Supreme Court New South Wales Medium Neutral Citation: 1st Fleet v Dirk Campbell Inglis [2011] NSWSC 949 Hearing dates: 15/08/2011 Decision date: 15 August 2011 Jurisdiction: Equity Division - Commercial List Before: McDougall J Decision: Application to set aside default judgment dismissed with costs. Catchwords: PRACTICE - summary disposal - application to set aside default judgment - whether defendant had a good defence on the merits - application dismissed. Cases Cited: Commonwealth Bank of Australia v Humphries [2010] NSWSC 581 Category: Procedural and other rulings Parties: 1st Fleet Pty Limited ABN 44 003 475 214 (Plaintiff) Dirk Campbell Inglis (Defendant) Representation: Counsel: J Darams (Plaintiff) D Ash (Defendant) Solicitors: Clayton Utz (Plaintiff) Etheringtons (Defendant) File Number(s): 2010/315108 Judgment (ex tempore) 1HIS HONOUR: On 3 December 2010, the plaintiff recovered judgment against the defendant in an amount in excess of $1,044,000. That judgment was given by reason of the defendant's default in entering an appearance. I am concerned today with the defendant's notice of motion filed on 31 May 2011 to set aside that judgment. 2The background to the dispute is that the defendant was a director of a company call Australian Contract Distribution Services Pty Ltd, sometimes referred to in the evidence as ACDS, and at other times referred to in the evidence, by reference to its trading name, as ABBX. That company is now in liquidation. 3Before it was wound up, ACDS, provided freight transport services to its customers. It did not itself deliver the freight. Instead, it collected the freight from customers, brought it to a distribution centre and had it on-carried by a sub-contractor. To the extent that the operation was profitable, the profit was derived from the margin between the price ACDS charged to its customers and the price that it paid to its sub-contractors. 4In late 2009, ACDS, through the defendant, opened discussions with the plaintiff. The plaintiff offered, on the evidence of the defendant, to provide "a national one stop shop". The discussions progressed to the point where, on 12 March 2010, ACDS made application to the plaintiff for an account, and the defendant gave his written guarantee to the plaintiff of the obligations of ACDS to the plaintiff in respect of that account. 5In essence, the contractual relationship between the plaintiff and ACDS was that ACDS would give all its transport work to the plaintiff, and the plaintiff would receive an agreed percentage split of the revenue that ACDS charged to its customers. The amount of that split varied, as the defendant now accepts. There was also discussion of trading terms, and it was agreed (as the account application form specifies) that ACDS would pay the plaintiff within 45 days of invoice. On the plaintiff's case, that was no more than a temporary arrangement, and it was intended (the plaintiff says, agreed) that the terms would drop to 30 days after an initial period. There is support for the plaintiff's case on this in a series of emails that passed between the parties in the months following 12 March 2010. 6Ultimately, ACDS did not meet its payment obligations to the plaintiff and, as I have said, ACDS has been put into liquidation. The plaintiff sues the defendant pursuant to his guarantee. 7It was common ground that, on an application to set aside a default judgment, the applicant (the judgment debtor) must provide some explanation for the failure to appear or to put on a defence, where relevant some explanation of the delay in moving to set aside the judgment, and in any event evidence that there is a good defence on the merits. In this context, the expression "good defence" does not mean that the applicant must show that he is likely to succeed; it means no more than that there is evidence of facts which, if accepted at a final hearing, would entitle the applicant to succeed. 8There is some debate as to the significance of the explanation for delay. I do not think that it is necessary to descend to the detail of that debate. I accept that the court's objective is to balance the competing interests of the parties and, in the light of that exercise, to determine whether the interests of justice require that the defendant should be let in to defend. See Commonwealth Bank of Australia v Humphries [2010] NSWSC 581 at [3]. 9To my mind, the fundamental point is that there is a good defence on the merits, in the sense that I have tried to explain that term. If a good defence is shown, then it may be that questions of default and delay are of secondary importance, unless they are so gross as, absent explanation, to dictate that the interests of justice require, purely by reason of that hypothetical default and delay, that the application should be refused. This might be the case if, for example, there had been some fundamental change in the position of the respondent to the application, or some other supervening event which rendered the impact of delay significantly and perhaps irreversibly onerous from the point of view of the respondent. 10In the present case, and without wishing to be unkind, the best that can be said for the explanation of default and delay is that it is thin. It is to be found entirely in paragraphs 36 to 38 of the defendant's primary affidavit. Those paragraphs read: 36. A the time that this proceeding was commenced I was under stress because of and regarding the liquidation of ACDS and I did not appreciate that I had a defence to the claim made against me by 1 st Fleet, for which reason I did not retain solicitors to act for me in the proceeding or file a response. 37. 1 st Fleet has commenced proceeding no. SYG 833/2011 in the Federal Magistrates Court of Australia, whereby it seeks a sequestration order against my estate. I have now retained solicitors to represent me, in both that proceeding and in this proceeding, and I am now aware that I can apply to have the judgment against me aside. 38. Regarding the Judgment, neither I nor any person on my behalf or representing me was present at the hearing before this Court at which the Judgment was given. 11The nature of the unparticularised stress is not explained; and the proposition that the defendant was suffering stress is not supported by any corroborative (medical or other) evidence. 12Likewise, the proposition that the defendant did not appreciate that he had some defence seems to me to be scarcely consistent with his account of the events leading up to the making of the contract between the plaintiff and ACDS, on which reliance is placed to suggest that there is some defence. In truth, I suspect, the explanation is that it was not until the seriousness of the matter was brought home to the defendant, by the proceedings in the Federal Magistrates Court to which reference is made in paragraph 37 of his affidavit, that he troubled himself to seek to dispute the plaintiff's claim. 13In this context, it may be noted that the uncontested evidence for the plaintiff shows that the matter was before the court on two occasions (22 October and 12 November 2010) before (on 3 December 2010) summary judgment was entered. It is common ground that, after each of the first two occasions, the plaintiff's solicitors notified the defendant of the adjourned date. The plaintiff's affidavit evidence includes proof of delivery of the letters in question. 14The suggested defence on the merits is said to arise out of the negotiations leading up to the making of the contract. The defendant says that, in the course of those negotiations, the plaintiff made a number of representations. Those representations were summarised in paragraph 17 of the defendant's principal affidavit: 17. By reason of the statements made to me by representatives of 1 st Fleet, my provision of data to 1 st Fleet to enable it to assess a commercial arrangement between ACDS and 1 st Fleet, 1 st Fleet's acceptance of the rebate figure of 79% and the circumstances of the matter, it was expressly and/or impliedly represented to me that: (a) 1 st Fleet had analysed all of the information that I had provided to 1 st Fleet; (b) the rebate of 79% was a commercially acceptable figure for 1 st Fleet; (c) the rebate figure would be 79% and 1 st Fleet accepted the rebate percentage of 79%; (d) 1 st Fleet would not demand or require an increase in the percentage rebate payable to it a month or so after 1 st Fleet began providing services to ACDS; (e) 1 st Fleet would not demand or require an increase from 79% to 89% in the rebate percentage payable to it a month or so after 1 st Fleet began providing services to ACDS; (f) 1 st Fleet would not demand or require a change in the trading terms between ACDS and First Fleet from 45 days to 30 days a month or so after 1 st Fleet began providing services to ACDS; and (g) 1 st Fleet had the capacity and the ability to perform the transport services and all aspects thereof, including the provision of proof of deliveries of freight (being the proof of delivery of freight that would be signed by the recipient of such freight) ( "PODs" ) in respect of freight which 1 st Fleet delivered for ACDS. 15One of the difficulties with paragraph 17 (which was admitted on a limited basis, and not as proof of the facts asserted in it) is that many of the representations are simply not supported by such probative material as there is in the preceding paragraphs of the affidavit. In this context, the representations alleged in paragraphs (a), (d), (e), (f) and (g) find no support. Further, the representations alleged in paragraphs (b), (c) and (e) are inconsistent with email exchanges that took place between the plaintiff's representatives and the defendant around and shortly after the time the contract was made. I accept that the defendant did not have those emails available to him when he swore his principal affidavit, but nonetheless the fact is that, when examined, those emails are not consistent with the sub-paragraphs to which I have referred. 16For example, it is now I think accepted that the rate initially agreed was not 79 per cent but a different rate; and it is also accepted (and if it were not accepted, I would find on the basis of the emails) that the 45-day trading terms were agreed to change from that period to 30 days after the relationship between the parties had stabilised. 17One of the suggested defences is that the defendant was induced, by the representations summarised in paragraph 17 of his affidavit, to cause ACDS to enter into the contract with the plaintiff and to give his own guarantee. There is no evidence of that, partly because there is no evidence that all of the representations were made, partly because it is clear that at least some of them were not made, and partly because the evidence of reliance is at best sketchy in the extreme. 18If that were the only suggested defence, I would treat it as, ultimately, it was treated in submissions: by leaving it to one side. 19Reliance was placed on the representations alleged in paragraph 17(g) of the defendant's principal affidavit. Mr Ash of counsel, who appeared for the defendant, accepted that there was no evidence of a representation, let alone warranty, in those terms. That would appear to provide some substantial obstacle to the defendant's prospects of success in this application. Mr Ash sought to counter that by referring to the generality of statements in the earlier paragraphs relating to the ability of the plaintiff to offer technological support for the delivery requirements of ACDS and its customers. He submitted that, proof of delivery being a self-evidently important matter, some term to the effect of the representation alleged in paragraph 17(g) could be implied. I do not agree. For the term to be implied, where the parties had on the face of things reduced their agreement to writing, it will be necessary to show that it met the "business efficacy" test. Without knowing a lot more than one knows about the operations of the plaintiff and ACDS (and it is the defendant's obligation to put that material before the court, in support of his contention that he has a good defence on the merits), the factual basis for such an implication is simply lacking. 20The other suggested defence arises in substance out of the PODs referred to in paragraph 17(g). There was some sketchy evidence that, because of the failure (or alleged failure) of the plaintiff to provide these, ACDS had lost custom. It was submitted that in those circumstances ACDS would have had a set-off to any claim brought against it by plaintiff, and that the defendant, as guarantor, could rely on that. 21The difficulty with this is, as I have indicated, that there is no evidence that anything as to PODs formed a term of the contract. Thus, at the level of fact, the essential prerequisite for the set-off is not made good. In those circumstances, it is unnecessary to consider whether, in any event, the exclusion of liability in clause 3(a) of the plaintiff's conditions of carriage would have any material impact on the alleged set-off. 22For the same reasons, if it is asserted that the representation in question was something that induced the making of the contract, the claim fails because there is no evidence that the representation was made. It is accordingly unnecessary to consider whether, if made, it was misleading or deceptive when made. 23For those reasons, I conclude that the defendant has not shown a good defence on the merits. It is therefore unnecessary to return to the question of the adequacy of the defendant's explanation for his default and delay. 24I order that the notice of motion filed on 31 May 2011 be dismissed with costs. ********** 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. Decision last updated: 25 August 2011