Civil Construction P/L v Marx Commercial P/L & Ors [2012] QMC 20

MAGISTRATES COURTS OF QUEENSLAND CITATION: Civil Construction P/L v Marx Commercial P/L & Ors [2012] QMC 20 PARTIES: CIVIL CONSTRUCTION SERVICES PTY LTD ACN 080 174 885 (plaintiff) v MARX COMMERCIAL PTY LTD ACN 117 452 329 (first defendant) and BORHAN BORHANI-SHIDANI (second defendant) and JAMAL WALKER (third defendant) FILE NO/S: M445 of 2011 DIVISION: Magistrates Court PROCEEDING: Claim- Application to set aside default judgment ORIGINATING COURT: Magistrates Court at Toowoomba DELIVERED ON: 14 August 2012 DELIVERED AT: Toowoomba HEARING DATE: 26 July 2012 MAGISTRATE: Carroll D ORDER: The Default Judgment entered on 17 May 2011 be set aside. The plaintiff pay the defendant’s costs of the Application to be agreed or assessed. CATCHWORDS: CIVIL LAW – PRACTICE AND PROCEDURE - application to set aside judgment by default — whether failure to comply with Rule 150(3) is reason to set aside default judgment Uniform Civil Procedure Rules 1999, r 290, r 150(3) -- 1 of 11 -- 2 SOLICITORS: Applicants/Defendants appear on own behalf Aden Lawyers Pty Ltd for the Plaintiff The Application [1] This is an application by the first, second and third defendants to set aside a judgment by default entered against them by the plaintiff on 17 May 2012. The History [2] Since the action was commenced the third defendant has been become bankrupt and as I understand the position, the application is now pursued by the first and second defendants. Mr Riwoe for the plaintiff informed the court that his client does not intend to pursue the third defendant. Accordingly I will make no reference to the third defendant in these reasons. [3] The plaintiff’s claim is for – ―1. The sum of $41,168.21 as a debt and/or liquidated damages pursuant to a Guarantee under a Deed dated 20 September 2010; 2. Additional amounts accruing pursuant to the abovementioned Deed and Guarantee from the date of filing to the date of the judgment; 3. Interest from the date of filing pursuant to the Deed or alternatively, pursuant to s 47 of the Supreme Court Act 1995 (Qld); 4. Costs on an indemnity basis pursuant to the Deed; or alternatively costs; and 5. Such further or other relief as to the court deems fit.‖1 [4] The Claim and Statement of Claim were filed on 29 November 2011 in the Toowoomba Registry of the Magistrates Court. [5] Marx Capital Pty Ltd ―The Debtor Company‖ is and was at all material times a company duly incorporated according to law.2 [6] On 23 June 2010 the plaintiff obtained judgment against The Debtor Company for $29,549.71.3 On 1 July 2010 the plaintiff served The Debtor Company with a Creditor’s Statutory Demand for Payment of Debt.4 The Debtor Company failed to pay the judgment debt within 21 days of receiving the demand.5 On 13 August 2010 the plaintiff filed an Originating Application in the Brisbane Supreme Court seeking 1 Paragraphs 1 to 5 of the Claim filed 29 November 2011 2 Paragraph 2 of the Statement of Claim. 3 Paragraph 6 of the Statement of Claim. 4 Paragraph 7 of the Statement of Claim 5 Paragraph 8 of the Statement of Claim. -- 2 of 11 -- 3 orders that The Debtor Company be wound up on the grounds of insolvency ―the winding up application‖.6 Pursuant to a Deed of Settlement dated 20 September 2010 the plaintiff agreed to provide The Debtor Company with further time to pay the judgment debt and in further consideration, the plaintiff agreed to temporarily refrain from pursuing the winding up application in accordance with the terms of the Deed.7 [7] At all material times the second defendant was a director of The Debtor Company and the first defendant8. [8] By clause 3.1 of the Deed The Debtor Company agreed to pay the settlement sum, i.e. the judgment debt plus any other sums owning to the plaintiff under the terms of the deed, within 28 days of the occurrence of a Crystallizing Event.9 [9] By virtue of clause 1.5 of the Deed a Crystallizing Event meant the earlier of the following: i. Within 11 months of the date of Deed: ii. The registration of title of any land development project with which the debtor company may be involved or has an interest in: iii. The sale of any real estate asset owned or controlled by the first defendant.10 [10] By virtue of clause 1.9 of the Deed, the first and second defendants would be guarantors of The Debtor Company’s obligations under the Deed. By virtue of clause 4.1 of the Deed interest would be payable on the settlement sum and all other sums payable under the Deed at a rate of 2% per calendar month. By virtue of clause 4.2 of the Deed interest is to be calculated on the balance of monies owing to the plaintiff under the Deed on the last business day of each calendar month and shall then be added to and form part of the settlement sum as an accretion to it.11 [11] Paragraph 13(a) of the Statement of Claim alleges that by virtue of the Deed, each of the guarantors agreed with the plaintiff that they would properly perform each of The Debtor Company’s obligations under the Deed. It further alleges that ―To the extent permissible by law, by executing this Deed, each Guarantor will be liable to perform each of the Debtor’s obligations under the Deed Costs Agreement as though the Guarantor was The Debtor Company;‖. [12] By virtue of clause 1.5 of the Deed the settlement sum was to be paid to the plaintiff by 20 August 2011.12 [13] Paragraph 16 of the Statement Claim sets out in tabular form particulars of the calculation of the original debt of $29,549.71 and the respective monthly accretion of interest thereon from 20 September 2010 at two per cent per annum up to and 6 Paragraph 9 of the Statement of Claim. 7 Paragraph 10 of the Statement of Claim. 8 Paragraph 4 of the Statement of Claim 9 Paragraph 11(b) and (c) of the Statement of Claim. 10 Paragraph 11(d) of the Statement of Claim. 11 Paragraph 12 of the Statement of Claim. 12 Paragraph 14 of the Statement of Claim. -- 3 of 11 -- 4 including the 31 October 2011. That table reveals that as at the 31 October 2011 the amount of the claim, including interest calculated in accordance with the terms of Deed, is $38,990.21. [14] In paragraph 17 of the Statement of Claim it is pleaded that The Debtor Company is liable, pursuant to the Deed, to pay to the plaintiff the sum of $38,990.21. [15] Paragraph 18 of the Statement of Claim alleges that by a letter dated 3 November 2011 the plaintiff made demand on the first and second defendants under the Guarantee. Paragraph 19 alleges that notwithstanding that demand, the first and second defendants have failed and or refused to pay the amounts demanded. [16] Paragraph 20 of the Statement of Claim alleges that in the light of the foregoing the defendants are jointly and severally liable to pay the plaintiff the sum of $38,990.21 plus additional amounts accruing pursuant to the Deed including, but not limited to, interest at the Default Interest Rate until the debt has been paid in full. [17] Paragraph 21 alleges that pursuant to clause 9.2.2 of the Deed, the first and second defendants are jointly and severally liable to pay on demand the plaintiff’s costs, charges and expenses in enforcing the Deed, including legal costs and expenses on the full indemnity basis. Paragraph 22 alleges that as at the 24 November 2011 the plaintiff’s costs incurred in enforcing its rights under the Deed are in the sum of $2,178.00. [18] Following paragraph 22, the next section of the Statement of Claim is not numbered. Its in the following terms – “RELEF SOUGHT The plaintiff claims the following relief – 1. The sum of $41,168.21 as a debt and or liquidated damages pursuant to a Guarantee under a Deed dated 20 September 2010; 2. Additional amounts accruing pursuant to the abovementioned Deed and Guarantee from the date of filing to the date of judgment; 3. Interest from the date of filing pursuant to the Deed alternatively, pursuant to section 47 of the Supreme Court Act 1995 (Qld); 4. Costs on an indemnity basis pursuant to the Deed; or alternatively costs; and 5. Such further or other relief as to the court deems fit.‖ [19] After the signing clause there is the ―NOTICE AS TO DEFENCE”. Thereafter is the following – “NOTICE UNDER RULE 150(3) $ 41,168.21 debt and/or liquidated damages pursuant to a Guarantee in under a Deed dated 20 September 2012 $ 1,065.00 for costs of issuing the claim and this statement of claim $ 38.50 Bailiff -- 4 of 11 -- 5 $ 208.00 Filing Fees $ 42,479.71” [20] Service of the Claim and Statement of Claim was effected by post on the first defendant on 1 December 2011. [21] Service on the second defendant was effected in accordance with an Order for substituted service made on 22 March 2012. Service on the second defendant was effected by posting the claim and Statement of claim and copy of the Order to two separate postal addresses and by emailing to a separate email address. [22] Paragraph 4 of the Order provides that service will be deemed to be effective three days after the Claim and Statement of Claim have been mailed/emailed by the plaintiff to all of the addresses identified in the Order. [23] I am satisfied that the letters to the second defendant and the email were sent on 12 April 2012. It follows that service is deemed to be effected on 15 April 2012. If follows from that that the last day for filing a Notice of Intention to Defend is 13 May 2012.13 [24] On 9 May 2012 the second defendant, Mr Borhan Borhani-Shidani sent an email to the solicitors for the plaintiff. He acknowledged the Claim and Statement of Claim and confirmed that the defendants would be defending the Claim. In accordance with Rule 222 of the UCPR, he requested a copy of the follow:- 1. The Deed of Settlement identified in paragraph 10 of the Statement of Claim; 2. The Deed of Costs Agreement identified in paragraph 13(a); and 3. The letters dated 3 November 2011 identified in paragraph 18 of the Statement of Claim. [25] Mr Borhani-Shidani asked that these copy documents be emailed to his email address by 5 pm on 11 May 2012. No response was received to that request. [26] On 14 May 2012 Mr Borhani-Shidani sent a further letter to the plaintiff’s solicitors by email. It was in these terms:- ―I refer to my letter the 9th May 2012. I note the documents requested pursuant to Rule 222 of the Uniform Civil Procedure Rules 1999 (Qld) were not received by 5 pm on the 11th of May 2012. Please confirm by 5 pm today whether you have instructions to provide these documents by email, or alternatively, to provide these documents for inspection and copying at your premises. I confirm the defendants will be defending the proceedings … ― [27] On 14 May 2012, and after receipt of the letter of the same date from the second defendant, the plaintiff’s solicitors wrote to the second defendant by email enclosing 13 Rule 137 UCPR. -- 5 of 11 -- 6 a copy of the Deed of Settlement and the letter of 3 November 2011. They continued – ―Please note that the Deed of Settlement and the Deed of Costs Agreement are the same documents. We confirm that you were served with our client’s Claim and Statement of Claim on 12 April 2012. In accordance with the court order dated 22nd of March 2012 service was effected three days after which by our calculations is the 17th of April 2012. As you have 28 days to file your Notice of Intention to Defend and Defence, the before mentioned are therefore due to be filed and served by no later than Tuesday 15th of May 2012. If the debt owing to our client (and all costs and interest) has not been paid in full, or if your Notice of Intention to Defend and Defence have not been filed and served by the before mentioned date, we will seek our client’s instructions to apply for default judgment without further notice to you. Please note that should you file a Defence and should that Defence fail to address our client’s pleadings as contained in its Statement of Claim, we will seek our client’s instructions to apply for Summary Judgment and ask the court that costs be awarded on indemnity basis (as in accordance with the terms of the Deed). Finally, as you are self-represented in this matter we strongly suggest that if there is anything in this letter that you do not understand, that you obtain independent legal advice. Yours faithfully …‖ [28] On 15 May 2012 the second defendant responded by email letter to the plaintiff’s solicitors in the following terms – ―We refer to your letter of the 15th of May 2012. On the 9th of May 2012 we requested documents mentioned in your client’s pleadings pursuant to Rule 222 of the Uniform Civil Procedure Rules 1999 (Qld) Rule and provided two clear days for you to comply with our request. We did not receive the requested documents on the 14th of May 2012. As you are aware, we are self-represented in this matter. We had set aside the weekend of the 12-13 May 2012 to complete our Notice of Intention to Defend and Defence (collectively, Defence); however, could not proceed without the requested documents. Furthermore, your letter of the 14th of May 2012 states that the Deed Costs Agreement, which we have requested pursuant to the Rule, is the same document as the Deed of Settlement; however, this is not pleaded or particularised in the Statement of Claim. Does your client intend to amend its pleading to plead or particularise this alleged fact? If not, we insist that your client provide the Deed of Costs Agreement so that we can adequately meet the claim. Subject to your advice about the Deed of Costs we advise that we will be filing our Defence on Monday 21st of May 2012. If your client insists on filing an application for Default Judgment in the meantime, we will use our recent correspondence to apply to have the Default Judgment set aside and concurrently file our Defence. -- 6 of 11 -- 7 Regards …‖ [29] On 17 May 2012 the plaintiff’s solicitors filed a Request for Default Judgment and an affidavit of David William Riwoe in support thereof. On the same date Judgment by Default was signed by the Senior Registrar for ―the amount of $49,940-64 including $14,359-60 interest to today and $448-00 costs‖. The relevant Rules and the submissions [30] Rule 290 of the UCPR is in these terms – ―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.‖ [31] The defendants submit that there are two bases on which the Application for Default Judgment should be set aside. They are:- (a) That the Default Judgment was irregularly entered; or in the alternative (b) If the Default Judgment was regularly entered, the court should exercise its discretion and set same aside. [32] As to their submission that the Default Judgment was entered irregularly, the defendants submit that:- (i) The Statement of Claim did not provide the requisite notice pursuant to Rule 150(3) of the UCPR; and (ii) The plaintiff did not produce a document requested pursuant to Rule 222. [33] As to the non-compliance with Rule 150(3), the defendants submit that:- (i) The claim for interest is not particularised as required by Rule 150(3)(b); (ii) The Statement referred to in Rule 150(3)(d) is omitted from the Statement of Claim; (iii) The Statement of Claim offend Rule 150(3)(e) in that there is no statement of the additional costs of obtaining judgment in default of the Notice of Intention to Defend. [34] Rule 150(3) of the UCPR is in these terms – ―If the plaintiff’s claim is for a debt or liquidated demand only (with or without a claim for interest), the plaintiff must state the following details in the statement of claim— (a) particulars of the debt or liquidated demand; (b) if interest is claimed—particulars as required by rule 159; -- 7 of 11 -- 8 (c) the amount claimed for the costs of issuing the claim and attached statement of claim; (d) a statement that the proceeding ends if the defendant pays the debt or liquidated demand and interest and costs claimed before the time for filing notice of intention to defend ends; (e) a statement of the additional costs of obtaining judgment in default of notice of intention to defend.‖ [35] Rule 159 of the UCPR is in these terms – ―159 Interest (1) This rule applies if a party intends to apply to the court for an award of interest, whether under the Supreme Court Act 1995, section 47 or otherwise. (2) This rule does not apply to a proceeding for damages for personal injury or death. (3) The party must allege in the party’s pleading particulars of— (a) the amount or amounts on which the interest is claimed; and (b) the interest rate or rates claimed; and (c) the day or days from which interest is claimed; and (d) the method of calculation. (4) However, the rate or rates of interest need not be separately specified if the party is claiming at the rate or rates specified in a practice direction.‖ [36] The plaintiff concedes that the Statement of Claim does not comply with Rule 150(3). Paragraph 7 of the plaintiff’s submissions in reply, dated 6 July 2012, is in these terms – ―Additionally, we also note that minor errors in the endorsements of the claim are unlikely to invalidate a judgment obtained in default of the filing of a Notice of Intention to Defend. See FAI Leasing Finance Pty Ltd v Beinit Pty Ltd (QSC de Jersey J 18 June 1993, unreported. BC 9304054) at 2.‖ ―FAI Leasing Finance Pty Ltd v Beinit Pty Ltd‖ [37] The plaintiff further submits that the lack of notice regarding the additional costs of obtaining judgment in default may be easily remedied by the court by reducing the judgment amount should it choose to do so. It further submits that such omission was a minor error and should not invalidate a judgment obtained in default of Filing Notice to Defend. Again it relies on FA Leasing Finance Pty Ltd v Beinit Pty Ltd. Discussion [38] It is trite law that if a judgment is entered irregularly the defendant is entitled to have it set aside ex debito justitiae. It has been said that where a plaintiff proceeds by default every step must comply strictly with the Rules, so that it is a matter strictissimi juris.14 14 CB Richard Ellis (C) Pty Ltd v Wingate Properties Pty Ltd [2005] QDC 399 at paragraph 2. -- 8 of 11 -- 9 Failure to comply with Rule 150(3)(b) [39] Sub-paragraph 3 of the prayer for relief is in these terms – ―3. Interest from the date of filing pursuant to the Deed or alternatively, pursuant to section 47 of the Supreme Court Act 1995 (Qld);.‖ [40] I note that the claim for interest is in the alternative. [41] I am satisfied that paragraph 16 of the Statement of Claim adequately sets out the claim for interest as provided for in the Deed. I am also satisfied that the “NOTICE UNDER RULE 150(3)” at the end of the Statement of Claim does not include a claim for interest pursuant to section 47 of the Supreme Court Act 1995 (Qld) because the alternative claim is made for interest under the Deed. Accordingly I am satisfied that the plaintiff has not failed to comply with Rule 150(3)(b). Failure to comply with Rule 150(3)(d) [42] The information contained in this sub-Rule has been omitted completely from the Statement of Claim. [43] In Rossco Developments Pty Ltd v O’Halloran and others15 the plaintiff contracted to sell a parcel of land to the defendants. The defendants did not pay the deposit or the balance of purchase monies. The plaintiff resold the land and then sued the defendants, incorrectly alleging in the Statement of Claim that the deposit had been paid. The plaintiff sought, inter alia, the forfeiture of the deposit, legal costs incurred by the plaintiff in the attempted sale and damages for breach of contract. The Statement of Claim did not bear the endorsement provided by O4, r.6 of the Supreme Court Rules (A.C.T.). That Rule provides in material respects ―(1) wherever the plaintiff’s claim is for a debt or liquidated demand only the indorsement, besides stating the nature of the claim, shall state the amount claimed for debt, or in respect of such demand, and for costs respectively and shall further state that upon payment thereof within four days after service …further proceedings will be stayed … ―. [44] Judgement was signed in default of the defendant’s appearance and at the hearing for the assessment of damages, which gave rise to the judgment, the defendants also did not appear. [45] At paragraph 3 on page 239 of the Report, Blackburn C.J. said ―…Had the Statement of Claim included a claim for the amount of the deposit, either as an alternative to a claim for unliquidated damages, or loan, the writ and Statement of Claim would have been very different. In the first place, of course, the Statement of Claim would have alleged that the deposit had not been paid, not that it had been paid. In the second place, the Statement of Claim would have had to bear the endorsement of notice as to stay of proceedings in accordance with O4, r.6. This requirement is mandatory where the claim is for a debt or liquidated demand only, and in such a case, the Statement of Claim is irregular without it. Its purpose is to confer a protection on the defendant by informing him of his right to minimise his costs by paying the amount demanded within the time limited for appearance. …” (The emphasis is mine). 15 1980 (42 FLR 236) -- 9 of 11 -- 10 [46] Rule 150(3)(d) provides similar protection to the defendant and the failure to comply with this sub-Rule means that the Statement of Claim does not strictly comply with the Rules. Failure to Comply with Rule 150(3)(e) [47] Again the Statement of Claim makes no reference to the added costs of obtaining judgment in default of a Notice of Intention to Defend. I note from the Default Judgment Order that these costs amounted to $240. The defendants were not told that these costs could be avoided if they filed a Notice of Intention to Defend. [48] In my view the failure to comply with this sub-Rule means that the plaintiff has not strictly complied with the Rules. [49] As noted above, the plaintiff relies upon the decision of FAI Leasing Finance Pty Ltd v Beinit Pty Ltd. In that case the second defendant applied to the court to set aside a judgment entered against him by the plaintiff in default of his having entered an appearance. Paragraphs 2 and 3 of the reasons for judgment of de Jersey J, as he then was, are in these terms – ―Mr Daubney, who appeared for the second defendant, submitted that the judgment was irregular. The basis of that submission was some errors in the special endorsement on the writ which the plaintiff’s solicitors have recently conceded. In particular, paragraph 11(c) refers to clause 3 whereas it should refer to clause 6(b). The relevant Deed of Guarantee and Indemnity has, however been incorporated into the pleading by paragraph 6 of the pleading. Further, paragraph 14 of the endorsement referred to 12 April 1993, whereas it should have referred to 12 March 1993 but, as I said before, the relevant date was probably the date of service of any demand, if any demand was necessary, and that is correctly specified as 7 April 1993. In any event, I doubt that such errors, had they been substantial, which these are not, could have invalidated the judgment entered by default …‖ [50] His Honour considered that the errors there where not substantial. In my view they are more akin to errors that could have been corrected by the slip rule. In the present case, it is my view that the failure to comply with Rule 150(3)(d) and (e) meant that the Statement of Claim did not strictly comply with the Rules. [51] The plaintiff further submits that if Rule 150(3) was deficient then, in accordance with Rule 371(1) of the UCPR it is an irregularity that does not render the proceeding, a document, a step taken or an order made in the proceeding, a nullity. [52] I accept that the failure by the plaintiff to comply with Rule 150(3)(d) and (e) did not render the Statement of Claim a nullity. The issue is not whether the Statement of Claim is or is not a nullity. Rather, it is whether it strictly complies with the Rules. [53] The plaintiff further submits that in accordance with Rule 372 of the UCPR the court may declare a document or step taken to be effectual or make other orders that the court considers appropriate. I refer to CB Richard Ellis (C) Pty Ltd v Wingate -- 10 of 11 -- 11 Properties Pty Ltd [2005] QDC 399 at paragraph 31 where His Honour McGill DJC, when referring to Rule 371 said – ―… as to this, it may be noted that although sub-rule (2)(b) gives an express power to set aside an order made in the proceeding, paragraph (d) does not contain expressly a power to declare an order made in breach of the Rules to be effectual …‖ [54] At the end of the day it is my view that the plaintiff’s failure to comply with Rule 150(3)(d) and (e) mean that the Statement of Claim does not strictly comply with the Rules. Accordingly the default judgment was entered irregularly and must be set aside. [55] As to the defendant’s submission that the judgment was irregular because the plaintiff did not produce a document requested pursuant to Rule 222 of the UCPR, I note that the last day for the defendants to file an Entry of Appearance and Defence was 15 May 2012. [56] The documents sought by the defendants were the Deed of Settlement referred to in paragraph 10, the Deed of Costs Agreement identified in paragraph 13(a) and the letter dated 3 November 2011 referred to in paragraph 18 of the Statement of Claim. A copy of the Deed of Settlement and a copy of the letter of 3 November 2011 were sent by email to the defendants on 14 May 2012. Under cover of the same letter, the plaintiff advised that the Deed of Settlement was one in the same document as the Deed of Costs Agreement. Although the documents might have been delivered one day before the last day for filing an Entry of Appearance and Defence, such late delivery did not in my view render the judgment irregular. That is not to say that the late delivery of such document may not be a factor which a court might take into account in exercising its discretion to set aside a regularly entered judgment. [57] Upon receipt of the advice of 14 May 2012 from the plaintiff’s solicitors that the Deed of Costs Agreement and the Deed of Settlement were one in the same document, the second defendant wrote to the plaintiff’s solicitor on 15 May 2012 submitting ―…this is not pleaded or particularised in the Statement of Claim. Does your client intend to amend its pleadings to plead or particularise this alleged fact. If not, we insist that your client provide the Deed of Costs Agreement so that we can adequately meet the claim …‖ It is my view that upon receipt of the advice of 14 May 2012 that the Deed of Costs Agreement and the Deed of Settlement were one in the same document, the defendants were in a position to plead to the Statement of Claim. [58] It is my view that there is no substance to the submission by the second defendant that the failure of the plaintiff to supply the documents in accordance with Rule 222 rendered the Default Judgment irregular. [59] I am satisfied for the reasons outlined above that the Default Judgment is irregular and the defendants are entitled, as of right, to have same set aside. The plaintiff should also pay the defendants’ costs of this application to be assessed or agreed. D. Carroll Magistrate -- 11 of 11 --