DISTRICT COURT OF QUEENSLAND

1. [1]
   The defendant applies to set aside a default judgment obtained by the plaintiff on 27 March 2002. The defendant submits, first, that it should be set aside ex debito justitiae for two reasons: that the judgment by default was entered for the wrong amount; and/or that the plaintiff’s cause of action is not made out in the pleadings.

In the alternative the defendant says he has given a satisfactory explanation for his failure to appear; the delay in applying to set the judgment aside is short; and, he has a prima facie defence on the merits, which he should be allowed to argue.

Relevant History

2. [2]
   On 22 February 2002 the respondent plaintiff commenced an action claiming $210,000 arising from a transaction in which he purchased all the defendant’s interest in a mortgage over real property on the Gold Coast. The defendant, it is alleged, was to act as the plaintiff’s solicitor in this transaction. The statement of claim alleges, relevantly:

3. [3]
   The claim and statement of claim were served, by arrangement, on the defendant’s solicitors on 25 February 2002. An affidavit from the defendant’s solicitor, Mr Baxter (filed 3 April 2002) asserts he was instructed to draw and file a defence, but his filing clerk did not attend at the Registry until some time on 27 March 2002, and discovered the judgment by default had been entered that morning.
4. [4]
   The affidavits filed by the plaintiff on his own behalf include material from the Registrar of Titles, and the Queensland Law Society showing the defendant held a Practicing Certificate as a solicitor at the time of the transaction referred to in the pleadings, and until 25 July 2001; and, that the transactions touching the subject property alleged to be the subject of the mortgage purchased by the plaintiff are confused. In particular, the owner of the land, Ms Helen Thompson, asserts the original mortgage to the defendant was obtained fraudulently; that a mortgage earlier in time than the defendant’s was fraudulently released (affidavit Arthur William Sibley, filed 21 May 2002); and, that other persons in addition to the plaintiff also claimed they were entitled to be registered as first mortgagees over Ms Thompson’s land. No specific objection was taken to this material by Mr Campbell of counsel, who appeared for the defendant but he submitted, and I agree, that it has no real relevance to this application.

Judgment Irregularly Entered

5. [5]
   The application is brought under UCPR 290 which provides:

“The Court may set aside or amend a judgment by default under this Division, and any enforcement of it, on terms, including terms about costs and the giving of security, the Court considers appropriate.”

6. [6]
   The Court has an inherent jurisdiction to set aside irregular judgments: Champion v Fay [1983] 2 Qd R 416 (FC). The position was well summarised by Dixon AJ (as he then was) in Chitty v Mason (1926) VLR 419, at 423:

“A distinction is drawn between a summary judgment obtained in accordance with the rules, that is, a judgment regularly obtained and in good faith and one which is irregularly obtained or obtained in bad faith. The former will not in general be set aside except upon an affidavit of merits by the defendant; that is, upon his showing the Court he has a fairly arguable defence. The latter will be set aside in the interests of justice irrespective of the merits of the defendant’s case.”

7. [7]
   Mr Campbell referred me to, and relies upon, The Laws of Australia para 5.5(33):

“For a default judgment to be regular, it must comply strictly with the rules and be for the relief to which the plaintiff is entitled on the pleading. The record must show the plaintiff to have a right to judgment, and the judgment entered must follow the relief claimed. If these requirements are not met, the judgment is irregular and it will be set aside.

…

A judgment signed for too much is irregular.

…

When the defendant seeks to set aside an irregular judgment, the only onus is to point to the irregularity.”

8. [8]
   The defendant relies upon the statement of claim, and the two figures of $189,874.50, and $210,000.00 for his first assertion that judgment was entered for too much. The pleading, and other evidence willingly adduced by the plaintiff certainly shows he only disbursed the lower sum to the defendant but the circumstances in which that occurred are revealed in correspondence between him and the defendant, exhibited to his affidavits. In a letter to the plaintiff 14 December 2000 the defendant said, relevantly:

“I am the registered mortgagee of 23 Edinburgh Road, Benowa owned by Ms Helen Thompson. You have a copy of the mortgage which secures repayment of $210,000 by 1 November 2001 and payment of monthly interest payments at 11 per cent p.a.

…

The owner is a woman being maintained by her estranged husband. She intends to sell the property within the term of the mortgage and buy a cheaper home.

The husband has deposited the amount of the interest for the term of the mortgage in my trust account as security for payment.

I can guarantee payment of the interest to anyone who takes over the mortgage because I have the money in hand.”

On 16 December 2000 the plaintiff wrote to the defendant saying, inter alia:

“We confirm our advice to you that the Coverdale Superannuation Fund will be prepared to purchase your interests in the above first registered mortgage for the principal sum of $210.000.”

On 18 December 2000 the defendant again wrote to the plaintiff saying relevantly:

“As agreed, Mortgage 704386698 will be transferred to you as undisclosed trustee of the Coverdale Superannuation Fund for $210,000.00 today.

Prepaid interest of $20,125.50 for the period from today until 1 November 2001 can be deducted from the price leaving a balance of $189,874.50 payable as I direct. I will not require any adjustment or refund of prepaid interest if the principal sum is paid before 1 November 2001.

…

I am enclosing copies of the transfer in your favour and insurance papers noting your interest as first mortgagee.

The stamp duty, lodgement fee and any other expenses associated with the transfer will be paid by me.

Following settlement, I will act for you to have the transfer stamped and registered and to enforce the mortgage if requested and I will not advise or represent the mortgagor.”

On the same day, 18 December, the plaintiff sent a message to the defendant reading, relevantly:

“Note that you can sign transfer as my solicitor. Please hang onto the file for me.”

9. [9]
   In his proposed defence the defendant asserts (para 10) that the plaintiff’s claim for $210,000 “…based on a total failure of consideration is misconceived and unsustainable because the alleged facts do not establish a cause of action and it is alleged that only $189,874.50 was paid by the plaintiff to the defendant.” Earlier in the same pleading, however, (paras 4, and 6) the defendant alleges “…the agreed price was $210,000…” and:

“6. The defendant denies the allegations in paragraph 6 of the statement of claim that the plaintiff acted under the agreement referred to in paragraph 4(a) of the statement of claim because the agreed price was $210,000 and the material terms of the agreement included the $20,125.50 for interest would be prepaid and deducted from the price.” (My italics)

10. [10]
    I do not see how the defendant’s correspondence or proposed defence can be construed as other than an agreement that the purchase price for the defendant’s interest under the mortgage was $210,000 but, for the reasons he gave, he waived the plaintiff’s payment of part of that sum, i.e. $20,125.50. Further corroboration for this conclusion is to be found in the document the defendant sent the plaintiff as an attachment to the defendant’s letter 18 December 2000, purporting to be a transfer of the mortgage capable of registration showing the consideration (in para 4) to be $210,000.
11. [11]
    It also cannot be gainsaid, however, that on the face of the statement of claim the only liquid sum disbursed by the plaintiff before the default upon which he relies occurred (namely, the failure to transfer the mortgage) was $189,874.50 and that sum, it seems to me, is the only amount for which the plaintiff could properly enter a default judgment for a liquidated sum under r 283. Judgment for the larger sum would have required a request and assessment under r 284 (i.e. in the plaintiff’s claims for $210,000 for damages for negligence, or breach of contract). It follows I am of the view the judgment was entered for too much.
12. [12]
    Ordinarily, that would be the end of the matter but r 290 also gives the Court a discretion to amend the judgment by default. No application of that kind has yet been brought by the self-represented plaintiff.
13. [13]
    The second arm of the defendant’s argument involves an assertion the plaintiff’s statement of claim is defective because it does not allege the agreement between the plaintiff and the defendant required the defendant to attend to all the formalities of registering the transfer. Paragraphs 4-9 of the statement of claim, set out earlier, are less than precise but para 4(b) is sufficient, I think, to establish that registration and all matters associated with the formalities of the transfer, on the plaintiff’s behalf, are in issue. The defendant denies, in para 5 of his proposed defence, that it was agreed he would act as the plaintiff’s solicitor and, in an affidavit filed by leave on the second day of the hearing (12 June 2002) swore he was not engaged by the plaintiff, and referred to the letter 18 December 2000 set out earlier and, in particular, the last paragraph. He has underlined the words “Following settlement” and “if requested” and, by inference, argues that he was only offering to act for the plaintiff upon request. The argument is a desperate one, and clearly without substance. The first phrase in the sentence is abundantly clear: “Following settlement I will act for you to have the transfer stamped and registered…”; the words “if requested” plainly appear in another context: “…and to enforce the mortgage if requested…”. The sentence should be read, too, in the context of the preceding two paragraphs in the letter which purport to enclose copies of the executed transfer and say:

“The stamp duty, lodgement fee and any other expenses associated with the transfer will be paid by me.”

There can be no doubt but that the defendant offered to act as the plaintiff’s solicitor in the stamping, lodgement and registration of the transfer of the mortgage from him to the plaintiff. I am satisfied the pleading addresses the issue sufficiently, and the plaintiff has proved the defendant failed to transfer the mortgage so there is an absolute failure of consideration on the defendant’s part.

The Applicant/Defendant’s Additional Arguments

14. [14]
    Submissions were also made on the defendant’s behalf to the effect that, if the judgment had been regularly entered, the Court should exercise its discretion to set it aside. While I am of the view the quantum of the judgment is irregular it is nevertheless appropriate, in anticipation of an application from the plaintiff to amend the quantum of the judgment to a lower sum, to address these arguments from the applicant defendant.
15. [15]
    The matters which fall for consideration in this arena are not in dispute and include:

a)whether or not the defendant has given a satisfactory explanation for its failure to appear;

b)whether or not there has been any delay in making the application; and

b)whether or not the defendant has a prima facie defence on the merits to the claim on which the judgment is founded.

(see Butterworths “Civil Procedure – Queensland; Uniform Civil Procedure Rules” para 290.10; and, National Mutual Life Association of Australasia Ltd v Oasis Developments Pty Ltd [1983] 2 Qd R 441, at 449).

16. [16]
    As to the first point, Atkinson J held in Yankee Doodles Pty Ltd v Blemvale Pty Ltd, unreported (SC (Qld) 23 June 1999, BC 9903401) that a defendant/applicant is required to demonstrate:

“A very compelling reason for the failure to appear and that it has a plausible defence.”

17. [17]
    Here, the solicitors appear to accept responsibility for the delay but Mr Baxter’s affidavit does not show when the defendant gave him instructions, but only that his filing clerk did not attend to the matter until it was, just, too late. The learned author’s of Butterworths commentary (supra) say:

“There should be material that indicates how it is that the defendant came to be bound by the judgment of the Court. However, it must now be questioned whether the same principles which are developed under the rules of the Supreme Court will be applied under r 290 in relation to this issue. The philosophy of the Uniform Civil Procedure Rules as set out in r 5 would suggest that something more than giving the reason for the failure to file a notice of intention to defend would be required.”

Cases touching the question whether a judgment which has gone in because of an error or oversight committed by a party’s solicitor should tell against the client were examined in my judgment in Prus-Butwilowicz v Moxey (2002) QDC 166. The question should be weighed against the other matters relevant to the discretion including, particularly, the existence of an arguable defence and the extent to which delay, and possible prejudice, affected the matter. Here, delay is not an issue: the application was brought promptly.

18. [18]
    The submissions of Mr Campbell of counsel in support of his argument that the defendant has established a prima facie defence relied upon two matters: first, that the “failure of consideration”, if any, suffered by the plaintiff was the lower sum, and not the amount for which judgment was entered; and, secondly, an assertion that the defendant did provide the plaintiff with a transfer of the mortgage. The first point is a technical, pleading matter which for the reasons set out earlier ought not extinguish the plaintiff’s claims, and does not amount to a substantial defence. The second is a matter of credit and in light of the defendant’s letter 18 December 2000 enclosing, not the transfer but alleged copies of it, followed by confirmation of the agreement to pay stamp duty and lodgement fees and act for the plaintiff to have the transfer stamped and registered it is, as I have already remarked, a matter in which credit can be easily resolved, and must go against the defendant. In his affidavit filed 20 May 2002 the defendant asserted that he duly signed and delivered a transfer to the plaintiff but could not exhibit a copy because he no longer practiced as a solicitor and did not have custody of the relevant file. In a letter from the Queensland Law Society 23 May 2002 exhibited to the plaintiff’s affidavit 24 May 2002, however, an employee of the Society says:

“I confirm that the society holds no files conducted by Peter Jensen on your behalf, it appears that none existed.”

It seems to me impossible the defendant could ever be believed on these credit issues and, without them, he appears to have no sustainable defence to the plaintiff’s claim.

Amending a Default Judgment

19. [19]
    The Court has a discretion to allow an irregular judgment to stand by making any order which is necessary to validate what has been done: City Mutual Life Assurance Society Ltd v Giannarelli (1977) VR 463; and, in appropriate circumstances, a plaintiff may move to vary a default judgment under r 290: Building Guarantee and Discount Co Ltd v Dolesji (1967) VR 764. Although a decade apart, both were judgments of McInerney J, in the Victorian Supreme Court. In the latter, he said at 766:

“On the facts of the case it is clear therefore that the defendant is entitled ex debito justitiae to have the judgment set aside unless in the exercise of my discretion I accede to the plaintiff’s application to amend the judgment. There may be cases in which it is perfectly proper to exercise that discretion in favour of an amendment and the discretion will almost certainly be exercised where the application is one initiated by the plaintiff independently of and not in response to an application to set aside the judgment.

In the present case, the application to set aside is one made only after the defendant’s application to set aside the judgment has been instituted; it was made only on the return day of that summons and there had, prior to the making of the application to amend the judgment, been demands by the plaintiff for costs based on a taxation carried out in execution of the judgment.

Furthermore, it appears from the material filed in support the second ground of the application that the case is one in which there is a substantial conflict of fact between the plaintiff and the defendant as to whether the judgment was, as the defendant alleged and the plaintiff denies, entered in breach of an understanding between the respective solicitors. In all those circumstances, it appears to me that, in the exercise of my discretion, I should not accede to the prayer for amendment of the judgment but that I should accede to the application to set aside the judgment.”

20. [20]
    The later case involved a judgment in default of appearance for a claim, and interest payable under the agreement which gave rise to it, and for “interest on interest”. After a lengthy examination of the relevant authorities his Honour determined there had been no power to allow interest under the relevant legislation so the defendant was entitled to have it set aside ex debito justitiae subject to the discretion to amend the judgment, of which he said at 471:

“In the present case, as in (Building Guarantee and Discount Co Ltd v Doesji (1967) VR 764) the plaintiff, at the late stage of the argument, made application to me to amend the judgment. In the case cited I refused – for the reasons set out at page 766 of the Reports – the plaintiff’s application for leave to amend the judgment. In the present case, I think I should accede to the plaintiff’s application. In the first place, the defendants do not dispute the debt and it would seem fatuous not to amend the judgment to reduce it to the amount admittedly due. …”

21. [21]
    For the reasons set out earlier I am concerned the plaintiff might at all material times have been entitled, at least, to judgment for the lower sum. The issue for him is whether he wishes to apply to amend it.