Stormer Building Group Pty Ltd v Graham Michael Johnson

• Jurisdiction: Australian Capital Territory
• Court: Supreme Court of ACT
• Judge: Master Mossop
• Judgment Date: 12 February 2014
• Date: 12 February 2014
• Docket Number: No. SC 229 of 2013

[2014] ACTSC 23

IN THE SUPREME COURT OF THE AUSTRALIAN CAPITAL TERRITORY

Judge:

Master Mossop

No. SC 229 of 2013

Between:

Stormer Building Group Pty Ltd

Plaintiff

and

Graham Michael Johnson

First Defendant

and

Jasminka Mary Johnson

Second Defendant

Counsel for the plaintiff: D C Robens

Counsel for the defendant: W L Sharwood

Collins Book Depot Pty Ltd v Bretherton [1938] VLR 40

Davies v Pagett (1986) 10 FCR 226

Evans v Bartlam [1937] AC 473

Ezekiel-Hart v Law Society [2012] ACTSC 103

Pope v Aberdeen Transport Co Pty Ltd [1965] NSWR 1550

Ryan v Adams (1993) 112 FLR 474

Court Procedure Rules 2006 (ACT) r 1188

PRACTICE AND PROCEDURE — application to set aside a default judgment by defendant — where plaintiff did not give notice of intention to apply for default judgment — where an arguable defence is disclosed on the merits — where defendants not personally at fault for failing to respond — no prejudice to plaintiff that cannot be compensated by a costs order — default judgment set aside.

ORDER

THE COURT ORDERS THAT:

• 1. The default judgment entered against the first and second defendants on 28 August 2013 is set aside.

• 2. The first and second defendants are to file a defence and any counterclaim against the plaintiff within 14 days of today.

• 3. The first and second defendants are to file and serve any third-party notices within 14 days of today and must, at the time of serving any such notice, also serve a document setting out the terms of these directions and a copy of each affidavit filed in the proceedings.

• 4. The defendants are to pay the plaintiff's costs of the application and costs thrown away by reason of the setting aside of the default judgment.

• 5. The proceedings are listed for further directions before me on 7 March 2014 at 10 am.

• 6. The plaintiff is to provide, no later than 28 February 2014, to each other party a proposed comprehensive set of directions to prepare the matter for hearing consistent with the following principles:

  • (a) any pleading shall be filed in a period no longer than the period specified in the rules;

  • (b) any order for discovery shall be limited to that which is necessary to do justice between the parties in the circumstances of the case;

  • (c) evidence at the hearing is to be given orally;

  • (d) the timetable shall have the matter prepared for hearing in no longer than six months from today;

  • (e) the timetable shall incorporate a mediation within three weeks of the date set for the filing of defences by any third party, either on terms as agreed between the parties or as directed by the Court;

  • (f) the timetable shall include a direction that:

    • (i) where any party is in default or likely to fall into default of any direction, it must apply by application under part 6.2 to have the matter relisted and will file and serve an affidavit fully disclosing the circumstances which give rise to the need to have the matter relisted and setting out the directions which it proposes to have made; and

    • (ii) if a party is in default of any direction for a period of more than seven days, each other party is under an obligation to have the matter relisted before the docket judge and shall do so by requesting the matter be relisted by emailing the docket judge's associate and each other party. Where that is done, the party in default must file an affidavit fully disclosing the circumstances of its non-compliance with the Court's orders no later than the day prior to the day on which the proceedings are listed.

  • 7. Any party that does not agree with the timetable proposed by the plaintiff must propose a variation to the timetable consistent with the above principles. The parties are to consult with each other and attempt to agree on a proposed timetable. In the event that the parties agree, then the plaintiff is to provide by email to the Master's associate no later than 4 pm on Wednesday, 5 March, a copy of the directions which the parties propose be made. In the event that the parties are unable to agree, the plaintiff and each other party that does not agree with the timetable proposed by the plaintiff are to send by email to the docket judge's associate no later than 4 pm on 5 March 2014 a copy of the directions which the party says should be made.

EX TEMPORE JUDGMENT

Factual Background

1 The defendants have applied by application, dated 2 December 2013, to set aside a default judgment which was entered against them. They rely upon rule 1128 of the Court Procedures Rules. The defendants have also sought orders in relation to costs. The defendants have relied upon the affidavits of Graham Michael Johnson, affirmed 2 December 2013, and the affidavit of Graham Michael Johnson affirmed 20 January 2014, and the affidavit of Jasminka Johnson, affirmed 20 January 2014.

2 The plaintiffs have relied upon the affidavit of Mr Robens, sworn on 31 January 2014. That affidavit annexes a transcript of proceedings relating to a caveat before the former Chief Justice, the file provided by the defendants' former solicitors, Nelson & Co, and certain correspondence between the parties. The underlying claim brought by the plaintiff arises out of two progress payments claimed pursuant to a building contract between the plaintiff, the builder and the defendants, the prospective owners of the house.

3 The unusual factor is that at the time the work the subject of the progress claims was undertaken, the defendants were not the registered proprietors of the land. Although, they had entered into a contract for the purchase of the land, that contract had not settled. Both the contract to purchase the land and the building contract substantially predated any construction on the land.

4 The critical evidence for the purposes of the claim and the critical events that provide background for the current application are as follows. On 30 May 2011, the building contract was entered into. That was a standard form of building contract. On 31 May 2011, a contract to acquire the land was entered. On 7 June 2012, the plaintiff sent the defendants an email stating, ‘We are looking forward to commencing construction on your new property once the land becomes available and we achieve building approval.’ A Crown lease was registered on 12 June 2012.

5 Settlement of the contract to purchase the land was scheduled for July or August 2012. On 20 July 2012, the plaintiff sent the defendants a letter commencing, ‘We are looking forward to commencing construction of your new property once the land becomes available and we achieve building approval.’ The letter also requested the defendants to sign certain documents for the purposes of obtaining building approval. Reminder emails were sent on 25 July and 27 July. The forms, in fact, were signed on 30 July. Those forms in their terms stated that the defendants were the owners of the land.

6 A critical issue in the case will be precisely the state of knowledge of the parties at the time these documents were signed and provided to the plaintiff as to the ownership status of the land, and what should be made of the representations in the letters and emails from the plaintiff on the one hand and the documents signed by the defendants on the other. Clearly, building work proceeded very soon after the documents were signed by the defendants, strip footings having been laid by 8 August 2012. Invoices were issued for a total of around $98,000 on 15 August and 3 October 2012. Although, the evidence at this stage is not completely clear, it appears that the defendants became registered proprietors of the land on 25 February 2013.

7 There is evidence put on for the purposes of this application that because a building was already partially constructed on the land, it was more difficult for the defendants to obtain construction finance for the building. For procedural reasons which do not need to be gone into at this stage, an originating application was filed by the plaintiff on 14 June 2013 seeking to maintain a caveat. Orders were made by the former Chief Justice continuing the caveat and directing the matter to proceed by way of pleadings. A statement of claim was served on 29 July 2013. No defence was filed.

8 A default judgment was entered on 28 August 2013 and served by letter received by the defendants' former solicitors on 5 September 2013. The evidence of the defendants was that they only became aware of the default judgment on 22 October 2013. Both defendants have filed and read affidavits to the effect that at no time prior to 22 October 2013 was the defendant told by Nelson & Co or any of its employees, nor were they otherwise aware, that the statement of claim had been served on Nelson & Co on 29 July 2013, that the defendants needed to file a defence by a certain date, what the consequences might be if a defence was not filed by that date, that default judgment had been entered on 28 August 2013, or that no action would be taken or was taken by Nelson & Co to defend the claim because Nelson & Co did not think that there was a defence to the claim. The defendants' current solicitors were instructed on 11 November 2013. The application to set aside the default judgment was filed on 3 December 2013.

Applicable principles

9 Rule 1128 is in the following terms:

(1) The court may, by order, amend or set aside a judgment entered under this division, and any enforcement of it.

(2) Without limiting rule 6901 (Orders may be made on conditions), an order may be made on any of the following conditions:

• (a) conditions about costs;

• (b) conditions about giving security.

10 The authority most commonly referred to in this context is Evans v Bartlam [1937] AC 473 at 480, where Lord Atkin made it clear that a discretion under a rule, such as r 1128, is unconditional, there is a general requirement that there be an affidavit disclosing the merits of the defence, but...