Civil Construction Services P/L v Marx Commercial P/L & Ors [2013] QMC 11

MAGISTRATES COURTS OF QUEENSLAND CITATION: Civil Construction Services P/L v Marx Commercial P/L & Ors [2013] QMC 11 PARTIES: CIVIL CONSTRUCTION SERVICES PTY LTD (ACN 080174885) (plaintiff) v MARX COMMERCIAL PTY LTD (ACN 117452329) (first defendant) and BORHAN BORHANI-SHIDANI (second defendant) and JAMAL WALKER (third defendant) FILE NO/S: M445/11 DIVISION: Magistrates Court PROCEEDING: Application for default judgment to be set aside under ORIGINATING COURT: Magistrates Court at Toowoomba DELIVERED ON: 23 May 2013 DELIVERED AT: Toowoomba HEARING DATE: 21 March 2013 MAGISTRATE: Carroll JD ORDER: 1. In accordance with Rule 290 of the UCPR I set aside the Default Judgement entered on 3 January 2013; 2. In accordance with Rule 7(1) of the UCPR I Order that the time for the First and Second Defendants to file their Unconditional Notice of Intention to Defend and Defence be extended for seven (7) days from today. I direct them to file same within that time; 3. I make no Order as to costs. CATCHWORDS: CIVIL LAW – PRACTICE AND PROCEDURE - application to set aside judgment by default - whether judgment was entered irregularly – can a default judgment be given when a conditional notice of intention to defend has -- 1 of 7 -- 2 been filed and an application to stay the proceeding dismissed Uniform Civil Procedure Rules 1999, r 290, r 144 SOLICITORS: Applicant/Second Defendant appears on own behalf and on behalf of the First Defendant. Aden Lawyers for the Respondent/Plaintiff [1] The First, Second and Third Defendants have applied to the court to set aside a Default Judgment entered against them on 3 January 2013. [2] The Application is authorised by Rule 290 of the Uniform Civil Procedure Rules 1999 (Qld) (UCPR) which is in these terms – “290 Setting aside judgment by default and enforcement 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.” [3] The basis of the Defendants’ Application is that the Judgment was entered irregularly. See the submission from the Defendants dated 5 March 2013. [4] The Third Defendant is bankrupt. As far as I am aware nobody has obtained the leave of the Court pursuant to Rule 72(1) of the UCPR to proceed against the Third Defendant or to act for it. Accordingly I will treat the Defendants’ application and submissions as those on behalf of the First and Second Defendants. [5] The Plaintiff submits that the Judgment was entered regularly and should not be set aside. [6] The relevant history to the matter is as follows:- (a) The Claim and Statement of Claim were filed on 29 November 2011; (b) Default Judgment was entered on 17 May 2012 and by Order of the this Court on 13 August 2012, that Judgment was set aside; (c) On 13 September 2012 the Plaintiff filed an Amended Statement of Claim. (d) On 17 October 2012 the First, Second and Third Defendants filed a Conditional Notice of Intention to Defend alleging the proceedings were irregular for the following reasons:- (i) The proceedings had not been properly started; (ii) The originating process had not been properly served; (e) On 31 October 2012 the Defendants filed an Amended Conditional Notice of Intention to Defend alleging the proceedings were irregular for the reasons set out in the Conditional Notice of Intention to -- 2 of 7 -- 3 Defend and further alleging that, “The Defendants say that this proceeding has not been started in the correct District”. This amendment to the Conditional Notice of Intention to Defend is relevant to the assertion in the Claim that, “The Plaintiff believes that the Court at Toowoomba has jurisdiction to decide the claim.” (f) On 1 November 2012 the Defendants filed an Application, dated 31 October 2012, seeking the following orders:- “(i) Under Rule 16 of the UCPR: a. A declaration that the Proceedings have not been properly served on the Third Defendant; b. The Proceedings be stayed; c. Any other Order the Court considers appropriate. (ii) Leave to proceed on behalf of the Third Defendant under Rule 72(1)(a) of the UCPR; and (iii) The Plaintiff pay the costs of the Defendants of this Application.” (g) The Application was set down for hearing on 20 December 2012 and was supported by an affidavit of the Second Defendant, Mr Borhan Borhani-Shidani. The affidavit addresses the issue of the non-service of the Amended Statement of Claim on the Third Defendant and the fact that service of the Amended Statement of Claim on himself was effected by post but not by post and email as required by an Order for Substituted Service made on 22 March 2012. The failure to serve the Third Defendant can probably be explained by the Plaintiff not having obtained the leave of the Court to proceed against the Third Defendant in accordance with Rule 72(1) of the UCPR. The affidavit does not address the jurisdictional issue raised in the Claim and the Amended Conditional Notice of Intention to Defend. (h) The Defendants did not appear on the hearing of the Application on 20 December 2012 and their Application for Orders under Rule 16 of the UCPR was struck out. (On 16 December 2012 the Second Defendant asked the Plaintiff to agree to an adjournment of the Application of 7 January 2013. In his email of that date he said, “… my personal and family circumstances are such that I cannot make the trip to Toowoomba and back for the hearing on that day …” . The Plaintiff refused the request for the adjournment noting that the Defendants had “nearly two months to prepare and make the necessary arrangements for this Application …”. I note the Second Defendant did not specify what his “personal and family circumstances” were and nor did he ask for leave to appear by telephone which he had done on three prior occasions and subsequently.) -- 3 of 7 -- 4 (i) On 21 December 2012 the Plaintiff filed a Request for Default Judgment supported by an affidavit of David William Riwoe. (j) Default Judgment was entered on 3 January 2013. (k) On 24 January 2013 the three Defendants filed an Application to set aside the Default Judgment supported by an affidavit of Mr Borhani- Shidani which was sworn 22 January 2013. A draft Notice of Intention to Defend and Defence was exhibited thereto. (l) On 28 February 2013 Mr Riwoe filed an affidavit on behalf of the Plaintiff opposing the Application to set aside the Judgment. (m) The matter came before Acting Magistrate Stark on 7 March 2013. As he was the Registrar who entered the Default Judgment he referred the matter to Magistrate Schemioneck who took ill and asked me to deal with the matter which I mentioned on 16 May 2013. Relevant Rules of the UCPR [7] Rule 144 of the UCPR is in these terms:- “Conditional notice of intention to defend (1) This rule does not apply to a defendant objecting to the starting of a proceeding in a district of a court other than in accordance with rule 35. Note— See rule 38 for objections to the starting of a proceeding other than in the correct district . (2) A defendant who proposes to challenge the jurisdiction of the court or to assert an irregularity must file a conditional notice of intention to defend. (3) Rule 139(1)(b) does not apply to a conditional notice of intention to defend. (4) If a defendant files a conditional notice of intention to defend, the defendant must apply for an order under rule 16 within 14 days after filing the notice. (5) If the defendant does not apply for an order under rule 16 within the 14 days, the conditional notice of intention to defend becomes an unconditional notice of intention to defend. (6) Within 7 days after a conditional notice of defence becomes an unconditional notice of intention to defend, the defendant must file a defence. -- 4 of 7 -- 5 (7) A defendant who files an unconditional notice of intention to defend is taken to have submitted to the jurisdiction of the court and waived any irregularity in the proceeding.” [8] Importantly, this Rule does not specifically provide for the course the action should take where the Defendants’ Application under Rule 144(4) is dismissed or struck out. [9] Rule 281 of the UCPR is in these terms:- “Application of div 2 (1) This division applies if a defendant in a proceeding started by claim has not filed a notice of intention to defend and the time allowed under rule 137 to file the notice has ended. (2) This division also applies if a defendant in a proceeding started by claim files a conditional notice of intention to defend that becomes an unconditional notice of intention to defend and the defendant does not file a defence within the time required under rule 144(6).” [10] Rule 281(2) authorises the Court to enter Judgment by default where a Conditional Notice of Intention to Defend “becomes an unconditional Notice of Intention to Defend” but does not specifically provide for where the application under Rule 144(4) is struck out or dismissed. [11] Rule 281 is contained in that part of the UCPR which provides for the entering of Judgment by Default. Discussion [12] The Defendants not having filed a Notice of Intention to Defend, the question is whether the Judgment signed by the Registrar was entered regularly or irregularly. [13] In paragraphs 32 to 41 of the Further Submissions, the Plaintiff’s solicitors submit that as the Defendants’ Application pursuant to Rule 144(4) for an Order under Rule 16 was dismissed then (at paragraph 38), “by virtue of the dismissal and subsequent lack of Orders being granted under Rule 16 of the UCPR, the Defendants‟ Conditional Notice of Intention to Defend became an Unconditional Notice of Intention to Defend”. While I can understand the rationale of this argument, Rule 144 does not provide that “by virtue of the dismissal … the Defendants‟ Conditional Notice of Intention to Defend became an Unconditional Notice of Intention to Defend”. [14] At Paragraph 39 of the Further Submissions the Plaintiff further submits that “following the above (paragraph 38) as the Defendants’ filed an Unconditional Notice of Intention to Defend, then in accordance with Rule 144(7) of the UCPR, the Defendants are deemed to have submitted to the jurisdiction of the Court and waived any regularity in the proceeding”. [15] It should be noted that the Defendants have never filed an Unconditional Notice of Intention to Defend. -- 5 of 7 -- 6 [16] Mr Borhani-Shidani submits that the Plaintiff’s argument is without merit. He relies on a decision of Master Lee, as he then was, in Capewell v Seltino Pty Ltd 1986 2 QdR 2 where the Master was discussing, inter alia, Order 12 Rule 22 of the Queensland Supreme Court Rules. [17] Order 12 Rule 22 of the Queensland Supreme Court Rules was in these terms:- “Conditional appearance 22.(1) A defendant in any cause may enter a conditional appearance denying the jurisdiction of the Court, and shall not thereby be deemed to have submitted to such jurisdiction, except as to the costs occasioned by the appearance or by any application under this rule; and the defendant may thereupon apply to the Court or a Judge for an order to set aside the service upon the defendant of the originating proceeding, or the service upon the defendant of notice thereof, as the case may be. (2) Or the defendant may make such application before appearing, and without entering a conditional appearance. (3) If the defendant enters a conditional appearance, and does not make such application promptly, the Court or Judge may set aside the conditional appearance with costs, to be paid by the defendant by whom it was entered. (4) If the Application is made and dismissed, the conditional appearance shall be struck out, and the defendant may enter an appearance as in other cases.” [18] In discussing the Rule at page 13 of the report, Master Lee said:- “The Rule expressly states that by entering a conditional appearance denying the jurisdiction of the Court, the Defendant „shall not thereby be deemed to have submitted to jurisdiction …‟. Furthermore, if the application is made and dismissed, „the conditional appearance shall be stuck out, and the Defendant may enter an appearance as in other cases‟. The Rule does not provide that the conditional appearance shall then be deemed to be unconditional.” [19] Master Lees’ reasoning is not directly relevant because Order 12 Rule 22(4) is not replicated in Rule 144 of the UCPR. However, it does highlight the lacuna in Rule 144. [20] In my view Rule 144 of the UCPR should be amended to provide that where an Application pursuant to Sub Rule (4) is dismissed or struck out then the Conditional Notice of Intention to Defend becomes an Unconditional Notice of Intention to Defend. [21] Rule 144 is silent as to how the matter should have proceeded in the present circumstances. Rule 281(2) does not specifically authorise the entry of Default Judgment in those circumstances. It is arguable that the Default Judgment was not regularly entered. With the benefit of hindsight, when the Rule 144(4) Application -- 6 of 7 -- 7 was dismissed, the Plaintiff should have applied for directions with respect to the future conduct of the matter. [22] This matter was commenced 18 months ago and the Defendants have still not filed their Notice of Intention to Defend. The Plaintiff’s attention to detail has been sloppy. The Second Defendant’s affidavit in support of the Rule 144(4) Application made no reference to the jurisdictional issue notwithstanding that the sole purpose of filing the Amended Notice of Intention to Defend was to allege that the proceedings were not commenced in the correct District. The action has not been conducted expeditiously as required by Rule 5(3) of the UCPR. [23] In the light of the foregoing, and in order to facilitate an early resolution of this matter I make the following Orders:- 1. In accordance with Rule 290 of the UCPR I set aside the Default Judgement entered on 3 January 2013; 2. In accordance with Rule 7(1) of the UCPR I Order that the time for the First and Second Defendants to file their Unconditional Notice of Intention to Defend and Defence be extended for seven (7) days from today. I direct them to file same within that time; 3. I make no Order as to costs. -- 7 of 7 --