Boral Resources (Qld) Pty Ltd v Haack [2012] QMC 24

MAGISTRATES COURTS OF QUEENSLAND CITATION: Boral Resources (Qld) Pty Ltd v Haack [2012] QMC 24 PARTIES: BORAL RESOURCES (QLD) PTY LIMITED ACN 009 671 809 (plaintiff) v DARREN ANTHONY HAACK (defendant) FILE NO/S: M3359/12 DIVISION: Magistrates Courts PROCEEDING: Claim – Application to set aside judgment ORIGINATING COURT: Magistrates Court at Brisbane DELIVERED ON: 5 September 2012 DELIVERED AT: Brisbane HEARING DATE: 6 August 2012 MAGISTRATE: Springer BL ORDER: Application dismissed. CATCHWORDS: CIVIL LAW – PRACTICE AND PROCEDURE - application to set aside judgment by default — whether the defendant had a reason for failing to file a defence - whether the defendant raised a prima facie defence on the merits COUNSEL: SOLICITORS: Background [1] The plaintiff, Boral Resources (Qld) Pty Limited (Boral) has sued Mr Darren Haack pursuant to a guarantee and indemnity. Mr Haack was at relevant times the sole director of Lifestyle Homes Mackay Pty Ltd (Lifestyle Homes). Goods had been sold on credit to Lifestyle Homes and the plaintiff pleads that the guarantee and indemnity means that Mr Haack guaranteed payment to the supplier of the price charged by the supplier of the goods ‗without any deduction or setoff whatsoever‘ and indemnified the supplier against all costs, losses and expenses which it incurs as a result of any default. [2] The claim was filed in this Court on 26 March 2012 for $58,132.52. A deputy registrar entered default judgment on 28 May 2012 for $5370.19 inclusive of $414.70 interest to that date and $1662.50 costs. It is clear, therefore, that most of -- 1 of 7 -- 2 the claim amount had been paid before judgment was entered. The affidavit of service filed preparatory to the entry of judgment referred to service on 14 April 2012 and was sworn on 20 April 2012. [3] By application filed 11 July 2012, the defendant seeks to have the default judgment set aside. That is opposed by the plaintiff. Setting aside a judgment [4] Rule 290 of the UCPR permits a court to ―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‖. [5] Where a judgment in default of appearance has been regularly entered, the Court, on application to set aside the judgment, will generally consider the following matters: 1. Whether or not the defendant has given a satisfactory explanation for its failure to appear; 2. Whether or not there has been any delay in making the application; 3. Whether or not the defendant has a prima facie defence on the merits to the claim on which the judgment is founded (Aboyne Pty Ltd v Dixon Homes Pty Ltd [1980] Qd R 142, Kelly J). [6] McPherson J in National Mutual Life Association of Australasia Ltd v Oasis Developments Pty Ltd [1983] 2 Qd R 441 at p 449 said that the issue whether the applicant defendant had a prima facie defence on the merits ―is the most cogent‖ of the three matters referred to by Kelly J in Aboyne Pty Ltd v Dixon Homes Pty Ltd. [7] I note also the statement of principle from the Court of Appeal in relation to applications of this nature in Cook v DA Manufacturing and Anor [2004] QCA 52. The judgment of Williams JA, with whom Chief Justice de Jersey and McPherson JA concurred, said at paragraph [16] (in referring to the three matters above): It is not the law that the applicant seeking to have a default judgment set aside must establish each of those three matters before the discretion to set aside the judgment can be exercised … [8] At paragraph [19] of his reasons Williams JA in Cook said: … of more importance for present purposes is the significance which Courts in recent times have placed on the fact that the applicant is able to demonstrate an arguable defence on the merits. McPherson J in National Mutual Life Association of Australasia Ltd v Oasis Developments Pty Ltd … said that the issue whether the applicant defendant had a prima facia case on the merits ―is the most cogent‖ of the three matters referred to by Kelly J in Aboyne Pty Ltd v Dixon Homes Pty Ltd … McPherson J went on to say ―It is not often that a defendant who has an apparently good ground of defence would be refused the opportunity of defending, even though a lengthy interval of time had elapsed provided that no irreparable prejudice is thereby done to the plaintiff‖. That passage has received the express approval of this Court (Davies, McPherson and Pincus JJA) in National Australia Bank Ltd v Singh ([1995] 1 Qd R 377 at 380) … -- 2 of 7 -- 3 [9] Other factors identified to be considered are the good faith of the defendant and the conduct of the defendant before and after the judgment (Unique Produce Marketing Pty Ltd v Bortek Sales Pty Ltd [2000] QDC 314 at paragraph [28]. Basis for the application [10] The basis for the defendant‘s application is that after unsuccessful attempts at negotiating a settlement of an amount less than was being sought on 17 April 2012, on that date he paid what he understood was outstanding. He received a letter from the solicitor for the plaintiff dated 23 April 2012. The letter sought payment of $6,883.80 calculated in the manner set out. It is clear that the figure sought was based on the amount of $54,839.53 which was Lifestyle Homes‘ debt to Boral and was also the amount claimed in a statutory demand, plus costs and interest. On page 2 of the letter, it referred to an intention to file a Notice of Discontinuance in the Magistrates Court of Queensland Brisbane registry to discontinue the claim. [11] The defendant deposes to his not considering the demand to be legitimate ―both due to the fact that the matter had already been dealt with and due to what [he] considered to be the ridiculous amount claimed‖. He also deposes to waiting for Mr Yam, the plaintiff‘s solicitor to contact him and he ―would confirm in no uncertain terms that no further amount was payable and that [he] regarded the matter as being at an end. [He] made that resolution believing that it would be necessary for the plaintiff to have a hearing before a Court when [he] would be able to attend and be heard.‖ [12] The statement of claim stated on page 6 (after the sum of $58,132.52 was claimed plus interest and costs): The proceeding ends if you pay those amounts before the time for filing your notice of intention to defend ends. If you are in default by not filing a notice of intention to defend within the time allowed, the plaintiff is entitled to claim additional costs of $240, costs of entering judgment in default. [13] As at 23 April 2012 or shortly thereafter, it is clear that the defendant was confronted with proceedings or enforcement steps on at least 3 fronts: the creditor‘s statutory demand to Lifestyle Homes Mackay Pty Ltd; caveats had been lodged on 2 central Queensland properties in which the defendant had an interest; and the existence of the Magistrates Court proceeding, the documents for which had been served on him on 14 April 2012. It was clear that the plaintiff was actively pursuing all legal avenues available to it to attempt to recover the debt. [14] The defendant submits that it has given a satisfactory explanation for the failure to defend including, at clause 3.7 of the written submissions, that it was ‗reasonable for the plaintiff to think that the new correspondence related to a separate Claim, not yet served‘. I do not accept that submission, particularly given that at the time the letter of 23 April 2012 was sent the defendant had been served with the Magistrates Court documents initiating the claim. One might have expected that given the silence from Mr Yam that a prudent defendant would after receiving that letter have sought clarification as to why the matter was not being viewed by the plaintiff as at an end. -- 3 of 7 -- 4 [15] I am not satisfied that the defendant has provided a satisfactory explanation for failing to appear. [16] The plaintiff sent to the defendant a further letter dated 28 May 2012, on which date the default judgment had been entered. The letter sought a further amount, $7519.06 and referred to the judgment obtained in this court and the caveat on 2 properties in central Queensland. Accordingly, on or soon after 28 May 2012, the defendant was aware of the Magistrates Court judgment. [17] As noted, the defendant did not file his application until 11 July 2012. This was 6 weeks after being informed of the judgment and when there could not, on any reasonable reading of Mr Yam‘s letter of 28 May 2012, have been any doubt that the judgment amount and the additional costs were being claimed. The defendant deposes at paragraph 20 of his affidavit sworn 3 August 2012 that: I did nothing when I received that letter and continued to wait for Yam to contact me. Again, I regarded debt had been sorted and that Yam would call me if he wanted to renegotiate the deal, as we have previously been negotiating over the phone. [18] While the defendant was clearly under pressure from the enforcement steps being taken by Boral, in the face of the letter of 28 May 2012 (which the defendant acknowledges receiving) to have done nothing to respond to the letter from the plaintiff‘s solicitors was unwise. That letter made plain the consequences both of paying and of not paying the amount referred to in the letter. I am not satisfied that the defendant has shown a reasonable explanation for the delay in making the application after becoming aware of the judgment. [19] Turning to what may be regarded as the ‗most cogent‘ of the matters about which the court must be satisfied, namely whether the defendant has a prima facie defence on the merits, the defendant relies on his memory of the conversation with Mr Yam as solicitor for the plaintiff; he does not depose to making any contemporaneous notes of the conversations. Mr Haack deposes at paragraph 4 of his affidavit about discussions with Mr Yam on 17 April 2012 as it was his ‗intention to attempt to settle the proceedings because [he] did not wish to put either the plaintiff or myself to the expense of litigation‘. After some discussions, the defendant deposes: It was clear to me that Yam would not budge in relation to the requirement that payment be made in a lump sum immediately, so I agreed to make payment in full later that day in settlement of the matter. [20] In Mr Yam‘s affidavit to which is exhibited his file notes of three conversations with the defendant, he does not refer to a conversation on 17 April 2012, the last conversation that he identifies being 11 April 2012. [21] Assuming for present purposes that the defendant did speak with Mr Yam on 17 April 2012, the amount that the defendant arranged to pay was the amount sought in the original letter of demand sent by the plaintiff‘s solicitors to Lifestyle Homes dated 7 February 2012 and in the statutory demand dated 26 March 2012. The defendant sent an email on 17 April 2012 to [email protected] which included the following text: -- 4 of 7 -- 5 Hi, Please find the remittance below for payment to Boral Resources from Lifestyle Homes Mackay today for the amount of $54,839.53. Please confirm that the matter has now been dismissed. [22] If the conversation took place between Mr Yam and the defendant on 17 April 2012 as claimed by the defendant (by which time the defendant knew of the Magistrates Court proceedings) it is curious that the defendant‘s email should make no reference to those proceedings or the payment being on behalf of Mr Haack‘s personal obligation, rather than the payment of Lifestyle Homes‘ debt. Mr Yam deposes to not being aware of the service of the Magistrates Court claim on Mr Haack until 30 April 2012. [23] By 17 April 2012, the plaintiff had lodged caveats over the central Queensland properties, had issued the statutory demand against the company and commenced the Magistrates Court proceeding and arranged for service of the documents for that. Service of the Magistrates Court claim had been effected (although that was not then known by Mr Yam). The Magistrates Court claim was for more than that. In my view, it seems inherently improbable that the plaintiff, through its solicitor, would simply agree to forego the significant amount of costs already incurred by that stage and accept on behalf of his client in finalisation of all claims and costs only the original amount of the company‘s debt. Further, the later correspondence made it clear that costs were also being pursued. The defendant deposes that it appeared to him that the plaintiff or its lawyers ―were attempting to gouge further payment from me after a deal had already been done‖ and he considered that ―to be most unfair‖. [24] The defendant‘s proposed Defence does not plead the consideration for the alleged agreement made with Mr Yam. I accept the plaintiff‘s submission that it is uncontroversial that ―in law the consideration for the discharging of an indebtedness in a particular sum cannot consist of a promise to pay the payment of a lesser amount of money‖ and refers to the decisions in Foakes v Beer (1884) 4 App Cas 605 and cites at length from Amos v Citibank (unreported, Qld Court of Appeal No 243 of 1994) where McPherson JA and Ambrose J (with whom Davies J agreed) held (at 8 to 9): … But it is a different matter where, as here, the subject matter of agreement is not a contractual obligation which is still to be performed, but simply a debt which hasarisen, become due, and is payable forthwith by one party to the other. It may be that, as Peter Gibson LJ has said: ―when a creditor and a debtor, who are at arms length, reach agreement on the payment of a debt by instalments to accommodate the debtor, a creditor will no doubt always see a practical benefit to himself in so doing:‖ … Here the debtor claims no more than that the creditor has agreed, and is consequently bound, to accept a sum less than the amount that was and is incontrovertibly due to him. In those circumstances, and in the absence of anything resembling an estoppel, the common law rule continued to prevail that some valuable consideration in law must be shown for the creditor‘s promise to release the unpaid balance of the debt. [25] It is obvious that the plaintiff was taking a hardline approach to debt recovery. Clause 2(b) of the Credit Account Terms and Conditions states that the Customer (Lifestyle Homes) ―agrees to pay all legal costs and expenses (including -- 5 of 7 -- 6 commissions paid by the Supplier to any commercial or mercantile agent) incurred by the Supplier in connection with the recovery of overdue amounts‖. Boral had a right pursuant to the Guarantee and Indemnity (G & I) to look to the defendant, as guarantor, for ―all costs, losses and expenses which it incurs as a result of any default by‖ Lifestyle Homes (see clause 2 of the G & I). A statement from the plaintiff dated 29 February 2012 showed that that company owed $54,839.53, that the amount was overdue and had been outstanding for 90 days. Thus the catalyst for recourse to the G & I was present. [26] I am persuaded by the plaintiff‘s submissions set out at paragraphs 53-55 of the written submissions.1 [27] In the absence of any identified consideration for an agreement to accept only the amount owing of Lifestyle Homes‘ original trading debt, exclusive of the costs already incurred as at 17 April 2012, and having regard to the statement of the law set out in Foakes v Beer and Amos v Citibank, I am not satisfied that the defendant has demonstrated a prima facie defence to the claim for the costs flowing from the plaintiff actively pursuing the defendant to recover the debt. [28] For the reasons given above, the defendant should not succeed on his application. The judgment entered 28 May 2012 for $5370.19 should stand. [29] The plaintiff submits that it should be entitled to indemnity costs for the reasons set out in paragraphs 58-63 of its written submissions. In a decision in the Court of Appeal of Platinum United II & Anor v Secured Mortgage Management Ltd (in liq) [2011] QCA 229 the Court of Appeal considered a situation where there was an alleged contractual entitlement to costs on an indemnity basis. One of the alternative bases relied on, namely clause 17.4(a), provided ―the borrower shall indemnify and upon demand reimburse the lender for all legal fees on an indemnity basis …‖. [30] At paragraph 6 of those reasons of Fraser JA (with whom Chesterman JA and Fryberg J agreed), the Court of Appeal acknowledged that a Court will usually exercise the discretion on whether to order costs on a standard or some other basis to ―give effect to a contractual provision which ‗plainly and unambiguously‘ provides for taxation on another basis‖. At paragraph 8, the Court concluded that the clause 17.4(a) quoted above, plainly and unambiguously obliged the first appellant to indemnify the respondent against its costs of the appeal on the 1 53. On that basis, notwithstanding that the Defendant considered that he had a Defence to the proceeding in which Judgment had been entered against him, on his own evidence and that of his solicitor: (a) He did not (or cause his solicitors to) raise the issue of the Agreement with the Plaintiff for the purpose of seeking an adjournment of the District Court application but instead chose to conduct himself on the basis that the Judgment was not contested for the purpose of obtaining the adjournment; and (b) While he was ‗outraged‘ on 28 June 2012 as to the amount that the Plaintiff was seeking against him, he did not instruct his solicitors as to the existence of the agreement (or provide verification of payment pursuant to same) until 9 July 2012. 54. The defendant‘s conduct after the entry of judgment referred to above was entirely consistent with the fact that there was no agreement alleged. 55. Indeed, an inference could be drawn that the Defendant only became concerned with the entry of Judgment because he had not anticipated that it would be relied upon in proceedings in the District Court in relation to properties jointly owned by he and his wife (cf because of his alleged Defence to it). -- 6 of 7 -- 7 indemnity basis; there was no reason why the Court‘s discretion should not be exercised in a way which reflected that contractual provision. [31] In the matter before me, although the clause (cl 2 of the G & I) relied on to justify the claim for indemnity costs is not as specific as that in the Platinum United case, clause 2 is widely drafted. I accept that the plaintiff has a contractual entitlement to indemnity costs of and incidental to responding to the application. [32] In view of the amount of the small amount of the judgment and to avoid further expense, if the amount of those costs cannot be agreed, it is my intention to fix those costs as permitted under Rule 683(2). I will receive submissions on the quantum of the plaintiff‘s costs of responding to the defendant‘s application. Orders: 1. The defendant‘s application filed 11 July 2012 is dismissed; 2. The defendant pay the plaintiff‘s costs on an indemnity basis in an amount to be agreed, or failing agreement to be fixed by me. -- 7 of 7 --