WRAY v BERNACKI CONSTRUCTIONS PTY LTD SUPREME COURT OF NEW SOUTH WALES COURT OF APPEAL MAHONEY, PRIESTLEY and CLARKE JJA 12 February 1990, 15 June 1990 [1990] NSWCA 190 Mahoney JA I agree with the judgment of Clarke JA. Priestley JA I agree with Clarke JA's reasons for thinking there was an error of law in the reasons of Downs DCJ. I also agree that those reasons appear on the face of the record, but think it useful to add that in my view authority in this court, in particular GJ Coles v Retail Trade Industrial Tribunal (1986) 7 NSWLR 503 takes the matter of what the record may be farther than it was taken in Glenville Homes Pty Ltd v Builders Licensing Board (1981) 2 NSWLR 608. I have given my reasons for this opinion in Commissioner for Motor Transport v Kirkpatrick (1988) 3 NSWLR 368 at 387-393. In my opinion the orders suggested by Clarke JA should be made. Clarke JA On 26 September 1986 the claimant, the defendant in the court below, and the first opponent entered into a written agreement whereby the first opponent agreed to erect a dwelling house for the claimant on land owned by her. Following the entry into the agreement the first opponent constructed the house and on 21 August 1987 it provided the claimant with a notice of practical completion. The claimant did not, however, make the final payments due under the agreement, apparently because she disputed the quality of the workmanship, and on 7 April 1988 the first opponent filed a statement of liquidated claim in the district court. No defence was filed in answer to that claim and, the first opponent having tendered proof of service of the statement of claim, it entered default judgment against the claimant on 21 June 1988. Subsequently it issued a bankruptcy notice which was served on the claimant on | July 1989. On 28 July 1989 the claimant filed a notice of motion in the District Court seeking that the default judgment be set aside and that she be allowed to file a defence and a cross-claim. This motion was heard by Downs DCJ on 25 August 1989 and at the conclusion of the evidence and submissions his Honour dismissed the motion and ordered the claimant to pay the first opponent's costs. There being no appeal from such decision (Fraser Credits Pty Ltd v Osterberg-Olsen, (1978) 1 NSWLR 121; Clutha Developments Pty Ltd v Barry, (1990) 18 NSWLR 86) the claimant has brought the present application seeking certiorari to quash his Honour's order on the ground of non jurisdictional error of law appearing on the face of the record. (See Glenvill Homes Pty Ltd v Builders' Licensing Board, (1981) 2 NSWLR 608.) Senior counsel for the claimant has submitted that an error of law appears in the reasons for judgment given by Downs DCJ and that those reasons form part of the relevant record. It is convenient to deal with those two submissions separately. The claimant's application was made pursuant to District Court Rules Pt 13, R1(2) which provides: "(2) A default judgment under this rule may, on sufficient cause being shown, be set aside, on terms by order of the Court." 2 UNREPORTED JUDGMENTS It is established that a court exercising jurisdiction under this sub-rule has to look at the whole of the relevant circumstances and decide whether or not sufficient cause has been shown. The most recent case dealing with this subject is Adams v Kennick Trading (International) Ltd, (1986) 4 NSWLR 503, in which Hope JA, after adverting to the need to consider all relevant circumstances, said (at 506): "The existence of a bona fide ground of defence and an adequate explanation for the failure to defend and any delay are the most relevant matters to consider, but there may be others,... A refusal of relief to an applicant is not automatically justified because he has failed to establish one relevant matter, such as an adequate explanation for the failure to defend or for delay; such a failure must be considered in the light of all the circumstances. The absence of an adequate explanation, particularly if it is coupled with prejudice, may justify the denial of relief, but only when considered with the other relevant circumstances of the case bearing in mind what Lord Wright said in Evans v Bartlin, (1937) AC 473, at 489: "... If merits are shown the court will not, prima facie, desire to let a judgment pass on which there has been no proper adjudication'." It is the submission of Senior Counsel for the claimant that Downs DCJ failed to consider all the circumstances and in that respect fell into error. What the learned judge did, according to the submission, was to isolate an issue and having decided that issue adversely to the claimant then dismiss the application. In my view the submission is well grounded. At the commencement of his reasons Downs DCJ said: "In order to accede to her application she is required to do two things. Firstly, in the circumstances of this case she would be required to prove why a defence was not filed and, secondly, to satisfy me that she had a defence on the merits. I indicated to counsel, before this motion started, that I only wished to hear them at this stage on this first matter, that is, the reason for a defence not having been filed, because if I did not find in the defendant's favour on that matter then I would not have to consider the second matter." The approach indicated by his Honour was contrary to his obligation to consider all the circumstances of the matter. No doubt the inability of the defendant to provide a satisfactory excuse for the failure to file a defence constituted a material matter for consideration by his Honour. Nonetheless it was quite wrong to consider any such failure in isolation. The obligation cast upon the learned judge was to look at all the circumstances of the case and to determine whether, in the light of those circumstances, the application should be granted. Having indicated his approach his Honour proceeded to consider the particular issue which arose on the question of service and that was whether the claimant/defendant had been served with the statement of claim. She denied that it had been while a process server deposed that he had served the document upon her. Downs DCJ decided that issue in favour of the first opponent (the plaintiff) and having done so proceeded to say: "\.. and it follows therefore that I am not satisfied that there is any excuse before me for the failure to file a defence. That being so I need not consider that second matter of a defence on the merits and it follows that the motion is dismissed and I order the defendant to pay the plaintiffs costs of the motion". It is clear that his Honour followed the course, which he had outlined at the start of his reasons, and dismissed the application for the reason that the claimant/defendant had failed to establish a satisfactory reason for her failure to file a defence. He therefore committed the error of which the claimant complains. URJ WRAY v BERNACKI CONSTRUCTIONS PTY LTD (Clarke JA) 3 Following the completion of His Honour's statement of his reasons counsel for the claimant, with commendable perseverance in the circumstances, pressed his Honour to exercise his discretion in favour of the claimant upon the basis that notwithstanding the determination in regard to service it was still open to the judge to set the judgment aside in all the circumstances of the case. After some discussion Downs DCJ simply said that he proposed not to exercise his discretion in the circumstances of this case. This interchange only served to highlight the error which his Honour had made. He had not heard all the circumstances and in particular had not considered the question whether the claimant had a bona fide ground of defence. If she did in fact have a defence on the merits then that would have been a most material circumstance for consideration in determining whether it was proper to set aside the judgment or to let it stand. But in taking the approach which he did Downs DCJ simply put that consideration to one side with the consequence that he was quite unable to give a determination on all the relevant circumstances of the case. As I earlier indicated his approach was erroneous and the claimant's first submission has been made good. The next question is whether the error appears on the face of the record. Although there have been some differences of opinion as to the extent of the record of a court such as the District Court it is unnecessary in this case to go beyond the established principle that the transcript of oral reasons will form part of the record if the tribunal or court chooses to incorporate them in the order. (Public Service Board of NSW v Osmond, 159 CLR 656.) In Glenvill Homes Pty Ltd v Builders' Licensing Board, (1981) 2 NSWLR 608, this court held that where a judge used the words "for these reasons" prior to the statement of his order there was an incorporation. Similarly in Adams Hope JA concluded that the use of the word "accordingly" prior to the statement of the order also effected an incorporation. In this case the wording is slightly different but it seems to me the effect is substantially identical. The use of the expressions "it follows" and "that being so" seem to me, in this context, to effect a clear incorporation of the reasons in the final order. It follows from my conclusion that the claimant has shown the existence of an error of law on the face of the record she is entitled to the order which she seeks. I would make the following orders: (1) Pursuant to s69 of the Supreme Court Act 1970 the record of proceedings No 4364/88 be called up from the District Court and orders made in the proceeding on 25 August 1989 by Downs DCJ be quashed. (2) The proceeding be returned to the District Court to be dealt with in accordance with law. (3) The first opponent to pay the claimant's costs of the application. Counsel for the Claimant: J Hamilton QC and PG Quinlan Solicitors for the Claimant: E Fredericks and Co, Lidcombe Counsel for the Opponent: Mr Bernacki's daughter appeared but not heard Solicitors for the Opponent: NIL