Thomas v St George Bank[2013] QCA 136

SUPREME COURT OF QUEENSLAND

[1] HOLMES JA:  The appellant, Mr Thomas, was sued by the respondent, St George Bank, for moneys owed under the terms of a guarantee and indemnity he had given.  Mr Thomas was ordered to provide further and better particulars of his defence.  The Bank, alleging a failure to comply with that order, successfully applied under r 374 for the judgment which is the subject of this appeal.

Rule 374

[2] Rule 374 of the Uniform Civil Procedure Rules deals with what may be done when a party fails to comply with an order to take a step in a proceeding.  The parts of it relevant to the present appeal are:

“374Failure to comply with order

(1)This rule applies if a party does not comply with an order to take a step in a proceeding.

...

(3)A party who is entitled to the benefit of the order may, by application, require the party who has not complied to show cause why an order should not be made against it.

(4)The application—

(a)must allege the grounds on which it is based; and

(b)is evidence of the allegations specified in the application; and

(c)must, together with all affidavits to be relied on in support of the application, be filed and served at least 2 business days before the day set for hearing the application.

Note—

See also rule 447 (Application to court).

(5)On the hearing of the application, the court may—

(a) give judgment against the party served with the application; or

(b) extend time for compliance with the order; or

(c) give directions; or

(d) make another order.

…

(8)A judgment given under subrule (5)(a) may be set aside—

(a) if the application is made without notice— on an application to set the judgment aside; or

(b) otherwise—only on appeal.

The pleadings

[3] The proceeding was commenced by the filing of a claim and statement of claim on 27 October 2011.  The statement of claim pleaded that in November 2007, the Bank had agreed to provide two commercial bill facilities, each for an amount of about $3.8 million, to a company, Wardell Street Investments Pty Ltd, of which Mr Thomas was sole director and shareholder.  The terms of the facilities were subsequently varied (by an amendment in March 2009) to increase their limits to almost $4 million each and (by a further amendment in August 2009) to extend the date for their expiry.  On the due date, the company defaulted in repayment of the amounts advanced, and it did not comply with a demand for payment.  Against Mr Thomas it was pleaded that he had executed, firstly, a guarantee of the moneys owing under the facility agreements and, later, an extension of guarantee document to cover the company’s further indebtedness under the facility agreements as varied in March 2009.  He had failed to comply with a demand for payment of the amounts owed under the facility agreements.

[4] On 2 January 2012, Mr Thomas (who was then unrepresented) sought further and better particulars of the statement and claim, which were provided on 20 March 2012.  He filed a notice of intention to defend and defence on 11 April 2012, in which he pleaded that he had executed the relevant documents as facility offers but had never entered a facility agreement.  (In fact, the facility offer in each case provided that, on acceptance, it became a facility agreement.)

[5] Mr Thomas further alleged that the original facility offers had been sent to the Bank’s agent, a Mr Elder of Elder Mortgages, and he, Mr Thomas, had not been provided with the general standard terms referred to in the offers when he executed them.  (Here it should be noted that the facility offers provided that the respective facilities were offered on the terms contained in the offer and the general standard terms, which were to be read together.)  The varied facility offers, according to Mr Thomas’ defence, had been forwarded to Wardell Street Investments Pty Ltd by email and did not enclose a copy of the general standard terms.  Mr Thomas denied having guaranteed payment by the company of the moneys owing under the facility agreements on the basis that any guarantee had been voided by (an unidentified) breach of the Code of Banking Practice and by the facility offer extension of August 2009.  (The guarantee provided, however, that the liabilities and rights it created were unaffected by any extension in the repayment term.)

The request for further and better particulars and the order for their provision

[6] On 9 May 2012, the Bank served a request for further and better particulars of the defence on Mr Thomas, who was still unrepresented.  On 21 May, the Bank sent a r 444 letter to Mr Thomas by email and by post, setting out that it had made the request for particulars, which had not been provided, and that it sought their provision by 28 May, failing which it would apply to the court.  On 26 July, the r 444 letter not having produced service of the particulars, the Bank duly made its application, which was set down for hearing on 8 August.  It served the application and supporting affidavit on Mr Thomas by email and post.

[7] In response, Mr Thomas filed an argumentative affidavit asserting that the application was frivolous and that the Bank’s affidavit did not demonstrate the need for it.  (Notably, he did not swear to any attempt at complying with the request for further and better particulars.)  Mr Thomas also deposed that he had appointed a solicitor, a Mr Robert Shacklady of a Sydney law firm, and would be amending his pleadings.  He annexed a letter from Mr Shacklady to the Bank’s solicitors which asserted that his client “contend[ed] the delivery of the above documents”, but gave no detail, and said that his firm would envisage being in a position to respond to the request for particulars no later than 15 August 2012.

[8] Mr Thomas did not, however, appear in person or by his solicitor on the hearing of the application on 8 August 2012.  The applications judge ordered that within seven days he provide further and better particulars of the relevant paragraphs of his defence and produce the documents identified by the Bank in its request and r 444 letter.  That afternoon, the Bank’s solicitors emailed a copy of the unsealed order to Mr Thomas’ solicitor.  On 16 August 2012, the Bank’s solicitors received a copy of the sealed order, having acted expeditiously to take it out, and emailed it to Mr Shacklady, also sending a copy by express post to Mr Thomas himself.

Events leading up to the r 374 application

[9] On 31 August 2012, the Bank’s solicitors served a further r 444 letter, sending it by email and by express post to Mr Shacklady.  The letter said that the further and better particulars and documents had not been provided; that they were sought; and that Mr Thomas should show cause why an order should not be made against him under r 374.  If those matters were not attended to by 6 September, the letter concluded, the Bank would apply to the court without further notice.

[10] On 18 September 2012, the Bank filed an application under r 374, seeking judgment for its claim against Mr Thomas.  The application (which, by virtue of r 374(4)(b), itself constituted evidence) set out the history of the matter: the order for particulars, its service, and Mr Thomas’ non-compliance with it.  At the hearing of the application on 27 September, the Bank relied, in addition, on four affidavits.  Two, filed with the application, dealt with service of the orders and the r 444 letter on Mr Thomas and his solicitor.  In a third, an officer of the Bank deposed to the debt claimed still being outstanding.  A fourth, by Mrs Arden, a solicitor with the conduct of the file for the Bank, was filed by leave at the hearing.  It exhibited some correspondence with Mr Shacklady.

[11] Mr Shacklady had sent an email and an attached letter to Mrs Arden on 25 September 2012, saying that he was presently overseas and that his client was currently out of the State and would not return to provide instructions until 1 October 2012.  In a second email, Mr Shacklady said that he would be back in Australia on 1 October 2012; it was his “understanding that Mr Thomas [would] be able to provide the requested material early next week”.  He requested an adjournment of the application to a date not before 4 October 2012.

[12] By return email and letter, the solicitors for the Bank conveyed their instructions to proceed with the application on 27 September 2012.  The following day, another email was received from Mr Shacklady, which made this assertion:

“You were provided with that request for particulars on 17 August 2012. The application for judgment as sought by your client is without merit. If it is the case that they seek further particulars to the response then it would be the [basis for] either an application or firstly a further request, your [client] has sought neither. It is relying on a breach of an Order which our client has complied with back on 17 August 2012, being the same day our appointment was filed and served.”

(It is apparent, taking the first sentence in context with what appears later, that Mr Shacklady’s reference to the provision of “that request for particulars” was meant to indicate that the particulars themselves had been provided.)

[13] The email went on to say that in light of his “absence and difficulties in communications from Asia”, Mr Shacklady had advised Mr Thomas to provide a letter to the associate of the judge who would be dealing with the application for the judge’s consideration.  (It was common ground that Mr Thomas did email the judge’s associate, attaching the correspondence from Mr Shacklady.  Mr Thomas’ email did not form part of the material read before the primary judge and, unsurprisingly, was not read by him.) Mr Shacklady’s email also informed Mrs Arden that Mr Thomas intended to join two other parties to the proceedings and would be filing an amended defence and counter-claim.

[14] Mrs Arden responded, saying that if Mr Shacklady meant to assert that the particulars had been provided, that was denied; the further and better particulars had not been received, and a search of the electronic court file showed that they had not been filed, as r 160 of the Uniform Civil Procedure Rules would require.  The letter noted also that, notwithstanding the service of the r 444 letter, it had not previously been suggested that the further and better particulars had been provided.

The hearing of the r 374 application

[15] At the hearing of the application on 27 September 2012, there was no appearance for Mr Thomas.  In submissions both written and oral, counsel for the Bank pointed out that although the proceeding was commenced in October 2011, a properly particularised defence had still not been provided, and the Bank was unable to proceed to trial.  Mr Thomas had not explained his default, put forward any proposal to remedy it or indicated any willingness to comply with the court order.  The primary judge was referred to this court’s consideration of r 374 in Johnson v Public Trustee of Queensland.[1]  That case, in turn, referred to the Federal Court’s identification in Lenijamar Pty Ltd v AGC (Advances) Ltd[2] of two situations which were “obvious candidates” for the exercise of the power conferred by a similar rule.  The Bank relied on the second of the categories described by the Federal Court, of

“non-compliance [which was] continuing and occasioning unnecessary delay, expense or other prejudice to the respondent”.[3]

[16] Counsel for the Bank drew the primary judge’s attention to the exchange of emails between Mrs Arden and Mr Shacklady.  Among other submissions, she made the point that Mrs Arden had informed Mr Shacklady that no particulars had been received.  If there were any substance in Mr Shacklady’s assertion that they had been delivered on 17 August, it would have been a simple matter to provide another copy in response.

[17] The primary judge noted that Mr Shacklady’s email asserted delivery of the particulars on 17 August.  He inquired whether Mr Thomas had delivered anything purporting to be particulars on that date.  Counsel said that her instructing solicitor had made inquiries the preceding day and had confirmed that nothing had been received by facsimile, email or letter; she had also checked her firm’s delivery log and established that nothing had been delivered by hand.  The provision of those details from the bar table should not have been encouraged,  but counsel also, more properly, pointed to Mrs Arden’s affidavit made the same day, in which it was deposed, without that level of detail, that no particulars had been received.

[18] The primary judge then said, without elaboration, that he would make an order in accordance with the draft provided by the Bank.  That order gave the Bank judgment against Mr Thomas in the amount of some $11 million and required him to pay the Bank’s costs of the application, to be assessed on the indemnity basis, and the balance of the costs of the proceeding, to be assessed on the standard basis.

The contentions on appeal

[19] Mr Thomas appealed that order on a large number of grounds, which included complaints about the circumstances in which the original order for provision of particulars was made.  Those grounds are irrelevant to whether the order under appeal was properly made.  What does require consideration is his complaint that judgment should not have been given in circumstances where his solicitor had advised that the request for particulars had been satisfied on 17 August, that he was absent overseas, and that he sought an adjournment of a week.

[20] By consent, two sets of further and better particulars were placed before this court.  One was dated 7 June 2012, at a time when Mr Thomas was still unrepresented; there was no evidence about what might have been done with it.  Another set of particulars, which was identical but for the fact that it was expressed to be in response to the order of 8 August 2012, was also in the material and was, presumably, the document referred to by Mr Shacklady.

[21] Counsel for the Bank reminded the court of the caution to be exercised in reviewing matters of practice and procedure.[4]  There was, he said, no error identified in the primary judge’s exercise of discretion.  The primary judge had before him a defence which was deficient in form: it did not plead the primary facts to support the allegation that the guarantee was rendered void by a breach of the Code of Banking Practice or by the extension of the facility offers.  The suggestion in the solicitor’s email that the particulars had been provided was not the subject of any sworn evidence before the primary judge, and it was not plausible.

[22] If the particulars bearing the June date had been delivered, it was inconceivable that Mr Thomas did not say so in his affidavit of 8 August 2012, or in response to service of the order for provision of particulars or the subsequent r 444 letter.  On Mr Shacklady’s indication, at the time when the r 444 letter was sent on 31 August, Mr Thomas had already provided another set of particulars on 17 August; but he did not react to the r 444 letter by pointing that out.  When the Bank’s solicitors advised Mr Shacklady that they had not received the particulars, he did not respond, although it would have been an obvious step to have Mr Thomas swear an affidavit exhibiting them, or at least to provide a copy to the Bank’s solicitors.  It was not explained why, if Mr Shacklady were overseas, another member of his firm could not have appeared on the application.

[23] Counsel for the Bank submitted that what the primary judge had taken into account could be deduced from the material read before him and from the submissions made, which had outlined the relevant facts.  The information before the judge included both Mr Thomas’ claim to have delivered the particulars and the assertion that neither he nor his solicitor was able to be present at the application.  The proceeding had begun in October 2011 and by September 2012, Mr Thomas had still not provided a properly pleaded particularised defence, thus preventing the Bank from proceeding to trial.  The case was one of an ongoing contumelious default of the type described in Lenijamar.  The trial judge, having regard to the deficient defence, the fact that the assertion that the particulars had been provided was unsupported by a copy of them, let alone sworn evidence, and the failure of Mr Thomas to show cause why an order should not be made, was justified in making the order he did.  His discretion had not miscarried.

[24] The second limb of the Bank’s argument was that, even if it were accepted that the particulars had been delivered, they were not proper particulars.  Their delivery did not constitute compliance with the order of 8 August, so that judgment would properly have been given against Mr Thomas under r 374 in any event.  To understand that submission, it is necessary to go into greater detail of both the request and the particulars.  The Bank had sought particulars of the “facts, matters and circumstances” relied on for the allegation that the facility offers were sent to the Bank’s agent, Mr Elder.  It also sought (impermissibly, in my view) a copy of any written evidence supporting the allegation as well as (permissibly, under r 222, since they were mentioned in the defence) a copy of the emails by which the amended facility offers were forwarded to Wardell Street Investments Pty Ltd.

[25] In the particulars placed before the court, Mr Thomas responded by saying the documents requested were within the Bank’s knowledge and that Elder was an agent of the Bank.  To the particulars dated 7 June 2012, at least, he annexed a copy of an email from Mr Elder to Mr Thomas and a document, presumably the attachment to the email.  It was one of the original facility offers, not the varied facility offer which was said in the defence to have been emailed.  The Bank had sought particulars of the provisions of the Code of Banking Practice breached and the substance of the allegation.  Mr Thomas’ particulars asserted that he would “be relying on the breaches of the Code of Banking Practice in totality” and that the Bank had failed or neglected to provide “such material” when the loan documentation was executed.  One could guess that “such material” was a reference to the general standard terms, but there was no indication of which provisions of the Code were said to have been breached.

[26] Finally, the Bank had sought particulars of the allegation that acceptance of the facility offer extension had the effect of voiding the guarantee, to which Mr Thomas responded as follows: the guarantee did not extend to the variation, nor had it been “tabled within the Facility Offer of 28 August 2009”; it “was affirmed… that this was true and correct” in a discussion he had held with a (named) Bank employee in December 2009; and the extension to the facility

“rendered any liability under the Personal Guarantee void due to the removal of the guarantee as evidenced by it not being contained in the Facility Offer dated 28 August 2009.”

[27] Those particulars, the Bank said, with considerable justice, did nothing to explain why the extension of the time for payment in the August 2009 variation had the effect of rendering the guarantee void.  And, it was submitted, the assertion that the defendant would rely on the “breaches of the Code of Banking Practice in totality” was tantamount to refusal to comply with the order for particulars.

[28] The Bank relied, in particular, on a decision of the Full Federal Court in Hiskey v Westpac Banking Corporation Ltd.[5]  That court upheld a primary judge’s decision, under a rule conferring similar powers to r 374, to dismiss an applicant’s claim for failure to comply with orders to provide an affidavit containing further and better particulars.  After her appeal against the dismissal of her claim was filed, the applicant had eventually filed an 83 page affidavit, purportedly pursuant to the original direction to provide particulars.  The court noted that nothing in it could be characterised as further and better particulars.

[29] In Hiskey, the Full Federal Court had regard to the analysis in Lenijamar, which it set out:

“The discretion conferred by O 10, r 7 is unconfined, except for the condition of non-compliance with a direction.  As it is impossible to foresee all of the circumstances under which the rule might be sought to be used, it is undesirable to make any exhaustive statement of the circumstances under which the power granted by the rule will appropriately be exercised.  We will not attempt to do so.  But two situations are obvious candidates for the exercise of the power: cases in which the history of non-compliance by an applicant is such as to indicate an inability or unwillingness to co-operate with the Court and the other party or parties in having the matter ready for trial within an acceptable period and cases – whatever the applicant’s state of mind or resources – in which the non-compliance is continuing and occasioning unnecessary delay, expense or other prejudice to the respondent.”[6]

The court referred also to the significance of the fact that the decision to be reviewed related to a matter of practice and procedure.  It was unnecessary to decide whether the applicant was required to show an error of principle as well as demonstrating a substantial injustice, or needed only to establish one of those criteria; neither had been demonstrated.

[30] Counsel for the Bank relied on Hiskey  both as identifying the principles on which a first instance decision of the kind would be set aside, and (in the rejection of the applicant’s affidavit) as demonstrating the correct approach in practice to documents which purported to, but did not in truth, provide particulars.

Discussion

[31] The present appeal, arising as it does out of an exercise of discretion, must, of course, be considered in accordance with the principles in House v The King.[7]  Because of the absence of reasons, this is not a case in which one can ascertain whether there has been any mistake of fact, taking into account of irrelevant considerations or failure to take into account relevant considerations.  Instead, any failure to exercise the discretion properly can be inferred only from the result; the question is whether it is “unreasonable or plainly unjust” so that “a substantial wrong has in fact occurred”.[8]

[32] In Lenijamar, the Full Federal Court said this of the power given by the cognate Federal Court rule:

“It is to be noted that the power given by this rule is conditioned on one circumstance only: the failure of a party to comply with an order of the Court directing that party to take a step in the proceeding.  There is no requirement of intentional default or contumelious conduct, although the attitude of the applicant to the default and the Court’s  judgment as to whether or not the applicant genuinely wishes the matter to go to trial within a reasonable period will usually be important factors in weighing the proper exercise of the discretion conferred by the rule.  There is no requirement of ‘inordinate and inexcusable delay’ on the part of the applicant or the applicant’s lawyers, although any such delay is likely to be a significant matter.  There is no requirement of prejudice to the respondent, although the existence of prejudice is also likely to be significant.  And it must be remembered that, in almost every case, delay adversely affects the quality of the trial and is an additional burden upon the parties.”[9]

[33] In my respectful view, this was not a case for the immediate exercise of the power under r 374.  Taking first the surrounding circumstances, there was a complaint of delay in the proceedings generally, but there was no evidence that that delay was attributable to Mr Thomas, apart from the period between May 2012 when the request for further and better particulars was delivered and the application in September 2012.  That last period of delay would have been relevant, but the attribution of responsibility for it to Mr Thomas depended on an assumption that there was nothing in Mr Shacklady’s claim that the particulars had been delivered.  There was no doubt the defence was deficient, but the solicitor had indicated an intention to amend it.

[34] More importantly, a question had been raised in the solicitor’s email as to the very premise on which the power under the rule was to be exercised.  One could not say that the jurisdictional basis for the exercise of the discretion had not been established; there was sworn evidence that the particulars had not been delivered and nothing in admissible form to say that they had.  And the bald assertion in the email that the particulars had been provided, unsupplemented by a copy of them or any sworn evidence as to the time and manner of their service, might well produce some level of incredulity.  But the fact that the existence of an issue about their provision was flagged, albeit in hearsay form, was relevant to whether the discretion should immediately be exercised.

[35] The Bank’s argument that, even had the particulars been before the primary judge, the order would have been made, cannot be accepted.  It would be an extraordinary course to give judgment summarily against a defendant for providing inadequate particulars, without affording any opportunity to rectify the deficiencies.  The usual course in those circumstances would be to give at least one opportunity to correct the defects; or possibly, where an amended defence was proposed, to permit the defendant to deliver the amended defence instead.

[36] It is worth mentioning that the facts in Hiskey v Westpac Banking Corporation Ltd do not, on closer examination, provide support for the approach taken.  In that case, the application was filed on 21 December 1999.  On 30 March 2000, the applicant was ordered to file and serve an affidavit giving particulars of the facts and circumstances relied on by her in support of her claim.  She did not do so.  There was another directions hearing in May 2000, when the time for compliance with the order was extended to July 2000.  At another directions hearing in July, a further direction was given that the applicant provide an affidavit with full particulars of her claim.  Again, she did not do so.  In August, the applicant was once more ordered to file the affidavit, but did not.  Later that month, the respondent filed a notice of motion seeking an order that the application be dismissed on the grounds of the applicant’s failure to comply with the orders.  It was set down for hearing in September 2000.

[37] At that hearing, the judge who ultimately decided the matter explained to the applicant the nature of the further and better particulars required.  He gave her six weeks within which to supply them, explaining that if she had not managed to do so he would have to dismiss her action.  When the matter came on for hearing six weeks later, the primary judge noted authorities to the effect that summary dismissal was a step of last resort only to be taken when all other avenues had been exhausted; but, he said, those avenues had been exhausted.  The Full Court’s view was that it was open to the primary judge to make the order; indeed, he had little alternative.

[38] It can be seen that in Hiskey, very considerable forbearance was extended to the unrepresented applicant before the step of giving judgment was taken.  The present case is very different.  It was not one in which all avenues had been exhausted; indeed, there was an obvious avenue which should have been taken, of giving Mr Thomas the opportunity to make good the claim that he had served the particulars.  The conduct of his solicitor in seeking an adjournment was remarkably laissez-faire.  Nonetheless, in view of the consequences of proceeding, the proper course would have been to adjourn the application for a week, as sought, with a direction that Mr Thomas file an affidavit setting out in detail what it was he had done to serve the particulars as claimed, providing any documentary evidence of their forwarding.  To adjourn the matter for a week, with the appropriate costs order, could have worked no real prejudice to the Bank.  To give judgment for some $11 million under a rule which permitted of no application to set the resulting judgment aside, in circumstances where there was a question, albeit not properly raised, as to the very basis on which the power was to be exercised under r 374, was unreasonable and constituted a substantial injustice.

[39] The orders made below should be set aside and the matter remitted to the trial division for hearing of the Bank’s application under r 374, with a direction as to an affidavit to be filed by Mr Thomas.  Although the existing costs orders must be set aside, Mr Thomas should, on any view, pay the costs of the hearing of the application on 27 September 2012.  At first instance, Mr Thomas was ordered to pay the costs of the application on an indemnity basis, but the costs of the proceeding were ordered on the standard basis.  Counsel for the Bank here explained the award of indemnity costs as the result of provision to that effect in the guarantee.  But in circumstances where validity of the guarantee has yet to be determined, I would not be prepared to order costs on an indemnity basis.

[40] I would make the following orders:

1. Allow the appeal.
2. Set aside the orders made below.
3. Remit the matter to the trial division for hearing of the respondent’s application under r 374, such hearing not to be listed earlier than a fortnight after the delivery of this judgment.
4. Direct that the appellant file, within one week of delivery of this judgment, an affidavit setting out the details of his claimed provision of further and better particulars to the respondent’s solicitors on or about 17 August 2012, specifying the means and time of delivery, identifying any human agent associated with that delivery by name and address, and annexing any documentary evidence in his possession which would support the occurrence of that delivery.
5. Order that the appellant pay the respondent’s costs of the hearing on 27 September 2012.

[41] WHITE JA:  I have read the reasons for judgment of Holmes JA and agree with all that her Honour has said and with the orders which she proposes.

[42] GOTTERSON JA: I agree with the orders proposed by Holmes JA and with the reasons given by her Honour.