McCullough Robertson Lawyers v Sea Slip Marinas (Aust) Pty Ltd and anor
[2008] QDC 72
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- McCullough Robertson Lawyers v Sea Slip Marinas (Aust) Pty Ltd and anor[2008] QDC 72
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McCullough Robertson Lawyers v Sea Slip Marinas (Aust) Pty Ltd and anor[2008] QDC 72
McCullough Robertson Lawyers v Sea Slip Marinas (Aust) Pty Ltd and anor[2008] QDC 72
DISTRICT COURT OF QUEENSLAND
CITATION: | McCullough Robertson Lawyers v Sea Slip Marinas (Aust) Pty Ltd and anor [2008] QDC 72 |
PARTIES: | MCCULLOUGH ROBERTSON LAWYERS (Plaintiff) v SEA SLIP MARINAS ( Aust ) PTY LTD (in liquidation) (First defendant) and LYN DULCIE BRIGHTON (Second defendant) |
FILE NO/S: | BD 1471 of 2007 |
DIVISION: | Civil |
PROCEEDING: | Application to set aside judgment |
ORIGINATING COURT: | District Court Brisbane |
DELIVERED ON: | 3 April 2008 |
DELIVERED AT: | Brisbane |
HEARING DATE: | 7 March 2008 |
JUDGE: | Rackemann DCJ |
ORDER: | The judgment obtained against the second defendant is set aside. The second defendant is permitted to withdraw her previous admission and to re-plead. |
CATCHWORDS: | Practice and procedure – Application to set aside summary judgment – Judgment as to part of claim on the basis of admissions – Judgment obtained in absence of defendants – Rule 302 Uniform Civil Procedure Rules – Whether adequate explanation for failing to appear – Whether adequate explanation for delay in bringing application to set aside – Withdrawal of admission – Whether assertion of a disputed compromise agreement in relation to outstanding fees constitutes an admission of liability as to part of the plaintiff’s claim for fees |
COUNSEL: | Mr M. Johnston of Counsel for the plaintiff Mr B. Wilson Solicitor for the second defendant |
SOLICITORS: | McCullough Robertson Lawyers for the plaintiff Mills Oakley Lawyers for the second defendant |
- [1]By a claim filed on 25 May 2007 the plaintiff commenced proceedings against each of the defendants seeking $122,617.13 together with interest and costs. That sum was claimed from the first defendant for fees for legal work performed by the plaintiff at the first defendant’s request. It was claimed against the second defendant pursuant to a guarantee for the payment of those costs. The costs have not been assessed. That is something which the second respondent wishes to have done[1].
- [2]On 20 September 2007 the plaintiff filed an application for summary judgment for part of its claim, namely $60,000, together with interest and the costs of and incidental to that application. On the return of that application, on 22 October 2007, there was no appearance for the defendants and the plaintiff was granted judgment in that sum. The first defendant has now gone into liquidation. On 7 January 2008 the plaintiff served a bankruptcy notice on the second defendant who, by an application filed on 24 January 2008, now seeks to set aside the judgment as against her. The discretion to set aside judgments given in the absence of the defendant is enlivened under r 302.
- [3]The second defendant’s failure to appear on the plaintiff’s application was explained in her affidavit of 24 January 2008. The solicitors who had been engaged to act on behalf of the defendants did not make her aware of the hearing on 22 October 2007. That firm of solicitors was served on 20 September 2007, but ceased to practice on or about 5 October 2007. That was unknown to the second defendant until a later time. The second defendant says that had she been present or represented at the hearing on 22 October 2007, she would have sought to resist the application.
- [4]It was submitted on behalf of the plaintiff that “it seems inconceivable that the defendants would not have been put on notice of the impending application and hearing for summary judgment”. It was also pointed out that there was no affidavit from the former solicitor and that the second defendant had not deposed, in terms, to being unaware of the fact of an application or at least of the plaintiff’s intention to make an application. I am not, however, prepared to reject the second defendant’s evidence that she was unaware of the hearing on 22 October, as a consequence of her solicitors’ failure duly to inform her. I accept that she has adequately explained her failure to appear on that day.
- [5]Some three months elapsed between the date of judgment and the filing of this application to set it aside. The plaintiff submitted that the delay in bringing the subject application had not been satisfactorily explained, and suggested that this application is a delaying tactic. It was also submitted that the plaintiff had suffered a degree of prejudice by proceeding to serve a bankruptcy notice on the second defendant, in reliance on the judgment.
- [6]The second defendant’s affidavit material does not state when she first became aware of the judgment or give a reason for any delay in bringing this application. It would appear that the first defendant was served with a copy of the judgment on 21 November 2007. The failure by the second defendant to explain these matters is relevant to the exercise of discretion, as too is the plaintiff’s actions in reliance upon the judgment. Neither matter is necessarily fatal to the second defendant’s application to set aside the judgment.
- [7]Counsel for the plaintiff contended that the judgment ought not be set aside because even on the second defendant’s current case, his client would still be entitled to judgment in the same amount. That became the focus of the argument.
- [8]In her affidavit of 23 January 2008, the second defendant states a number of bases upon which she would have sought to resist the application for summary judgment, had she appeared or been represented. A number of those can be disposed of relatively briefly. There was a bare allegation that the guarantee is unenforceable, for reasons which are unexplained. It was also contended that, to the extent it is otherwise enforceable, the guarantee was obtained by duress. The particulars of the duress are that the plaintiff would otherwise not continue to act for the first defendant. That would not, of itself, ordinarily justify a conclusion that the guarantee was obtained by duress.
- [9]The second defendant’s proposed amended defence asserts that:
“The plaintiff did not otherwise comply with the requirements of the Legal Profession Act in respect of seeking to recover payment of legal fees from the second defendant.”
That allegation is not further particularised. On the hearing of the application it was said to relate to disclosure requirements, but was not further pursued in argument.
- [10]The second defendant’s affidavit also refers to a proposed counter-claim, but her solicitor expressly disavowed reliance upon that, for the purposes of this application. The argument ultimately focussed on whether there continued to be a basis to conclude that the second defendant is liable for at least $60,000 of the plaintiff’s claim.
- [11]Although the plaintiff’s successful application was for summary judgment, it did not seek judgment for the whole of the claim. The plaintiff’s application proceeded as an application for judgment for part of the claim on the basis of a formal admission made in paragraph 5 of the defence. That part of the defence responded to paragraphs 15 and 17 of the Statement of Claim, in which it was alleged that the amount owed was $122,617.13. Paragraph 5 of the defence asserted that a settlement agreement had been entered into, whereby the defendants agreed to pay the sum of $60,000 in full and final satisfaction of the plaintiff’s claim. It was in this context that paragraph 5 went on to plead that “the defendants are only indebted to the plaintiff in the sum of $60,000 only”. That is the admission which was relied upon in order to obtain judgment for part of the plaintiff’s claim. Counsel for the plaintiff confirmed that I need not be concerned about whether the plaintiff would or might be entitled to summary judgment for an amount in excess of $60,000[2].
- [12]The existence of the alleged compromise agreement was expressly denied in the plaintiff’s reply. The plaintiff admitted to having made an offer of compromise with respect of its own fees (excluding counsel’s fees), but asserted that the offer was impliedly withdrawn, prior to acceptance, by the commencement of the subject proceedings. Further, it was submitted by counsel for the plaintiff that the offer had not been accepted within a reasonable time and that the first defendant’s purported acceptance of the offer, after institution of the plaintiff’s action, constituted a counter-offer (since it also proposed payment of monies over time). Those contentions appear to have substance. Accordingly, the plaintiff:
- (a)commenced and maintained its action on the basis that the first defendant was indebted to it in respect of fees, the payment of which had been guaranteed by the second defendant;
- (b)maintained its claim in the sum of $122,617.13;
- (c)denied that there was a concluded compromise agreement;
- (d)did not plead a case based on a compromise agreement, even in the alternative; and
- (e)reserved the right to pursue its full claim, on the basis that judgment had only been obtained for part thereof[3].
- [13]The plaintiff based its application for judgment, and its resistance of the subject application, on the amount which was the subject of that alleged compromise agreement, even though it did not purport to sue on the agreement, the existence of which it denies.
- [14]In support of her application to set aside the judgment, the second defendant deposed that the first defendant purported, at her direction, to accept the plaintiff’s offer of compromise; but that she was not a party to that agreement, and, to the extent paragraph 5 of the defence pleaded to the contrary, it did not reflect the instructions she had given to her then solicitors. The written submissions on behalf of the plaintiff contended that the second defendant’s reliance on not being a party to the purported settlement agreement was misconceived, since she is liable under the guarantee, which, it was said, secured the admitted indebtedness of the first defendant.
- [15]The plaintiff’s pursuit of its application for judgment was on the basis that the part of paragraph 5 of the defence that pleaded the defendants “are only indebted to the plaintiff in the sum of $60,000 only” was a formal admission that the defendants, including the second defendant, were liable for part of the plaintiff’s claim. The reference to $60,000 was however, clearly a reference to the amount which was the subject of the alleged (but denied) settlement agreement. Counsel for the plaintiff ultimately conceded as much[4]. After the hearing of this application had been stood down for a short while, counsel for the plaintiff stated “my instructions are that the plaintiff accepts that the admission as to $60,000 relates to the settlement agreement,” but submitted that sum was a debt secured by the guarantee.
- [16]The notion that in asserting an agreement to compromise (or in purporting to accept an offer of compromise or, in the second defendant’s case, instructing the first defendant to purport to accept an offer of compromise) the defendants admitted liability as to part of the plaintiff’s claim, appeared to underlie the submission that the second defendant remains liable, under the guarantee, for at least $60,000 of the plaintiff’s claim.
- [17]A compromise agreement does not necessarily involve a partial admission of an existing claim. The same may be said of the purported acceptance of an offer to compromise, or the actions of a guarantor in causing the principal debtor to purport to accept an offer of compromise. The purpose of a compromise is to put an end to an existing dispute. Such cause or causes of action as existed prior to the compromise are discharged and new causes of action arise from the existence of the compromise[5]. While the plaintiff’s claim for fees may have been the subject matter of the disputed compromise agreement, in purporting to accept the plaintiff’s settlement offer, the first defendant is not presumed to admit that its true indebtedness to the plaintiff for fees is at least $60,000. Similarly, the second defendant, in causing the principal debtor to purport to accept such an offer, is not thereby taken to make an admission that the indebtedness of the first defendant which is secured by the guarantee is at least $60,000.
- [18]A person may well be prepared to settle a dispute by paying more than what that person thinks is recoverable, but less than that which is claimed. The purported acceptance, in this case, does not appear to make an admission, either expressly or by necessary implication.
- [19]Similarly, in offering to accept $60,000 in full and final satisfaction of its fees, the plaintiff is not presumed to admit to overcharging the first defendant by the extent to which its claim exceeded the amount of the offered compromise. A compromise of the kind alleged (but denied) is simply an agreement between the parties to pay and accept a certain sum to settle a claim for outstanding fees.
- [20]Had there been a compromise, followed by a failure to pay the agreed sum, the plaintiff may have had the option of accepting the repudiation constituted by the non-payment so as to reassert its original claim; or, alternatively, affirming the compromise and suing upon it[6]. In suing for the $60,000 on the basis of an affirmed agreement of compromise, the plaintiff would be enforcing a cause of action on the agreement, rather than for fees owed. The plaintiff may not however, both affirm the compromise and also sue to judgment upon it and also pursue its original claim. To an extent that is, in effect, what the plaintiff has done by pursuing judgment for the amount of the purported compromise while continuing to assert its right to pursue its original claim. That is despite the plaintiff’s denying the existence of such an agreement; suing on the original cause of action; and not pleading a case based on the settlement agreement, even in the alternative[7].
- [21]The assertion of a compromise agreement does not, in any event, lead to the conclusion that the plaintiff must ultimately be successful against the second defendant, at least to the extent of $60,000. In that regard:
- There appears to be a sound basis for the plaintiff’s contention that no compromise agreement was concluded in any event; and
- Even had the first defendant been liable to pay the sum of $60,000 by virtue of a concluded settlement agreement, an issue would then arise as to whether payment of that sum was secured by the guarantee. By clause 3 of the guarantee, the second defendant was responsible, in the event of default, to pay the entire balance of “the debt” then outstanding[8]. That expression was defined, in clause 1.1 to mean the “current balance” and the “hearing fees”. By reference to recital C, it can be seen that the “current balance” was a reference to the amount of $41,165.36 then outstanding in respect of invoices already issued. The “hearing fees” were those payable under future invoices for work yet to be done. It would appear that what the second defendant guaranteed was payment of outstanding fees, not performance of an obligation under a settlement agreement or any other kind of indebtedness. It was not suggested that the guarantee was varied to secure performance of the disputed compromise agreement.
- [22]The second defendant, as guarantor, would ordinarily be at liberty to dispute the liability of the principal debtor which is secured under the guarantee. A subsequent compromise resulting in a discharge of the debtor, in whole or in part, may correspondingly discharge the guarantor but, subject to the terms of the guarantee, a guarantor is not ordinarily bound to accept that the true amount of indebtedness secured is at least that which the primary debtor has subsequently been willing to pay to compromise a dispute with the creditor[9]. Similarly, that summary judgment has been obtained against the first defendant would not ordinarily estop the second defendant, as guarantor, from disputing the indebtedness secured by the guarantee.
- [23]There would seem to be no sufficient basis for maintaining the judgment which was obtained against the second defendant on the basis of an admission of liability to part of the plaintiff’s claim. In that regard:
- (a)The only basis for contending that there is an admission of liability in the sum of $60,000 is by reference to the asserted compromise agreement, to which the second defendant says she was not a party.
- (b)The plaintiff denies (on apparently good bases) that any such compromise agreement was concluded, and has pleaded a cause of action based on the first defendant’s liability for fees and the second defendant’s liability, under the guarantee, for the payment of those fees. It does not plead a cause of action on or by reference to the compromise agreement.
- (c)Neither the assertion of a compromise agreement between the plaintiff and the first defendant nor the purported acceptance of a settlement offer by the first defendant, on the instructions of the second defendant, necessarily involves an admission of liability, by the second defendant, for part of the plaintiff’s claim.
- (d)To the extent that the purported compromise agreement is said to result in the second defendant becoming liable pursuant to the guarantee:
• There are apparently good bases for contending that no such agreement was concluded; and
• The guarantee does not, (or at least arguably does not) secure the performance of the first defendant’s obligations under the disputed compromise agreement.
- (e)The second defendant, as guarantor, would ordinarily be at liberty to dispute the indebtedness of the first defendant, which is secured by the guarantee.
- [24]I accept that the second defendant has not adequately explained the delay in bringing this application and that the plaintiff acted in the meantime, in reliance upon that judgment. On the other hand, I accept the plaintiff’s explanation for failing to appear or to be represented on the day judgment was granted. Further, for the reasons stated, I do not consider that there is a sufficient basis to maintain summary judgment against her, in reliance on an admission of liability as to part of the plaintiff’s claim.
- [25]On balance, I am prepared to exercise my discretion to set aside the judgment obtained against the second defendant, to permit her to withdraw her previous admission made contrary to instructions and to re-plead. I am also prepared, subject to hearing further submissions, to consider giving directions as to the future conduct of the proceeding.
Footnotes
[1] Third-party payers may apply for an assessment under s 335 of the Legal Profession Act 2007. Such applications can be made out of time (s 335(b)).
[2] T24 ll 1-10.
[3] See T3 of the transcript of the hearing before Martin SC DCJ on 22 October 2007.
[4] T 28.
[5] See “The Law and Practice of Compromise”: Foskett: 6th ed at p 151.
[6] This assumes that the agreement is properly characterised as a one in which the discharge would occur upon payment rather than simply in return for a promise to pay. If it were characterised as the latter, then the plaintiff would have been limited to enforcing the settlement agreement – see “The Law and Practice of Compromise” at pg 152.
[7] I note that Martin DCJ raised the possibility of the judgment which he gave being pleaded as a bar to any further claim – see T3.
[8] Under clause 4, the debtor was to be liable to pay the balance of the debt together with other nominated fees in the event of termination of the retainer.
[9] See “Modern Contract of Guarantee”: O'Donovan & Phillips at [6.700] and [11.250].