Cellnet Group Limited v Konneh [2009] QDC 325

DISTRICT COURT OF QUEENSLAND CITATION: Cellnet Group Limited v Konneh [2009] QDC 325 PARTIES: CELLNET GROUP LIMITED (Plaintiff/Respondent) V LYNDON VARNIE KONNEH (Defendant/Applicant) FILE NO/S: BD454 of 2008 DIVISION: Civil PROCEEDING: Application ORIGINATING COURT: District Court at Brisbane DELIVERED ON: 23 October 2009 DELIVERED AT: Brisbane HEARING DATE: 24 August 2009 JUDGE: Judge McGinness DCJ ORDER: The application to set aside default judgement is dismissed. I order Mr Konneh pay Cellnet Group’s costs of and incidental to the application to be assessed on the standard basis. CATCHWORDS: JUDGMENT – APPLICATION TO SET ASIDE DEFAULT JUDGMENT – where applicant has not filed a defence – where delay in bringing application to set aside default judgment – whether prima facie defence was raised on the merits Uniform Civil Procedure Rules 1999 r 290 Cases cited: Aboyne Pty Ltd v Dixon Homes Pty Ltd [1980] Qd R 142 Bratic v Toohey [1988] 2 Qd R 140 Colgate Palmolive Co & Anor v Cussons Pty Ltd (1993) 118 ALR 248 -- 1 of 7 -- 2 National Mutual Life Association of Australasia Ltd v Oasis Developments Pty Ltd [1983] 2 Qd R 441 Yankee Doodles Pty Ltd v Blemvale Pty Ltd [1999] QSC 134 (unreported, 23 June 1999) Atkinson J COUNSEL: Mr Konneh appeared on his own behalf Mr Pitman (sol) appeared for the plaintiff/respondent SOLICITORS: Mr Konneh appeared on his own behalf Morgan Conley Solicitors for the plaintiff/respondent [1] This is an application to set aside a default judgment by Mr Konneh. Cellnet Group obtained judgement by default against Mr Konneh on 1 October 2008 in the sum of $64,798.04. On 24 August 2009, Mr Konneh’s application to set aside the default judgment proceeded to hearing. I also heard submissions as to costs. I reserved my decision and now publish my reasons for dismissing the application. Background Facts [2] On 2 May 2005, Varkon Office Solutions Pty Ltd (“the Company”) by its sole director, Mr Konneh, entered into a credit agreement with Cellnet Group. Mr Konneh signed the agreement as director of the company 1 . Mr Konneh does not dispute this. Clause 8 of the terms and conditions of the credit agreement provide: “That the Applicant agrees to pay any and all costs, commissions, and legal costs and expenses on a full indemnity basis whatsoever arising from the collection of any overdue moneys. Such interests, costs and commissions and legal expenses may be recovered as a liquidated debt” …2 [3] On 11 May 2005, the company by its sole director, Mr Konneh, signed a guarantee and indemnity agreement as guarantor3 . Clause 2 of the Guarantee and Indemnity provides: “This Guarantee and Indemnity creates a principal obligation from the Guarantor to Cellnet and it is in addition to any security which Cellnet holds from the Company. This Guarantee and Indemnity may be enforced without Cellnet having to take any steps against the Company or its security.” 4 [4] Between 6 September 2006 and 3 October 2006, Cellnet Group sold and delivered goods pursuant to the credit agreement, resulting in a debt in the sum of $43,953.32 being incurred by Mr Konneh. 5 [5] On or about 7 December 2007, Morgan Conley, solicitors for Cellnet Group sent a letter of demand, to which there was no response from Mr Konneh 6 . 1 Affidavit of Emma Hazelton, Exhibit EH1. 2 Affidavit of Emma Hazelton, Exhibit EH2. 3 Exhibit EH1 referred to in the Affidavit of Emma Hazelton sworn 20 August 2009. 4 Affidavit of Emma Hazelton, Exhibit EH2. 5 Affidavit of Emma Hazelton, Exhibit EH3. 6 Affidavit of Emma Hazelton, Exhibit EH4. -- 2 of 7 -- 3 [6] On 27 February 2008 a claim and statement of claim was filed by Cellnet Group against Mr Konneh in the District Court of Queensland. Personal service of the claim and statement of claim was executed on 20 March 2008. [7] On 18 June 2008, Peter P. Krejci was appointed administrator of the company pursuant to section 436A of the Corporations Act 2001. [8] Default Judgment was entered against Mr Konneh on 1 October 2008 in the sum of $64,798.04 (including $8,036.31 interest and $1,709.50 by way of costs) on the grounds that no payment had been made and no defence filed by Mr Konneh. The Default Judgment was sent to Mr Konneh by way of service on or about 9 October 2008 by Morgan Conley. [9] On 14 January 2009, a Bankruptcy Notice was issued against Mr Konneh and personal service was executed on 5 February 2009. [10] Despite the exchange of correspondence between the Mr Konneh and Morgan Conley between February and May 2009 with respect to a possible payment plan and settlement7 , a satisfactory arrangement was not reached. Consequently, a Creditors’ Petition was filed against Mr Konneh in the Federal Magistrates Court at Brisbane on 14 July 2009, and personally served on Mr Konneh on 28 July 2009. The Creditors’ Petition hearing date was set down for 5 August 2009 8 . [11] On 4 August 2009, Mr Konneh attended the Brisbane Registry of the District Court of Queensland and filed an Application to set aside the Default Judgment obtained against him on 1 October 2008. [12] On 5 August 2009, Federal Registrar Baldwin adjourned the Creditors’ Petition hearing to 26 August 2009. Discretion to set aside default judgment [13] Rule 290 Uniform Civil Procedure Rules provides that the court may set aside or amend a judgment by default under that division of the rules and any enforcement of it on terms including terms about costs and the giving of security that the court considers appropriate. The relevant considerations to be taken into account are set out in a number of authorities 9 and include: (a) whether there is good reason why the defendant failed to file a defence; (b) whether there has been any delay by the defendant in bringing the application; (c) the defendant’s conduct in the action before and after judgment; (d) the defendant’s good faith; (e) whether the defendant has raised a prima facie defence on the merits. 7 Affidavit of Emma Hazelton, Exhibits EH8, EH9, EH10 and EH11. 8 Affidavit of Emma Hazelton sworn 20 August 2009, Exhibit EH12. 9 Aboyne Pty Ltd v Dixon Homes Pty Ltd [1980] Qd R 142 at 143-144; National Mutual Life Association of Australasia Ltd v Oasis Developments Pty Ltd [1983] 2 Qd R 441 at 449-450; Bratic v Toohey [1988] 2 Qd R 140 at 146-147. -- 3 of 7 -- 4 Failure to file defence or enter an appearance [14] Mr Konneh has failed to provide good reason for the failure to file a defence. Mr Konneh has even at the date of this hearing failed to file a defence. [15] Mr Konneh must demonstrate “a very compelling reason for the failure to appear and that it has a plausible defence either in law or in fact” 10 . Personal service of the claim and statement of claim was effected upon Mr Konneh on 20 March 2008. Mr Konneh states at the time he was served he handed the Claim and Statement of Claim to his solicitor David Brown. Mr Konneh states he and his solicitor “immediately fell apart and his solicitor did not return the papers to him.”11 There is no evidence before the court to confirm Mr Konneh’s contention. There is no evidence Mr Konneh took steps to contact Cellnet Group to explain any problems with his solicitor and to ask for a further copy of the proceedings. There is no evidence Mr Konneh made any attempt to have his solicitor return these documents to him. I also accept Cellnet Group’s submission that Mr Konneh must have known of the serious nature of the proceedings because he had initially retained a solicitor. Mr Konneh has failed to satisfy the court he had a compelling reason for his failure to enter an appearance in response to the Claim and Statement of Claim. Delay in bringing the application to set aside [16] The default judgment against Mr Konneh was regularly obtained on 1 August 2008. Mr Konneh does not argue otherwise. On 9 October 2008 Cellnet Group served Mr Konneh with a copy of the default judgment. 12 The letter of 9 October 2008 also demanded payment of the judgment amount by 20 October 2008 in the absence of which enforcement proceedings could be commenced including bankruptcy. Mr Konneh did not contact Cellnet Group’s solicitors at this time. Mr Konneh did not file the application to set aside the default judgment of 1 October 2008 until 4 August 2009, one day prior to the hearing of the creditor’s petition in the Federal Magistrates Court. This is some ten months after the default judgment was notified to Mr Konneh. Mr Konneh has given no satisfactory explanation for the delay. I accept Cellnet Group’s submission there has been extensive and unexplained delay on the part of Mr Konneh in bringing this application Prima facie case on the merits [17] Mr Konneh’s submissions and affidavit material upon which he relies to support his application to appear to raise three possible defences to the claim on which judgment was founded: • He never signed any guarantee; • Alternatively, when he signed the document purporting to be the guarantor he did so in the belief he would not be personally guaranteeing the company • There is a dispute as to the quantum of the debt allegedly owed by Mr Konneh. 10 Yankee Doodles Pty Ltd v Blemvale Pty Ltd [1999] QSC 134 (unreported, 23 June 1999) Atkinson J. 11 Affidavit of Lundon Konneh sworn 17 August 2009. 12 Affidavit of Emma Hazelton, Exhibit EH5. -- 4 of 7 -- 5 [18] First, Mr Konneh in his affidavit sworn on 3 August 2009 deposed he had never signed any guarantee for any debt in favour of Cellnet Group. On 17 August 2009 Mr Konneh next deposed by affidavit that he did not remember giving any guarantee or indemnity to Cellnet Group. On or about 20 August 2009 Cellnet Group served affidavit material on Mr Konneh containing a copy of the guarantee and indemnity which clearly showed Mr Konneh’s signature as personal guarantor. Mr Konneh does not dispute it is his signature on the documents. [19] Rather, Mr Konneh on the day of the hearing sought to argue he thought he was not guaranteeing anything even though he signed the Guarantee as guarantor. At the hearing on 24 August 2009, Mr Konneh sought leave to file an affidavit of John Popovich sworn 23 August 2009. John Popovich deposed that he was an employee of the company at the time Mr Konneh signed the credit application and guarantee and indemnity. John Popovich deposed that he was informed by an employee of Cellnet Group, a Mr Sandeep Marwah that, if Mr Konneh signed the application but did not insert the company name and ACN number at the top of the guarantee and indemnity page, Mr Konneh would not be guaranteeing anything on the company’s behalf. A copy of the credit application, terms and conditions of credit and the Guarantee and Indemnity are exhibited to Emma Hazelton’s affidavit. A perusal of these documents reveals that paragraph “A” of the Guarantee and Indemnity has not been filled in with a company name or A.C.N. Mr Konneh in his affidavit filed by leave at the application on 24 August 2009 deposed that, based on information given to him, he did not insert the company’s details and its ACN number when he signed the guarantee. [20] Mr Konneh submits that this new evidence filed in court on 24 August 2009 raises a prima facie defence with merit. Mr Konneh did not give notice of this new evidence to Cellnet Group prior to the hearing of the application on 24 August 2009 and did not make Mr Popovich available for cross-examination at the application. Cellnet Group objected to the admission of paragraphs 3, 4 and 5 of Mr Popovic’s affidavit on the basis it was hearsay evidence. I ruled those parts of the affidavit as inadmissible. [21] Mr Konneh further deposed he did not understand he was being held responsible for the alleged debt because his solicitor at the time, Mr Brown, did not explain this to him. There is no evidence before the court from Mr Brown. The Guarantee document is clear in its wording and easy to understand. It clearly explains the obligations of the guarantor and advises a guarantor to seek independent legal advice prior to signing as guarantor. [22] Mr Konneh has provided no evidence to rebut the fact that his signature appears as guarantor upon the guarantee and indemnity. It is clear on Cellnet Group’s material, that Mr Konneh’s explanation as to his intent when signing the guarantee document is not credible and does not give rise to a defence. Correspondence between Mr Konneh and Cellnet Group’s solicitors betrays Mr Konneh’s awareness that he was responsible for the payment of the company’s debts to Cellnet Group. In correspondence with the solicitors13 Mr Konneh stated: “In the absence of an alternative payment plan from your client to what I proposed; other than pursuing bankruptcy against me; I’m not 13 Affidavit of Emma Hazelton, Exhibit EH10. -- 5 of 7 -- 6 sure what I can offer that will be acceptable to your client. I am prepared and willing to consider and work with any acceptable alternative payment proposal from your client to reach a resolution that is satisfactory to them.” [23] The evidence overwhelmingly supports Cellnet Group’s contention that when Mr Konneh signed the Guarantee and Indemnity document he did so as personal guarantor for the company’s debts owed to Cellnet Group. [24] Mr Konneh also submits there is a dispute as to the quantum of the amount claimed. He referred in his affidavit material 14 to some purchases he “knows” the company made and paid for. However, Emma Hazelton at paragraphs 36 to 38 of her affidavit deposed to the fact that the payments which Mr Konneh refers to were made and applied to invoices that were not the subject of the proceedings or the default judgement. Further Emma Hazelton has attached evidence of the unpaid invoices to her affidavit. Mr Konneh has raised no defence in his material which specifically challenges these invoices or their validity. I accept they provide uncontested evidence supporting the quantum awarded in the default judgment.15 Prejudice to Cellnet Group [25] Mr Konneh has allowed Cellnet Group to continue to incur costs in enforcing its default judgment. Mr Konneh allowed Cellnet Group to issue bankruptcy proceedings which cannot adequately be provided for by an order for costs. Mr Konneh has allowed the liquidation of the company and has in correspondence made a statement of insolvency. I accept Cellnet Group’s submission that it cannot be adequately compensated by an award for costs. Conclusion [26] I am satisfied Mr Konneh is indebted to Cellnet Group in the sum of $64,784.04 including interest. No defences have been shown on the merits and the setting aside of the judgement would simply result in further delay to Cellnet Group obtaining the relief to which it is entitled. The application to set aside default judgement is dismissed. Costs [27] The parties made submissions on costs at the time of the hearing of the application. Cellnet Group submitted that in the event of the application is dismissed costs should be awarded on an indemnity basis against Mr Konneh. This submission is based on the contention that the application had no prospects of success and has not acted in good faith. Although I have determined Mr Konneh’s application lacked merit, there is no special or unusual feature which would justify assessment of costs on an indemnity basis.16 I am not persuaded this is an appropriate case to order indemnity costs. 14 Affidavit of Lyndon Konneh, sworn 17 August 2009. 15 Affidavit of Emma Hazelton, Exhibit EH3. 16 Colgate Palmolive Co & Anor v Cussons Pty Ltd (1993) 118 ALR 248. -- 6 of 7 -- 7 [28] I order Mr Konneh pay Cellnet Group’s costs of and incidental to the application to be assessed on the standard basis. -- 7 of 7 --