Barrier Reef Arts Pty Ltd & Ors v The Reserve Vault Pty Ltd [2011] QDC 143

DISTRICT COURT OF QUEENSLAND CITATION: Barrier Reef Arts Pty Ltd & Ors v The Reserve Vault Pty Ltd [2011] QDC 143 PARTIES: BARRIER REEF ARTS PTY LTD (First Plaintiff) and BLUE STAR CAPITAL LIMITED (Second Plaintiff) and BRISCOWE PROPERTIES PTY LTD (Third Plaintiff) v THE RESERVE VAULT PTY LTD (Defendant) FILE NO/S: BD 707/11 DIVISION: Civil PROCEEDING: Application to set aside judgment ORIGINATING COURT: District Court, Brisbane DELIVERED ON: 4 August 2011 DELIVERED AT: Brisbane HEARING DATE: 29 July 2011 JUDGE: Farr SC, A/DCJ ORDER: APPLICATION REFUSED CATCHWORDS: PROCEDURE – APPLICATION TO SET ASIDE SUMMARY JUDGMENT – APPLICATION REFUSED – defendant did not provide a reasonable explanation for its failure to attend the court hearing of the plaintiffs’ application for summary judgment – defendant failed to show a sufficient basis for summary judgment not to be maintained – defendant had no real prospect of successfully defending all or part of the claim Uniform Civil Procedure Rules 1999 (Qld), rr 166, 292, 302 District Court of Queensland Act 1967 (Qld), s 68 Bernstron v National Australia Bank Limited [2002] QCA 231, cited -- 1 of 9 -- 2 Cape York Air Lines Pty Ltd v QBE Insurance (Australia) Limited [2008] QSC 302 at [27] – [29], applied Deputy Commissioner of Taxation v Salcedo [2005] QCA 227, cited GEL Custodians Pty Ltd v RQ Consultants Pty Ltd & Ors [2010] QSC 181, cited McCullough Robertson Lawyers v Sea Slip Marinas (Aust) Pty Ltd [2008] QDC 72, cited Qld Pork Pty Ltd v Lott [2003] QCA 271 at [41], applied COUNSEL: M Deighton (solicitor) for all plaintiffs P Sands (self represented) for the defendant SOLICITORS: Hemming & Hart for all plaintiffs [1] The plaintiffs obtained summary judgment against the defendant on 9 June 2011 to the following effect:- (i) Pursuant to r 292 of the Uniform Civil Procedure Rules 1999 (Qld) and s 68 of the District Court of Queensland Act 1967 (Qld), the Defendant deliver up possession of the artwork known as “The Reef Panorama” to the Plaintiffs within 14 days of the date of this order. (ii) The Defendant pay the Plaintiffs’ costs of and incidental to this application and the action to be assessed on the standard basis. [2] An enforcement warrant was issued by the Deputy Registrar on 6 July 2011. It remains valid until 5 July 2012. [3] The defendant was served with a sealed copy of the summary judgment order and a Contempt Notice by facsimile, email and by hand delivery under cover of letter dated 10 June 2011.1 [4] On 7 July 2011 the defendant filed an application seeking:- “To have the summary judgment that was handed down on 9 June 2011 at the Brisbane District Court, by his Honour Judge Samios. 1. Dismissed on the grounds that Hemming & Hart lawyers were at fault in not supplying information as legally required, to inform The Reserve Vault of the court date. 2. We also seek costs incurred accordingly.” [5] The court may set aside or vary a judgment given on an application in a party’s absence pursuant to the provisions of r 302 of the Uniform Civil Procedure Rules 1999 (Qld) (UCPR). In such circumstances however, the applicant must give a 1 Annexure MTD-2 to affidavit of Matthew Thomas Deighton dated 1 July 2011. -- 2 of 9 -- 3 reasonable explanation for its failure to attend, and provide a sufficient basis for the judgment not to be maintained.2 Nature of Claim [6] The first plaintiff acquired artwork titled “The Reef Panorama” in February 2006. Following that acquisition, it engaged the second plaintiff to attempt to on sell it. The plaintiffs have alleged that as part of the second plaintiff’s attempt to market the artwork, it entered into an oral agreement with the defendant to display and store “The Reef Panorama” at its business premises in Brisbane. [7] The artwork was then displayed at the defendant’s premises until around the middle of June 2007. Since that time it has been stored by the defendant. In early 2010 the second plaintiff sought to take possession of “The Reef Panorama” from the defendant without success. In late 2010, seven of the thirty three paintings which comprise “The Reef Panorama” were sold to the third plaintiff. A dispute exists between the second plaintiff and the defendant regarding outstanding storage fees and the defendant has to date refused to release the artwork to the plaintiffs. [8] The claim was filed on 9 March 2011 and a Notice of Intention to Defend was filed on 15 April 2011. Failure to Appear at the Summary Judgment Hearing [9] The plaintiffs rely on an affidavit of service of one Kristie Mitchell. She has attested that she caused an application for summary judgment and an affidavit sworn by Gregory Hall to be filed and served on the defendant by hand delivering those documents to the defendant’s address for service on 25 May 2011. Annexed to her affidavit is a document entitled “Service Form”. It’s dated 25 May 2011 and identifies the name of the matter to which the documents relate; the nature of the documents being served; the address at which service took place; the time of service; the name and position of the person who took receipt of the documents and the signatures of both that person and Ms Mitchell. That form identified the documents being served as: 1. Application. 2. Affidavit of Gregory Hall. It also identified the receiver of the documents as Miriam Neilson and that Ms Neilson held the position of Office Manager with the defendant. [10] Miriam Neilson has provided an affidavit dated 6 July 2011 which relevantly says:- “I was served with papers by Kristie Mitchell of Hemming & Hart on Friday 27 May. In reading the document, I could not see any reference to a court date.” 2 McCullough Robertson Lawyers v Sea Slip Marinas (Aust) Pty Ltd [2008] QDC 72; GEL Custodians Pty Ltd v RQ Consultants Pty Ltd & Ors [2010] QSC 181. -- 3 of 9 -- 4 [11] Ms Neilson does not refer to the service of any document on 25 May. In her oral evidence before me, Ms Neilson maintained that the documents were served on Friday 27 May, although she conceded the possibility that such service could have occurred on the 25th. [12] Due to the inadequate nature of her affidavit, Ms Neilson gave oral testimony and produced the documents that she said were served on her. Those documents were: (a) A covering letter from Hemming & Hart which identified the action and which said further: “Please find enclosed by way of service the following documents filed in the District Court today: 1. Application; and 2. supporting affidavit of Gregory Hall”, and (b) An affidavit of Gregory Hall. That covering letter provided the telephone number and the email address of its author. [13] In support of the application to set aside the order for summary judgment, the defendant has relied on two affidavits – the one by Ms Neilson, the other by Alfred George Hughes, Operations Manager of The Reserve Vault. It is worthwhile to repeat in their entirety those affidavits: I, Miriam Neilson Accounts Person of The Reserve Vault Pty Ltd solemnly and sincerely affirm and declare:- On 24 May 2011, Kristie Mitchell attempted to serve documents on me, but I was unable to leave our office at the time due to Security Protocol and asked her to please fax and email them. I was served with papers by Kristie Mitchell of Hemming Hart on Friday 27 May. In reading the document, I could not see any reference to a court date. I was shocked on Thursday 9 June to be contacted by a woman at Hemming & Hart Lawyers to be informed that there had been hearing and judgment at the District Court, as we had not been informed of a court date. Additionally I was being put under pressure by Hemming & Hart to agree to the removal of the artwork, however I told them that I had no authority to give access and that I would inform Mr Sands of the judgment. I then SMS messaged and emailed Mr Sands, to inform him as he was out of the country at the time. -- 4 of 9 -- 5 I also noted to Peter Sands on 17 June that in two emails that we received from Hemming & Hart Lawyers they stipulated the removal of The Reef Panorama artwork. The emails were for two different days. It was pointed out in my reply to Hemming & Hart. I later received an email reply apologising for the “confusion caused by erroneous reference to collection”. More recently (22 June 2011) I have received another email from Kristie Mitchell that appears to have been sent in error, as it does not apply to the case, but it demonstrates a trend of miscommunication, and lack of attention to detail. I, Alfred George Hughes, Operations Manager of The Reserve Vault, 102 Adelaide Street Brisbane Qld 4000 state that I have read 3 x documents received by the company prior to June 10th from Hemming Hart Lawyers and there was no mention of a designated court date or time. Dealings with Hemming Hart seem to be of questionable integrity as per my separate affidavit regarding the overall dealings with the firm as well as citing the letter dated 17 June from Hemming Hart apologising for their erroneous communications. [14] As is obvious, those affidavits did not identify the documentation that was said to have been served nor was any such documentation annexed. Nor, did Ms Neilson offer any explanation for her signature on the “Service Form” acknowledging receipt of the application. For those reasons, the defendant (who was self represented) was allowed to adduce further oral testimony regarding those matters. [15] In evidence before the court, Ms Neilson stated that the only documents that were served upon her were the aforementioned covering letter and the affidavit of Gregory Hall. When asked why she signed the document acknowledging receipt of two documents, one of which was said to be an application, she said that she assumed or believed that the covering letter was the application. She conceded that she did not ask any questions of Ms Mitchell about the missing application or about what must have been a confusing belief that the covering letter was an application itself. [16] No evidence has been placed before the court by the defendant that any attempt was made to contact either the plaintiff’s solicitors or the court itself to inquire about the nature of the application. [17] Furthermore, as noted above, Mr Hughes stated in his affidavit that he read three documents from Hemming and Hart received by the Reserve Vault Pty Ltd prior to 10 June 2011. In evidence, Mr Hughes said that he specifically recalled the day that the documents the subject of this proceeding were served on Ms Neilson. Given however, that Ms Neilson alleges that she was only served with two documents, Mr Hughes, understandably was questioned as to the identity of the third document that he claimed to have read. He was unable to identify that third document in any way. He did say however, that The Reserve Vault Pty Ltd did receive numerous documents from Hemming and Hart about this matter during that time. -- 5 of 9 -- 6 [18] Ms Neilson said in evidence that she took the documents to her employer’s office and left them in a drawer. Her employer was Mr Sands, who appeared before me today on behalf of the defendant. In a statement from the Bar table, Mr Sands stated that the documents he received did not disclose a hearing date. The defendant has placed no evidence before the court as to why no enquiries were made to discover the nature of the application referred to in the covering letter. Conclusion [19] I do not accept that the defendant has provided a reasonable explanation for its absence from court on 9 June 2011. My reasons are: (a) Ms Neilson signed an acknowledgment of receipt of only two documents, one of which was said to be the application. It is now alleged that the application was not enclosed. I find that impossible to accept given the evidence of Ms Mitchell and the “Service Form” signed by Ms Neilson; (b) Ms Neilson stated that she thought that the covering letter was the application. Whilst I appreciate that Ms Neilson is not a lawyer, I find it difficult, if not impossible to accept that anyone could make such a mistake. That covering letter clearly identified the application as being a separate document; (c) No attempt was made at any stage to contact either the solicitors for the plaintiffs or the court to ascertain the nature of the application referred to in the covering letter. In my view, this is an extraordinary omission. No explanation for that omission has been provided; (d) Mr Hughes has attested to reading three documents - which is entirely consistent with the documents that Ms Mitchell said were served i.e. the covering letter, the application and the affidavit; and (e) Ms Mitchell has attested that she served the application on the defendant. [20] Accordingly, in my opinion the defendant has not provided a reasonable explanation for its failure to attend court on 9 June 2011. [21] To be successful in this application the defendant had to provide both a reasonable explanation for its failure to attend and show a sufficient basis for the judgment not to be maintained. I do not therefore need to embark upon an examination of the evidence in relation to the second point, given my findings on the first. Nevertheless, I will make some brief comments on that second point. Has the defendant shown a sufficient basis for the judgment not to be maintained? [22] The defendant has not placed any new material relevant to this issue before the court. Nor has the defendant indicated that it intends to amend its defence. -- 6 of 9 -- 7 [23] The test to be applied in respect of summary judgment applications is “does the defendant have a real as opposed to fanciful prospects of successfully defending all or part of the claim.”3 [24] The test was specifically adopted in the Court of Appeal decision of Bernstron v National Australia Bank Limited4 by Jones J (with whom Chesterman J agreed). Jones J commented: “[37] In Swain Lord Woolf said concerning the relevant rules: „… the court now has a very salutary power, both to be exercised in a claimant‟s favour or, where appropriate, in a defendant‟s favour. It enables the court to dispose summarily of both claims or defences which have no real prospect of being successful. The words „no real prospect of succeeding‟ do not need any amplification, they speak for themselves. The word „real‟ distinguishes fanciful prospects of success or … they direct the court to the need to see whether there is a „realistic‟ as opposed to a „fanciful‟ prospect of success‟.” [25] Whilst the plaintiffs’ bear the onus of proof in such an application, once that onus has been discharged – that is, once the plaintiff has put sufficient evidence before the court of its prima facie right to summary judgment – the evidentiary onus shifts to the defendant to satisfy the court that its defence has real prospects of succeeding should the matter proceed to trial. [26] In Qld Pork Pty Ltd v Lott5Jones J described the onus in the following terms: “In this type of proceeding, as with an application under the former rules, the onus is on the applicant to prove the claim and to persuade the court that there is no real prospect of the opposite party succeeding. In some circumstances a respondent to the application may be able to convince the court that the onus has not been discharged without filing any evidence at all. But once a prima facie case has been made out entitling the applicant to judgment then an evidentiary onus shifts to the respondent.” [27] It is worth repeating the defendant’s Notice of Defence in its entirety: “The defendant relies on the following facts in defence of the claim: 1. The defendant admits the allegation in paragraphs 1, 3, 7, 10, 13, 15, 19 of the statement of claim. 2. The defendant does not admit the allegation in paragraphs 2, 11, 16, 17 of the statement of claim. The defendant has made reasonable enquiries and remains uncertain of the truth or otherwise of the 3 Deputy Commissioner of Taxation v Salcedo [2005] QCA 227. 4 [2002] QCA 231. 5 [2003] QCA 271at [41]. -- 7 of 9 -- 8 allegation and is unable to admit it because truthful facts are unknown to the defendant. 3. The defendant denies the allegation in paragraphs 4, 5, 6, 8, 9, 12, 14, 18, 20, 21, 22 and 23 of the statement of claim because they are incorrect, misrepresentation of facts and manipulation of the true events. 4. This matter has been blown out of all context with various negotiations, mediation and concessions in trying to resolve the matter, being accepted then ignored, then renegotiated, then accepted again, then defaulted on when deadlines for various payments fell due. This was with a representative of the second plaintiff. Previously, various invoices and correspondence hand delivered and sent to the plaintiffs supplied mail address over a three year period were purposefully ignored.” [28] Such a defence clearly poses many problems for the defendant. Rule 166(4) of the UCPR states that “a party‟s denial or non admission of an allegation of fact must be accompanied by a direct explanation for the party‟s belief that the allegation is untrue or cannot be admitted.” [29] Rule 166(5) of the UCPR states that “if a party‟s denial or non admission of an allegation does not comply with sub-rule (4), the party is taken to have admitted the allegation.” The defendant has not pleaded any material facts in support of its denials of paragraphs 4, 5, 6, 8, 9, 12, 14, 18, 20, 21, 22 and 23 of the statement of claim. [30] Nor has the defendant explained the basis of its belief that the allegations contained in those paragraphs of the statement of claim are untrue. [31] In Cape York Air Lines Pty Ltd v QBE Insurance (Australia) Limited,6 Daubney J stated at paragraphs [27] – [29] that: “The nature of the direct explanation of the party‟s belief that an allegation is untrue necessarily compels the party to plead, in compliance with rule 149, the material facts (not evidence) on which it will rely to controvert the allegation or other matters to prevent the opponent being taken by surprise. Thus, if the direct explanation given by a defendant is that the alleged fact is so inconsistent with other matters that the defendant believes it to be untrue, the defendant should plead those other matters by way of response (rule 165(1) expressly provides for a party to plead „another matter‟ in response), either as material facts under rule 149(b) or as matters required to be stated to prevent surprise under rule 149(c).” [32] The plaintiff has submitted that the denials contained in paragraph 3 of the defence are deemed to be admissions. The defendant made no submissions on that topic. I agree with the plaintiff’s submissions. The consequence of that conclusion is that 6 [2008] QSC 302. -- 8 of 9 -- 9 the defendant has not provided any defence to the claim and therefore has failed to show why the judgment entered on 9 June 2011 should not be maintained. [33] Furthermore, putting aside the provisions of r 166(5), the defendant has not in any event asserted any legal basis on which it is entitled to maintain possession of the artwork or deny possession of it by the first and third plaintiffs. The defendant has not pleaded that it is exercising a lien over the property nor has it filed a cross claim seeking to recover the outstanding storage fees. [34] I find therefore that the defendant has failed to show a sufficient basis for the judgment not to be maintained. In my view, the defendant had no real prospect of successfully defending all or part of the claim. Order [35] The application is refused. [36] I will hear the parties as to costs. -- 9 of 9 --