Supreme Court New South Wales Medium Neutral Citation: Sargeant v HE & FG Campbell Agricultural Machinery Repairs [2016] NSWSC 544 Hearing dates: 28 April 2016 Decision date: 02 May 2016 Jurisdiction: Common Law Before: Adamson J Decision: See paragraph 77 Catchwords: PRACTICE AND PROCEDURE – appeal from interlocutory decision of Local Court refusing to set aside default judgment – defendant in Local Court gave explanation for failure to file defence and asserted a bona fide defence in sworn affidavit – Magistrate disregard of sworn evidence caused discretion to miscarry – default judgment set aside PRACTICE AND PROCEDURE – plaintiff named in statement of claim unregistered business name – lack of legal personality of plaintiff constitutes "substantial irregularity" – judgment given irregularly Legislation Cited: Civil Procedure Act 2005 (NSW), ss 56, 57, 58, 59, 100 Interpretation Act 1987 (NSW), ss 21, 80 Local Court Act 2007 (NSW), ss 40, 41 Uniform Civil Procedure Rules 2005 (NSW), rr 7.1, 7.19, 7.20, 7.21, 7.22, 14.7, 14.12, 35.1, 36.15, 36.16 Suitors' Fund Act 1951 (NSW), s 6 Supreme Court Act 1970 (NSW), s 75A Cases Cited: Arnold v Forsythe [2012] NSWCA 18 B & L Linings Pty Ltd v Chief Commissioner of State Revenue [2008] NSWCA 187; 74 NSWLR 481 Carr v Finance Corporation of Australia Ltd (No. 1) (1981) 147 CLR 246 Dai v Zhu [2013] NSWCA 412 Dunwoodie v Teachers Mutual Bank Ltd [2014] NSWCA 24 Fenato v Chief Commissioner of State Revenue [2010] NSWCA 80; 78 NSWLR 20 Hassoun v Wesfarmers General insurance Ltd t/as Lumley General [2016] NSWCA 76 House v The King (1936) 55 CLR 499 Magnate Projects Pty Ltd v Youma Constructions (No 2) Pty Ltd [2005] NSWCA 331 Mamo v Surace [2014] NSWCA 58; 86 NSWLR 275 Michail v Mount Druitt and Area Community Legal Centre Inc [2015] NSWCA 396 Owners Strata Plan 4003 v Mustafa [2012] NSWSC 780 Perpetual Trustees Australia Ltd v Heperu Pty Ltd (No. 2) [2009] NSWCA 387; 78 NSWLR 190 Thaina Town (on Goulburn) Pty Ltd v City of Sydney Council [2007] NSWCA 300; 71 NSWLR 230 Category: Principal judgment Parties: Raymond Paul Sargeant (Plaintiff) HE & FG Campbell Agricultural Machinery Repairs (1st Defendant) Hugh Edwin Campbell (2nd Defendant) Fiona Gay Campbell (3rd Defendant) Representation: Counsel: T O'Brien (Plaintiff) P Reynolds (Defendants) Solicitors: APJ Law (Plaintiff) Clifton Legal (Defendants) File Number(s): 2015/328909 Decision under appeal Court or tribunal: Local Court of New South Wales Jurisdiction: General Division Date of Decision: 14 October 2015 Before: Stafford LCM File Number(s): 2014/357537 Judgment Introduction 1. By summons filed on 9 November 2015, Raymond Sargeant, the plaintiff, applies for leave to appeal against the decision of Stafford LCM in the Local Court at Tenterfield to dismiss his application to set aside a default judgment entered against him in the amount of $68,412.08 in favour of HE & FE Campbell Agricultural Machinery Repairs, the first defendant (the business name). 2. Hugh Campbell, the second defendant, and Fiona Campbell, the third defendant, are parties to the proceedings in this Court although they were not parties to the proceedings in the Local Court. 3. To avoid confusion, I propose to refer to parties by name rather than describing them as plaintiff or defendant since the plaintiff in the Local Court was the first defendant in this Court and the defendant in the Local Court was the plaintiff in this Court. 4. The order dismissing Mr Sargeant's application to set aside the default judgment is interlocutory: Carr v Finance Corporation of Australia Ltd (No. 1) (1981) 147 CLR 246, at 248 per Gibbs CJ and 256-257 per Mason J. This Court's jurisdiction derives from s 40 of the Local Court Act which provides that a party to proceedings in the Local Court who is dissatisfied with an interlocutory order of the Local Court may, with leave, appeal to this Court. 5. The grounds of challenge set out in the summons are: "1 That failure of the learned Magistrate to allow the plaintiff to file material in support of his notice of motion was an error of law in that: a) it was a denial of procedural fairness; b) it was contrary to section 56(2) of the Civil Procedure Act 2005 (CPA); c) it was contrary to section 57(1)(a) & 57(1)(b) of the CPA; and d) it was contrary to section 58(1) of the CPA. 2. The learned Magistrate erred, as a matter of law in failing to give directions pursuant to section 61(1) of the CPA, for a timetable for the service of evidence in support of, and opposition to, the notice of motion, and for the hearing of the motion. 3. The learned Magistrate erred, as a matter of law, in failing to set aside the default judgment made on the 12 February 2015 pursuant to rules 36.15 and 36.16 of the Uniform Civil Procedure Rules 2005 as: a) the default judgment was entered irregularly or illegally in that the Statement of Claim did not disclose the proper plaintiff; b) the default judgment was entered irregularly or illegally in that the Statement of Claim did not disclose a proper cause of action; c) the plaintiff had, at all relevant times, a bona fide defence to the Statement of Claim; and d) the plaintiff had attempted to explain his default in failing to file a defence in time." Facts 1. It is necessary to set out such facts as were established by the evidence in the Local Court. The statement of claim 1. On 22 December 2014, HE & FE Campbell Agricultural Machinery Repairs commenced proceedings against Mr Sargeant in the Local Court at Tenterfield by filing a statement of claim. The amount claimed was in the order of $65,000. Additional amounts were claimed for interest and costs. 2. The pleading began with the words, "The plaintiff relies on the following facts and assertions." There followed a table with three columns listing the date of invoice, invoice number and invoice amount. Eight invoices were listed; the largest of these, A5256, was alleged to be dated 2 May 2014 and was in the sum of $53,773.50. Accordingly, the lion's share of the amount outstanding was attributable to this invoice. 3. There followed an allegation, "The defendant has paid $6,150.00 to date", after which there was a table which set out the calculations of interest under s 100 of the Civil Procedure Act 2005 (NSW). 4. Mr Sargeant admitted in his affidavit in support of the application to set aside default judgment that he was served with the statement of claim and that he did not file a defence within the time provided for by the Uniform Civil Procedure Rules 2005 (NSW) (UCPR) or at all. He also admitted that he had seen a solicitor to obtain legal advice after he received the statement of claim. The solicitor had told him to obtain particulars as to his defence and provide them to the solicitor. He had failed to do so. Mr Sargeant expected that he would be notified of a court date and did not appreciate that he had to put on a defence or risk default judgment. It was not suggested that HE & FE Campbell Agricultural Machinery Repairs had engendered this expectation. The notice of motion for default judgment 1. In February 2015 HE & FE Campbell Agricultural Machinery Repairs filed a notice of motion for default judgment. It served the motion on Mr Sargeant, who admitted that he received it. Mr Sargeant did nothing to oppose the motion, which was dealt with in chambers without a hearing by the Registrar. The affidavit in support of the motion for default judgment 1. The affidavit in support of the motion for default judgment was sworn by Fiona Campbell on 10 February 2015. The deponent described her occupation as "business partner". She deposed: I am a director partner of HE & FE Campbell Agricultural Machinery Repairs and am authorised to verify this affidavit on its behalf. The defendant is indebted to the plaintiff in respect of the balance of the cause of action for which this action was commenced in the amount of $65,135.34 together with interest on the principal sum from the date of the cause of action to today's date at 6.5% $2,050.54 calculated as follows:. . . [The alteration from "director" to "partner" in [1] was made by hand and initialled by the deponent] 1. A table setting out the calculation of interest was included, as were amounts for costs and service. 2. The Registrar of the Local Court at Tenterfield entered default judgment against Mr Sargeant on 12 February 2015 in the sum of $68,412.08, as claimed. 3. In June 2015 Mr Sargeant received a letter from the Sheriff regarding the execution of a writ issued for the levy of property as a result of the default judgment. Mr Sargeant instructed a solicitor and sought advice on how to set aside the default judgment against him. Mr Sargeant's notice of motion to set aside the default judgment 1. A notice of motion to set aside the default judgment was prepared by Mr Sargeant's solicitor and dated 23 July 2015. It did not specify which part of the UCPR was being relied upon. The relevant rules were UCPR r 36.15 and UCPR r 36.16. 2. It was not filed for some time. It was accepted by Mr Reynolds, who appeared on behalf of HE & FE Campbell Agricultural Machinery Repairs and Mr and Mrs Campbell, that the delay in filing was as a result of difficulties occasioned with the postal service and on-line filing and was not the fault of Mr Sargeant. 3. Mr Sargeant swore an affidavit in support of his notice of motion. The affidavit was not dated. He deposed to the matters set out above, including that: he had been served with the statement of claim; that he believed he would receive a court date; that he did not read the statement of claim properly; and did not appreciate that he was required to put on a defence. He saw a solicitor but did not provide the particulars he was advised to give; he ignored the motion for default judgment; and it was only when he received the letter from the Sheriff that he realised that orders had been made against him personally. After this explanation of what had occurred, he deposed as follows: "8. I apologise to the Court for my oversight in relation to this matter and should have provided my solicitor with my particulars so that I could have obtained the advice. 9. I ask for leave of the Court for the default judgement to be set aside based on the following facts which will be further stipulated in my defence. 10. Firstly, I have been sued personally in the Statement of Claim. My business is operated by a Company, R.P'S Total Assessments and Driver Training Pty Ltd and trading as Tenterfield Parcel Xpress. A copy of the ASIC Current Organisational Extract is annexed hereto and marked with the letter "A" detailing the business company address and full details. 11. I do not believe that I should be individually sued when the business that I operate is run by a Company. I believe that I am not personally liable to be sued on invoices belonging to RP's Total Assessments and Driver Training Pty Limited and Tenterfield Parcel Xpress. 12. I believe that there is a valid defence and possible counterclaim against the Plaintiffs which should be before the Court before a decision is made as follows: (i) The amount of hours claimed by the Plaintiff in Invoice No A5256 either did not occur or alternatively there are other arrangements in place for the time that was spent allegedly delivering by the Plaintiff such as free delivery for the Plaintiff's business; (ii) Parts of the amounts claimed for rent/parts/maintenance throughout Invoices A4890, A4996, A4972, A5071, A5150, A5164, A5190, A5256 are false and inaccurate; (iii) The Plaintiffs were in possession of a fork lift for a period of five years owned by my Company without charge in lieu of work performed by the Plaintiff. 9. I believe that I have a bona fide defence which can be evidenced in a defence filed within 28 days. 10. In addition to the wrong Plaintiff being named and a defence for the amount claimed, there is a conflict of interest in that the Plaintiff's Solicitors Stuart Cook & Braham provided both the Plaintiff and myself with joint legal advice in relation to the opening of a business together, which is part of the defence to this claim which will be evidenced further. I therefore object to that solicitor providing legal advice to the Plaintiff to sue myself or my company as we were a previous client. 11. I believe that there are merits in my case to show that this Honourable Court will not find a prima facie case by the Plaintiff and therefore I request proper adjudication of this matter and time for me to file my defence." 1. Mr O'Brien, who appeared on behalf of Mr Sargeant in this Court, accepted that, although Mr Sargeant used the word "Plaintiff" in paragraph [10] above, he ought be taken to have meant "Defendant". On this basis, Mr O'Brien accepted that the issue regarding the business name's lack of legal personality was not raised before the Magistrate. The hearing of Mr Sargeant's notice of motion 1. Mr Sargeant's notice of motion was ultimately returnable before the Local Court on 14 October 2015 for hearing. Mr Bassett appeared for HE & FE Campbell Agricultural Machinery Repairs; Ms Burnheim appeared for Mr Sargeant. They indicated that the matter was ready for hearing. The matter stood in the list while other matters were dealt with. 2. At the commencement of the hearing, the Magistrate raised with Ms Burnheim the fact that Mr Sargeant's affidavit was not dated and said, "it is not properly sworn if it is not dated". Ms Burnheim apologised and said that it was forwarded to the court on 23 July 2015. Ms Burnheim offered to have Mr Sargeant reswear the affidavit that day, to which her Honour asked (rhetorically) whether it was "a bit late". 3. Ms Burnheim explained the difficulties she had experienced in endeavouring to file the documents (the notice of motion and affidavit). She then said: "Your Honour one of the issues in relation to this is really that in this matter the defendant does have a bona fide defence, we could file that defence today before the end of registry. The defendant can swear to the facts in relation to that and if there is proper adjudication on my client's facts then the application that has been made and the default judgment that has been made will be set aside, so without this proceeding my client would be denied any relief in relation to this, I note that he has taken a considerable amount of time to respond to this and that is acknowledged by my client. For starters the defendant is incorrectly named. My client actually trades in the company name, so to be sued personally in relation to this matter is the wrong defendant." 1. Ms Burnheim continued to try to make submissions. The Magistrate observed that the annexure said to be attached to the affidavit (the ASIC search of Mr Sargeant's company) was missing and that the invoices on which HE & FE Campbell Agricultural Machinery Repairs had sued had not been tendered by Mr Sargeant. Ms Burnheim said: "I know now that I can file those sort of things on line when I'm not able to physically provide them to the Court. Your Honour I believe that once the defence is provided he does have a bona fide defence, he was named as the wrong defendant. The invoice [sic] aren't correct. There was a conflict of interest with the other solicitor that was involved in relation to this-- HER HONOUR: That's not a bona fide defence, I have got – look I am going to make a decision on now, you were first up today, I was told the matter was ready and I'm dealing with it now and there's not going to be any further delays." 1. At this point (although her Honour had interrupted Ms Burnheim mid-sentence) the Magistrate proceeded to give an ex tempore judgment. Her Honour recited the reasons for the delay and continued: "The defendant submits that default judgment should be set aside on the basis of that explanation for the delay and that there is a defence on the merits and there is a possible cross claim." 1. Her Honour then referred to ss 56, 57 and 58 of the Civil Procedure Act 2005 (NSW) and said: "Now default judgment may be set aside under the rules, rule 36.16. Now the principles behind my exercise of discretion are these. I must look at all of the relevant circumstances. I must see whether on the documents that have been filed in support and of the Notice of Motion and of the motion itself, whether there exists a bona fide defence, whether there exists a possible cross-claim, has there been an adequate explanation for the delay and it also says that the defendant must swear to facts which would afford a defence. Now in that undated affidavit Mr Sargeant asserts that the wrong party has been sued. He says that he operates under a company name, as I have said there is no annexure, so there is no ASIC document annexed to the affidavit I have before me. In addition to that he talks about the invoices, there are no invoices attached to any documents I have before me. He talks about the plaintiff's in possession of a forklift in lieu of work performed. There is no documents to substantiate that claim. There is certainly no contract. There is no document at all to show who was the agreement between. Was it the plaintiff and Mr Sargeant as an individual? Or was it the plaintiff and the company as a registered company. As I say there is nothing on the documents I have been given. Ms Burnheim urges that I stand this matter down so she can file an affidavit that is properly sworn and annexe all of these documents that would show a bona fide defence and cross claim. I decline to give this matter any more time. The parties were here first thing in the morning, they asked me to deal with it first. I stood it down to deal with some shorter criminal matters, I then called this matter on and I was told it was ready. It was when I pointed out that the affidavit was improperly sworn, it was when I pointed out that there was nothing attached to the annexures that then I was urged further time in the matter." 1. Her Honour continued: "The law does say though even if there is an inadequate explanation for the delay to the documents before the Court show a bona fide defence and for the reasons I've already gone through in relation to the lack of documentation annexures, any evidence to support the assertion in the affidavit that he has a bona fide defence and the wrong party was sued and there was possession of a forklift in lieu that in addition to that, that the amount claimed by the plaintiff for repairs and maintenance it is asserted they're false and inaccurate, but there's just nothing else before me. In these motions I don't have to have a mini trial and work out if there is an adequate defence, but I've just as I say got to decide on the papers and all I've got is an assertion, an undated affidavit that this is a case with nothing to support that. LOOKING AT ALL THE RELEVANT CIRCUMSTANCES THERE BEING NO EXPLANATION FOR THE LACK OF EXPEDITION THAT'S ADEQUATE, IT WAS WITHIN THE CONTROL OF MR SARGEANT AND THE DEFEDANT'S DEPOSITION OF FACTS WHICH HE SAYS SUPPORT HIS DEFENCE SIMPLY ISN'T BORNE OUT BY THE AFFIDAVIT THAT I HAVE CONSIDERED AND IT IS FOR THOSE REASONS AND BEARING IN MIND THE PRINCIPLES IN S 56 I DECLINE TO GRANT THE MOTION. Mr Sargeant in a nutshell that means that the writ of the property is no longer stayed." Whether leave to appeal ought be granted 1. The principles for the grant of leave were summarised in Michail v Mount Druitt and Area Community Legal Centre Inc [2015] NSWCA 396 by Leeming JA and Emmett AJA at [49] as follows: What is generally required to obtain a grant of leave from an interlocutory judgment is a demonstration by the applicant for leave that there is a question of principle, or a matter of public importance involved, or where there is an injustice which goes beyond that which is merely arguable: see Carolan v AMF Bowling Pty Ltd [1995] NSWCA 69; Lee v New South Wales Crime Commission [2012] NSWCA 262; 224 A Crim R 94 at [12]. 1. Although dismissal of an application to set aside a default judgment is interlocutory, the finality of its practical effect is a factor in favour of the grant of leave, since there may be significant injustice if leave is not granted: see Hassoun v Wesfarmers General Insurance Ltd t/as Lumley General [2016] NSWCA 76 at [22] per Ward JA, Sackville and Barrett AJJA. 2. The question whether leave ought be granted is closely associated with the substance of the appeal and the question of injustice. Accordingly I propose to consider the grounds before addressing the question of leave. The relevant rules 1. Rule 36.15 of the UCPR relevantly provides: 36.15 General power to set aside judgment or order (1) A judgment or order of the court in any proceedings may, on sufficient cause being shown, be set aside by order of the court if the judgment was given or entered, or the order was made, irregularly, illegally or against good faith. 1. Rule 36.16 of the UCPR relevantly provides: 36.16 Further power to set aside or vary judgment or order (1) The court may set aside or vary a judgment or order if notice of motion for the setting aside or variation is filed before entry of the judgment or order. (2) The court may set aside or vary a judgment or order after it has been entered if: (a) it is a default judgment (other than a default judgment given in open court), or The grounds of appeal 1. The grounds of appeal set out in the summons are reproduced at the commencement of these reasons. Because I consider that the third ground has been made out, it is not necessary to deal with the first two grounds of appeal, which largely concern matters of procedure and natural justice. It is sufficient to say that the Magistrate was entitled to proceed to hear the matter on the evidence before her. Procedural fairness did not require her to give Mr Sargeant an opportunity to reswear his affidavit so that it could be dated with the day of the hearing or so that it could annex the company search. However, for the reasons that follow, these matters were not apt to affect the outcome of Mr Sargeant's notice of motion had the correct principles been applied. 2. The third ground of appeal can be distilled into two categories of complaints: the first formal and the second substantive. The formal complaints are that the default judgment ought be set aside under UCPR r 36.15 on the ground that the statement of claim is irregular because it does not plead a cause of action and the named plaintiff is not a person and therefore cannot commence or conduct proceedings. The substantive complaints are that the Magistrate erred in refusing to set aside the default judgment because she applied the wrong principle and did not act in accordance with UCPR r 36.16. 3. These will be considered in turn. I propose to consider the ground that the HE & FE Campbell Agricultural Machinery Repairs was not a proper person last as it was not raised before the Magistrate. The statement of claim does not plead a cause of action 1. The statement of claim did not plead a cause of action. It did not comply with UCPR, r 14.7. Nor did the draftsperson seek to plead facts in short form, as provided for in UCPR, r 14.12. Ms Burnheim adequately raised those matters before the Magistrate. Her Honour did not address the argument in the reasons. 2. It was held in Fenato v Chief Commissioner of State Revenue [2010] NSWCA 80; 78 NSWLR 20 that deficiencies in a pleading could constitute an irregularity in giving the judgment and could thereby attract the Court's power in UCPR r 36.15 to set aside the judgment: at [75] per Gzell J (Beazley P and Macfarlan JJA agreeing). In Arnold v Forsythe [2012] NSWCA 18, the appellant argued that if a plaintiff obtains default judgment on the basis of a statement of claim that omits material facts necessary to support the pleaded cause of action, the judgment is given irregularly and is thus susceptible to being set aside pursuant to UCPR r 36.15. It was not necessary for the Court of Appeal to decide this point, but Sackville AJA (McColl and Young JJA agreeing) said, at [84]: In the present case, however, the omissions in the statement of claim went to the very foundations of the respondents' cause of action against the appellant. By reason of the omissions, the case the appellant was required to meet was not clear. On the authority of Fenato v Chief Commissioner, this would have been a sufficient reason to conclude that the default judgment had been given irregularly. In a case where the appellant has an arguable defence, the appropriate order would have been to set aside the default judgment. 1. Mr Reynolds' answer to the ground relating to the inadequacy of the statement of claim was that Mr Sargeant must have been able to discern the case he had to meet because he set out in his affidavit his defences to the claim. I do not regard the detail in Mr Sargeant's affidavit as pertinent to overcome the well-founded objections to the statement of claim. The statement of claim was embarrassing and inadequate. It failed to identify a cause of action; if the claim was for breach of contract, it failed to identify the parties to the contract, or the term breached. Its omissions were sufficient to empower the Magistrate to set aside default judgment pursuant to UCPR r 36.15. Whether the Magistrate's discretion to set aside the default judgment under UCPR 36.16 miscarried The relevant principles 1. Mr O'Brien accepted that Mr Sargeant was obliged to demonstrate that the Magistrate's discretion miscarried in the sense referred to in the following oft-cited passage from House v The King (1936) 55 CLR 499 at 505 per Dixon, Evatt and McTiernan JJ: The manner in which an appeal against an exercise of discretion should be determined is governed by established principles. It is not enough that the judges composing the appellate court consider that, if they had been in the position of the primary judge, they would have taken a different course. It must appear that some error has been made in exercising the discretion. If the judge acts upon a wrong principle, if he allows extraneous or irrelevant matters to guide or affect him, if he mistakes the facts, if he does not take into account some material consideration, then his determination should be reviewed and the appellate court may exercise its own discretion in substitution for his if it has the materials for doing so. It may not appear how the primary judge has reached the result embodied in his order, but, if upon the facts it is unreasonable or plainly unjust, the appellate court may infer that in some way there has been a failure properly to exercise the discretion which the law reposes in the court of first instance. In such a case, although the nature of the error may not be discoverable, the exercise of the discretion is reviewed on the ground that a substantial wrong has in fact occurred. 1. A default judgment which has been regularly obtained will generally not be set aside unless the defendant files an affidavit which demonstrates a prima facie defence on the merits and an explanation of why a defence was not filed to the statement of claim within the requisite time. The reason for this requirement is that the defendant needs to show that there is utility in setting aside the default judgment (because there is a bona fide defence on the merits) and to explain why the default judgment was entered in order to have the Court's discretion exercised favourably: see the authorities referred to in Dai v Zhu [2013] NSWCA 412 at [83]-[93] per Sackville AJA (Barrett and Leeming JJA agreeing) and in Dunwoodie v Teachers Mutual Bank Ltd [2014] NSWCA 24 at [43]-[46] per McColl JA. 2. The demonstration of a bona fide defence on the merits requires the defendant "to show that the defence is asserted bona fide and that there is an arguable or triable issue": Dai v Zhu at [92] per Sackville AJA. Justice Hodgson said in Magnate Projects Pty Ltd v Youma Constructions (No 2) Pty Ltd [2005] NSWCA 331 at [52]: "In my opinion, an applicant seeking to set aside a judgment obtained after an undefended hearing does not have to show that a different result is likely should the judgment be set aside and a new trial ordered. However, the circumstances may be such, as Jordan CJ says, as to require "a reasonably clear case of merits to be shown"; that is, that it appear reasonably clearly that there is a defence capable of producing a different result. If that defence depends on facts, then there should be some evidence of those facts; and the circumstances may be relevant to the quality of the evidence that is required to show a defence on the merits in particular cases. Among such circumstances could be the degree of the applicant's default, and hardship to the respondent." 1. The ultimate issue for the Magistrate was whether it was in the interests of justice (viewed in the light of the matters referred to in ss 56, 57, 58 and 59 of the Civil Procedure Act 2005 (NSW)) to allow the party seeking to set aside the default judgment to defend the proceedings on the merits. The evidence in support of Mr Sargeant's application 1. Mr Sargeant relied on his own affidavit. It was not dated. No objection was taken to it and he was not required for cross-examination. The lack of date was a formal irregularity which did not prevent its being used: UCPR r 35.1. Substantial compliance with the form prescribed for an affidavit was sufficient: s 80 of the Interpretation Act 1987 (NSW). The absence of a date did not go to weight since there was nothing of substance in the affidavit which made the date of its swearing relevant. 2. Mr Sargeant explained the delay and apologised to the court for his inaction, which had led to the entry of default judgment. 3. He then gave unchallenged evidence that he operated his business through a company, RPS Total Assessments & Driver Training Pty Ltd (paragraphs [10] and [11] of his affidavit). An ASIC search of Mr Sargeant's company was referred to in the body of the affidavit but was not, in fact, annexed. Nonetheless, there was no objection to the sentence referring to the annexure. That the wrong defendant had been sued constituted a defence which, if established, would defeat the whole of the claim. As long as it was propounded bona fide, it would ordinarily warrant an order setting aside the default judgment. 4. Mr Sargeant also disputed the amounts in the invoices, including the invoice for the largest sum, A5256, and referred to a potential cross-claim (for the use of a fork lift owned by his company). 5. In summary, as a result of Mr Sargeant's affidavit, there was unchallenged evidence of: his explanation for the delay; a complete defence to the claim; an additional partial defence to the claim; and a potential cross-claim. The Magistrate's approach to the application 1. The Magistrate's approach is to be adjudged by reference to her Honour's reasons. It is generally inappropriate to consider exchanges between bar and bench to identify error since such exchanges are no substitute for reasons and may simply be regarded as a means of testing propositions, rather than amounting to reasons for a considered view arrived at on the basis of evidence and submissions. Nonetheless in the present case, the exchanges, as well as the reasons, reveal that her Honour was unduly focussed on peripheral, formal matters (such as whether the affidavit was dated and whether the company search was attached) at the expense of the substance of the application and (of principal significance) whether there was evidence of a bona fide defence. 2. Moreover, the Magistrate's reasons reveal that her Honour misapplied the principles set out above. Rather than considering whether the plaintiff had adduced evidence of a bona fide defence (which he undoubtedly had), her Honour appears to have imposed a different standard: namely whether, disregarding his affidavit evidence, Mr Sargeant had proved his defence by adducing business records (by the tender of invoices, a company search and any other relevant documents). Although her Honour acknowledged that she did not "have to have a mini trial", she concluded that all she had was "an assertion, an undated affidavit and this is a case with nothing to support that". Conclusion 1. Mr Sargeant's affidavit constituted unchallenged evidence. It did not need anything to "support" it since it constituted evidence in its own right. In circumstances where no objection was taken to it on the basis that it was undated, her Honour ought not to have rejected it (and, indeed, made no ruling that it had been rejected), or disregarded the evidence which it comprised. Her Honour's erroneous assessment of the affidavit as constituting no more than unsupported assertions caused her Honour's discretion to miscarry. 2. Although no draft defence was annexed to Mr Sargeant's affidavit, his affidavit gave at least as much particularity as a draft defence could be expected to have included. Moreover, it constituted evidence, rather than mere allegations in a draft pleading and was therefore entitled to greater weight. 3. In my view, Mr Sargeant has established that the discretion miscarried as a result of a flawed process (referred to above). Moreover, he has also established that the result of the application was so unreasonable and plainly unjust that I can infer that there was a failure properly to exercise the discretion conferred on the Magistrate under UCPR r 36.16. 4. Accordingly, I am persuaded that the order dismissing the application to set aside the default judgment must be set aside on the basis that her Honour's discretion miscarried. The named plaintiff is not a person 1. For completeness, I propose to address the ground (which was not raised in the Local Court) that the named plaintiff in the statement of claim was not a person. The pleading 1. There was no allegation in the statement of claim that HE & FE Campbell Agricultural Machinery Repairs was a corporation; indeed, it is common ground that it was not. No ACN number was specified. Indeed Mrs Campbell, in her affidavit in support of the application for default judgment, corrected the description of her status from "director" (which would have been apposite had the plaintiff been a company) to "partner". The pleading was, accordingly, irregular since the named plaintiff was not a person and therefore could not be a party. The relevant rules and statutory provisions 1. UCPR r 7.1 makes provision for those by whom proceedings may be commenced and carried on. Only persons may commence and carry on proceedings. "Person" and "party" are defined in s 21 of the Interpretation Act 1987 (NSW) to include "an individual, a corporation and a body corporate or politic". A business name (such as HE & FE Campbell Agricultural Machinery Repairs) is not a person and, accordingly, a business name cannot be a plaintiff. Division 5 of the UCPR provides for business names. UCPR r 7.19 provides that: Subject to this Division, persons are to sue and be sued in their own names, and not under any business name. 1. UCPR r 7.20 provides that proceedings may be commenced against a person conducting a business under an unregistered business name by naming an unregistered business name as a defendant. However, in a defence to such proceedings the actual person must enter an appearance and file a defence in his or her own name: UCPR r 7.21. Once the plaintiff has ascertained the real name of the person who is conducting the business, the plaintiff is to amend documents in the proceedings to replace the business name with the defendant's own name: UCPR r 7.22. The parties' submissions 1. Mr Sargeant accepted that the irregularity in the identity of the plaintiff was not raised before the Magistrate. Nonetheless, Mr O'Brien contended that it raised a question of law which could not have been met by the calling of evidence and, accordingly, ought be entertained and determined by this Court in accordance with recognised exceptions to the principle that a party is bound by the conduct of his or her case: see the summary in Mamo v Surace [2014] NSWCA 58; 86 NSWLR 275 at [76] per McColl JA, Ward JA and Tobias JJA agreeing. 2. Mr Reynolds contended that the business name's lack of legal personality was not an "irregularity" within the meaning of UCPR r 36.15 and that there was no difficulty in construing it as meaning Mr and Mrs Campbell as owners of the business name and partners of the business. He relied on Perpetual Trustees Australia Ltd v Heperu Pty Ltd (No. 2) [2009] NSWCA 387 in support of the proposition that a mistake in the identification of the correct defendant was not regarded as an "irregularity" within the meaning of UCPR r 36.15 at [15]-[18] where the Court of Appeal (Allsop P, Campbell JA and Handley AJA) held that the naming of the wrong defendant was not, in the circumstances of that case, an irregularity in the making of an order. The Court said at [18] that the irregularities occurred before the hearing of the matter. Mr Reynolds submitted that the lack of personality of the business name was in the same category. Conclusion 1. Although Mr Sargeant did not articulate this objection to the judgment at the hearing in the Local Court, it was common ground that HE & FE Campbell Agricultural Machinery Repairs was not a person. It was also apparent from the pleading since no ACN and no reference to either "Pty Ltd" or "Ltd" such as would indicate corporate personality was given. 2. The Court of Appeal said in Perpetual Trustees Australia Ltd v Heperu Pty Ltd (No. 2) at [17] that UCPR r 36.15 "applies with particular force" to default judgments. 3. The lack of legal personality of a named plaintiff is no mere technicality. It is a substantial "irregularity". It is quite a different situation from that which arose in Perpetual Trustees Australia Ltd v Heperu Pty Ltd (No. 2), where the wrong defendant was named but it, and the putative "correct" defendant, were both corporate persons. 4. The rules do not contemplate that a business name can be a plaintiff, and for good reason: a business names is not a person. Although there is provision for a plaintiff to name a business name as a defendant, this is a temporary measure only so as not to prejudice someone who does not know who stands behind an unregistered business name. The question for present purposes is whether this irregularity can be said to be one that has the effect that the default judgment was given irregularly within the meaning of UCPR r 36.15(1). 5. In my view, the default judgment in favour of HE & FE Campbell Agricultural Machinery Repairs was given irregularly since no judgment can be entered in favour of something (such as a business name) that has no legal personality. This was not a matter that depended on evidence. It could not be cured except by setting aside the default judgment and amending the statement of claim to substitute the names of the persons behind the business name. Accordingly, in my view, the named plaintiff's lack of legal personality provides a separate ground for setting aside the default judgment. Although it was not raised in the Local Court, the principle that a plaintiff must be a person is so fundamental that the default judgment ought, subject to the question of this Court's jurisdiction to make orders under s 41 of the Local Court Act (addressed below), be set aside. Whether leave to appeal ought be granted 1. For the reasons given above, I regard the present case as an appropriate one for the grant of leave. The interests of justice are, in my view, overwhelmingly in favour of a grant of leave. Several matters of principle (identified above) are involved. The manifest injustice in leaving the Magistrate's order standing would be considerable. The appropriate relief 1. For the reasons given above, leave to appeal ought be granted, the appeal allowed and the orders of the Magistrate dismissing Mr Sargeant's application to set aside the default judgment ought be set aside. The further question arises whether I ought remit Mr Sargeant's application to set aside the default judgment for determination by the Local Court according to law, or whether I ought make an order setting aside the default judgment. 2. The Court's power derives from s 75A of the Supreme Court Act 1970 (NSW) and from s 41 of the Local Court Act. The Court's power under s 75A has effect subject to s 41(1) which provides: (1) The Supreme Court may determine an appeal made under section 39 (1) or 40: (a) by varying the terms of the judgment or order, or (b) by setting aside the judgment or order, or (c) by setting aside the judgment or order and remitting the matter to the Local Court for determination in accordance with the Supreme Court's directions, or (d) by dismissing the appeal. 1. The question of the extent of the appellate court's powers to make orders was considered by the Court of Appeal in the context of an appeal from the Land and Environment Court in Thaina Town (on Goulburn) Pty Ltd v City of Sydney Council [2007] NSWCA 300; 71 NSWLR 230. Chief Justice Spigelman (Mason P, Beazley JA, Giles JA and Ipp JA agreeing) said: [103] This Court must be concerned that the course of administration of justice in this State does not impose unnecessary cost burdens on parties by adopting a narrow interpretation of statutory powers conferred upon the Court to ensure the just and efficient administration of justice. Where no new findings of primary fact are required to be made, this Court should exercise a power conferred upon it in wide terms so as to ensure that the cost of legal disputation is minimised and thereby apply the guiding principle in s 56 of the Civil Procedure Act 2005 to the exercise of powers conferred by an Act other than that Act or by Rules of Court, so as to facilitate the just, quick and cheap resolution of the issues in dispute in civil proceedings. [104] Nothing in the text of s 57 of the Land and Environment Court Act or s 75A of the Supreme Court Act requires this Court to refuse to make an order that should have been made where no new findings of fact are required. 1. However, the Court of Appeal considered that, in the context of an appeal on a question of law from the Administrative Decisions Tribunal, it was not appropriate for the Court to do other than remit the matter to the tribunal once error had been established: B & L Linings Pty Ltd v Chief Commissioner of State Revenue [2008] NSWCA 187; 74 NSWLR 481 at [77] per Allsop P. Justice Basten addressed the question of statutory construction that was required to determine, by reference to the statute that conferred jurisdiction on the appellate court, the extent of its powers if an appeal was allowed. His Honour accepted that where an appeal lay on a question of law, the appellate court would be precluded from engaging in any review of the decision beyond the question of law identified: [139]. His Honour said, at [139]: It would seem to follow that the powers of the Court do not extendto making an evaluative judgment based on primary facts as found by theTribunal, or exercising a discretionary power vested in the Tribunal, unless the finding or order was the only one open. 1. The present case involves a different problem. Although leave to appeal against an interlocutory decision of the Local Court under s 40(2) is required, leave may be granted on a question which is not solely a question of law, since the statute does not limit the right (with leave) to appeal on that basis. It follows that the considerations which led to the narrower construction of the powers of the appellate court in B & L Linings Pty Ltd v Chief Commissioner of State Revenue are not necessarily apposite in an appeal to this Court from the Local Court. 2. I respectfully adopt the approach taken by Beech-Jones J in Owners Strata Plan 4003 v Mustafa [2012] NSWSC 780 which is reflected in the following passage from his Honour's reasons: [15] It is unnecessary to explore the limits on this court's powers to determine the totality of a matter such as this where the court's jurisdiction under ss 39(1) and 40(1) of the Local Court Act is invoked and it embarks upon an exercise of the power conferred by s 75 A. It is sufficient to state that in this case it has the power to do so. [16] The entirety of the evidence before his Honour was documentary. As the matter developed, there was no challenge to any finding of primary fact by his Honour. Instead, the matters raised by the plaintiff concerning his Honour's judgment only concerned legal issues. That said, to the extent that any of the findings that I make travel beyond discerning and then resolving questions of law and into mixed questions of law and fact, then I grant leave for that to occur. [17] The factors in favour of this court determining the matter in its entirety are overwhelming. As I will explain, the principal error made by his Honour was basic and fundamental. The amount in dispute is small. The parties should not have to be put to the burden of having to incur a third set of costs to resolve a set of issues which, at least by the time of the hearing, they had narrowed: see Thaina Town (on Goulburn) Pty Ltd v City of Sydney Council [2007] NSWCA 300 ; (2007) 71 NSWLR 230; Pacific Asia Express Pty Ltd v Renegade Gas Pty Ltd [2010] NSWSC 1188 at [33]–[41] (per Rein J); and Pool Data Systems Pty Ltd v Bayliss [2011] NSWSC 224 at [144]–[145] (per Hall J). 1. Both parties accepted that the appropriate order would depend on the basis on which the appeal was allowed. I understood it to be common ground that if additional findings of fact were to be made, it would be inappropriate for this Court to embark on that process but that if no such findings were to be made this Court could determine the matter for itself. Mr Reynolds contended that the matter ought be determined on the basis of the evidence in the Local Court. Mr O'Brien accepted this constraint. 2. The sole evidence before the Local Court was the uncontroverted affidavit evidence of Mr Sargeant. I consider that he has explained the delay and that he has put forward (and substantiated, by his affidavit) a bona fide defence (that he conducted his business through a company and not personally). Although these matters may well be described as "evaluative judgments", I consider that the jurisdiction under s 41 of the Local Court Act permits me to make them in circumstances where I consider that the only proper exercise of the Magistrate's discretion under UCPR r 36.16 was to set aside the default judgment. Indeed, one basis of my finding that the House v The King error was made out was that the exercise of her Honour's discretion was so plainly unreasonable and unjust that the discretion must have miscarried. 3. Moreover, had I not considered that the only possible result was to set aside the default judgment under UCPR r 36.16, I would have considered that it ought be set aside as irregularly entered under UCPR r 36.15 on either of the two bases argued: the defective pleading and the lack of legal personality of the named plaintiff. Other matters 1. Mr Sargeant's grounds did not include a complaint about the denial of natural justice occasioned by the Magistrate's interruption of Ms Burnheim's submissions, which was followed by the immediate delivery of an ex tempore judgment. Accordingly, it is not necessary to consider what effect this denial had. It is sufficient to say that, generally speaking, a judicial officer ought not interrupt a party who has not completed submissions and proceed to deliver judgment. Further, although Mr Bassett (who appeared for the business name in the Local Court) was not required to be heard (since the orders were in his client's favour) it is generally advisable for a judicial officer to ask the other party whether he or she wishes to add something, even if the judicial officer makes it clear that he or she does not need to hear from the representative on particular topics. This allows for the potential correction of error before a decision is made. For example, in the present case, the business name's representative could have said that no point was taken about the lack of date or lack of annexure to Mr Sargeant's affidavit. Costs 1. I have not heard from the parties on costs. Indeed, I indicated that I would make provision in the orders for applications for costs and submissions to be made in writing after publication of these reasons. 2. Mr Reynolds indicated that if the appeal were to be allowed, he was instructed to seek a certificate under s 6(1) of the Suitors' Fund Act 1951. I am persuaded that it is appropriate to issue a certificate in the present case. Although the irregularities in the pleading (which led, in my view, to the judgment being irregularly given) were the responsibility of his clients, the conduct of the hearing by the Magistrate was not influenced in any material respect by their legal representative, since the debate was almost entirely between Ms Burnheim and the Magistrate. Almost no contribution to that exchange was made by Mr Bassett, who appeared for the business name. Orders 1. For the foregoing reasons I make the following orders: 1. Grant leave to the plaintiff to appeal from the interlocutory order made by Stafford LCM on 14 October 2015 dismissing the plaintiff's notice of motion for an order setting aside the default judgment entered against the plaintiff (the defendant in the Local Court) on 12 February 2015 (the Order), such leave to be granted on questions of law and of mixed fact and law. 2. Allow the appeal. 3. Set aside the Order and, in lieu thereof, order that the default judgment entered against the plaintiff (the defendant in the Local Court) on 12 February 2015 be set aside. 4. Subject to a written application for a different costs order being made in writing to my Associate within seven days hereof (together with submissions in support), order the defendants to pay the plaintiff's cost of the proceedings in this Court. 5. Grant a certificate under s 6(1) of the Suitors' Fund Act 1951 (NSW) to the defendants in respect of the costs referred to in (4) above. 6. If any party seeks an order in respect of the costs in the Local Court, direct that any such application be made in writing to my Associate together with any submissions in support within seven days. 7. Otherwise remit the matter to the Local Court to be determined according to law. ********** 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: 02 May 2016