Pratt v Parker[2013] QSC 147

SUPREME COURT OF QUEENSLAND

[1] The defendant makes application pursuant to r 290 UCPR to set aside a default judgment given for the plaintiff against the defendant on 26 April 2013. 

Background

[2] The action was commenced against the defendant on 15 February 2013.  The plaintiff seeks to recover a sum of $115,000 plus interest for monies loaned and advanced by the plaintiff to the defendant. 

[3] On 27 February 2013 I authorised and directed the plaintiff to serve his claim and statement of claim on the defendant by electronic transmission to an identified email address.  Information before the Court at that time indicated the defendant was residing overseas.  The plaintiff served his material in accordance with that direction.  He subsequently also forwarded the materials in hard copy to the defendant’s supposed home address in the Philippines.

[4] The defendant asserts he had ceased use of the identified email address, did not receive the Court documents by email and only received them for the first time when they were received in hard copy at his home address in the Philippines on 22 April 2013. 

[5] The application for default judgment was heard on 26 April 2013.  The defendant failed to file a notice of intention to defend or to otherwise appear before the Court and default judgment was entered against him. 

The discretion

[6] The Court is empowered by r 290 to set aside the default judgment.

[7] The considerations relevant to the exercise of the discretion conferred by r 290 include:

a)whether or not the applicant has a satisfactory explanation for the failure to appear in the action;

b)whether or not the applicant’s delay in making application to set aside the default judgment is such as to preclude the applicant from relief; and

c)whether or not the applicant has demonstrated a prima facie defence on the merits to the claim upon which the judgment is founded.[1]

[8] The defendant’s explanations for his failure to appear in the action suggest he has been remarkably unlucky.  His series of unfortunate events includes the cessation of use of his email address being the email address which was known to the plaintiff, the theft of his mobile phone the number for which was known to the plaintiff and the freezing of his computer when he went to open documents emailed to him by the plaintiff’s solicitors.  The manner in which circumstances conspired against the defendant prior to the default judgment is at the outer edges of credulity however the plaintiff does not submit I ought go behind the defendant’s explanations.  Nor does the plaintiff suggest there was any material delay in applying to set the default judgment aside once it was delivered.

[9] In the circumstances the plaintiff chose to resist the present application by arguing that the applicant has not demonstrated a prima facie defence on the merits.  If the defendant cannot point to an arguable defence on the merits there is no utility in allowing the resurrection of the action and the application should be refused.

Discussion

[10] The plaintiff pleads he loaned and advanced nine sums of money to the defendant between 6 July and 2 November 2010, that the plaintiff and defendant agreed the defendant would pay interest on those loans and that none of the money has been repaid.

[11] The defendant’s proposed defence does not dispute the payments were made but pleads they were contributions towards the sum of $150,000 as a deposit towards the purchase by the plaintiff of the defendant’s residential property and mobile retail sales business. 

[12] The defendant pleads there were two oral agreements for acquisition of the property and business by the plaintiff and one Gary Marshall – an initial agreement of July 2010 and a further agreement of 10 August 2010.  The first agreement allegedly contemplated that the money advanced towards the deposit would be refundable until the plaintiff and Mr Marshall confirmed, no earlier than 23 August, that they would proceed with the purchase of the property and business.  Under the further agreement it was allegedly agreed the payments made would be non-refundable and that in consideration for payment of the deposit monies the plaintiff and Gary Marshall would assume all responsibility for the business and property and be entitled to all income derived from the business and from letting the property.

[13] The defendant also counterclaims alleging the plaintiff repudiated the agreements on about 5 October 2010 and seeks the shortfall in the deposit payment, the amount of the property’s depreciation in value and the shortfall between the price the business has since sold for and the price the plaintiff would have paid.  The timing of the alleged repudiation does not rest well with the undisputed fact that two more of the nine advances were made after that time on 8 October and 2 November.

[14] The plaintiff and Mr Marshall each depose to there having been discussions about the potential purchase of the property and business but neither acknowledge any concluded agreement was reached.  The plaintiff acknowledges he and Mr Marshall were involved in the conduct and management of the business for a “trial period” in July and August of 2010 but asserts all income produced remained the property of the defendant. 

[15] On the other hand Kevin Franklin, who was the defendant’s manager of the business, deposes that Mr Marshall collected all daily takings of the business.  The defendant deposes that the plaintiff and Mr Marshall “received all income from the business”.  Moreover Mr Franklin and the defendant each depose that Mr Franklin was living on the residential property and that he paid rent to the plaintiff by way of deductions from his salary received for working for the business.  Curiously the quantum of the relevant income and rent is not deposed to.  No set off is pleaded.  The defendant’s affidavit also exhibited an email of 22 August 2010 in which the plaintiff acknowledged he had paid rates in respect of the property and had paid monthly insurance in respect of the business.

[16] The loans the plaintiff allegedly made to the defendant during August were described in his own bank records as “business purchase” or “business payment”.  He deposes this was because they were advances made in the expectation the monies might be applied towards the acquisition of the business.  He deposes to having advised the defendant he would not purchase the business on about 1 September 2010.  His bank records described the advances made after August as “business loan”.

[17] An email by the defendant to the plaintiff of 7 October 2010 leaves little room for doubt that by that time the defendant well knew the plaintiff did not intend to proceed with any purchase and that the defendant in requesting the payment of further money regarded such payments as loans.  The defendant wrote:

“…Anyway what has happened here is this, because you were going to buy the business, I cancelled the loan, but here in the Philippines it has to go through full approval again… Another 3-4 months wait… My credit cards are getting low so can you lend me another $15k and put it into my ANZ private account please… Have no fear I will return it all… either from the 250k loan here or from the sale of the business.”[2]

[18] The email’s use of the words “lend me another $15k” suggests one or more earlier advances were also loans rather than payments of a deposit. So too does its reference to returning “it all”.  These features provide objective evidence in support of the plaintiff’s case.  On the other hand the email asserts that the plaintiff was going to buy the business.  Notably it does not suggest any arrangement about the house but it does imply the defendant perceived there was an arrangement of such certainty regarding the acquisition of the business that the defendant cancelled a loan he had arranged in the Philippines.   The mere holding of such a perception is not positive evidence of an agreement. It might just be evidence of past wishful thinking.  However it slightly diminishes the force of the otherwise obvious inference that the email’s references to lending another amount and returning “it all” are statements against interest to the effect that the earlier advances were also loans.

[19] It is noteworthy that even on the defendant’s evidence the initial agreement alleged by him only contemplated the plaintiff’s involvement in the business would be for a “trial period” and that the advances were refundable.  Further he deposes that the further agreement, of 10 August 2010, included an agreement “to organise the paperwork for the transfer of the property and the business” when the defendant returned to Cairns 12 weeks later. 

[20] The plaintiff contends it is a determinative feature of the matter that there was no concluded and enforceable contract between the parties for the acquisition of the property or the business.  It is highly unlikely that a court would impute the intention to be legally bound, a requisite of an enforceable contract, from an oral contract for the sale of land when contracts for the sale of land other than purchase at auction must necessarily be in writing by reason of various provisions of the Property Agents and Motor Dealers Act 2000 (Qld).  This notorious fact gives rise to a strong expectation that parties to an agreement for the sale of land do not intend to be bound until a formal contract is executed although, exceptionally, the conduct of the parties may reveal an intention to make a binding agreement concerning land before a contract is signed.[3] 

[21] The plaintiff cannot call upon statutory requirements to make the same submission as forcefully regarding the purchase of the business, although it emphasises the alleged agreement was a combined one, for the sale of the land and the business, making it unlikely that there was an intention to be bound in respect of the business acquisition in the absence of a similar intention regarding the land acquisition.

[22] In the present case the evidence, albeit vague, that Mr Franklin effectively paid rent to the plaintiff arguably undermines the ordinary inference in the absence of a written contract that the parties did not intend to be bound in respect of the oral agreement regarding the land.  Similarly the undetailed evidence that the plaintiff and Mr Marshall received the income of the business arguably supports the existence of an intention to be bound regarding its acquisition.  Such arguments do not appear particularly persuasive given the whole of the evidence.  The more probable factual conclusion on the present materials is that while the plaintiff may have benefitted directly from the business and indirectly from the property (in the sense Mr Franklin was paid less by the business to the extent of rent he otherwise would have had to pay), that merely reflects that he had control of the business during a trial period after which he chose not to enter into an agreement to buy the business or property.  However I am not prepared to reach a concluded view at this early stage.  

[23] It is also necessary to bear in mind it is for the plaintiff to prove the monies advanced were repayable as loans.  The defendant contends its defence pleads a prima facie case the monies advanced were not repayable because the plaintiff agreed they were to serve as a deposit for the purchase of the business.  It is not material presently, however even on that case it appears the last two advances were not advanced to serve as part payment of the deposit.  That is, the defendant’s prima facie case appears to apply at best to the first seven advances, not the last two. 

[24] The plaintiff contends that even if that case is accepted there has been a failure of consideration and the monies were not on any view a gift and are repayable.  Its entitlement to the monies is not presently pleaded in that way but even if it were that would not be determinative. The defendant’s case does not necessarily compel the conclusion there has been a failure of consideration.  Its evidence suggests the plaintiff benefitted financially from the business and property while in control of the business.  Moreover its counter claim pleads the plaintiff repudiated the agreement. 

[25] There are obvious difficulties with its counterclaim in so far as it relates to the property in that s 59 of the Property Law Act 1974 (Qld) precludes the bringing of an action upon any contract for the sale of land unless some memorandum or note of the contract is in writing.  Further s 367(4) of the Property Agents and Motor Dealers Act 2000 (Qld) would in the present circumstances require the repayment in full of the deposit monies in so far as they relate to the purchase of the property.  These problems for the defendant’s case go particularly to the alleged agreement to purchase the property.  It would be premature to determine whether the agreement to purchase the property is so bound up with the agreement to purchase the business that these problems also infect the agreement to purchase the business so that no component of the alleged deposit can be retained.

Conclusion

[26] The above discussion exposes some obvious weaknesses and over-reaching in the defence case and counter claim.  The defendant’s case does not appear to be a strong one.  However taken at its highest there appears to be a prima facie defence in so far as it relates to the first seven of the nine payments.  In the circumstances it is an appropriate case to exercise the discretion to set aside the default judgment.

[27] Given the issues discussed herein it is appropriate that rather than order the filing of the present proposed defence and counter claim I give the defendant some opportunity to consider his position and refine the pleading of his defence and or counter claim if he intends to continue to resist the claim.

[28] As to costs while the application has been successful it was an application the defendant had to make because default judgment had been entered against it.  There is no suggestion it was obtained irregularly.  In the circumstances the defendant should pay the plaintiff’s costs on the indemnity basis.

Orders

[29] My orders are:

1.Leave is given for the filing of a notice of intention to defend and defence (and any counterclaim) by no later than 4pm on 13 June 2013.

2.If a notice of intention to defend and defence is filed by that time the application is allowed and the default judgment of 26 April 2013 is set aside.

3.The defendant pay the plaintiff’s costs of and incidental to the application on the indemnity basis.