Laminex Group Pty Ltd v Fresh Electrical & Data Pty Ltd
[2017] QDC 181
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- Unreported Judgment
- Laminex Group Pty Ltd v Fresh Electrical & Data Pty Ltd[2017] QDC 181
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Laminex Group Pty Ltd v Fresh Electrical & Data Pty Ltd[2017] QDC 181
Laminex Group Pty Ltd v Fresh Electrical & Data Pty Ltd[2017] QDC 181
DISTRICT COURT OF QUEENSLAND
CITATION: | Laminex Group Pty Ltd v Fresh Electrical & Data Pty Ltd & Anor [2017] QDC 181 |
PARTIES: | LAMINEX GROUP PTY LTD (plaintiff) v FRESH ELECTRICAL AND DATA PTY LTD (first defendant) and MICHAEL JAMES MITCHELL (second defendant) |
FILE NO/S: | BD 894/2017 |
DIVISION: |
|
PROCEEDING: | Request for default judgment |
ORIGINATING COURT: | District Court at Brisbane |
DELIVERED ON: | 23 June 2017 |
DELIVERED AT: | Brisbane |
HEARING DATE: | Request for default judgment referred by Registrar, without oral hearing |
JUDGE: | McGill SC DCJ |
ORDER: | Request for default judgment refused |
CATCHWORDS: | PRACTICE – Default judgment – whether relief claimed within rules 283 – 287 – whether request for default judgment properly made to registrar – request refused. UCPR rr 283, 284, 287, 288. Alexander v Ajax Insurance Co Ltd [1956] VLR 436 – followed. Chen v Kevin McNamara & Son Pty Ltd (No. 2) [2012] VSCA 229 – applied. Crane Distribution Ltd v Brown [2011] QSC 90 – followed. IBM Australia Ltd v State of Queensland [2016] QSC 70 – considered. Jackson v Arawak Holdings Pty Ltd [2016] QSC 133 – followed. Platinum United II Pty Ltd v Secured Mortgage Management Ltd [2011] QCA 229 – applied. Willmott v McLeay [2013] QCA 84 – applied. |
COUNSEL: | |
SOLICITORS: | Turks Legal for the plaintiff The defendants were not represented |
- [1]On 13 March 2017 the plaintiff filed a claim and statement of claim against two defendants, which was served on 17 March 2017 on both defendants. No notice of intention to defend having been filed by either defendant, a request to the Registrar for default judgment was filed on 21 April 2017. On 11 May 2017, a Registrar referred the application for default judgment to the court constituted by a judge, on the ground that part of the amount claimed in the request for judgment was outside the scope of r 283. Hence the matter subsequently came before me.
- [2]On 13 June 2017 my associate communicated with the solicitors for the plaintiff seeking further information, which was provided in an email on 21 June 2017, which also enclosed a further affidavit, exhibiting what was deposed to be an application for credit account and agreement executed on 11 December 2015 by the first defendant, and a deed of guarantee and indemnity executed the same day by the second defendant.
The nature of the claim
- [3]By the claim the plaintiff claimed an amount of $101,197.10, a declaration that the second defendant granted an equitable charge over his interest in lands in respect of the amount of the indebtedness under the guarantee, interest in accordance with the credit agreement, and costs and expenses, including legal costs on an indemnity basis. The statement of claim alleged that on or about 11 December 2015 the plaintiff entered into an agreement with the first defendant for the supply of goods on credit, that the plaintiff issued invoices in relation to goods supplied under the agreement between 6 September 2016 and 25 November 2016, and that invoices in the amount of $95,719.14 remained outstanding.
- [4]It was further alleged that it was a term of the agreement that the first defendant pay all collection costs and expenses incurred by the plaintiff in relation to monies due and owing to the plaintiff by the first defendant, and that the plaintiff had incurred legal costs in the sum of $692 and what are said to be the plaintiff’s internal costs associated with recovering the amount owing on the invoices “and are a genuine pre-estimate of damage suffered by the plaintiff for attempting recovery of the amount owing for the invoices” in the sum of $4,785.96. The statement of claim went on to plead expressly that the recovery costs were not the costs or expenses of a debt collector, so that their recovery is not prohibited by statute.[1]
- [5]It was then alleged that on the same day the second defendant entered into a guarantee under which it agreed to guarantee payment of monies owed by the first defendant to the plaintiff. It also alleged that the second defendant was a joint tenant of an estate in fee simple in certain land, and that under the guarantee he charged his interest in the land to secure “its indebtedness” to the plaintiff. It was finally alleged that it was a term of the agreement that the first defendant pay interest on monies due at a rate calculated by reference to a rate fixed under an Act, and that interest was claimed, calculated in accordance with a rate.
- [6]It is apparent from the credit agreement and guarantee exhibited to the affidavit forwarded with the email on 21 June 2017 that almost everything in that statement of claim was actually wrong. The document headed “application for credit account and agreement” exhibited to that affidavit identified the applicant as “Michael James Mitchell”, the second defendant, said to be trading with a registered business name “Fresh Electrical and Data.” By cl. 5.2 of the terms and conditions of sale attached to that document, all amounts owing to the company on account of goods supplied to “you”[2]were due and payable by the last working day of the month following dispatch of invoices to “you”. It follows that in order to show that time for payment for any particular goods supplied to the second defendant had arrived it was necessary to show that goods were supplied to him on credit, an invoice in respect of those goods was dispatched to him, and that the last working day of the month following the date of that dispatch has arrived. I regard what was said in para 4 of the statement of claim as wholly inadequate to establish the factual basis for payment under that clause.
- [7]Clause 5.4(d) provided that “if you fail to pay in accordance with this cl. 5, we may… recover all collection costs and expenses incurred in collecting overdue accounts…”. Again, on the face of it, this was an agreement with the second defendant, and it was a claim for an indemnity in respect of whatever costs and expenses had been actually incurred, presumably reasonably incurred. It was therefore an unliquidated claim.[3]
- [8]As to the proposition that the second defendant guaranteed payment of money owing by the first defendant, the difficulty with that is that, although there is a document “deed of guarantee and indemnity” which does seem to have been signed on 11 December 2015 by the second defendant, clause 2 guaranteed due and punctual payment of monies payable “by the customer” for goods and services or both supplied from time to time to the customer. The term “the customer” was defined within cl. 1 of the deed by reference to a name to be filled in, in a large blank space in the middle of cl. 1, after the words “guarantor has requested Laminex to supply goods or services from time to time on credit to.” In the document exhibited to the affidavit, that space is still blank. Insofar as these words by description identify anyone, it was the applicant in the application for the credit account and agreement, who was the second defendant. Apart from that, the guarantee and indemnity seems to me to suffer from the deficiency that it does not identify the principal debtor. The existence of a principal debtor is a fundamental requirement of a guarantee.
- [9]Clause 3 provides for an indemnity, but against “any loss or expenses incurred because the customer fails to pay the secured monies.” If there was no identified customer, there can be no liability under that clause either, and if the customer was the second defendant, an indemnity by him is meaningless. It is very difficult to see how this document is effective as a guarantee or indemnity. In those circumstances it is difficult to see how the charge clause in cl. 9 of the deed is effective, or indeed that it secures any amount, because it is only money owing by the guarantor which is secured.
- [10]With regard to interest, cl. 5.4(b) of the terms and conditions of sale contains an agreement that “we may…charge interest on debts at 4% above the rate prescribed pursuant to the Penalty Interest Rates Act 1983 (Victoria) from time to time.” There was however no allegation that any particular rate was at any relevant time prescribed under that Act. Section 2(1) of that Act provides:
“Penalty interest rate
- (1)The penalty interest rate is the interest rate expressed as a percentage fixed by the Attorney-General from time to time by notice published in the Government Gazette.”
That a particular rate was so fixed at a particular time is a matter which, in my view, ought to have been alleged in the pleading.
- [11]I should say something as well about the claim for legal costs on an indemnity basis. Whether a party to a proceeding is entitled to the costs on this basis in respect of a proceeding such as this has been considered at appellate level.
Authorities
- [12]The effect of a provision in a contract between parties to a court proceeding on an entitlement to costs in respect of that proceeding was considered by the Court of Appeal in Platinum United II Pty Ltd v Secured Mortgage Management Ltd [2011] QCA 229. In that matter Fraser JA with whom the other members of the court agreed said at [6]:
“The general principle is that a mortgagee is ordinarily limited to party and party costs (or “the standard basis of assessment” in r 702 of the Uniform Civil Procedure Rules 1999 (Qld) (“UCPR”)) but a court will usually exercise the discretion as to costs to give effect to a contractual provision which “plainly and unambiguously” provides for taxation on another basis. It is doubtful whether cl 15.1(C) of the agreement confers an entitlement to have costs assessed on the indemnity basis in sufficiently clear terms to justify the exercise of that discretion, but the expression “on an indemnity basis” in cl 17.4(a) clearly comprehends “the indemnity basis of assessment” of costs provided for in UCPR r 703(1).”
- [13]The relevant provision of clause 17.4(a) referred expressly to an indemnity for all legal fees “on an indemnity basis”, whereas clause 15.1 contained an indemnity “against any loss, expense or tax which the lender may reasonably sustain, incur or be required to pay as a consequence of … the enforcement of all or any of the securities under all or any of the transaction documents.”
- [14]In Chen v Kevin McNamara & Son Pty Ltd (No. 2) [2012] VSCA 229 the Victorian Court of Appeal said at [8]:
“An agreement to pay costs will be construed as an agreement to pay costs on a party and party basis, unless it is plain from its terms that costs are to be paid on a special basis. Where the terms plainly and unambiguously provide for costs to be assessed on some special basis, the court will take such a provision into account but it is not bound to give effect to any extra-curial contract as to costs. An agreement to pay costs on a special basis is only a factor informing the exercise of the court‘s discretion, but not requiring the exercise of that discretion in a particular way. Generally however, where the parties have unmistakeably agreed to the making of a special costs order, such a term will be given effect to unless there is some other discretionary consideration that militates against the making of such an order.”
- [15]Both of those passages were cited by the Court of Appeal in Willmott v McLeay [2013] QCA 84, where it was held that a clause in the contract which entitled the seller to claim damages for loss suffered from the buyer’s default including legal costs on an indemnity basis did not “plainly and unambiguously” provide for the payment of costs on an indemnity basis except in circumstances where there was a claim for damages for loss suffered from the buyer’s default: [29]. This decision suggests that the approach of the Court of Appeal in such circumstances is a fairly strict one. There are other cases where effect has been given to a clear clause, including Jackson v Arawak Holdings Pty Ltd [2016] QSC 133 at [5].
- [16]The appeal decisions were analysed in some detail by Martin J in IBM Australia Ltd v State of Queensland [2016] QSC 70 where an issue arose in relation to an entitlement to costs under an agreement compromising certain matters of dispute in relation to a contract without any admission of liability by either party: [10]. One of the clauses of that contract quoted at [2] provided:
“If the State makes a claim against an IBM party which is the subject of the State covenant or State release, then the State fully indemnifies each IBM party against any liability (including the amount of any judgment, settlement sum and legal and other costs) incurred by the IBM party as a result of that claim.”
- [17]It was held that that clause did apply in the particular circumstances then under consideration, and his Honour went on to consider whether the effect of that clause was that it was a “plain and unambiguous” provision for the payment of costs on the indemnity basis. His Honour noted that although that test had arisen in the context of liability under a mortgage, it had also been applied in circumstances where there was no mortgage, and went on to apply it in that case to the contract. His Honour observed at [18], in relation to the decision of the Court of Appeal in Platinum United (supra), that “the specific reference to ‘legal fees on an indemnity basis’ in clause 17.4(a) would suggest that the very general words in clause 15.1 would not be construed to include indemnity costs.” His Honour’s judgment was comprehensive and, with respect, very useful. His conclusions were set out at paragraphs [25]-[27] as follows:
“[25] It is also appropriate to take into account the nature of the indemnity under consideration. The parties had settled a very large dispute and had set out, in some detail, the manner in which the conflict was to be brought to an end. When clause 5.1(d) speaks of “fully indemnifies” the word “fully” is not mere surplusage. It may be regarded as an intensifier but it is one which applies to “any liability” and it is a full indemnity for any liability – where specific mention is made of costs.
[26] In ordinary circumstances, assessment on the standard basis is the default measure. But, in this case, a sensible, commercial construction arrives at a plain and unambiguous meaning, namely, that clause 5.1 (d) should be construed as entitling IBM to indemnity costs.
[27] The contractual provision does not control the exercise of discretion, but there is nothing which would suggest that an order for indemnity costs is inappropriate.”
- [18]The wording of the clause in this case seems to me to fall into the same general description as the first clause which the Court of Appeal in Platinum United did not regard as clearly and unambiguously showing an entitlement to indemnity costs. In my view on the authorities there is no contractual entitlement to indemnity costs under this agreement, even assuming that all of its other deficiencies could be overcome, and accordingly insofar as the plaintiff is claiming legal costs on an indemnity basis it has no contractual right to them. It was not submitted that the plaintiff had any other basis which would justify exercising the discretion so as to order indemnity costs, and there is nothing obvious exposed in the material before me.
- [19]Overall, it seems to me that, on the basis of the material exhibited to the recent affidavit, the statement of claim as it stands alleges claims which do not in fact exist.[4]
Procedural problems
- [20]On the basis of the pleading however, what is sought is a money judgment, and equitable relief by way of declaration against the second defendant. In addition, interest is sought on a particular sum from 1 January 2017, and the payment of all costs and expenses including all legal costs on an indemnity basis.
- [21]The rules in relation to default judgment are set out in Division 2 of Part 1 of Chapter 9 of the UCPR. Rule 283 permits the court constituted by a Registrar to give judgment if the plaintiff files a request for judgment when the plaintiff’s claim is for a debt or liquidated demand with or without interest, if the request is for judgment for an amount not more than the amount claimed together with interest calculated to the date of judgment at the rate specified in the claim or in a Practice Direction for the Civil Proceedings Act 2011 s 58, and for the costs of issuing the claim, the costs of obtaining judgment and any other fees and payments to the extent they have been reasonably incurred and paid.
- [22]It is true that on the pleading, part of the plaintiff’s claim is for a debt or liquidated demand, but insofar as the plaintiff is claiming “collection costs and expenses” that is not a liquidated sum, and the claim for such matters does not fall within r 283. Insofar as the plaintiff is claiming a declaration, that also does not fall within r 283. Rule 284 deals with a claim for unliquidated damages with or without another claim, and authorises the court constituted by a Registrar to give judgment if the plaintiff files a request for a judgment conditional on the assessment of damages by the court under Chapter 13, Part 8. That was not done in the present case, and accordingly the Registrar had no power under r 284 to give default judgment insofar as the claim was one for unliquidated damages.
- [23]Rules 285 and 286 are concerned with a claim for detention of goods and a claim for possession of land, and they need not be further considered. Rule 287 applies if a plaintiff’s claims for relief against a defendant in default include two or more claims for relief mentioned in rules 283 to 286, and no other claim. The effect of that rule is that the Registrar can deal with all such matters. That would have permitted the Registrar to deal with both the liquidated and unliquidated money claims, but it does not permit the Registrar to deal with the claim for equitable relief.
- [24]It is of course possible for the Registrar to deal with the request for default judgment in the present case if the claim for equitable relief is abandoned,[5]but in circumstances where the request for default judgment did not identify that that was the situation, the true position is that there was no power in the Registrar to give judgment on the request for default judgment which was filed by the plaintiff on 21 April 2017. That is the request which has been referred to me, but in considering it I am considering what ought to be done by a Registrar in respect of a request for default judgment. Because it was not made in accordance with the rules, what ought to be done is that default judgment should be refused.
- [25]If a plaintiff seeks judgment by default in respect of matters not within those rules, the appropriate course is to apply to the court for judgment under r 288. A court may give the judgment it considers justified on the pleadings under that rule, but only “on the application.” There is no such application before me, and accordingly I cannot give the judgment that I consider is justified on the pleadings, even if I thought that some form of judgment for the plaintiff was justified on this pleading, which in the light of the information now available to me I do not. In those circumstances, I am not disposed to wave the plaintiff’s failure to comply with the prerequisite in r 288, assuming I otherwise have power to do so.
- [26]It is therefore unnecessary to decide in the present case whether the fact that interest was claimed at a rate which was neither specified in the claim nor limited to the rate prescribed under the practice direction for the Civil Proceedings Act 2011 s 58 meant that default judgment could not be given for the liquidated part of the claim under r 283, or to consider whether a Registrar on a request for judgment under r 283 may give judgment for costs other than on the standard basis. Rule 694 provides:
“694 Default judgment
If a default judgment is given with costs under chapter 9, part 1, the registrar must fix the costs in accordance with the prescribed scale.”[6]
- [27]I accept that r 694 is only concerned with costs fixed by the Registrar, but the situation therefore is that, if a plaintiff is claiming costs other than in accordance with the scale of costs, the matter does not fall within r 283(2)(b) and it is necessary to abandon the claim for more costs, or to apply to the court for judgment under r 288.
- [28]It follows that it was completely inappropriate for the plaintiff to have filed the request for default judgment by the Registrar, and the request is refused.
Footnotes
[1] Debt Collectors (Field Agents And Collection Agents) Act 2014 s 27(1). I am not sure that a gratuitous pleading like this assuages my cynical suspicions.
[2] Defined as the applicant stated in the application, that is, the second defendant.
[3] A claim on an indemnity is an unliquidated claim unless it is for an indemnity in respect of an agreed amount: Alexander v Ajax Insurance Co Ltd [1956] VLR 436.
[4] In theory this is not a matter I should consider on this application: r 283(10); Crane Distribution Ltd v Brown [2011] QSC 90.
[5] Indeed, I suspect that if a default money judgment had been given by the Registrar in response to the request, the plaintiff would have lost any right to claim such equitable relief, as its rights would have merged in the judgment.
[6] Crane Distribution Ltd v Brown [2011] QSC 90 at [33].