted to police, they had ample opportunity to amend the Statement of Claim accordingly. In fact they did amend the Statement of Claim, but did not alter paragraphs 24 to 26 to particularise the claim against Mr Davis in the terms maintained by the plaintiff’s counsel during the hearing before me. [21] It is not adequate, in defending a judgment obtained without the benefit of trial, to argue that the pleading means something less than or different to what it says. The difficulty is obvious when attention is given to the process that must follow from the judgment being obtained. [22] The claim against Mr Davis is for damages for breach of contract, and to the extent that the claim relates to loss attributable to the removal of the chattels, for conversion. Because the cause of action does not require proof that loss was caused by the breach, the judgment does not preclude argument about causation of loss. At the damages hearing, the plaintiffs would be required to prove what loss was caused by Mr Davis’ breach of contract. -- 5 of 6 -- Page 6 of 6 [23] The difficulty is that the breach alleged is different from the basis upon which the plaintiff’s counsel said the claim was maintained against Mr Davis. I cannot comprehend how the judge allocated the task of determining what damages should be awarded against Mr Davis can do so on a different factual basis than the one pleaded in the Claim and Statement of Claim upon which judgment was obtained. [24] Given my conclusion on the state of the plaintiffs’ pleading and judgment, I do not propose to canvass the proposed defence and counterclaim. Suffice it to say that the proposed defence appears to sit comfortably with Mr Davis’ signed statements to police. He may well have no defence to a claim confined to his admissions to police, but such a claim is not now before me and that is a matter for another day. As to the counterclaim, I will only observe that I anticipate Mr Davis’ prospects of maintaining actions in abuse of process, equitable estoppel and waiver face obstacles on the evidence currently before the court. [25] On the Amended Claim and Statement of Claim, Mr Davis has a prima facie defence. Although his failure to defend was not satisfactorily explained, he should be afforded the opportunity to defend the claim against him, so that any judgment for damages is obtained on facts admitted or proved against him. Conclusion [26] Mr Davis’s application is granted and the judgment obtained by default on 5 September 2013 is set aside. [27] Given my observations about the state of the plaintiffs’ pleadings, I will make directions to allow the plaintiffs time to file a further amended Claim and Statement of Claim, before Mr Davis is required to file his Defence. The parties are invited to settle an agreed set of directions to be provided to my associate by 4pm on Wednesday 4 December, failing which the matter will be listed for directions on Thursday 5 December at 9.30am. [28] Because the judgment was obtained due to Mr Davis’s default, I order he pay the plaintiffs’ costs thrown away in obtaining and serving judgment and their costs of and incidental to this application, to be assessed on the standard basis, if not agreed. -- 6 of 6 --