Exit Distraction Free Reading Mode
- Unreported Judgment
Houston v Smith QDC 296
DISTRICT COURT OF QUEENSLAND
Houston v Smith  QDC 296
JOHN MICHAL HOUSTON
JAN MAREE SMITH
3415 of 2015
District Court, Brisbane
21 July 2017 (ex tempore)
30 June 2017, 13 and 21 July 2017
PRACTICE AND PROCEDURE- APPLICATION TO SET ASIDE DEFAULT JUDGMENT- whether judgment should be set aside- whether adjournment should be granted
Uniform Civil Procedure Rules 1999 (Q) r 290
R v Smith  QCA 144
Yankee Doodles Proprietary Limited v Blemvale Proprietary Limited  QSC 134
Mr P. Beehre for the plaintiff
Williams and Co solicitors for the plaintiff
- HIS HONOUR: This is an application by the defendants to adjourn the hearing of an application to set aside default judgment. There is a cross-application by the plaintiff to dismiss the defendant’s application and alternatively, an application for security for costs. The defendant’s application was filed on the 1st of June 2017. The matter came before the Court on 30 June 2017. The first defendant indicated she wished to file more material in support of her application. At that stage, she did not have the consent of the public trustee to proceed, bearing in mind she is a prisoner serving in excess of three years imprisonment.
- The matter was also mentioned on 13 July 2017 to see how things were going. An extension was given to the defendant to file certain documents and the matter came on for hearing today. Today, the first defendant informed me she had the consent of the public trustee, but she had no further material yet available, aside from a purported answer concerning a list of assets and liabilities. She applies for an adjournment. The plaintiff opposes this application and indeed applies for the defendant’s application to be dismissed. Is it in the interests of justice to grant the adjournment application and should I dismiss the defendant’s application? It is necessary to consider the background of this matter.
- The plaintiff, Mr Houston, issued a claim and a statement of claim from the District Court on 1 December 2015, document 1. In the claim and statement of claim, the plaintiff claimed damages for money had and received by the first defendant to the plaintiff’s use by reason of her misappropriating his funds. There was a further claim for a declaration that he was entitled, as against the first defendant, for an equitable charge or lien to the value of the misappropriated funds over the property situated at 117 Carpenter Way, Sandstone Point Queensland. Further, he claimed to be able to trace the misappropriated funds and claimed damages in the amount sought. He further claimed damages for money had and received by the second defendant and a declaration that the second defendant held a sum equal to misappropriated funds upon a constructive trust in favour of the plaintiff and claimed a declaration that the plaintiff was entitled, as against the second defendant, to an equitable charge or lien to the value of the misappropriated funds on the property of 117 Carpenter Way, Sandstone Point.
- In the statement of claim, the plaintiff alleged he became friendly with the first defendant. She persuaded him to register a company and the first defendant became the person in charge of all bookkeeping and accountancy matters. It is alleged that she fraudulently took $20,000 and then $85,000 and a further total of $236,982. As a result, these claims were brought.
- I am satisfied on the evidence the first and second defendants were served with the claim and statement of claim about 2.13 pm on the 16th of September 2015. See documents 2 and 3.
- On the 8th of October 2015, on application for a Mareva injunction was sought. The application was supported by the affidavit of Peter Williams. There was a further affidavit by the plaintiff, which supported it. The allegations contained in the statement of claim, are detailed in a statement by the plaintiff to the police of some 88 pages, which, in my opinion, clearly prove the misappropriation by the first defendant.
- On the 8th of October 2013, Butler SC DCJ made the Mareva order. The material in support of the Mareva order and the order was served on the defendants on 15 October 2015 at 1.37 pm. Document 10. I am satisfied it was so served. There was no evidence of the contrary.
- An amended statement of claim was filed on the 29th of April 2016, which was served on the defendants on 29 April 2016. Document 20. I am also satisfied that was served.
- On 7 September 2016, the plaintiff applied to the Court for judgment against the first and second defendants in default of filing a notice of intention to defend, pursuant to r 288; a declaration the plaintiff was entitled as against the defendant to an equitable charge or lien of the total amount ordered over the property at 117 Carpenter Way, Sandstone Point Queensland; a declaration that the first and second defendants held a sum of money equal to the total amount ordered upon constructive trust in favour of the plaintiff; an amount ordered as money had and received by the defendants for the plaintiff’s use; an order that the plaintiff was entitled to trace the total amount misappropriated into the property; an order that the defendants pay the sum of $232,582 and $171,000 or so in interest, together with damages in the sum of $70,896.38 and, that Mr Sheehy, a solicitor, be appointed receiver of the property. An order was sought that the receiver be entitled to sell the property and discharge any liability secured against the property, pay his costs and expenses, pay outstanding capital gains and GST and pay the balance to the plaintiff in discharge of moneys owing. An affidavit of debt was filed in support of that application and a detailed case outline was filed.
- Now, it is important to realise that on 1 May 2016, the first defendant had pleaded guilty to two counts of fraud. She was convicted and sentenced to five years’ imprisonment, suspended after serving two years, with an operational period of five years. She appealed that sentence to the Court of Appeal, which was dismissed. See R v Smith  QCA 144.The Court of Appeal found the applicant was in charge of all bookkeeping and accountancy matters for Mr Houston, the plaintiff.The fraud occurred over about four years and eight months, from January 2007 to August 2011.During the period of the fraud, she used the Netbank facility to transfer sums of money to her account, on over 500 occasions.She fraudulently applied to her own use living expenses in the sum of $150,000. $50,000 was repaid in August 2011.She made attempts to cover her tracks.Three fake documents were created.She declined to participate in an interview.She pleaded guilty on the first day of the trial.She attempted to lead fresh evidence, but that was rejected on appeal and the application for leave to appeal against sentence was dismissed.
- The application for judgment in default was served on the public trustee and on the defendants at the Brisbane Women’s Correctional Centre at 2.11 pm on 13 September 2016, through a staff member –document 25. An affidavit of the plaintiff was filed and that of the solicitor. Judge McGill granted judgment in default of appearance on 19 September 2016, ordering:
- The first defendant pay the plaintiff $400,889.50, including $147,010.53 by way of interest and including a claim for unliquidated damages assessed in the sum of $70,896.38.
- The second defendant pay $329,993.12 by way of interest.
- A declaration the plaintiff was entitled as against the second defendant to an equitable charge in lien, to the value of the total amount ordered over the property at 117 Carpenter Way, Sandstone Point.
- A declaration the first and second defendants were liable in respect of the judgments against them upon a constructive trust in favour of the plaintiff.
- That Mr Sheehy be appointed receiver of that property, with the powers set out in that application.
- On 12 January 2017, the receiver applied to the Court for an order that any and all occupants of the property situated at 117 Carpenter Way deliver vacant possession. Judge Koppenol ordered vacant possession on 30 January 2017. It is in that context that on 1 June 2017, many months after the proceedings were initially served and not defended, the defendant has applied to set aside this judgment. In a very short affidavit filed 1 June 2017, the defendants alleged that the property was purchased with money from an inheritance from the first defendant’s parents and they were the only moneys used to purchase the property and she is the trustee of the family trust.
- At no stage during the proceedings or since the orders were made by the court as the first or second defendant, filed any material in response to any application, affidavit or other material filed in these proceedings. She failed to comply with an order requiring her to provide a list of assets and liabilities, but has belatedly filed that today. The receiver has been appointed the properties sold and the proceeds have been distributed to Mr Houston, pursuant to Court orders. The Court of Appeal decision in the criminal matters was handed down on 23 June 2017. As I said, at no stage has there been any response to the allegations made in the pleadings or affidavits. It is clear the evidence shows the first defendant deliberately took steps to cover the fraud. I accept, by reason of the decision of the Court of Appeal, there has been a profound effect on Mr Houston. Aside from emotional effects, he was found to owe a significant sum of money in unpaid taxes and had to enter into an agreement to pay the ATO and was left with other debts.
- I also note that the Court of Appeal refused leave to grant the first defendant the prospect of leading further evidence because the evidence could have reasonably been obtained and used at the time of her sentence. The new evidence was said to be probative as to the alleged forging of bank statements, but it was found to be a hopeless proposition by the Court of Appeal. The police had evidence the first defendant had taken at least $232,992. She agreed to plead guilty to the lesser amount of $150,000. Of course, that does not bind the civil proceedings. She confirmed $50,000 was paid back to him. The full extent of the fraud is not known and not admitted to. The bank accounts cover the period January 2007 until August 2011. The company was incorporated in 2004 and the first defendant commenced working as the bookkeeper from June of that year. So, from mid-2004 until January 2007, no one knows exactly how much was stolen and, indeed, no claim was made for funds misappropriated during that period.
- I note that the plaintiff submits that they have not actually been served with any documents with respect to the matter. The defendants have been aware of the solicitor’s address. This has resulted in a failure to comply with r 31(5) of the Uniform Civil Procedure Rules, but the reality is they do have those documents, and I would not be disposed to dismiss the application on that basis alone.
- There are other irregularities with the application. Firstly, it does not comply with r 26, and the affidavit is grossly deficient. Again, if that were the only point, I would not be disposed to dismiss the matter on the basis that the proper rule is not referred to.
- It seems clear to me that r 290 is relied upon. It has been previously held that relevant considerations to be taken into account in exercising the discretion conferred by r 290 are:
- (a)Whether there is a good reason why the defendant failed to file a defence;
- (b)Whether there is any delay by the defendant bringing the application;
- (c)The defendant’s conduct in the action before and after judgment;
- (d)Good faith;
- (e)Prima facie defence on the merits; and
- (f)Prejudice to the plaintiff.
- I am not satisfied, bearing in mind that the original proceedings were served almost two years ago now, that there is any good reason provided as to why the defendants did not file a defence. The claimant’s statement of claim was served on her, as was the amended claim. The application and supporting affidavits freezing the assets were also served, as were the orders concerning the appointment of a receiver. There has been significant delay in bringing the application. The judgment in default was made by the Court in September 2016, over 10 months ago now. There is no good reason for the delay. Now, obviously enough, the house is now sold.
- The conduct by the first defendant cannot be ignored. I infer she has ignored the claimant’s statement of claim and deliberately did not comply with the requirement to provide a list of assets and liabilities. I suspect it may have been due to the criminal proceedings, but that provides no excuse. Perhaps privilege could have been claimed; it was not.
- There is no prima facie defence on the merits on the material. There is no defence drafted. In that regard, I take into account that which was stated by Justice Atkinson in Yankee Doodles Proprietary Limited v Blemvale Proprietary Limited  QSC 134.This is a regularly entered judgment.There was no plausible defence raised.Assertions made in the affidavit and from the bar table do not establish the truth of what is alleged.There is no evidentiary basis to set aside the default judgment ordered.There is no denial that money has been stolen; in fact, Ms Smith seems remorseful today.It is not suggested the judgment is wrong.
- Regardless, it would seem to me, with this judgment in place, a warrant of possession could have been taken over the property anyhow. I am satisfied that tracing may occur in this case. And over and beyond all those matters, there would be significant prejudice to Mr Houston if the orders were set aside. The proceeds of the sale of the real estate have been paid out to him. It would cause him considerable distress. I am satisfied, on all of the evidence, the effect of the first defendant’s actions made a huge impact on his life, and he would incur considerable costs if that were to happen. The serious delay in this matter would cause prejudice to him and affect the justness of the case.
- I considered carefully Ms Smith’s submissions today. The reality is she is in jail, but she has had more than sufficient time to obtain material relevant to this application. As I said, I am satisfied she was served with the relevant documents despite that which she stated from the bar table.
- In all of the circumstances, I am not satisfied, for the reasons I have mentioned, it is in the interests of justice to adjourn the application. There is insufficient evidence to support the application; it follows, therefore, that I dismiss the defendant’s application to set aside the default judgment. Yes, Mr Beehre, what other orders do you seek? …
- Published Case Name:
Houston v Smith
- Shortened Case Name:
Houston v Smith
 QDC 296
21 Jul 2017