New South Wales Supreme Court CITATION : DELUXE CHEMICALS PTY LTD v EDWARD RUSHTON PTY LTD [2002] NSWSC 635 CURRENT JURISDICTION: Common Law FILE NUMBER(S) : SC 13901 OF 2001 HEARING DATE(S) : 11 March 2002 JUDGMENT DATE : 23 July 2002 DELUXE CHEMICALS PTY LTD (Plaintiff) v PARTIES : EDWARD RUSHTON PTY LTD (Defendant ) JUDGMENT OF : Levine J LOWER COURT Local Court JURISDICTION : LOWER COURT 336/98 FILE NUMBER(S) : LOWER COURT Magistrate B.A Lulham JUDICIAL OFFICER : T Faulkner (Applicant) COUNSEL : R Perry (Respondent) MBP Legal (Applicant) SOLICITORS : Frank M Deane & Co (Respondent) CATCHWORDS : Appeal from Local Court - findings of fact by Magistrate not disputed - proper principles for exercise of discretion - settting aside default judgment - no error of law Justices Act 1902 LEGISLATION CITED : Local Court (Civil Claims) Act 1970 Local Court (Civil Claims) Rules 1988 Adams v Kennick Trading (International) Ltd (1986) 4 NSWR 503 Carr v Neill [1999] NSWSC 1263 CASES CITED : House v The King (1936) 55 CLR 599 Pace v Read [2000] NSWSC 823 State of Queensland v JL Holdings Pty Ltd (1997) 189 CLR 146 DECISION : Summons dismissed with costs - 12 - IN THE SUPREME COURT OF NEW SOUTH WALES COMMON LAW DIVISION JUSTICE DAVID LEVINE 23 JULY 2002 13901 OF 2001 DELUXE CHEMICALS PTY LTD (Plaintiff) v EDWARD RUSHTON PTY LTD (Defendant ) JUDGMENT (Appeal from Local Court - findings of fact by Magistrate not disputed - proper principles for exercise of discretion - settting aside default judgment - no error of law) 1 The plaintiff (Deluxe) is the defendant in Local Court proceedings brought by the defendant (Rushton). On 14 September 2001 proceedings were heard by Magistrate Dillon in the absence of any appearance by Deluxe. The learned Magistrate ordered judgment in the sum of $13,455.00 in favour of Rushton, plus costs. 2 On 8 November 2001 Deluxe applied to the Local Court to have the judgment set aside pursuant to Part 21 rule 2(2) of the Local Court (Civil Claims) Rules. Magistrate Lulham dismissed Deluxe's application delivering written reasons for judgment on 6 December 2001. It is from the decision of Magistrate Lulham that Deluxe now appeals to this Court. 3 By summons filed on 20 December 2001 Deluxe claims an order that the judgment of Magistrate Lulham of 6 December be set aside and consequential orders. 4 In support of the summons for relief from this Court two affidavits by Christine Louise Perry, sworn 5 March and 7 March 2002, were read. Annexed or exhibited to these affidavits is material relevant to both the summons and that which was in existence as evidence and otherwise before the learned Magistrate. 5 The appeal to this Court is bought pursuant to s69 of the Local Court (Civil Claims) Act 1970 which states: "(1) Subject to subsection (2), all judgments and orders of a court exercising jurisdiction under this Act shall be final and conclusive. (2) A party to proceedings under this Act who is dissatisfied with the judgment or order of the court as being erroneous in point of law, may appeal to the Supreme Court therefrom. (2A) … (3) The provisions of Part 5 of the Justices Act 1902, apply, to the extent to which they are applicable, to appeals under subsection (2) in the same way as they apply to appeals to the Supreme Court under those provisions". 6 Such an appeal is confined in a very strict way to an error of law: see Carr v Neill [1999] NSWSC 1263, 17 December 1999, Sully J at paragraphs 13 and 22; see also Pace v Read [2000] NSWSC 823, 18 August 2000, O'Keefe J at paragraph 40. 7 The order appealed from was made pursuant to Part 21 rule 2(2) of the Local Court (Civil Claims) Rules which states: "Where the court proceeds to the hearing of the action on the part of the plaintiff only, as referred to in subrule (1) (b), or gives judgment as referred to in subrule (1) (c), its judgment: (a) may, on sufficient cause being shown, be set aside by order of the court on terms, and (b) shall, if not set aside, be as final and conclusive between the parties to the action as if both parties had appeared". 8 It was not in dispute in the hearing before me that the jurisdiction to set aside is in the Court's discretion which must be exercised judicially: Adams v Kennick Trading (International) Ltd (1986) 4 NSWR 503 at 506 per Hope JA and 510 per Mahoney JA. The relevant matters in all the circumstances are whether there exists a bona fide defence and whether there has been provided to the Court an adequate explanation for the failure to defend (Adams at 506 per Hope JA). 9 The exercise of a discretion judicially must be in accordance with the principles enunciated by the High Court in House v The King (1936) 55 CLR 599 at 505 per Dixon, Evatt ad McTiernan JJ. Deluxe contends that the relevant principles are that the Judicial Officer must not allow extraneous or irrelevant matters to guide him and must not fail to take into account some material consideration. 10 The appellant, Deluxe, acknowledges that the learned Magistrate identified the correct legal principles at pages 10 –11 of his judgment, being exhibit CLP 3 to the first affidavit of Ms Perry. What is contended is that the learned Magistrate misapplied those principles. 11 The proceedings in the Local Court were commenced by a Statement of Liquidated Claim (exhibit CLP 8) by which, shortly stated, Rushton sought payment for fees charged by it for insurance claim preparation services performed by the defendant. The grounds of defence (exhibit CLP 9) appear to state a defence founded in the notion of total failure of consideration. As I understand it from exhibit CLP 10 a cross-claim in response to the action commenced by Rushton was filed. The learned Magistrate, inter alia, on the application to set aside the default judgment, was provided with detailed chronologies of the litigation in the Local Court. His Worship summarised those chronologies for the purposes of his judgment as follows: "20 November 1998 Hearing of Notice of Motion filed by defendant. No appearance of defendant. Defence struck out. 17 December 1998 Judgment in default entered in favour of plaintiff. 26 February 1999 Judgment set aside by consent. 15 December 1999 Matter set down for hearing 29 March 2000. 10 March 2000 Hearing date of 29 March 2000 vacated. Defendant to pay plaintiff's costs. 7 June 2000 Matter fixed for hearing 20 November 2000. 15 November 2000 Notice of Motion by defendant hearing dated of [sic] 20 November 2000 vacated. Matter set down for hearing 4 June 2001. 15 March 2001 Hearing date of 4 June vacated. 9 April 2001 Matter set down for hearing on 14 September 2001. 16 August 2001 Notice of Motion by defendant to vacate hearing date of 14 September 2001 heard. Application dismissed. Matter to proceed on 14 September 2001. 14 September 2001 Hearing date. No appearance on the part of defendant. The matter proceeded before Magistrate Dillon and the Court file bears the following notes; · Tendered invoices attached to Statement of Claim · Statement of plaintiff · Peter Regan gave evidence of non-payment · Verdict for plaintiff · Judgment accordingly Judgment was entered for $13,455 plus interest to be calculated by the Registrar. Costs were assessed at $25,000. I note from a reading of the file and the plaintiff's and defendants [sic] chronology that on at least seven separate occasions a costs order in relation to an application before the Court was made in favour of the plaintiff. Prior to the matter being first set down for hearing, the matter was in for callover an extraordinary number of times as follows: 19 October 1998 31 March 1999 12 May 1999 7 July 1999 1 September 1999 1 October 1999 24 November 1999 15 December 1999 In relation to each of the following hearing dates an application for the vacation of the hearing dates was made by the defendant and was successful; 29 March 2000 20 November 2000 4 June 2001" 12 At page 11 his Worship acknowledged that the existence of a defence on the merits was not argued. 13 His Worship was conscious of subjective matters relied upon by the directors of Deluxe as evoking "enormous sympathy and compassion". His Worship found the matter "as difficult and worrying as any [he had] had to decide" (page 2). That subjective matter was described by his Worship as follows: "The tragic event which has so devastated the lives of Mr & Mrs Chaina-Azar was the death of their son Nathan who died on a hike trip conducted by The Scots College on 24 November 1999 at Urunga Creek, Kangaroo Valley. At the time of his death Nathan was acting as a chaperon for his younger brother Matthew on a father/son hike. At the time Nathan was fifteen years of age. He was the second of the three sons of Mr & Mrs Chaina-Azar. Nathan was acting as chaperon because his father was unable to attend because of business commitments". 14 His Worship had before him an affidavit sworn 11 October 2001 of Rita Chaina-Azar (exhibit CLP 6 to the affidavit of Ms Perry sworn 5 March 2002). That affidavit sets out matters going to the subjective features to which I have referred. Annexed to the affidavit of Mrs Chaina-Azar are the written submissions for the Coroner prepared by senior counsel and dated 11 September 2001. There is a letter from Mr and Mrs Chaina-Azar to the Coroner dated 18 September 2001. The affidavit itself deals with legal representation and changes thereto in relation to the proceedings in the Local Court and as they existed for the purposes of the Coronial inquest. The affidavit also deposes as to what is describes as psychological and physical harm arising from the tragic events as they affected Mr and Mrs Chaina-Azar. Exhibit L to that affidavit is a brief report of Dr Chris Wever, Child and Family Psychiatrist. That report is dated 7 September 2001 and relates to the history of consultation between Mr and Mrs Chaina-Azar and Dr Wever. In it is stated a view that the doctor's patients would be unable to attend court on Friday 14 December by reason of the then existing extremely stressful time for both of them. 15 For Deluxe it was contended that the learned Magistrate found that the evidence and presence of Mr and Mrs Chaina-Azar at the hearing of the Local Court proceedings was vital to their case and would otherwise cause prejudice to the defendant's claim. By reference to page 5 of his Worship's judgment this cannot be constituted as a finding as there his Worship is merely setting out the contents of an affidavit sworn in support of a motion to vacate the hearing of 14 September. His Worship did find (judgment page 17) that the medical evidence tendered on behalf of the directors of Deluxe was very powerful. He took into account the dramatic and powerful evidence contained in Mrs Chaina-Azar's affidavit and the nature and extent of the tragedy that had befallen Mr and Mrs Chaina-Azar. His Worship in fact reviewed in detail (see pages 7 and 12 of his judgment) the medical evidence that had been placed before him. He acknowledged that the directors of the defendant were intimately concerned with the Coronial inquest, briefing senior counsel to represent the family and had incurred massive costs in that regard. The hearing of the inquest took place between May and June 2001 over a period of 4 weeks, continued from 3 to 7 September 2001 and then was adjourned for the parties to make oral submissions from 17 December 2001 (see his Worship's judgment at pages 20 to 21). It is to be borne in mind that the relevant hearing at which there was no appearance for Deluxe took place on 14 September 2001. His Worship acknowledged that a short time before 6 September 2001 the inquest was particularly disturbing and that on 6 September 2001 Deluxe's solicitors ceased to act. His Worship identified that an inference was clearly open that the reason for the solicitor ceasing to act was because of the difficulties in his obtaining instructions from the directors of the company. Equally, his Worship found that it may well be that it was their actions or lack of action which caused the solicitor so to act. His Worship went on to find that the directors could not rely heavily upon that situation "as a changed circumstance said to be of considerable weight" when considering the question of sufficient cause when the solicitor's actions may well have been caused by action or inaction on the part of the directors themselves (judgment, page 19). 16 Further, his Worship (page 21 of his judgment) notes that Rita Chaina-Azar did not say in her affidavit that the defendant was ignorant of the matter being listed on 14 September 2001. The deponent merely stated that by reason of the fact that she was "in the midst of the hearing of the inquest" she was not in the position to identify and instruct another solicitor to act. His Worship then makes the critical statement: "It was a deliberate decision of the directors not to appear on 14 September 2001". 17 I add that at page 19 of his Worship's judgment he had expressed his conclusion that he was "not satisfied that there was such deterioration, or if it was, that it was as severe as the doctor or Rita and George Chaina-Azar would ask me to believe" – that is, deterioration in their psychological and medical condition. 18 Deluxe proceeded to submit before me that it did not appear at the Local Court on 14 September 2001 because the directors were dramatically and powerfully affected by the September hearings of the Coronial inquest. That is not a finding that the Magistrate made. 19 The learned Magistrate in fact found (page 19) after the reference to "deterioration" set out above, that "They were able to attend the Coronial inquiry from 3 September to 7 September…They were well enough on 18 September to prepare their own submissions to the Coroner". (In fact, his Worship attaches a copy of the submissions to his judgment). 20 His Worship went on to find, in relation to correspondence placed before him, that it indicated "that during the period 16 August to 14 September the directors of the defendant company were involved in negotiations in relation to the settlement of the matter and able to give considered instructions in relation thereto". 21 In the proceedings before me none of the findings of fact of the Magistrate was challenged. 22 Deluxe, in its submissions before me, then pointed to what are described as "countervailing" considerations taken into account by the learned Magistrate namely its conduct prior to 14 September 2001, the interests of justice and prejudice to the plaintiff, Rushton. 23 As to Deluxe's conduct, his Worship (at pages 17-18) took into account the history of the proceedings prior to 16 August 2001. The plaintiff's claim was for work done in 1993 and 1994, the proceedings were instituted therefor on 15 January 1996. It was his Worship's view that the plaintiff (Rushton) was entitled to expect that its claim would be heard by the Court within a reasonable period of time. The plaintiff was entitled to expect and the Court must take into account, his Worship remarked, its expectations and interests when considering applications for adjournment and sitting timetables for the hearing of the case. His Worship noted that three separate dates prior to the hearing date of 14 September had been fixed and had been vacated on the defendant's application. On each of those occasions the basis for the adjournment concerned the death of the son and the inquest. His Worship reviewed various aspects of the conduct of the litigation in the Local Court including seven orders for costs made against Deluxe with which there had been no compliance. His Worship also found that prior to 16 August 2001 the court had given full weight to the problems facing the directors of Deluxe. His Worship noted that his Court had taken into account the history of the matter in refusing to vacate the hearing of 14 September 2001 and that that date had been fixed on 9 April 2001, thus providing Deluxe with ample notice for the hearing and "importantly" that date was fixed prior to the fixing of the final dates for the hearing of the inquest. 24 As to the interests of justice, his Worship did state (page 23): "There is public interest in the principle that there should be some security and permanency in so far as Court judgments are concerned". It was submitted that such a matter is not a consideration which may be taken into account when considering whether "sufficient cause" has been shown under Part 21 rule 2(2) of the Local Court (Civil Claims) Rules. It is submitted that the Rule itself evidences Parliament's intention with respect to finality and conclusiveness of judgments. The provision is made that a judgment is only to be taken to be final and conclusive "if not set aside" "on sufficient cause being shown": Part 21 rule 2 (2)(b). Thus, the submission was made, that the correct approach is to consider whether there is sufficient cause, not whether the judgment ought to be final and conclusive. 25 Further, the learned Magistrate, it was submitted, had no regard for another interest of justice namely that there was an arguable defence (it was not in issue) and that the defendant should have been permitted to argue it, reliance being placed on the decision of the High Court in State of Queensland v JL Holdings Pty Ltd (1997) 189 CLR 146 at 154-155 per Dawson, Gaudron and McHugh JJ. 26 Thus the error of law is identified, it was submitted for Deluxe, that by considering an interest of justice contrary to Parliamentary intention and failing to consider an applicable interest of justice (JL Holdings) the exercise of the discretion was miscarried. 27 The learned Magistrate dealt with the prejudice to the plaintiff (pages 21-22 of his judgment). His Worship concluded that it would be "unconscionable" if the judgment was set aside for the plaintiff to be faced with what he described as "further Notices of Motion or requests for documents now some eight years after the work which it did for the defendant was completed". He found that it was "extraordinary that the defendant would as part of its application for this judgment to be set aside be setting out further interlocutory proceedings which it would plan to bring if the application is successful". This finding was based upon the affidavit of Rita Chaina-Azar sworn 11 October 2001 before his Worship in which the deponent stated that she would be in a position to deal with litigation including the provision of all relevant documents for discovery (a process explained to her by her solicitor) and the provision of an affidavit of the facts on which she relied in the proceedings. That last mentioned affidavit had been required to be served by 24 November 1999 and his Worship found that a witness statement of George Chaina-Azar was in fact filed on 29 January 2001. This provides a factual context for his Worship's observation as to conduct and prejudice. Contrary to the submission for Deluxe before me there was evidence before the Magistrate of further interlocutory proceedings as I have set out above. I do not find it to have been a irrelevant matter for his Worship's consideration. 28 His Worship held that he was not satisfied that interests of the plaintiff (Rushton) could sufficiently be met by orders for costs and security. In fact, Rushton did not submit that it would suffer any prejudice incapable of being cured by an order for costs. The transcript of proceedings (page 13) indicated that counsel for Rushton had made submissions to the learned Magistrate about the costs order that ought to be made to insulate the plaintiff from prejudice from a judgment to set aside. What counsel was seeking was that security be provided for the amount of the claim itself ($13,000) particularly in the light of costs thrown away in the context of witnesses having to come from New Zealand. 29 Thus it is submitted, there not being in issue that there was a defence on the merits, prejudice should have properly been excluded thus leaving the only countervailing consideration being the prior conduct of Deluxe. It was argued that the only question then is whether the Deluxe ought to be deprived of having the judgment set aside, as it would otherwise be entitled to, when there was no prejudice to Rushton because of the Deluxe's prior conduct in the case. In the circumstances of the extremely difficult subjective matters encountered by the directors of Deluxe, the discretion ought to have been exercised by letting them in to defend. 30 I am not persuaded by the submissions for Deluxe. The critical finding by the Magistrate, having reviewed carefully the material before him, was that the decision of the directors of Deluxe not to appear on 14 September 2001 was deliberate. That gains a special significance in the context of other matters in relation to the real focus of his Worship's consideration of the state of health of Deluxe's directors in respect to which he made the finding that I have set out above. 31 The decision of the High Court in JL Holdings in my respectful view is not in point, the more so by reason of the unchallenged finding of fact by his Worship as to the reason for non-appearance by Deluxe's directors. I note that no submission was in fact made to the learned Magistrate in relation to JL Holdings. 32 Further, I am of the view that it was open to the learned Magistrate to make the finding that there was prejudice not capable of being compensated by an order for costs (even in the circumstances when no express submission was made to him to that effect). 33 Part 21 rule 2(2) does not in my view preclude the Magistrate from considering the interests of justice and achieving finality of proceedings. The question is not "begged", as the submissions for Deluxe would seem to indicate, by a Magistrate taking into account the interests of justice on the question of sufficient cause being shown and a finding that it is not shown and thus bringing about the finality and conclusiveness of the order under consideration. 34 Thus I am of the view that no error of law was made by his Worship. I must agree with his Worship that the subjective circumstances with which he was confronted were tragic and added difficulty to the disposition of the application with which he was concerned. 35 Additionally, I find that there were sufficient grounds for the learned Magistrate to come to the conclusion, which he did, bearing in mind the provision of s110 of the Justices Act (see Pace v Read, supra, paragraph 33). 36 I dismiss the plaintiff's summons and order the plaintiff, Deluxe, to pay the defendant, Rushton's, costs. ********** Last Modified: 07/25/2002 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. 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