HASTIE v NIXON SUPREME COURT OF NEW SOUTH WALES COURT OF APPEAL MAHONEY, PRIESTLEY and CLARKE JJA 23 and 24 September 1991, 9 October 1991 [1991] NSWCA 297 SUMMARY JUDGMENT IN DISTRICT COURT — summary judgment under ptl1A r2 District Court rules — entered after application upon notice to defendants who appeared by counsel — defendants not present — no evidence from defendants — subsequent application to set aside judgment under Pt11A r2(3), which permits that to be done "on sufficient cause being shown" — application to set aside dealt with on basis that matters which could and should have been dealt with at application for summary judgment should not be considered on application to set aside — considerable evidence from defendants before judge hearing application to set aside — argued for defendants that judge erred in law in not taking into account all matters before him — procedure under Ptl11A r2(3) discussed — discussion of applicability of Adams v Kennick Trading (1986) 4 NSWLR 503 (a decision on Pt13 r1(2) of District Court Rules) — held there had been an error of law order refusing to set aside judgment quashed. Mahoney JA I agree with the judgment of Priestley JA and the orders he proposes. Priestley JA In these proceedings Mr RM Hastie asks the court to exercise its powers under s69 of the Supreme Court Act 1970 to quash an order made by Shillington DCJ refusing to set aside a summary judgment entered by Downs DCJ on 8 June 1990 against him in the sum of $48,118.03 together with interest. The proceedings in which Downs DCJ ordered summary judgment against Mr Hastie were begun by Mr W Nixon by a District Court statement of liquidated claim, filed on 3 May 1989, which named two defendants, the first Miss G Benecke, the second Mr Hastie. Mr Nixon pleaded his cause of action in the statement of liquidated claim as follows: 1. The Plaintiff did at all times trade as 'Monteith Wools' and has carried on the business as a seller of wool. 2. At all relevant times the First Defendant was the registered proprietor and carried on business under the business names known as 'The Shearin' Shed' and 'Tam-O-Shanter Mohair and Wool Fibres' each of which are business names within the meaning of the Business Names Act 1962 (NSW). 3. At all relevant times the Second Defendant expressly acted with the authority of the First Defendant and/or the First Defendant allowed or permitted the Second Defendant to contract on her behalf as her duly authorised servant or agent. 4. In or about April 1988 the First Defendant and the Second Defendant contracted to purchase from the Plaintiff bales of wool which were delivered between April and July 1988... This pleading ended with a summary of the transactions between the plaintiff and the defendants. The summary alleged that there had been sales of wool in April, May, June and July 1988, with a total sale price of $153,481.89. It showed 2 UNREPORTED JUDGMENTS credits in the months of May, June and July 1988 totalling $78,925.50, subsequent credits totalling $9,992.80 and a credit for "value of stock" $17,245-56; these totalled altogether $105,363.86, leaving $48,118.03 as the amount claimed to be owing. The first defendant filed a verified notice of grounds of defence on 13 June 1989 in which she alleged that she only carried on business under the registered business name "Tam-O-Shanter Mohair and Woollen Mill", that the second defendant was not her servant and that she did not allow or permit him to contract on her behalf as her duly authorised agent. She also denied indebtedness to the plaintiff. The defence of the second defendant was to the same effect. On 30 March 1990 the plaintiff filed a notice of motion returnable on 18 May 1990 asking the District Court to order that (1) both defences be struck out, and (2) judgment be entered for the plaintiff in the sum claimed with interest. The District Court Rules permitted the first order to be made under Pt9 r17 and the second under Ptl1A r2. The plaintiff's notice of motion came on for hearing before Downs DCJ on 8 June 1990. An affidavit in support of the notice of motion sworn 29 March 1990 by the plaintiff was in evidence before his Honour. Counsel appeared for the defendants but neither defendant was present. No evidence was tendered on behalf of either of them. Mr Nixon's affidavit said that his dealings had been with Mr Hastie. He said Mr Hastie had placed four written orders with him and six oral orders. He did not say what happened in regard to the written orders. The photostats of what were said to be the written orders were annexed to the affidavit as Annexures "A" to "D" and were undated. The plaintiff did not say any dispute arose from them. Each was on a letterhead entitled "The Tam-O-Shanter Mohair and Woollen Mill Company". Under this heading was the statement "The Shearin' Shed is the retail and mail order company". Their contents were handwritten and signed "Mike". The name of no person or corporation was mentioned in the printed or handwritten part of the notes, other than Mike, who was undoubtedly the second defendant. These documents must have led the plaintiff to believe that the person he was dealing with was the second defendant. The plaintiff said the six oral orders were met by goods being despatched on six occasions, the first being 18 April 1988 and the last 4 August 1988. He also said, in para 6 that in regard to parts of the loads referred to in three of the orders, the price was to be agreed after inspection and valuation by the second defendant. Annexures "E" to "M" to the plaintiff's affidavit were copies of nine documents which he said were faxed to the second defendant confirming the oral orders. Writing on the documents, and what the plaintiff said in para 7 of his affidavit show that what he was asserting was that he would get an oral order from the second defendant, would make a written list, would send the wool in the list to Goulburn Wool Processors at Goulburn, apparently together with the list which was marked "A/C Mike Hastie", and fax a copy of the list to the second defendant. According to para 7 this happened with all but the fifth of the six loads. As to the fifth, the procedure was the same, but delivery was made to Footscray West, Victoria. Annexures "E" to "M""" each showed prices, but in view of what the plaintiff had said in para 6, in regard to at least three of the loads, the prices were not alleged to have been agreed between him and the second defendant. The three loads to which this comment applies did not include the fifth, to Footscray West, the price claimed by the plaintiff for which was URJ HASTIE v NIXON (Priestley JA) 3 $1,664.80, far lower than the figure mentioned for any of the other loads. The plaintiff also said that he rendered no invoice to the second defendant beyond the faxes "E" to "M". Also annexed to the plaintiffs affidavit was a schedule of amounts paid in respect of the sales, totalling $94,118.30. In his affidavit the plaintiff also said that a further credit was made in respect of the goods "as a result of the sale of stock held at Goulburn" for $9,341.07. The credits thus totalled $103,459.37, a slightly smaller figure than that credited in the statement of liquidated claim. If this later figure were the correct one, then the plaintiffs claim would have been for a slightly larger amount. In his affidavit he said he abandoned that difference. The various differences between the statement of liquidated claim and the figures in the affidavit were not explained. Annexures "P", "Q" and "R" to the affidavit were handwritten letters from Mr Hastie dealing with matters of payment, in which he spoke in the first person as the person responsible for payment. Annexures "P" and "R" are undated, "Q" is dated 17 March 1988, and they are hard to relate to the transactions from which the plaintiff claims the debt arose. They are relevant however in that they make it quite plain that Mr Hastie was dealing with the plaintiff on the footing that he was the person running the business described in the letterhead. On the face of the Annexures and in light of the way those signed by Mr Hastie are expressed, there can be no argument but that the plaintiff was led to believe by the second defendant that it was Mike Hastie he was contracting with. Annexure "Q", a two page letter dated 17 March 1988, might have the additional relevance, if the transactions it was referring to could be identified, of showing that Mr Hastie was apparently having some difficulty in working out precisely how much he owed the plaintiff in regard to some transactions, and that, from his point of view, amounts stated by the plaintiff in accounts sent to him were not necessarily final amounts. Annexure "R", also on the letterhead earlier described, and signed "Mike", appears to relate to the first consignment of wool under the oral orders in respect of which the plaintiff was claiming. It is undated but a period of interest mentioned in it suggests it was probably sent about 10 May 1988. This document, incidentally, indicates that the wool despatched on 18 April 1988 in fulfilment of the first oral order was fully paid for during May 1988, with, on Mr Hastie's figuring, a slight credit in his favour. No further letters from Mr Hastie concerning payment were annexed to the plaintiff's affidavit after Annexure "R". Annexure "O" however, setting out the credits acknowledged by the plaintiff, shows that payments were made throughout 1988 and in February, March and April of 1989. The plaintiff said that copies of a detailed account (Annexure N to his affidavit) were handed to the second defendant on or about 15 February 1989 and 15 March 1989. No details of what (if anything) was said on these two occasions were given in the plaintiff's affidavit. Apart from that evidence, there is nothing directly stated in the plaintiff's affidavit indicating what passed between him and Mr Hastie concerning payment prior to the writing of a letter of demand to Mr Hastie on 17 March 1989. One hint perhaps appears in para 11 of the plaintiff's affidavit. In it he said that in his opinion the total price he charged for the wool sold was fair and reasonable. It may be that this statement is connected with what he had said in para 6, that at least on some occasions, the price was not agreed before delivery, but was to be agreed after inspection and valuation by the second defendant. The statement that 4 UNREPORTED JUDGMENTS in his opinion the price was fair and reasonable might well indicate that on some occasions no agreement on price was reached. At all events a letter of demand dated 17 March 1989 was written by the plaintiffs solicitors, and it contained a curious mistake. It was headed "Roy Robinson Wool Brokers" and began by saying that the solicitors were acting on behalf of those brokers. It then alleged indebtedness to those brokers of $48,618.03 together with interest and required payment. When Mr Hastie got this letter he wrote on it "Bill these are the overseas company I deal with" and drew an arrow from these words to the heading of the letter. He then sent the letter to Mr Nixon along with a note on notepaper on which was the printed heading "From the desk of Raymond (Mike) Hastie"; at its foot was printed "Tam-O-Shanter Mohair and Woollen Mill". In it, Mr Hastie wrote, "Bill, it is important that they do not contact Roy Robinson Wool Brokers on this matter. I owe you the money not them and it makes it quite difficult for me (illegible on photostat), Mike." These two documents were Annexure "V" to the affidavit. These were the materials before Downs DCJ. There are aspects of them which would require clarification in some circumstances: was the second defendant being sued independently of the first; had all the prices asserted by the plaintiff been agreed by the second defendant; how much had been paid; what did Annexures "P", "Q" and "R" mean? There is no evidence of what counsel for the defendants tried to do to persuade Downs DCJ not to take the course he did - perhaps he relied on some of the points I have mentioned. But the materials were unanswered by the defendants, and in particular there was no evidence explaining Annexure "V". In these circumstances Downs DCJ had little choice but to do what he did. First he struck out the defences and then he entered judgment for the plaintiff. He observed that it was fifteen months since Mr Hastie had sent Annexure "V" to the plaintiff and that in it the second defendant admitted not only his liability but "inferentially admitted his liability in the amount claimed and nothing has been done since then by the first or the second defendants except that Mr Hickey said they were in a position to file fresh defences in the very near future." He entered judgment against the second defendant only. On 6 July 1990 the second defendant filed a notice of appeal in the Court of Appeal. Later, the plaintiff filed a notice of motion challenging the competency of the appeal. Before the competency motion was dealt with, the plaintiff and defendants filed further notices of motion in the District Court; the plaintiff sought entry of judgment against the first defendant and some ancillary orders and the defendants sought (1) leave for the first defendant to file and serve an amended verified notice of grounds of defence together with a notice of cross claim, (2) that the judgment of 8 June 1990 against the second defendant be set aside and (3) that the second.defendant be given leave to file and serve an amended verified notice of grounds of defence. An order was also sought that the particulars of claim as against the second defendant be struck out as disclosing no cause of action against him. Downs DCJ heard the plaintiffs motion on 8 August 1990. He ordered the second defendant to pay interest on the judgment in the sum of $11,424.04 and stood the balance of the motion over to 31 August 1990. On that date Finnane Ass. DCJ had both the plaintiff's and the defendants' motions before him. He granted leave to the first defendant to file and serve a verified amended defence and cross claim within twenty-one days, noted an undertaking by the plaintiff not URJ HASTIE v NIXON (Priestley JA) 5 to enforce judgment against the second defendant until further order, made ancillary orders, and stood the balance of both motions over until a later date. On 3 September 1990 Meagher JA heard submissions on the motion challenging the competency of the appeal, following which he struck out the second defendant's notice of appeal and ordered him to pay the plaintiff's costs. The argument in the proceedings before this court has gone forward on the basis that the appeal was incompetent because it was from an order "in proceedings ancillary to an action" not "in an action": see Clutha Developments Pty Ltd v Barry (1989) 18 NSWLR 86. On 2 November 1990 the balance of the plaintiff's and defendants' notices of motion came on for hearing before Shillington DCJ. An affidavit sworn 31 August 1990 by the second defendant was read, and he was cross examined upon it. In his affidavit he said he was the sales manager of the business called the Mohair and Wool Centre and that he had been so employed for five years by Miss Benecke, the owner of the business. In his affidavit he did not explain how he came to swear the uninformative grounds of defence of 13 June 1989, although it appears, on his account, that at the time of swearing the affidavit verifying those grounds detailed instructions had not been taken from him by his solicitors. That did not happen, according to his version, until some months later. In his affidavit he said: 4. "In late September or early October of 1989, I was asked by my solicitor, Mr Craig Saunders, to attend the chambers of Mr Brewer, my barrister, at Parramatta. I recall that I was told that the other side was trying to strike out my Defence. I answered various enquiries that were made, and I was asked to go away and prepare a statement as to what happened. I prepared such statement and sent it to my solicitor on or about the 10th of October. 5. [heard nothing further about the matter until my solicitor contacted me in about April, 1990, at which time he asked me to urgently attend the chambers of Mr Brewer. I understood that the other side were trying to knock me out of the action. Mr Brewer asked me about the matter in considerable detail, and I was told that the plaintiff's course of action could be dealt with satisfactorily. 6. I did not hear anything more about the matter until about the 15th of June, 1990 when I was informed by my solicitor that Judgment had been entered against me. I have not had the opportunity to defend this matter. I wish to defend the matter on two grounds, which I set out below. The first ground Mr Hastie wanted to rely on was that it was Miss Benecke and not he who had contracted with the plaintiff. His position here was that he had no share in the business, that he was Miss Benecke's employee and that his understanding was that all payments to the plaintiff had been made by cheques bearing one of the following names, "G Benecke t/as The Shearing Shed", "G Benecke t/as The Tam O'Shanter Mohair and Woollen Mill', or "G Benecke t/as Tam O'Shanter Mohair and Wool Fibres". I earlier mentioned that on the plaintiff's evidence as it stood before Downs DCJ, it appeared that he had been paid for the first of what he said were six loads delivered upon orders of the second defendant. There is no explanation in the materials of the difference between the versions of the plaintiff and the second defendant on the question whether there were six loads altogether as the plaintiff 6 UNREPORTED JUDGMENTS says or five as the second defendant says (although it may bea sound conjecture that the second defendant was not taking the fifth, Footscray West, delivery into account). It seems however that the dispute between them concerning price and payment relates to the loads after the first load. In regard to these, the second defendant's affidavit was as follows: 12. "In respect of the second to fifth loads, on each subsequent occasion, the plaintiff telephoned me to tell me that he was sending some wool down to Goulburn Wool Scourers which I might be interested in looking at. On those occasions, the loads were purchased as a result of my deciding, on the particular occasions concerned, that we would take some of the wool that I looked at. On each occassion, the price being asked for the wool was too high, and the actual price was agreed orally between me and the plaintiff after I had inspected the wool. Then, the plaintiff would deliver it to me. 13. I have annexed hereto five sheets marked 'A' to 'E" respectively in which I set out partlculars of the content and agreed price of each load. 14. Annexed hereto and marked 'F' is a summary of balances in respect of businesses dealings with the plaintiff. I say that not only have all amounts due from the business to the plaintiff been paid, but the plaintiff has been overpaid the sum of $13,633.44, which I am informed the first defendant intends to cross claim." Although the Annexures "A" to "F' are consistent with the assertions made by the second defendant in para 12 to para 14, the detail in Annexures "A" to "E" is impossible to understand without further explanation than appears in the evidence. Annexure "F" asserts total invoice debits of $116,435, total credits of $130,068 and reject returns of $17,334. The second defendant's affidavit then went on to add to and explain various paragraphs in the plaintiff's affidavit of March. In some respects he joined issue with the plaintiff on statements in that affidavit, some of these issues not being central to the dispute. One such matter was that, according to him, what the plaintiff had referred to as the four written orders he received from the first defendant, never resulted in any sale of wool by the plaintiff. Some of these 'orders' were not, he said, orders at all, for instance, Annexure "C". In regard to another, Annexure "D", the second defendant said: "18. I refer to the annexure marked 'D' of the plaintiffs affidavit. This was a letter that I sent to the plaintiff, I believe, in December, 1987 indicating requirements I had at the time. I say again that all purchases of wool by the business were made on inspection of wool supplied by the plaintiff, the business taking what it required on the occasion concerned. I say that the plaintiff never supplied any wool in accordance with what is set out in annexure 'D'." In para 19 the second defendant again stated his version of how the transactions in question were conducted between him and the plaintiff: "I never placed orders with the plaintiff. The plaintiff would contact me from time to time to tell me what he had available for inspection. He would then send to me by letter or facsimile a written indication of what was available for inspection together with the price that he wanted. Annexures 'E' to 'N' of the plaintiff's affidavit are such communications. They are not in order and do not represent individual shipments." URJ HASTIE v NIXON (Priestley JA) 7 This account of the course of business seems to be describing the same procedure the plaintiff had said occurred, in para 6 of his affidavit, in some instances at least. In regard to the second defendant's response to the letter of demand headed "Roy Robinson Wool Brokers", he said in para 22 of his affidavit that those brokers were a major overseas buyer that the business dealt with; he was alarmed at the prospect of their "having knowledge of a legal dispute that one of their suppliers was involved in"; he wanted to point out very urgently to the plaintiff that he should not let his solicitors have any contact with those brokers; he could not understand how their name appeared in the solicitor's letter. Then he said: "Consequently, I wrote the note which is annexure 'V' to the plaintiff's affidavit in a state of considerable concern. I did not regard myself as liable to the plaintiff for the businesses' debts." On 20 September 1990 an amended notice of grounds of defence and cross claim was filed with the District Court by the first defendant pursuant to the leave granted by Finnane Ass DCJ. The grounds of defence were verified by an affidavit sworn by the first defendant on 6 September 1990 in which she said the defence was true in substance and in fact. In it she said that the second defendant had been acting as her agent, that she had contracted to buy five loads of wool but no more and annexed the same particulars of those purchases as were annexed to Mr Hastie's affidavit of 31 August 1990 and said that she had paid to the plaintiff the total sum of $130,068.62. She denied any indebtedness. These documents were in the court file and available to Shillington DCJ on 2 November 1990. When the balance of the notices of motion came on for hearing on that day, counsel told the judge that the primary matter for his consideration was whether he would set aside the judgment against the second defendant. It was agreed between counsel that if that judgment were not set aside then the plaintiff could not continue his proceedings against the first defendant. The second defendant was cross examined on his affidavit of 31 August 1990. One matter dealt with in cross examination was the apparent inconsistency between what he said in the affidavit about being an employee of Miss Benecke and what he had said in the verified notice of grounds of defence of 13 June 1989, namely: "3. At all material times, the Second Defendant did not expressly act with the authority of the First Defendant and the First Defendant did not allow or permit the Second Defendant to contract on her behalf as her duly authorised servant or agent." What was in substance put to him in cross examination was that, in light of the facts disclosed in his 31 August 1990 affidavit and the attitude taken up by him in para 3 of his original defence and taken up by the first defendant in a similar paragraph in her defence, she and he must have agreed to give instructions to their solicitors, contrary to the fact, that he had no authority to buy wool on behalf of her business. It seems reasonably plain from the transcript of the cross examination that he never appreciated what was being put to him. His answers to the questions show more bafflement than anything else. They also show quite clearly that he thought there was a distinction between "servant and agent" on the one hand and "employee" on the other, and that if he was in the latter class, which he said he was, he could not be in the former. It may be of course that his puzzled answers were the result of deliberate dissimulation, partial or total. Such an explanation of his evidence was not directly put to him by the cross examiner, 8 UNREPORTED JUDGMENTS who no doubt was relying on Annexure "V" to the plaintiff's affidavit. This was undoubtedly a powerful weapon, particularly in regard to the relation, even if only a relation by estoppel, between the plaintiff and the second defendant. It emerged in the cross examination that the second defendant had gone to solicitors shortly before the filing of the grounds of defence of 13 June 1989. He was asked whether he had given the solicitors instructions to defend the claim. In his answer he began to say what the instructions were, but was stopped by the cross examiner. Later in the cross examination there was reference to what Mr Hastie had said in pars 4-6 of his affidavit earlier set out. He was asked whether he had discussed with Mr Brewer whether or not in the transactions he was the first defendant's agent. He was asked to answer this question yes or no. The following then appears in the transcript: "A. I don't really know how to answer it because it is just not a yes or no question, because he went through the information that I - OBJECTION: ALLOWED. WITNESS: Just let me, if you can, because I am not used to this. I sent in October a detailed analysis of what the transactions were and we went through that. COLEFAX: Q. I am going to suggest to you Mr Hastie that in that conference with Mr Brewer, you instructed him that in relation to the contracts between the plaintiff and yourself that you had entered into those contracts without reference to the first defendant and that you denied in that conference that you were the authorised agent or servant of the first defendant in those transactions, do you agree or disagree with that proposition? A. Can you just go through that again, I am sorry? Q. I suggest to you that when you saw Mr Brewer of counsel in April of this year, you gave him instructions that in relation to the contracts which the plaintiff was suing on -? A. There were no contracts. Q. The agreements, that you had entered into them without any reference to the first defendant. Did you give him those instructions? A. No, I don't think so, I really don't. Q. Did you give Mr Brewer instructions that in relation to those agreements you denied you were the authorised servant or agent of the first defendant? A. Well I denied that I was an agent, I worked for the company. I was an employee only." On the face of it (and bearing in mind the qualification I earlier mentioned) this is a fine example of a lay person all at sea when in the grip of a procedure and lawyers whose language he does not fully understand. The employee/servant and agent problem was explored at some length. The position as it was finally left appeared most clearly in the following passage: "Q. Iam suggesting to you Mr Hastie - I am being quite blunt about this - when you saw the solicitors and Mr Brewer before 8 June you instructed them explicitly that you were not, for the purpose of these transactions, the servant or agent of the first defendant? A. That's right. Q. And that after the judgment was entered against you you have changed your mind and you now assert in the affidavit you have sworn and filed, read here today, that you were the agent or servant of the first defendant? A. No, I haven't done that at all. In my mind I was an employee of the business. Q. I suggest -? A. Would you ask that question again? URJ HASTIE v NIXON (Priestley JA) 9 Q. I suggest that the reason that you have changed your story simply is because of the fact a judgment had been entered against you by Judge Downs? A. Rubbish. In the course of the cross examination one piece of information came to light which does not appear to have been challenged and which provides a more likely explanation than any other I can think of (on the materials) for the non informative grounds of defence first filed by the defendants. Mr Hastie was being asked about his having verified the first defence and answered: "Yes, but I must explain something here. All I want to say is, this was the first time I ever received such a document, meaning a summons, and I spoke to Mr Nixon and told him that he still owed me the credit and he was trying to do something for me but he wouldn't do anything. We ran out of time so we went to the local solicitor about three days before the due date was up. The solicitor himself had to go away and it was done by his woman solicitor at the last moment." At the conclusion of that part of the cross examination which dealt with Mr Hastie's denial of himself being a contracting party with the plaintiff, the employee/servant or agent question and the form of the first defence, a general charge of untruthfulness was put.to him that he was prepared to say anything to seek to avoid the enforcement of the judgment entered against him. It was further put to him that his affidavit of 31 August had been filed on that basis. He said it was true and correct. The cross examination then moved to Mr Hastie's account of the course of dealing between him and the plaintiff. It was put to him that where his account differed from the evidence of the plaintiff, his evidence was incorrect. He answered: "My evidence is not incorrect. Have you bothered to ask Mr Nixon?" This last answer may not have been responsive, but shows a basic layman's grasp of desirable procedures. What was happening in this interlocutory application was approaching what happens at a trial on the merits. The second defendant was being cross examined as to credit, the cross examiner clearly, and from the point of view of trying to defeat the second defendant's application, relevantly in a substantial though perhaps not correctly in a technical sense, hoping to plant firmly in the judge's mind the idea that the second defendant was not to be believed. This sort of approach is usually regarded as being appropriate at a trial on the merits rather than at an interlocutory stage of the proceedings. Counsel for the second defendant had earlier commented on the fact that the plaintiff was not present at court for cross examination on his earlier affidavit. Whether this was because he had not been required to attend for cross examination does not appear from the materials in this court. These matters highlight what appears to some extent to have been overlooked as the proceedings before the judge on this day went along, that what was happening was not a trial on the merits, but an application by the second defendant so that there could be a trial on the merits, which application could not succeed unless he showed that there was material warranting the judge in setting aside the judgment against him. When the time for re-examination of Mr Hastie came, what on the face of it appears to be his lack of understanding of some aspects of the law of contract and estoppel was again demonstrated: Q. Mr Hastie, do you understand that there is a difference between an agent and an employee? A. Yes, there is. Q. That is your understanding? A. Yes, there is. 10 UNREPORTED JUDGMENTS Q. You have said that you were an employee of the business? A. That's right. Q. Did you have authority from Miss Benecke to enter into deals on her behalf? OBJECTION: WITHDRAWN. Q. You are the sales manager of the business? A. That's right. Q. How long have you been the sales manager of the business? A. Just on five years. Q. Five years? A. Yes. Q. In that time have you bought and sold goods for the business? A. Yes. Q. Is that one of the things that you normally do in your work? A. Part of it. Q. It is part of it? A. Yes. Q. Just one last question Mr Hastie, is it correct to say that your understanding is that an employee and an agent are two different things? A. Correct. Your Honour, am I allowed to clarify something? HIS HONOUR: You can discuss it with your counsel and if something arises you can go back and give further evidence of it. WITNESS RETIRED. The second defendant's application before Shillington DCJ was pursuant to Pt11A of the District Court Rules. This was inserted in them on 1| July 1985. Subr(1), Subr(2) and Subr(3) of r2 are the substantively important part of PtllA. They are in identical terms to what was until 1 July 1985 s83C of the District Court Act 1973. That section had been introduced into the Act by Act No 196 of 1979. It gave the District Court power to enter summary judgment identical to that possessed by the Supreme Court. Pt 11A 12, subr(1) and subr(2) authorise the court to give judgment for a plaintiff if there is evidence before the court of the facts on which the claim is based and that evidence shows the defendant has no defence to the claim. Rule 3 says a judgment under the rule "may, on sufficient cause being shown, be set aside, on terms, by order of the Court." For the second defendant it was argued in this court that Shillington DCJ erred in law in the way in which he applied r3. It was submitted that he did not consider whether sufficient cause had been shown, before him, to warrant the setting aside of the judgment. This was said to be apparent from his reasons. In these, he began by referring to the "somewhat contradictory" terms of para 3 and para 4 of the plaintiff's statement of claim. Presumably it was the equivocation in these two paragraphs that was the basis of the second defendant's application to strike out the statement of claim. The judge took a broad view on this point, reading par 4 as alternative to the preceding paragraphs and as "alleging a claim against both defendants on a contractual basis. The judge then mentioned what had happened before Downs DCJ and continued: "The plaintiff, on his affidavit for Judge Downs, apparently satisfied his Honour that there was a clear admission by the second defendant of his personal liability. As a result of that notice of motion his Honour struck out the defence and directed judgment be entered against the second defendant. This present application seeks to set aside the particulars of claim and inferentially the judgment entered as based on those particulars of claim. The second defendant relies on Ptl1A r2(iii). Judgment under this rule, may on sufficient cause being shown, be set aside on terms by order of the court. When this matter came before me it seemed at first blush, and I expressed this view to counsel, that the matter should go back before Judge Downs who was acquainted with the circumstances of the hearing of the notice of motion in June. The parties have not sought that I should take that course and I, with some reluctance, have, and I now proceed to deal with the matter. URJ HASTIE v NIXON (Priestley JA) 11 The second defendant has filed an affidavit on 31 August. He has been cross-examined. It is the submission of plaintiff's counsel that all the matters which are raised in this notice of motion, were dealt with before Judge Downs and that it is inappropriate and I have no power to deal with this present notice of motion, it being something which has been determined by Judge Downs. Mr Blackburn of counsel for the defendant has submitted that, on the face of it, the statement of claim is advanced as against the second defendant and the court should proceed to deal with the matter at this stage. I am firmly of the view, having looked at the material and having heard the second defendant in the witness box, that these are matters which could and should have been dealt with before Judge Downs. It seems to me it would be quite wrong for me to go over these matters again which I am satisfied is what I would be invited to do. Mr Blackburn for the second defendant has submitted that these are matters which perhaps should have been dealt with by Judge Downs if the second defendant's case had been properly put before him, but it seems to me that there was the opportunity at that time for the matter to be dealt with and it was not on that basis. I am also mindful of the delay having regard to the fact that this notice of motion was filed on 28 August. In any event, I have formed the view that it is not a matter which should be re-litigated in the way that it is proposed by the defendant." Pt11A, which permits summary judgment, has some features in common with Pt13 which provides for default judgment, in actions commenced by the lodging of a statement of liquidated claim, where a defendant has not filed a notice of grounds of defence. Pt13 r1(2) provides that such a default judgment "may, on sufficient cause being shown, be set aside, on terms, by order of the Court." The words "sufficient cause" in Pt13 r1(2) have been considered by this court: Adams v Kennick Trading (International) Ltd (1986) 4 NSWLR S03. In that case, Hope JA, with whom Glass JA agreed, pointed out (at 506) that courts with jurisdiction in debt proceedings generally have rules providing for default judgments and setting them aside in appropriate circumstances; and, further, that sometimes the rules specify grounds each of which must be made out to obtain the relief but sometimes the rules require all the circumstances of the case to be taken into account. In regard to the latter type of rule, Hope JA said the decision has to be reached upon the whole of the relevant material. In his view Pt13 r1(2) was such a rule. He went on: "A court exercising jurisdiction under this subrule has to look at the whole of the relevant circumstances and decide whether or not sufficient cause has been shown. 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 other matters: see, for example, Reinehr Industrial Lease and Finance Pty Ltd v Jordan (Court of Appeal, 4 June 1974, unreported) noted Ritchie's Supreme Court Procedure (NSW) Practice Decisions 8505. 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 Bartlam [1937] AC 473 at 489: 12 UNREPORTED JUDGMENTS '... if merits are shown the Court will not prima facie desire to let a judgment pass on which there has been no proper adjudication.' In the present case a problem arises because of the course taken by Williams DCJ in deciding whether a bona fide defence on the merits had been disclosed. In Simpson v Alexander (1926) 26 SR (NSW) 296 at 301; 43 WN 76 at 78. Street CJ, in whose judgment Gordon and Campbell JJ concurred, said: "... In considering whether a defendant, who seeks to be let in to defend, discloses a defence upon the merits, the Court or a Judge is not to try the issues of fact arising upon the alleged defence. That is for the jury at the trial. All that is required on an application of this kind is that the defendant should swear to facts which, if established at the trial, will afford a defence; and should establish his bona fides in setting up that defence. Although, however, issues of fact cannot ordinarily be gone into on an application of this kind, and although it is not usual to go beyond the evidence put forward by the defendant for the purpose of disclosing a defence on the merits, there is, so far as I know, no inflexible rule of law or of practice preventing affidavits in answer from being received.' Whatever else this statement means, in my opinion it means that evidence can be received, by cross-examination or otherwise, as to the bona fides of the applicant in seeking to rely upon the defence, even though the evidence adduced relates to the issues which would be determined if the matter went to trial. However the question to which this evidence is directed is not simply whether the applicant has shown a defence on the merits; it goes rather to the composite question whether the applicant has shown a bona fide defence on the merits. If the judge hearing the application concludes that the applicant has deliberately lied about the alleged defence and is thus dishonest in raising it, the applicant would fail to establish that he had a bona fide defence on the merits. But if in such a case the judge merely concluded that he preferred the evidence of the respondent to that of the applicant, or anything as to credit short of a disbelief by the applicant in the facts he relied on to found the defence, he would not on that account alone be entitled to find that the applicant had failed to establish that he had shown a bona fide defence on the merits. If he did so, he would be trying the issue to be determined at the trial, and this would be an error of law." (at 506-507) In the argument in this court one of the principal questions became whether an application under Ptl1A 12(3) should be approached by the District Court judge along the same lines as those which were indicated in Kennick Trading as being appropriate in dealing with applications under Pt13 r1(2). For the plaintiff it was submitted that despite the identity in wording of the relevant provisions, the different circumstances with which they dealt required a different approach in each case. Counsel's starting point is substantially correct; there is, usually, a significant difference between the summary and default judgment procedures. In the former, under Ptl1A, judgment is given for a plaintiff only after a judge has been satisfied by evidence that the defendant had no defence to the claim. Frequently, although not invariably, the defendant will have been represented at the hearing before the judge. Under the default judgment procedure, there is no hearing before a judge and there is never any representation of the defendant at the stage where the default judgment is entered up by the Court or the Registrar. Counsel also pointed to the fact that although Ptl1A clearly derives from Ptl3 of the Supreme Court Rules, there is no equivalent in Pt13 of the Supreme Court Rules to r2(3) of the District Court Rules PtllA. URJ HASTIE v NIXON (Priestley JA) 13 It is clear that the cases of a defendant who has resisted an application for summary judgment and who has put all available materials before the judge in the course of the application but has nevertheless then had judgment entered against her or him, and of a defendant who has suffered a default judgment after failing to file a defence in due time are very different. The fact however that successful applications under Ptl1A and Pt13 will usually arise from quite different circumstances so far as defendants against whom judgments are entered are concerned, does not necessarily require a conclusion that the identical words in Ptl1A r2(3) and Pt13 r1(2) should be given different meanings. They will usually be invoked in different circumstances and it may well be more difficult to show "sufficient cause" when trying to set aside a Ptl1A summary judgment than a Pt13 default judgment. Counsel for the plaintiff submitted that to give the Kennick Trading meaning to "sufficient cause" in applications to set aside Ptll1A judgments would be to stultify the primary operation of Pt11A itself. I do not think that in practice this would be correct. It seems to me far less likely that summary judgment will be entered against a defendant with a bona fide defence than that default judgment will be entered against such a defendant. It would be in comparatively rare cases that a defendant with a bona fide defence on the merits, appearing by counsel to contest an application for summary judgment, would find judgment entered against her or him. If such a defendant in fact had a bona fide defence on the merits and the appropriate materials had been put in evidence, it would almost inevitably be the case that the judge in ordering summary judgment would have made an error of law, only correctable until 1 March 1991 by s69 proceedings in the Court of Appeal and since that date by an appeal, subject to leave, of the ordinary kind. However, it is possible to imagine cases where by mismanagement of some kind or failure of communication between the defendant and the defendant's legal representative, a defendant with a bona fide defence on the merits will not succeed in having the relevant materials before the court in answer to the application for summary judgment. In such a case, where the assumption is that there is a bona fide defence on the merits, which has not been ruled on by the court, then provided the plaintiff is recompensed for any costs thrown away on the plaintiff's side by reason of whatever it was that caused the failure by the defendant to present the bona fide defence at the summary hearing, and provided there has been no element of attempt in the defendant's conduct to obtain some unmeritorious advantage against the plaintiff, I can see no reason why the defendant should not be let in to defend, on appropriate terms. The fact that when the summary judgment procedure was introduced in the District Court, the provision in r2(3), copied from the District Court's own default procedure provisions was incorporated, seems to me to reinforce this view. The inclusion of subr3 indicates that the legislature took the view that there would be cases where sufficient cause for setting aside a summary judgment could be shown and that in such cases the judgment should be set aside. What I have said so far does not fully answer the submission made for the plaintiff. He submitted for example that the last consideration I have mentioned, and indeed all the matters I have mentioned, would be met by so construing "sufficient cause" in subr3 that it could only be made out by satisfying three requirements: (1) tendering material evidence, (2) establishing or tending to establish a triable issue, (3) which evidence was not reasonably available to the defendant at the hearing at which summary judgment was entered. 14 UNREPORTED JUDGMENTS It was the third ingredient on which the argument turned, as counsel for the plaintiff found it difficult to contend that the first two had not been satisfied. As to the third requirement, I do not think "sufficient cause", in its context, has the necessary connotation. Pt11A is available for cases where a plaintiff believes, and can satisfy a judge on evidence after notice to the defendant, that whatever it is the defendant is saying in answer to the plaintiff's claim can not be an answer in law to that claim. What the procedure under Pt11A is aimed at is indicated by the heading to the Part, "Summary Disposal'. That is, in my opinion the Part is aimed at two objects: the entry of judgment (1) where there is no defence to the plaintiff's claim, (2) by a method shorter than that involved in a full trial. It seems to me to be contrary to what the procedure under Pt11A is aimed at if it can result in summary judgment where object (1) is not in fact the case. If summary judgment in such a case is the result of some deficiency on the part of the defendant or the defendant's legal representatives the result should not, in my opinion, be that the defendant is shut out from having a bona fide defence investigated, but rather that such defence should be allowed to go forward to the ordinary processes of a trial, on the inevitable footing that the defendant will have to bear the costs thrown away by the plaintiff because of the defendant's shortcomings and subject also to whatever other conditions in particular cases the court thinks appropriate to impose upon the defendant to ensure that the defendant's shortcomings cause no prejudice to the plaintiff. My conclusion therefore is that in dealing with an application under PtllA 12(3) a District Court judge should adopt the approach described in Kennick Trading, bearing in mind the difference in circumstances that will usually obtain in such applications, as I have described above, from circumstances in which an application under Pt13 r1(2) will usually arise; that is, it will be necessary to bear in mind that the applicant under PtllA 12(3) will have already had the opportunity of presenting all evidence relevant to the defendant's defence to the court and that circumstance together with the explanation why the matter now sought to be put before the court was not previously put, should be taken into account by the court in considering the bona fides of the defence the applicant/defendant is seeking to raise. It appears from the third of the paragraphs I have earlier set out from Judge Shillington's reasons that the submission which was put to this court by plaintiff's counsel concerning the approach to be adopted under Pt11A r2(3) was made to his Honour. Although he did not adopt it in the complete form which he recorded as having been put to him, the judge accepted it to the extent that he said it would be quite wrong for him to go over matters again which could and should have been dealt with before Judge Downs. I have come to the conclusion that his Honour's eventual decision refusing to set aside the judgment was at the very least significantly influenced by his stated opinion that it would be wrong for him to go over matters which could and should have been dealt with before Judge Downs. This means that he took the view that he should not consider the material before him that had not been before Judge Downs. Although he said immediately before stating his conclusion that he was also mindful of the defendants' delay in putting forward the facts of their defence and that in any event he had formed the view the matter was not one to be re-litigated as proposed.by the defendant, the whole of his reasons leave me with the clear view that in reaching his conclusion he acted on the basis that he should not consider the new material that was before him. URJ HASTIE v NIXON (Priestley JA) 15 One reason why I reach this conclusion is that there is no mention in Shillington DCJ's reasons of what, to my mind, could have been held by him to be evidence supporting a finding that the second defendant had shown the elements of a bona fide defence. I am referring to the materials, earlier set out in these reasons, in which the second defendant asserted that (1) the prices for wool he bought were arrived at after inspection of wool delivered to a particular inspection point (which as far as I can understand from the plaintiffs evidence was a way of reaching the price different from that asserted by the plaintiff in regard to some but not all orders), (2) the total amount of purchase money thus becoming payable was less than that claimed by the plaintiff, and (3) that more money had been paid to the plaintiff than the plaintiff was giving credit for in his claim. Sworn assertions to the preceding effect were all in evidence before the judge. The evidentiary form of the assertions was not challenged. Cross examination did not go to the detail of the assertions, but was in substance restricted to a general frontal assault on the second defendant's credibility. Although some of the judge's comments as recorded in the transcript and one or two remarks in his reasons indicate he may not have been impressed by the second defendant as a witness, he made no specific finding that he did not believe him; at most it might be possible to say that the judge "concluded" (to use Hope JA's words from Kennick Trading at 507) "that he preferred the respondent's evidence to that of the applicant", but I do not think that he either indicated or intended to indicate that he found "a disbelief by the applicant in the facts he relied on to found the defence" (also at 507). The conclusion I reach therefore is that the submission made for the second defendant is correct, that is Shillington DCJ did not take into account in considering whether there was sufficient cause to set aside the judgment all the matters that he should have taken into account, and that he took this course because he acted on the submission of the plaintiff's counsel concerning the proper approach to Pt11A r2(3) which for the reasons I have earlier set out I do not think should be accepted. His decision was therefore reached by a process which involved an error of law and should in my opinion be quashed. The question then arises whether it would be appropriate for this court to go further and say that, (1) as a matter of law Shillington DCJ should have set aside the summary judgment against the second defendant and (2) make an order bringing that about. Although I think there is a strong case for saying that on the materials before Shillington DCJ it would have been better to set the judgment aside, I do not think this court should do more than quash the order below. The hearing of the application should take place in the appropriate jurisdiction upon whatever materials the parties put before the judge, to be considered upon the footing stated by this court, and after cross examination and assessment of witnesses as indicated in Kennick. This court cannot carry out that task on the materials presently before us. Once the motion to set aside the judgment against the second defendant is again on foot, the parties will have a choice between various courses of action. They could agree upon the judgment being set aside and the second defendant let in to defend upon suitable conditions being met by him. If that agreement is not possible, they could simply allow the further hearing of the motion to go ahead. Or, they could make an effort to resolve their differences without further litigation. It is a striking feature of this case that orders have been made in it, after argument, and often also the giving of evidence, before Judge Downs (at least twice, substantively), before Finnane Ass. DCJ, before Shillington DCJ, before 16 UNREPORTED JUDGMENTS Meagher JA, before Clarke JA (on a stay application, as a result of which he stayed execution on the judgment upon the second defendant paying $5,000 on account of costs) and last before a bench of three, all without the merits of the case being fully examined. The issues in the case seem to be simple enough. 1. A number of loads of wool were delivered to a point where the second defendant inspected them. It must be possible for the parties, acting through sensible solicitors, to establish how many loads were delivered. 2. There is an argument about how much was paid to the plaintiff in respect of the various parcels of wool sold. Again, sensible solicitors must be able to reach agreement, less expensively than through litigation, on the amount paid, or, if agreement cannot be reached, at least the amount in issue must be able to be considerably narrowed. 3. Finally, what might well be the only matter that might truly need to be litigated appears to be the matter of price for particular parcels of wool. Here again, the materials before the court indicate that there has been a considerable measure of agreement about many purchase prices, and it must be possible, again by the solicitors getting together, to make a list of those particular sales of wool which took place, how many there were, what the plaintiff claims was the price in respect of each one and what the second defendant asserts to have been the price in respect of each one. When those lists have been made it will be possible to see what the actual dispute is between the parties and it would be very surprising if it were not then possible either for agreement to be reached, or the area of dispute greatly narrowed. In a perfect world all of this would have been done before the defendants' first filed their defences in June 1990. However, even in this imperfect world, there is no reason why those steps should not be taken now. The parties will still save considerable money if they take those steps before passing again through the doors of a court room, even if they still have not reached agreement. In considering the submissions that have been made about the merits of the defence of the second defendant, I have not mentioned the defence that Miss Benecke and not the second defendant is liable for any debt that may be found to be owed to the plaintiff. This is because, on the material before this court, it seems clear beyond almost any question that the second defendant cannot deny that as between himself and the plaintiff he was transacting the business that took place between them in the name of Mike Hastie. I do not think he has any reasonable prospect of persuading any judge to the contrary. This does not necessarily involve any discredit to him. Not only he, but also the lawyers on both sides seem to have been confused about the position of parties. The plaintiffs particulars of claim almost in the same breath asserted that the second defendant was the first defendant's agent and yet was liable to the plaintiff; the second defendant may well have genuinely believed that because he was the employee of Miss Benecke he could not be liable to the plaintiff, a belief, which if he held it, was quite wrong in law, but perhaps understandable in a layman. I would propose that the following orders be made: (1) Order of Shillington DCJ of 2 November 1990 refusing to make O.3 in the defendants' notice of motion of 28 August 1990 quashed. (2) Order of same date that second defendant pay plaintiff's costs of the notice of motion quashed. (3) Plaintiff/respondent to pay second defendant/ claimant's costs of the proceedings in this court. (4) Liberty to apply. Clarke JA I agree with Priestley JA. URJ HASTIE v NIXON (Clarke JA) 17 (1) Order of Shillington DCJ of 2 November 1990 refusing to make O.3 in the defendants' notice of motion of 28 August 1990 quashed. (2) Order of same date that second defendant pay plaintiff's costs of the notice of motion quashed. 5 (3) Plaintiff/respondent to pay second defendant/ claimant's costs of the proceedings in this court. (4) Liberty to apply. Counsel for Claimant: MISS M CLARK 10 Solicitor for Claimant: GRAY and PERKINS Counsel for Opponent: AM COLEFAX Solicitor for Opponent: FOULSHAM and GEDDES