Lin v CNK Global Pty Ltd[2021] QSC 166

SUPREME COURT OF QUEENSLAND

1. [1]
   The third defendant (the plaintiff by counterclaim and the applicant) sought default judgment on his counterclaim filed on 25 May 2021.  That was the second occasion on which default judgment had been requested.  The first occasion was on 15 March 2021. The Registrar refused the first request for default judgment on 22 March 2021.

2. [2]
   On 30 March 2021, the Deputy Registrar made a consent order for the third defendant to file and serve his second further amended counterclaim by 31 March 2021, and for the plaintiff to serve and file his amended answer by 17 April 2021.
3. [3]
   While the third defendant filed his second further amended defence and second further amended counterclaim, the plaintiff did not file his amended answer by the nominated date.  The plaintiff still has not filed his amended answer. 
4. [4]
   On 25 May 2021, the third defendant filed a further request for a default judgment against the plaintiff, on the basis of his counterclaim, due to the plaintiff not having filed an answer to the counterclaim.
5. [5]
   The Registrar determined that it was appropriate to refer questions to a judge, pursuant to r 982 of the Uniform Civil Procedure Rules 1999 (Qld) (UCPR). A judge may dispose of the matter, or refer it back to the registrar with the directions the judge considers appropriate.^[1]
6. [6]
   The Registrar sought directions from the Court in respect of the following questions:

1. Does a plaintiff by counterclaim require leave of the Court or a Registrar pursuant to r 377 of the UCPR to amend the relief sought in a counterclaim?

2. Can a Registrar grant default judgment against a defendant by counterclaim who is also the plaintiff to the original proceeding that has not filed and served an answer to the counterclaim or can default judgment only be granted against the defendant by counterclaim added as a result of the counterclaim and who has not filed a Notice of Intention to Defendant?

3. Can a Registrar grant the request for default judgment filed 25 May 2021 against the plaintiff/defendant by counterclaim?

4. Any other directions the Court considers appropriate.

7. [7]
   The Registrar informed the third defendant’s legal representatives that he was referring questions to the Court.  As a result, the third defendants prepared an Outline of Submissions and filed a further affidavit.^[2]
8. [8]
   The Registrar also requested that the third defendant consider whether or not he should notify the plaintiff (the defendant by counterclaim) of the referral to the Court.  While counsel for the third defendant contended that the third defendant did not need to give such notice, given default judgment was being sought, the third defendant’s counsel stated that notice was given to the plaintiff out of an abundance of caution.  A solicitor did attend the hearing on behalf of the plaintiff, although he had not been served with the documents relating to the application. While restricted as to his ability to make submissions on behalf of the plaintiff, he made some submissions opposing the grant of default judgement.
9. [9]
   Given that default judgment was being sought by the third defendant, it is not a matter upon which the third defendant was obliged to give notice to the party the subject of the application, given such applications can be made ex parte under the rules.  That proposition has some limited support from the decision of Aust Investment Corp (Holdings) Ltd v Markway Holdings Pty Ltd [2002] QSC 305, which involved an ex parte application to McKenzie J from a refusal of a Registrar to grant default judgment on a counterclaim on the basis that there was no power to do so under the UCPR. The application was heard ex parte. That case was not, however, on all fours with the present matter in terms of whether default judgment was available where a counterclaim was made against an existing party. The question in that case was whether the Court could provide a direction to the Registrar to enter default judgement. McKenzie J found that there was no express power for the Court to review the decision of the Registrar under r 455 or r 456 of the UCPR, and that directions should have been sought for the Court to rehear the matter under r 791 of the UCPR.^[3] To the extent the decision has been cited as authority for the proposition that default judgment cannot be sought in respect of a counterclaim against a plaintiff, it did not decide that or affirm the Registrar’s decision in that regard.
10. [10]
    Division 2 of Part 5 of Chapter 6 of the UCPR provides for the making of counterclaims.
11. [11]
    Rule 175 of the UCPR provides that subject to necessary charges, Division 2 applies as if the plaintiff to the original proceedings was a defendant and the defendant a plaintiff.
12. [12]
    Rule 177 of the UCPR provides for a defendant to bring a counterclaim against a plaintiff instead of bringing a separate proceeding.  Rule 178 of the UCPR provides for a counterclaim to be brought against a person, other than a plaintiff, in certain circumstances. That person becomes a party to the proceeding upon service of the defence and counterclaim.  Rule 178(4) of the UCPR provides that for a person not originally a party to the proceedings, Chapters 2, 4 and 5 and Chapter 9 Part 1 apply as if the counterclaim were a proceeding that was started by a claim, and the party making the counterclaim were a plaintiff and the party against whom the counterclaim is made were a defendant.
13. [13]
    Chapter 5 provides for a defendant to file a notice of intention to defend. Chapter 9 Part 1 makes provision for default judgment.
14. [14]
    Under r 180 of the UCPR, a party served with a counterclaim is to file an answer to the counterclaim. The answer to a counterclaim is included within the definition of a “defence” under the UCPR.^[4]  Given that Chapter 5 also applies to counterclaims against persons who are not existing parties to proceedings those persons must file an intention to defend.
15. [15]
    Under r 164 of the UCPR, an answer is to be filed within fourteen days of service of the counterclaim for an existing party to the proceeding and  within twenty-eight days of service of the counterclaim for a party who was not an existing party to the proceeding.
16. [16]
    Rule 181 of the UCPR provides that the rules are to apply as if the plaintiff to a counterclaim was a plaintiff in an original proceeding, and the defendant to the counterclaim was a defendant in an original proceeding. It further provides that Chapter 4 of the UCPR does not apply to a defendant to a counterclaim who is a party to the original proceedings.  Rule 181(3) provides that, subject to r 182, a counterclaim must be tried at the trial of the plaintiff’s claim.
17. [17]
    Rule 281 of the UCPR provides that:

(1) This division applies if a defendant in a proceeding started by claim has not filed a notice of intention to defend and the time allowed under rule 137 to file the notice has ended.

(2) This division also applies if a defendant in a proceeding started by claim files a conditional notice of intention to defend that becomes an unconditional notice of intention to defend and the defendant does not file a defence within the time required under rule144 (6).

18. [18]
    In the case of a person not a party to an existing proceeding, it is clear that the provisions in Chapter 9 Part 1 apply, given it is provided for expressly in r 178(4). Chapter 5, which provides for the filing of a notice of intention to defend, also expressly applies to such a counterclaim. In particular, r 135 provides that no step can be taken by a defendant unless they have first filed a notice of intention to defend. Rule 137 provides for the notice of intention to defend to be filed within twenty eight days of service. Rule 164 provides the time for filing and service of an answer to the counterclaim, which is also twenty eight days. An answer to a counterclaim is a defence which, under r 139 of the UCPR, must be attached to the notice of intention to defend. Relevantly, the notice of intention to defend and the defence are distinct under the UCPR, albeit inter-related.
19. [19]
    Where, as in this case, the plaintiff is the defendant by counterclaim there is, however, no provision which requires that party to file a notice of intention to defend.  That is consistent with the fact that a plaintiff has already provided the information contained in the notice of intention to defend, which provides for the particulars of the defendant to be set out with the facts relied upon for the purposes of the defence being attached in the form of a defence.
20. [20]
    The third defendant contends that Part 9 applies to a counterclaim against a plaintiff to a proceeding just as it applies to a counterclaim against a person not a party to the proceedings, given that r 180 provides that the plaintiff is in the same position as a defendant. Chapter 4 of the UCPR is the only chapter of the rules which is expressly stated not to apply. That is, however, consistent with the fact that the counterclaim is brought against existing parties to the proceeding and r 180 provides for an answer to the counterclaim to be filed and r 164 provides for the timing of the answer. Unlike rule 178(4), rule 177 does not provide for the counterclaim to be treated as if started by claim. Chapter 5 only applies to a proceeding started by claim.^[5]
21. [21]
    While the contentions of the third defendant are not without merit, I consider that the preferable construction of r 281 of the UCPR is that it does not permit a defendant, who is a plaintiff by counterclaim against an existing party, being able to seek default judgment which can be sought ex parte because a party has not responded to the claim at all by filing a notice of intention to defend.  The rules make a clear distinction between those rules which apply to a counterclaim against a plaintiff and those which apply to a person who was not an existing party. In particular, the rules expressly provide for the counterclaim to be treated as a claim and for Chapter 5 and Chapter 9 Part 1 to apply, enabling the plaintiff by counterclaim to seek default judgement against a party who is not an existing party. The plaintiff, who is a defendant by counterclaim, is not obliged to file a notice of intention to defend under Chapter 5 of the UCPR since Chapter 5 only applies to a proceeding started by claim.  That would appear to accord with the fact that while the existing plaintiff is obliged to file an answer to a counterclaim under r 180, it has already made a claim which is the subject of the proceedings.
22. [22]
    Chapter 9 part 1 only applies to proceedings that are commenced by a claim where there is a failure to file a notice of intention to defend, albeit that it generally has the defence attached. While the defence attached to a notice of intention to defend is the more significant document, the rules distinguish between a notice of intention to defend and a defence.
23. [23]
    While the third defendant contends that the exclusion of Chapter 4 of the UCPR from applying to counterclaims against an existing party to proceedings, together with r 175 of the UCPR, supports the fact that the remainder of the rules apply, that fails to recognise that r 175 applies to the application of Division 2, not generally, and that while the counterclaim against an existing party is an originating proceeding, it is not designated to be a proceeding started by claim. It also fails to recognise that r 181(1) applies to the conduct of the counterclaim on the basis that the party to whom the counterclaim is directed is already a party to the proceedings, and that the rules provide for an answer to the counterclaim to be filed.  Chapter 4 is presumably excluded because it applies to the service of an originating process and is not limited to a claim.
24. [24]
    Construing the rules in this way such that default judgment is not available in respect of a counterclaim against an existing party is not an absurdity when one has regard to the fact that an existing party is on the court record in a proceeding and, in the case of a plaintiff, is pursuing a claim. Such an outcome does not leave a plaintiff by counterclaim without redress for failure by a defendant by counterclaim to provide an answer to the counterclaim. Rule 371 of the UCPR provides the Court with broad powers for non-compliance with the rules. In the present case, an order was made by consent for the delivery of a reply and answer to the second further amended counterclaim on or before 17 April 2021, which was not complied with, which could enliven the powers of the Court under r 374 of the UCPR. Summary judgement may also available in respect of a counterclaim.^[6]
25. [25]
    I would therefore be inclined to answer question 2 from the Registrar in the negative. However, in the present case there is a complete answer to the present application in relation to question 3, which makes it unnecessary to determine the other questions.  Default judgment is not available to the third defendant in the present case. The plaintiff filed a reply and answer to the original defence and counterclaim. The counterclaim has not been struck out or set aside.
26. [26]
    The counterclaim has been significantly amended by the third defendant since the original counterclaim, to which there was a reply and answer, was filed.^[7] Thus, even if an answer to a counterclaim by an existing party is treated as being the equivalent of an obligation to file a notice of intention to defend, it has been complied with, thus preventing judgment by default. The precondition for default judgment under r 281 is not met.  The fact that, as submitted by the third defendant, the answer to the counterclaim has little relevance to the second further amended counterclaim, given the significant amendments that have been made, does not belie the fact that it exists.  Amending a statement of claim or claim requires an amended answer to be filed. It does not result in the original answer being rendered without any effect, albeit that it may be liable to be struck out or the subject of a claim for judgment if it remains unamended.
27. [27]
    Therefore, even if I was satisfied that default judgement could be sought in relation to a counterclaim against an existing party, the third defendant is prevented from seeking default judgement under Chapter 9 Part 1 given an answer to the counterclaim has been filed.
28. [28]
    In those circumstances, the direction to the Registrar should be that the Registrar cannot grant the request for default judgment filed 25 May 2021 against the plaintiff/defendant by counterclaim. Given that, the other questions do not require an answer. The application for default judgement should therefore be dismissed. 
29. [29]
    I do not presently consider it appropriate to make any directions in relation to the matter. The plaintiff/defendant by counterclaim submitted that directions should be made for the management of the action.  It raised the failure of the third defendant to provide what it contends is a proper response to the request for documents under r 222.  That is disputed by the third defendant.  No application has been brought in that regard and, in any event, that would not stay any order that the plaintiff provide an answer to a counterclaim. The plaintiff is on notice that it has not complied with the orders to provide an answer to the counterclaim.  If it does not seek to address that non-compliance, it may be open to the third defendant to take action against the plaintiff in that regard.  It is therefore not appropriate to make any particular directions in that regard.

Conclusion

30. [30]
    Given my answer to question 3 of the questions asked by the Registrar is no, it is unnecessary to answer the remaining questions. I do not propose to make any directions.
31. [31]
    The Court may dispose of a matter under r 982(3) of the UCPR. Accordingly, I order that the request for default judgment on the counterclaim (Court Document 90) be refused. 
32. [32]
    I do not consider any order should be made as to costs. While the third defendant was not successful, the plaintiff was notified of the hearing out of courtesy and chose to appear. In any event, the plaintiff has failed to comply with Court orders in not filing an amended answer to the counterclaim, which was not remedied or proposed to be remedied at the time of hearing. It should not get its costs in such circumstances.

Orders

33. [33]
    I order that:

    1. The request for default judgment on the counterclaim be refused.
    2. There be no order as to costs.