Carr v Rynah Pty Ltd[2003] QDC 113

CIVIL JURISDICTION

JUDGE O'SULLIVAN

and

BRISBANE

DATE 28/03/2003

JUDGMENT

HER HONOUR: This is an application for a judgment to be set aside. Three questions arise. The first is whether or not the defendant has given a satisfactory explanation for its failure leading to the judgment in the first place. The second is whether or not there has been any delay in making the application to set aside. The third is whether or not the defendant has a prima facie defence on the merits to the claim on which the judgment is founded.

Justice McPherson said in National Mutual Life Association of Australasia Ltd v Oasis Developments Pty Ltd [1983] 2 QdR 441 that the third factor, the prima facie defence, is “the most cogent one”. It is clear from the authorities that delay prior to judgment must be weighed against the other matters relevant to the discretion including, particularly, the existence of a defence, and extent to which delay and possible prejudice affected the matter.

A prima facie defence on the merits must be shown whether in the pleading, or by affidavit; I respectfully agree with Judge Wilson SC in his decision in Prus-Butwilowicz v Moxey [2002] QDC 166.

To quote Justice McPherson again in National Mutual Life Association of Australasia Ltd v Oasis Developments Pty Ltd, “It is not often a defendant who has an apparently good ground defence would be refused the opportunity of defending even though a lengthy interval of time had elapsed provided that no irreparable injustice is thereby done to the plaintiff.” This was cited by Judge Forde in a decision of Smith v Western Metals Copper Ltd and Others [2003] QDC 006 and was cited with approval by the Court of Appeal in National Australia Bank Ltd v Singh [1995] 1 QdR 377.

I have obtained some assistance from a decision of Tonkin v Johnson [1999] 2 QdR 318. To quote from that decision,

I have also obtained assistance from the decision of Justice Holmes in Telco Australia Ltd v Favell [2002] QSC 208. In that case the explanation was that the applicant did not realise the ramifications in failing to provide instructions. Justice Holmes found that was not a satisfactory explanation of failure to defend, but said that while that factor may be a powerful consideration in deciding whether judgment should be set aside, she doubted that it alone can be determinative where there is no extreme delay, and no suggestion of prejudice to the respondent.

She considered, and I respectfully agree, that it is appropriate to consider the arguments as to the merits of the proposed defence. The affidavit material reveals that the defendant did not understand the gravity of entering judgment and understood the matter ought be resolved by the broker and/or HIH claims support, or by some other authority.

Affidavit material makes it plain that Mr Sullivan did not read the letter advising judgment would be entered into, and simply forwarded it to his insurance broker. He also did not read the letter advising that judgment had been entered.

There was a period of 25 months between the date for the defence, 21 February 2001, and the date of the hearing of the application to set aside. Because of the length of this delay, I have given the application to set aside some thought.

I adopt the words of Justice McPherson in Troiani v Alfrost Properties Pty Ltd [2002] QCA 281, “Unimpressive though some of this explanation for delay may be, I regard it as enough to provide a sufficient explanation of the delay for the purpose of letting the defendants in to defend the action, given that the defendant has shown a defence on the merits.”

I note that Justice McPherson also said in Troiani: “Suffice to say that much less significance is now ascribed to delay than may have been a case at some times in the past.”

It is true that the defendant was made aware of the existence of the default judgment on 14th November 2002, more than four months prior to this application. Mr Sullivan says he became aware of the judgment when he read the letter from the solicitors for the plaintiff on 28th January 2003. Perhaps the sequence of events is somewhat similar to that described by Judge Forde in the authority of Smith to which I have already referred, in which he found the explanation to be “somewhat thin in parts” and he also said there was “a tardy approach to the urgent nature of such an application”.

The solicitor for the respondent to this application went further, and described the conduct of the defendant as “extremely tardy and tantamount to not acting in good faith”. When I pressed him as to his reference to good faith, he informed me that this was connected with the failure to file affidavit material from the insurance broker.

FAI went into liquidation on 15th March 2001, and many of the problems that have occurred are as the result of enquiries as to indemnity. I find that there was prompt action when the question of indemnity was resolved, but that has been very recently, and I can appreciate that the respondent to this application may feel that considerable latitude has been given. Difficulties arose because the former solicitor was not instructed by the insurer which meant that when judgment was entered, it was not sent to that solicitor. It is true that there is no affidavit of any insurance broker, but I do not consider that is a fatal, or even a particularly strong, factor. There is, as Judge Forde said in Smith, “a question mark over the explanation”. But as he said in that judgment, if there is a defence on the merits, a failure to explain though it may be the subject of criticism, may not be fatal to the application to set aside.

Turning then to the defence, I consider that the extent to which there is a statutory duty, if at all, has been properly raised in the proposed defence. I consider that the proposed defence has clearly raised whether the defendant is in breach of its legal obligations, and in particular whether the measures outlined in some detail in the proposed defence fulfilled its legal obligations to the plaintiff. I find that the defendant's proposed defence does show a plausible defence in law and in fact.

The plaintiff has raised prejudice because of the passage of time and possible difficulties as to the availability of witnesses. I have given this matter some thought, and I consider it is a relevant factor, but not such as to warrant refusal of the application. It does not fall into the category of cases where compensation in an award of costs would not be sufficient. I note that Justice McPherson said in Troiani, that where defendants show a plausible defence in the merits it would be an “unusually heavy sanction” for delay if the application to set aside is refused.

I am not sure whether this is a case of fault on the part of the solicitor because the solicitor was in the position of holding no instructions due to problems arising from the FAI failure but I mention in passing that this issue has been canvassed in Troiani and it was also canvassed in the decision of Judge Wilson SC to which I referred.

I grant the application to set aside the default judgment. The applicant is to pay the respondent's costs.

-----