Local Court of New South Wales CITATION: Acimall AustraliaCong Bui Buu t/a Austcraft Furnitures [2004] NSWLC 4 JURISDICTION: Civil PARTIES: Acimall Australia (Judgment Creditor/Respondent) Cong Bui Buu t/a Austcraft Furnitures (Judgment debtor/applicant) FILE NUMBER: 6075/99 PLACE OF HEARING: Donwing Centre DATE OF DECISION: 06/10/2004 MAGISTRATE: Magistrate H Dillon CATCHWORDS: Practice - Setting aside default judgment - irregulairty - whether liquidated or unliquidated claim - whether delay adequately explained - presumptive prejudice to plaintiff - limitation period LEGISLATION CITED: Local Court (Civil Claims) Rules 1988 pt 11 r2 pt 26 r 3 Brisbane South Regional Health Service v Taylor (1996) 186 CLR 541 CASES CITED: RT Company Pty Ltd v Minister of State for the Interior (1957) 98 CLR 168 Gemini Property Investments Pty Ltd v Woodards Investments Pty Ltd [2000] SASC 210 Spain v Union Steamship Co of NZ (1923) 32 CLR 138 REPRESENTATION: Mr Richardson for the plaintiff/Judgment Creditor Mr Canceri for Defendant/Judgment Debtor ORDERS: 1. Motion dismissed.; 2. Applicant to pay respondent's costs of disposal of motion in sum agreed or assessed. Reasons for Decision 1. This is the fifth motion brought by the judgment debtor to set aside default judgment in this matter. I do not know whether that is a record but I am confident that it may be close. The proceedings now before this Court have had, to say the least, a tortuous progress thus far. Background to the current motion 2. The judgment creditor, Acimall Australia Pty Ltd ("Acimall") filed a Statement of Liquidated Claim at the Downing Centre Local Court on 2 June 1999, claiming the sum of $33,594.00 in respect of a contract said to have been entered by the parties pursuant to which the judgment debtor agreed to buy a Morbidelli Model Author 504STC Machining Centre for an amount of $167,500.00. The judgment creditor alleged that the judgment debtor had repudiated the contract, which had been accepted by the judgment creditor, and that as a result the judgment creditor had lost $33,594 in profits. 3. The Statement of Liquidated Claim was duly served but no defence was filed within the time allowed by the Local Court Rules and default judgment was subsequently entered for the plaintiff on 27 August 1999. On 8 March 2000, solicitors for the judgment creditor filed an application to issue execution of judgment. 4. On about 5 May 2000, the judgment debtor filed a motion to set aside the default judgment. On 8 May a stay of execution of judgment was granted. In the judgment debtor's affidavit in support of his motion, Mr Bui swore that he had received the Statement of Liquidated Claim but had "thought it so ridiculous that [he] did not seek advice from a solicitor". He swore that he was inexperienced in litigation and that he did not understand that it had been necessary for him to file a defence. He stated that he had assumed that the matter would be set down for a hearing and that he would then defend himself. He also filed with his affidavit a letter from his solicitors to the plaintiff's in which he outlined his defence. 5. On 16 June 2000, the judgment debtor's first motion seeking to set aside default judgment was dismissed and the judgment debtor was ordered to pay the judgment creditor's cost of $450.00 within 28 days. So far that costs order remains unsatisfied. 6. On 14 July 2000, a fresh motion to set aside the default judgment proceeded, this time successfully for the judgment debtor. The defendant filed a Notice of Grounds of Defence. In the course of the motion, Mr Bui gave evidence by way of affidavit that he had paid a deposit of $1000 for the machine the centre of the dispute but had not entered a final contract with the plaintiff. His evidence was that it was a term of the proposed contract that a deposit of $10,000 be paid before the contract crystallised and that he had not done so. Further, he gave evidence that the plaintiff had agreed to return his $1000 deposit after he had refused to go on with the purchase of the machine. 7. The matter was then listed by the Local Court Registry for call-over on 6 November 2000. Mr Bui failed to appear on that day. His defence was struck out and he was ordered to pay costs. On 8 November 2000 default judgment was again entered and the cycle began again. 8. On 19 April 2002, the Local Court heard and dismissed the judgment debtor's third Notice of Motion seeking to have default judgment set aside. Costs again were ordered against the judgment debtor and remain unpaid. 9. On 21 August 2002, the defendant filed a fourth Notice of Motion to set aside default judgment . He did not attend on 24 October 2002 when the motion was listed for hearing. The motion was dismissed. 10. On 25 January 2002, the judgment creditor had a Bankruptcy Notice issue against the judgment debtor in the sum of $44,555.33. An application to set aside the Bankruptcy Notice was dismissed by Gyles J in the Federal Court. Costs were awarded against the judgment debtor and remain unpaid. 11. On 28 July 2003, the judgment creditor had a further Bankruptcy Notice issued against the judgment debtor because there had been a technical error in the earlier Notice. Again the judgment debtor sought to have it set aside and was unsuccessful in the Federal Magistrates' Court. Costs were again ordered against the judgment debtor. The current motion 12. The motion now before the Court is an application, pursuant to Pt 26 r3 of the Local Court Rules or, alternatively, Pt 11 r1(2), to set aside default judgment on the grounds that the default judgment entered on 8 November 2000 was entered irregularly because the claim was not a liquidated demand as pleaded. Consequential orders are also sought. 13. The judgment debtor not only argues the procedural issue but gave evidence which purports to provide a reasonable explanation for the delays caused by him in mounting his defence and to demonstrate that he not only has an arguable defence but a relatively strong one. 14. The respondent judgment creditor opposes the motion on the grounds that the combined effects of the judgment debtor's various defaults has led to such an extensive delay that there is not only a presumption of prejudice but that there would be actual prejudice to the plaintiff if the motion were granted. Moreover, the respondent argues that there has been no satisfactory or reasonable explanation provided which adequately and reasonably explains the judgment debtor's regular defaults in these proceedings. It is argued that he has, time after time, been granted indulgences and has thrown away the opportunities given him by the courts. 15. The applicant argues that it would be unfair if the defendant were to be denied a hearing on the merits and that there would be no substantial prejudice to the respondent if the motion were granted. The evidence 16. The applicant relied on several affidavits which have been filed in various interlocutory matters over the last five years. Apart from those matters to which I have referred above, I will refer here to the critical pieces of evidence adduced by the parties. 17. In relation to the question of whether the judgment debtor has an arguable defence, the applicant tendered a statement of Mr Matthew Bom, a former employee of the respondent, who gave evidence that he had spoken both to Mr Bui and to Mr Neil Foley, his manager at Acimall. After Mr Bui had indicated that he could not afford the machine which is the subject of these proceedings, Mr Foley said to Mr Bom "Let's offer him a cheaper machine." Mr Bom said that he had then spoken to Mr Bui and told him that he could sell Mr Bui a cheaper machine. 18. Also tendered was a letter dated 27 November 1997 from the respondent, under the hand of Mr Foley, to the applicant the relevant parts of which stated: Further to your recent discussions with our sales people, we must inform you that the purchase order and deposit you placed with Wood Tech Aust (NSW) dated 7th November 1997… under the terms and conditions of our quotation and confirmation of sale dated 8 November 1997, is unable to be cancelled and was accepted in good faith from Austcraft Furniture. This machine has been ordered from stock in our Queensland office, and was taken off the market as soon as your order was placed. That machine has been off the market for 20 days now. We could of probably sold it twice in that time. Wood Tech Aust will be taking every action to complete the order received from Austcraft Furniture. I hope you understand the situation you have placed your company in. Please feel free to discuss with myself this matter, so it can be resolved as quickly as possible. 19. In addition to matters recited above, on the question of delay Mr Bui gave evidence of various matters. First, he stated that after he had had the default judgment set aside in 2000, he had been told by his barrister's clerk that the plaintiff may "drop the case". He awaited developments but did not receive the notice to appear for call-over at court in November 2000 when his defence was struck out and default judgment was entered a second time. He stated that he had changed addresses a number of times. He attributed the failure of the court to send the notice of listing to the correct address to the fact that his legal representative, Mr Rory McCrudden, had inadvertently notified the wrong address for service to the Local Court. 20. Secondly, the explanation proffered in respect of the failure by the respondent to appear on 24 October 2002 is that both parties assumed, for reasons which are not clear, that motion was to be heard the following day. It is clear from the court record that there was no appearance of either party on 24 October 2002. I dismissed the motion at about 12.30pm, there being no appearances. On that day, Mr Canceri, Mr Bui's counsel sent an urgent letter by fax to the Downing Centre Local Court Registry notifying the court that it had been intended by both parties to apply for an adjournment of the motion to a date in December that year. Mr Canceri was apparently unaware at that stage that the motion had been dismissed but anticipated correctly that it had been and sought an order in chambers that the that order be vacated without the need for a fresh motion being filed. 21. It appears from the Court's file that on 15 November a Registrar or a magistrate, whom I cannot identify, took the view that the matter ought be placed before a magistrate, preferably me, for decision on that request because it was, effectively, seeking review of my order of 24 October. That does not appear to have been done, and certainly the matter was not placed before me by the Registry. On 19 November 2002, despite the annotation on the file which I have outlined above, the Registry wrote to the parties directing that a fresh motion be filed. That is the motion now before the Court. 22. The respondent gave evidence concerning the prejudice it is likely to suffer if the default judgment is set aside. Affidavits of Ms Charlotte Christmas were tendered to show that searches had been conducted by the respondent's solicitors to locate Mr Bom and Mr Foley. As at mid-2002, Ms Christmas was unable to locate Mr Bom. She did, however, manage to speak to Mr Foley in July of that year. Mr Foley, according to her account of the conversation she had had with him, did not have a clear recollection of Mr Bui or any conversations he had had with Mr Bui. Findings Irregularity? 23. The respondent argues that the judgment entered for the judgment creditor was entered irregularly because the plaintiff ought to have filed an Ordinary Statement of Claim rather than a Statement of Liquidated Claim. The submission is that any damages suffered by the judgment creditor were at large rather than a sum certain. This is because the claim was for loss of profits. Any such loss could only have been ascertained after the loss had been mitigated. No such mitigation had been pleaded. 24. If the judgment is found to have been irregularly entered, the applicant relies for his argument upon a decision of Dixon CJ in RT Company Pty Ltd v Minister of State for the Interior (1957) 98 CLR 168. in which he said (at 170): I have had some doubt as to the course I should take having regard to the delay and to the attempted use made of the existence of the judgment in the proceedings before Fullagar J. But I think that I ought not to allow the delay or the course taken by the defendants before Fullagar J. to operate to keep on foot against the defendants an irregular judgment imposing on them a liability jointly to which the claim did not extend. It is an irregular judgment and ought not to be on the records of the Court notwithstanding that I can see that the imposition of a joint liability is probably a matter which has no great practical importance. But I think that so far as the delay affected the course afterwards taken by the plaintiff I may take it into account in imposing terms and that I will proceed to do. 25. Put simply, the applicant contends that this is a highly authoritative decision expressing a general principle which ought be applied in these circumstances. 26. The respondent, which does not concede that the judgment was entered irregularly, says that, even if it was, times have changed since Dixon CJ's day and that, authoritative has any decision of his may be, the modern approach is more pragmatic and gives much greater weight to considerations of case management than was the case in 1957. Counsel for the respondent argues that, at the very least, the Court should balance the prejudice to the judgment creditor against the desirability of having a pleading and judgment in proper form on the Court's record. 27. The first question, therefore, is whether the claim was a liquidated demand. The judgment creditor contends that it was. The claim was for loss of profits in a sum certain according to a formula or positive data. In this case, various data are relevant: the cost of the machine to the judgment creditor; the price negotiated with the judgment debtor; the deposit paid by the judgment debtor; the price at which the machine was sold (if it was sold) after the sale to judgment debtor fell through. 28. The judgment debtor contends that because the judgment creditor did not plead its mitigation as a material fact that it is open for the judgment debtor, if this judgment is set aside, to plead a failure to mitigate. It is argued that the quantum by which the sum claim ought be reduced is not ascertainable from positive data and that therefore the claim is unliquidated. 29. It is not clear that a judgment entered in respect of a liquidated demand which ought to have been made in the form of an unliquidated claim is an irregularity which is of more than technical significance and imperfection. See Gemini Property Investments Pty Ltd v Woodards Investments Pty Ltd [2000]SASC 210 (BC200003779) at [17] (On the other hand, a judgment will have been entered irregularly, and in a significant fashion, if entered for a sum in excess of the debt or amount due.) I have, however, been referred in this case to no authority suggesting that it is incumbent upon a plaintiff to plead mitigation and I am aware of no such principle or rule. I would have thought that this was a matter for evidence. In my opinion, this statement of claim conforms with the requirement that the claim be for a sum certain, ascertainable from positive data. See Spain v Union Steamship Co of NZ (1923) 32 CLR 138. Judgment does not appear to me to have been entered irregularly. 30. If I am incorrect on this point, however, it does not seem to me that RT's Case is necessarily decisive. It will be self-evident that any decision by Dixon CJ carries his enormous authority with it and that even if this case may be distinguishable on its own facts it is highly desirable to have no irregular judgment on the Court's record. All other things being equal, it seems to me that an irregular judgment will ordinarily be set aside. Nonetheless, I think that counsel for the respondent is correct to argue that the Court must balance its aspirations for the integrity of its record against the interests of parties who have brought matters before it. It is noteworthy that Dixon CJ himself considered the issue of significant delay to have created a real dilemma which he resolved by applying the discretion he saw himself having in the fashion he did. Nearly 50 years later it seems to me to be entirely possible that he would take the more pragmatic approach now urged upon me. 31. In Gemini Property Investments v Woodards Investments Debelle J held that "while it is well established that a defendant would normally be able to get a judgment irregularly entered set aside ex debito justitiae, that very proposition carries within it the not that it is not an invariable rule that it would be set aside." [2000] SASC 210 at [18]. It does not appear that Debelle was referred to RT in drawing that conclusion but he was undoubtedly correct. In short, I do not think that the regularity point is conclusive, even if resolved in the applicant's favour, although it is obviously of considerable significance and may weigh on the judgment debtor's side of the balance. An arguable defence? 32. On the evidence before me there is no question that the judgment debtor could mount an arguable defence on three bases: first, the judgment creditor's failed to mitigate its loss; second, that no contract had been formed and, third, that if there was a contract it was rescinded mutually. While the letter of 27 November 1997 referred to above implies that the judgment debtor repudiated the contract, Mr Bom's evidence and that of Mr Bui supports a contention that there was a mutual rescission of the contract and a decision taken by the judgment creditor to enter fresh negotiations with a view to selling Mr Bui a cheaper machine. As I understand it, while the judgment creditor contests this point it is mainly on the basis of an inference that arises from the judgment debtor's dilatory conduct and the alternative nature of the defences. In my opinion, there are arguable and bona fide defences available to the applicant. Prejudice to the judgment creditor 33. If the application is granted there must inevitably be some prejudice to the judgment creditor. This issue is, in my view, the critical issue in relation to this application. 34. The High Court's decision in Brisbane South Regional Health Service v Taylor is well-known but repays close examination here. In that case, the Court considered the question of the rationale for limitation periods on the bringing of action and the principles to be applied when considering when extensions of time should be granted. Some of the observations of McHugh J are pertinent in the present context. He said (at ): Even before the passing of the Limitation Act 1623 (Imp), many civil actions were the subject of time limitations. Moreover, the right of the citizen to a speedy hearing of an action that had been commenced was acknowledged by Magna Carta itself. Thus for many centuries the law has recognised the need to commence actions promptly and to prosecute them promptly once commenced. As a result, courts exercising supervisory jurisdiction over other courts and tribunals in their jurisdictions have power to stay proceedings as abuses of process if they are satisfied that, by reason of delay or other matter, the commencement or continuation of the proceedings would involve injustice or unfairness to one of the parties. The effect of delay on the quality of justice is no doubt one of the most important influences motivating a legislature to enact limitation periods for commencing actions. But it is not the only one. Courts and commentators have perceived four broad rationales for the enactment of limitation periods. First, as time goes by, relevant evidence is likely to be lost. Second, it is oppressive, even "cruel", to a defendant to allow an action to be brought long after the circumstances which gave rise to it have passed. Third, people should be able to arrange their affairs and utilise their resources on the basis that claims can no longer be made against them. Insurers, public institutions and businesses, particularly limited liability companies, have a significant interest in knowing that they have no liabilities beyond a definite period. As the New South Wales Law Reform Commission has pointed out: "The potential defendant is thus able to make the most productive use of his or her resources and the disruptive effect of unsettled claims on commercial intercourse is thereby avoided. To that extent the public interest is also served." Even where the cause of action relates to personal injuries, it will be often just as unfair to make the shareholders, ratepayers or taxpayers of today ultimately liable for a wrong of the distant past, as it is to refuse a plaintiff the right to reinstate a spent action arising from that wrong. The final rationale for limitation periods is that the public interest requires that disputes be settled as quickly as possible. 35. In my opinion, all these considerations apply to the question whether, pursuant to Pt 11 r2 and Pt26 r3, the applicant has shown "sufficient cause" for the Court to set aside the default judgment. 36. Evidence was given by the judgment creditor that it would be actually prejudiced if the application is granted. When spoken to by Ms Christmas Mr Foley was, perhaps not surprisingly, unable to recall with any clarity conversations he had had with Mr Bui several years before. As he would be the main witness for the plaintiff if the matter went to trial, the judgment creditor is in a very difficult situation responding to the evidence likely to be given by Messrs Bom and Bui. On the other hand, however, there are at least some documents, the letter of 27 November 1997 being one, from which it may be possible for Mr Foley to revive his memory. 37. It is not clear what other business records are available now, almost seven years after the contract was allegedly formed or whether Mr Foley is still available. Furthermore, the evidence of Mr Bom can be interpreted in the judgment creditor's favour also. While his evidence is to the effect that Mr Foley accepted Mr Bui's failure to purchase the machine, his evidence is consistent with the plaintiff accepting repudiation of the agreement by Mr Bui as well as with Mr Bui's contention that there was mutual rescission. The prejudice to the judgment creditor is immediately obvious – it would seem to be a case of word against word because Mr Bom's evidence is effectively neutral. Mr Foley, unless he was able to refresh his memory from business records, seems to be unable to give an cogent evidence. The plaintiff is therefore placed at an enormous and probably irreparable disadvantage insofar as it relies on his evidence. (I understand that he would be the plaintiff's main witness.) 38. A further point of prejudice is that it appears that most of the relevant transactions and conversations between the parties took place in late 1997. If that is when the cause of action arose it is now outside the limitation period. If the judgment were set aside for the irregularity of the statement of claim, it would appear to follow that the statement of claim would in effect be struck out and the plaintiff therefore denied the opportunity to file a fresh Ordinary Statement of Claim. Can the prejudice be cured ? 39. The applicant urges the Court to find that, even if there would be prejudice to the judgment creditor in setting aside the default judgment, the prejudice can adequately and reasonably be dealt with by the making of suitable orders. He would also consent to a self-executing order conditional upon paying outstanding costs. The judgment creditor's response to that submission is that the lapse of time is now so great that no proposed orders can sufficiently overcome the prejudice to it to ensure a fair trial. Conclusions 40. In my opinion, this is a very unfortunate case. It may be, as implied by Mr Bui, that judgment was entered for an amount in excess of what he owed. He may even have had a complete defence if he had managed to stay the course to a trial. These things are imponderable now. 41. While there are explanations proffered in respect of each default, the problem is that there has been an accumulating prejudicial effect. It is particularly striking that after 24 October 2002 the issue of the default judgment was allowed by the applicant to drift for a further year and a half. No doubt he had other things to deal with in that time but so had the judgment creditor. 42. Courts are, of course, reluctant to see issues, especially where serious crimes or claims are concerned, resolved without a hearing on the merits or some agreement being struck by the parties. It is always unsatisfactory for contests to be concluded without a trial of the real issues or an agreement being reached. But a trial of the issues must be fair to both sides. 43. In this case, while I am troubled by the possibility of injustice being done to Mr Bui in allowing the default judgment to stand, it seems to me that there is nothing the Court could do to rectify the obvious prejudice to the judgment creditor if the judgment were set aside. Any trial ordered now could only be unfair and therefore oppressive to the plaintiff. Orders 44. The motion is dismissed. 45. The applicant is to pay the respondent's costs of the motion in a sum agreed or assessed. Hugh Dillon Magistrate DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated.