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- Unreported Judgment
DISTRICT COURT OF QUEENSLAND
Gustin v Shalev  QDC 254
Magistrates Court at Brisbane
12 December 2019
District Court at Brisbane
17 October 2019
I will hear submissions as to the orders including orders as to costs.
APPEAL – CIVIL PROCEDURE – MAGISTRATES COURT – SUMMARY JUDGMENT – APPLICATION TO SET ASIDE – where the appellant appeals from an order of the Magistrates Court dismissing the appellant’s application to set aside an order for summary judgment – where respondent had sought to recover the balance of a loan made to the appellant – where appellant was employed by a company of which the respondent was the CEO.
Uniform Civil Procedure Rules (1999) r 667(2)(a)
Aboyne Pty Ltd v Dixon Homes Pty Ltd  Qd R 142
Mutual Life Association of Australia Limited v Oasis Developments Pty Ltd  2 Qd R 441
Hirvonen v White  QDC 103
P.D Tucker for the appellant
P.W Wacker for the respondent
Aitken Whyte Lawyers for the appellant
Results Legal for the respondent
- The appellant appeals from an order of the Magistrates Court made on 16 April 2019 dismissing the appellant’s application to set aside an order for summary judgment made against the appellant on 12 October 2018.
- Although the appellant had filed a notice of intention to defend and defence, the application for summary judgment was uncontested as the appellant failed to appear. On the application to set aside the summary judgment an issue of whether or not the application and supporting material, including a Notice to Admit Facts, had been served on the appellant was considered. The magistrate found that it had been properly served. Although that finding is contested in the notice of appeal, it is not now contended that the learned magistrate was incorrect in finding that service had been affected.
- The appellant’s application, pursuant to r 667(2)(a) of the UCPR, to set aside the summary judgment of 12 October 2018 was heard on 1 February 2019 and 16 April 2019. On the latter date the application was dismissed. The appellant now appeals from that decision.
- Rule 667(2)(a) of the UCPR provides that a court may set aside at any time an order made in the absence of a party. In this case the summary judgment had been entered in the absence of the defendant. Rule 302 of the UCPR is to similar effect.
- The parties both relied, when before the learned magistrate and before me, on the decision of Kingham DCJ in Hirvonen v White  QDC 103 at . Her Honour there said:
“The court’s discretion is unfettered. The factors which arise for consideration include:
- (a)the defendant’s conduct in the action and after judgment;
- (b)the defendant’s good faith;
- (c)whether the defendant shows a case on the merits;
- (d)whether if the applicant be let back in, irreparable wrong will be done to the party who has obtained judgment.”
- It was also accepted by the parties that the most important factor was whether there was a case on the merits; or, to phrase it differently, whether there was a real issue to be tried. See Aboyne Pty Ltd v Dixon Homes Pty Ltd  Qd R 142; National Mutual Life Association of Australia Limited v Oasis Developments Pty Ltd  2 Qd R 441 especially at 449/450.
Magistrate’s Court hearing
- On the hearing of the application the magistrate, on 1 February 2019, dealt with a preliminary issue concerning whether the application for summary judgment and supporting material had been served by post. The argument concerned whether the face of the envelope, showing the address at which the documents had been served was required to be exhibited. The evidence was that the envelope had a clear window through which the address of the applicant as printed on the letter inside was clearly visible. The letter was itself exhibited to the affidavit of Victoria Campbell, an administrative assistant with the respondent’s solicitor who explained how the letter had been placed in the envelope with the clear window.
- The transcript does not disclose the magistrate’s decision on this issue but consideration of the subsequent transcript of 11 April 2019 indicates that the learned magistrate determined that she would hear argument on the substantive issue before determination of the narrow point of service (see T1-3, l 7/15).
- Although the notice of appeal to this court raises again issues of service, and the form and content of the affidavits on which the respondent relied before the magistrate, before me the applicant relied only on the grounds that the material:
“(i) discloses that the respondent had a prima facie defence; and
- (ii)discloses substantial issues requiring adjudication.”
Counsel submitted that on the basis of those matters, I ought set aside the order refusing the application for summary judgment.
- In support of a similar submission before the magistrate the appellant’s counsel relied on a number of matters.
- First he referred to the proposed draft defence exhibited to an affidavit of Lachlan Rieck filed on 30 January 2019. (The draft defence is at pps 204-215 of the appeal book.)
- In essence it contains allegations that the respondent engaged in misleading or deceptive conduct contrary to s 18 of the Australian Consumer Law (ACL), by reason of misrepresentations concerning the nature of the appellant’s employment and remuneration with the respondent’s company, Clevertech.
- He noted also that proceedings in which the appellant as plaintiff sought damages from Clevertech for breach of contract, and from Clevertech and the respondent for relief under ss 236 and 237 of ACL, based on the same allegations that underpin the proposed Magistrates Court defence I referred to, have been commenced in the Supreme Court.
- Counsel (at T 1-16, l 39 ff of that hearing) referred to those Supreme Court proceedings and to the draft amended defence. He indicated that if the summary judgment were set aside, that an application would be made in the Supreme Court to transfer the Magistrates Court proceedings to that court, to be heard with the existing Supreme Court proceedings.
- Counsel for the respondent submitted that the failure of the appellant in the email correspondence between the parties to raise the defence that he now “seeks to agitate” raised significant doubts about the merit of the appellant’s claim. Indeed he described the assertions as “patently unbelievable” (T1-19, l 27) and motivated by a realisation “he will be bankrupted unless he invents something” (T1-19, l 41). He then referred to issues concerning the appellant’s credibility to which I will subsequently refer, and which largely depend upon consideration of email correspondence attached to an affidavit of Mark Goldsworthy, the respondent’s solicitor.
- The application to set aside the summary judgment of 12 October 2018 was dismissed. Her Honour noted the judgment had been entered in the appellant’s absence. Her Honour indicated that she accepted the appellant had been served by post on about 12 September 2018. As I have said, that finding is not currently disputed.
- Her Honour identified the most relevant factors to be considered were:
- (a)the appellant’s conduct both before and after judgment including his explanation for failing to appear and for any delay in making the application;
- (b)his good faith;
- (c)whether he has a case on the merits;
- (d)whether the judgment were set aside, irreparable damage would be done to the respondent.
- Such an approach is of course consistent with the decision of Hirvonen v White (supra) earlier set out. Her Honour accepted that the most cogent factor involved whether there was a defence on the merits.
- Having identified these factors, her Honour then noted that at paragraph 37 of the appellant’s affidavit filed on 11 December 2018 he admitted to borrowing $65,000. Her Honour said that admission was inconsistent with his existing defence and with the Supreme Court’s statement of claim. Her Honour said that in any defence it “is not articulated or pleaded how any of the matters pleaded by the defendant have the effect of invalidating the loan agreement”. Her Honour said “there is a failure to articulate a good defence by the (appellant)” and, on that basis, her Honour dismissed the application.
- Before turning to consideration of the merits of the appeal it is, in view of her Honour’s reasons, appropriate to consider both the existing defence, and the Supreme Court statement of claim, but also the proposed amended defence, and to consider these alongside paragraph 37 of the applicant’s affidavit to which her Honour referred.
- Paragraph 37 of the affidavit is in these terms (see p 162 of Appeal book):
“Before borrowing the $65,000, (the respondent) told me that my position with Clevertech was secure. He also told me I could repay the money through reductions in my bonuses from Clevertech. Further, he said that my bonuses would be increasing. It was on this basis I agreed to borrow the $65,000 and repay it. (The respondent) knew at the time of advancing me $65,000 that he would terminate my contract. This is consistent with the comment at the bottom of page 17 of the Affidavit in relation to the $15,000 advance.”
- I do not understand the meaning of the reference to “the comment at the bottom of page 17”. That comment was part of an email from the appellant to the respondent of 22 August 2013 in which the appellant said that he would be comfortable to make repayments of $3,000 per month by way of fortnightly deductions of $1,500 from payments by Clevertech to the appellant. Because of the frequency of such reduced repayments – fortnightly – it seems clear he envisaged this was to be made from his fortnightly salary payments, and not from any periodic bonuses.
- More importantly, there is a need to consider her Honour’s determination that the applicant’s admission in that affidavit to borrowing the $65,000 was inconsistent with its existing defence, and with the Supreme Court statement of claim, and whether the matters pleaded failed to “have the effect” of invalidating the loan agreement, as her Honour found.
- The existing defence is at pages 346 to 349 of the appeal book but the affidavit of the appellant’s solicitor, Lachlan Rieck filed on 30 January 2019 exhibits a proposed draft amended defence and counterclaim (see appeal book page 204-215). The Supreme Court amended statement of claim is also exhibited to Mr Rieck’s further affidavit filed on 8 April 2019 (see appeal book pp 223-233).
- It is unclear why her Honour considered the existing defence to be relevant bearing in mind the content of the proposed amended defence and counterclaim. Perhaps she thought it relevant to the issue of the appellant’s credit insofar as that might be determined by a consideration of the pleading. If doing so, however, it is important to understand that the original defence was drafted by the applicant as a self-represented party. In that original defence he did not in fact plead in response to paragraph 2 of the statement of claim, which alleged that the plaintiff agreed to loan the defendant $84,000 in 2013. However in paragraph 2 of the defence the applicant pleaded that the plaintiff agreed to “advance” the defendant the sum of $13,000 and later a further $65,000, both in US dollars, by way of “bonuses”.
- The proposed amended defence deletes essentially all of the previous defence, including paragraph 2 thereof earlier referred to by me, and instead pleads in paragraph 17 thereof that the appellant and Clevertech on 15 October 2013 entered into a collateral contract whereby Clevertech “would advance the sum of $65,000 to the appellant and he would receive that sum “less in bonus payments” from Clevertech. A similar allegation was made in relation to the alleged $15,000 loan of August 2013.
- This allegation is substantially repeated in paragraph 16 of the Supreme Court amended statement of claim.
- In such circumstances her Honour concluded that in any defence it “is not articulated or pleaded how any of the matters pleaded … have the effect of invalidating the loan agreement”.
- The reality is that the loan agreement was not in that way alleged to be invalidated. Rather it was alleged that the agreement was that the loan would be repaid by reductions of bonus payments, otherwise payable by the respondent’s company, Clevertech, to the appellant. It was then further alleged that the respondent made representations to the appellant concerning his employment with Clevertech, including as to his remuneration and the security of such employment, which induced the applicant to enter into his contract of employment with Clevertech and to enter into the contract to borrow both the $15,000 advance of 22 August 2013 and $65,000 advance of 15 October 2013. It is alleged such representations constituted misleading and deceptive conduct within the meaning of s 18 of the ACL and entitled the applicant to seek damages under s 236 thereof, or compensation pursuant to s 237 from the respondent.
- Perusal of the email correspondence does cause me to have doubts about the appellant’s credibility. I shall refer to that issue later. It may be that the learned magistrate similarly perused that email correspondence contained in the affidavit of Mr Goldsworthy and came to a similar conclusion but that is not clear from her Honour’s judgment.
- The reasons of the magistrate however do not indicate the extent her Honour perused that material. She refers only to his admitting to borrowing “at least $65,000” in paragraph 37 of his affidavit which I earlier set out. Whilst this might be considered inconsistent with the existing defence, as Her Honour found, that document was drafted by the appellant himself and the assertion therein that the $65,000 was an “advance” of his bonus can be helpfully contrasted with the wording of the assertion in his proposed amended defence and counterclaim, and with the Supreme Court statement of claim that Clevertech, the respondent’s company, “would advance the sum of $65,000” to him and he would receive $65,000 less in bonus payments.
- Seen in that way I do not think that paragraph 37 of his affidavit is inconsistent with his pleaded position.
- Moreover, her Honour’s conclusion that the pleadings do not articulate a good defence is not justified. It is not a case that the loan agreement is or is not invalidated, as she framed the matter. The amended defence and statement of claim accept the respondent’s company, Clevertech, in fact advanced that sum of money to the appellant. The appellant’s pleadings however allege that the conduct of the respondent induced the appellant to enter into that agreement and that the respondent’s conduct was in breach of s 18 of the ACL. Whilst the email correspondence can be said to raise doubts about the appellant’s credibility it cannot in my view be said that he fails to demonstrate an arguable defence.
- Initially, I prepared a judgment which carefully analysed the email correspondence. Ultimately I have concluded it is not necessary to do that beyond observing that the appellant may well have significant credit issues because of the consistent reference in such correspondence to the making of loans from the respondent to the appellant and his repaying it, apparently from his salary rather than from bonuses as he currently articulates in the pleadings to which I have referred.
- There are other issues of concern in the construction of the agreement advanced by the respondent and which underpin the amount of the summary judgment. For example, whilst it is asserted that the respondent was entitled to interest at the rate of 8 percent per annum, it appears to me that the offer that was made was of a loan or advance to use a more neutral term, with a sum of 8 percent thereof to be repaid to the respondent in addition to the loan sum. The agreed figure did not constitute an annual rate of interest, but on the face of the agreement appears to be a one-off payment equivalent to 8 percent of the capital sum, repaid over the period of the loan repayments.
- Be that as it may, it is unnecessary to resolve that issue because it seems to me that this is a case where it was appropriate to have set aside the summary judgment and to have allowed the matter to be appropriately litigated. Ultimately it is likely that will occur in the Supreme Court, but as I earlier indicated the appellant will need to bring an application in that court for the transfer of the Magistrates Court proceedings.
- I should add that there are in my view, no other factors of great relevance in the determination of the matter.
- Proceedings were commencing on 14 February 2008. The applicant filed his defence on 15 May. Nothing was then done by the respondent until the filing of his amended statement of claim, application and other documents in support on 12 September. The order for summary judgment was made 12 October and the application to set it aside was filed 12 December. Supreme Court proceedings were commenced on 18 March 2019. In my view there was no relevant delay which might militate against the making of the order I propose.
- Furthermore, nothing before me suggests that the respondent would be unduly prejudiced if the judgement was set aside. The principal, indeed the overwhelming consideration in this case, concerns whether the judgement should be set aside to allow consideration of the merits of the appellant’s position.
- In the circumstances I have concluded that the appeal should be allowed and that the judgment of 12 October 2018 should be set aside. In my view it is also appropriate to dismiss the application for summary judgment but I will hear submissions on that matter.
- It is also necessary to consider the question of costs. It is relevant that the finding that the application for summary judgment and supporting material has been served on the appellant was not contested before me. Furthermore until after 30 January 2019, when Mr Rieck’s affidavit exhibiting the proposed amended defence was served, the respondent was unaware of the true nature of the appellant’s defence.
- It is my preliminary view that in that circumstance, and in the circumstance that the appellant did not appear to context the matter, materially contributing to the need for the application to set it aside, probably appropriate to order that the appellant pay the respondent’s costs of and incidental to the application for summary judgment and of the application to set it aside but I will hear submissions on that issue. The respondent should pay the appellant’s costs of the appeal.
- I will delay making orders until I have heard submissions about the form of the orders and costs.
- Published Case Name:
Richard Gustin v Kuty Shalev
- Shortened Case Name:
Gustin v Shalev
 QDC 254
12 Dec 2019