Peter Bernard Graham v Barkable Pty Limited [1988] ACTSC 46 (3 August 1988)

SUPREME COURT OF THE ACT

PETER BERNARD GRAHAM v. BARKABLE PTY. LIMITED
S.C. No. 1245 of 1984
Practice and Procedures

COURT

IN THE SUPREME COURT OF THE AUSTRALIAN CAPITAL TERRITORY
Gallop J.(1)

CATCHWORDS

Practice and Procedure - application to set aside judgment regularly entered - principles which govern exercise of discretion

Surfers Paradise International Convention Centre Pty Limited v. National Mutual Life Association of Australasia Limited (1984) 2 QdR 447

Vacuum Oil Pty Co. Limited v. Stockdale (1942) 42 SR(NSW) 239

Chitty's Archbold, 10th ed., 1457; 12th ed. 1526

HEARING

CANBERRA
3:8:1988

ORDER

The application for an extension of time within which to make the application to set aside the judgment be granted.

The application to set aside the judgment be dismissed.

The judgment debtor pay the judgment creditor's costs in respect of the Notice of Motion dated 17 May 1988.

DECISION

This is an application by the judgment debtor instituted by notice of motion dated 17 May 1988 to set aside the judgment entered in favour of the judgment creditor on 4 May 1988 and for an extension of time within which to do so. The action was heard on 3 and 4 May 1988 in the absence of the defendant pursuant to Order 38, rule 10, which reads:
"10. If, when a trial is called on, the plaintiff

appears, and the defendant does not appear, then the
plaintiff may prove his claim, so far as the burden of
proof lies upon him."

2. The present application is brought pursuant to Order 38, rule 15, which reads:

"15. Any verdict or judgment obtained where one
party does not appear at the trial may be set aside by
the Court or Judge upon such terms as are just, upon an
application made within seven days after the trial."

3. An extension of time in which to make the application is necessary because more than seven days has expired between the date of judgment and the date of the application. Order 64, rule 5 provides for the enlargement of time appointed under the Rules for doing any act or taking any proceeding.

4. It is necessary to relate the history of the proceedings. The writ of summons issued on 4 December 1984 and the statement of claim giving particulars of the judgment creditor's claim in detinue was delivered with the writ. An appearance to the writ of summons was entered on 14 December 1985. A defence was delivered on 15 April 1985 and the pleadings were closed on 6 November 1986.

5. The judgment debtor failed to respond to the judgment creditor's request to sign the certificate of readiness so that the matter could be set down for trial. It was necessary for the judgment creditor to move the court for an order that the matter be set down for trial notwithstanding the judgment debtor's failure to sign the certificate of readiness. That application came on before the Registrar on 17 March 1987. By consent the application was dismissed and it was ordered that the judgment debtor pay the judgment creditor's costs of and incidental to the application. The matter was then set down for trial, the certificate of readiness having been executed by the solicitors for both parties. It was not executed by the solicitors for the judgment debtor until 13 March 1987 and that no doubt explains why the application to set the matter down notwithstanding the failure of the judgment debtor to execute the certificate of readiness was dismissed on 17 March 1987. The matter was set down for trial on 1 April 1987. At a callover some months before the hearing date, the matter was listed for hearing on 3 May 1988.

6. The solicitors on the record then applied by notice of motion of 14 April 1988 for an order that they cease to act for the judgment debtor and an order to that effect was made by the Registrar on 26 April 1988.

7. It is instructive to consider the terms of the retiring solicitor's affidavit in support of the application for an order that the solicitors on the record cease to act for the judgment debtor at that stage. In his affidavit sworn 14 April 1988, John Sidney Snell sets out the difficulties that the solicitors on the record had been experiencing in obtaining instructions in order to properly prepare the judgment debtor's case. He deposed that on 18 November 1986 he telephoned Mr Peter Woods, one of the principals of the judgment debtor and said "I must see you as soon as possible regarding the Graham matter as it will be going to hearing before the Court". Mr Woods said "Bryce (the Managing Director) will be back from Brisbane on Thursday and will contact you about a counter claim."

8. On 21 November 1986 Mr Snell spoke by telephone with Mr Bryce Grocott, the Managing Director of the defending Company. He said "We are very busy at the moment and cannot attend to this matter with Mr Graham." Mr Snell said "I will prepare a Brief to Counsel". Mr Grocott said "Yes, but we don't have time to provide details at present."

9. On 23 June 1987 Mr Snell sent a letter to the judgment debtor advising of the steps taken and referring to outstanding costs, a copy of the letter was annexed to the affidavit. No response was received from the judgment debtor.

10. On 28 July 1987 Mr Snell forwarded a letter to the judgment debtor providing details of all current matters being conducted on behalf of the judgment debtor and requesting outstanding costs. It was stated in the letter that unless the outstanding costs were paid the solicitors would be unable to continue to act on behalf of the judgment debtor. A copy of the letter was annexed to the affidavit. No response was received.

11. On 2 December 1987 a further letter was forwarded by Mr Snell to the judgment debtor requesting payment of outstanding accounts. A copy of the letter was annexed to the affidavit. No response was received.

12. On 29 January 1988 a further letter was forwarded by Mr Snell to the judgment debtor advising that this matter had been set down for hearing before this Court in Canberra on Thursday, 3 May 1988 at 10.00 am and requesting further instructions and costs. A copy of the letter was annexed to the affidavit. No response was received from the judgment debtor.

13. On 1 February 1988 Mr Snell sent a further letter to the judgment debtor repeating the hearing date of this matter and again requesting payment of costs outstanding. A copy of the letter was annexed to the affidavit. No response was received.

14. On 5 February 1988 Mr Snell telephoned Mr Peter Woods of the judgment debtor at the judgment debtor's Canberra office and said that payment of all outstanding amounts was required immediately, to which Mr Woods replied that the judgment debtor was not happy with the progress on some matters. Following further discussion Mr Woods told Mr Snell that Mr Grocott was not happy about the costs and that Mr Grocott would telephone Mr Snell later. He did not telephone later, which caused Mr Snell to telephone himself later on 5 February 1988 but there was no answer at the judgment debtor's office.

15. On 10 February 1988 Mr Snell sent a further letter to the judgment debtor regarding outstanding costs and intimating that if the solicitors did not receive instructions they would apply to be removed from the record as the solicitors for the judgment debtor. A copy of the letter was annexed to the affidavit. No response was received.

16. On 3 March 1988 Mr Snell telephoned the judgment debtor's office in Canberra and was advised by recorded message that the judgment debtor had relocated its premises in Queensland and giving a telephone number and stating that correspondence could continue to be sent through the Post Office Box in Canberra.

17. On 3 March 1988 Mr Snell telephoned the judgment debtor's office in Queensland and was advised that Mr Woods was not there and that Mr Grocott was busy with a customer. Mr Snell left a message to the effect that he was concerned about the hearing of "the Graham matter" and that the directors of the judgment debtor should advise him of their intentions urgently. No response was received.

18. On 10 March 1988 Mr Snell sent a further letter to the judgment debtor advising of the solicitor's intention to apply to be removed from the record as solicitors for the judgment debtor. A copy of the letter was annexed to Mr Snell's affidavit. No response was received.

19. On 31 March 1988 Mr Snell sent a further letter to the judgment debtor again advising of the application to be removed from the record and suggesting that urgent arrangements be made in relation to "the Graham hearing". No response was received.

20. On 13 April 1988 Mr Snell telephoned the judgment debtor's office in Queensland. He was advised that Mr Grocott was in Adelaide and Mr Woods was not in. Mr Snell left a message for them to telephone him. Later on 13 April 1988 Mr Snell again telephoned the judgment debtor's office in Queensland and spoke to Mr Woods who said, "I know nothing about this particular matter, but Bryce Grocott knows all about it. I will mention to Bryce that you have called and he will have to contact you".

21. It should be noted that as a consequence of the Registrar's order of 26 April 1988 there was no solicitor on the record for the judgment debtor at the time of trial. Another firm of solicitors filed notice of change of solicitor on 17 May 1988 and that firm of solicitors has continued to act for the judgment debtor in relation to the present application.

22. On the hearing of the application to set aside the judgment, the judgment debtor relied upon an affidavit of Rodney Bryce Grocott who described himself therein as a director of the judgment debtor. The affidavit, sworn on 30 May 1988, was, so far as relevant, in the following terms:

"(1) I am a Director of BARKABLE PTY LIMITED the
Defendant applicant herein.
(2) The Defendant applicant previously engaged Gallens
Solicitors to act on its behalf.
(3) A dispute between BARKABLE PTY LIMITED and Gallens
relating to costs arose in March/April 1988. On
15 April 1988 BARKABLE PTY LIMITED received a
Notice of Motion that Messrs Gallens be removed
from the record as solicitors for BARKABLE PTY
LIMITED. I was away in Adelaide on business at
the time and was not aware of the Notice of Motion
until late on 18 April 1988. The Notice of Motion
received by me late on 18 April 1988 did not have
any explanatory material with it and it was not
until I received a letter on 20 April 1988 that I
became fully aware of the nature of the problem.
Annexed hereto and marked with the letter "A" is a
copy of a letter from Gallens dated the 31st day
of March 1988 received by me on 20 April 1988. It
appears the letter was addressed to the old
address in the Australian Capital Territory
instead of the new address in Queensland. There
was a re-direction order from P O Box 458 at
Fyshwick in the Australian Capital Territory to
our Queensland address.
(4) On or about 20 April 1988 I telephoned Jonathon
Bell from Boardman Allport Bell & Finlayson
solicitors in Queanbeyan and gave him instructions
to try and settle the matter. Due to the dispute
with Gallens I was unable to obtain the file of
BARKABLE PTY LIMITED relating to this matter so as
to fully instruct Jonathon Bell to appear at the
hearing. I was confident that the matter could be
settled. As at the 28th day of April 1988 the
offer of settlement made to the Plaintiff was
still open. I am informed by Jonathon Bell and
verily believe that he was informed by Ian
Gillespie-Jones, the solicitor for the plaintiff,
that he could not get instructions until after the
weekend of 30 April because the plaintiff could
not be contacted by telephone. I consequently
went on a short pre-arranged trip away with my
family returning on Monday 2 May 1988. On that
day I telephoned Jonathon Bell in order to
ascertain the present position. I was informed by
his secretary that he was away that day. At that
time it was totally impossible for me to instruct
any other solicitor to appear at the hearing in
order to defend the matter especially in view of
the fact that the file was held by Gallens
Solicitors.
(5) The possibility of obtaining an adjournment was
considered but I was advised that it would cost
$20,000.00 to get an adjournment at that time.
BARKABLE PTY LIMITED did not have $20,000.00 to
pay on a few days notice.
(6) ...
(7) I agree that all of the chattels referred to in
paragraph 1 of the Statement of Claim with the
exception of the squaring jig for router, the air
pressure gauges and 3/415 15 amp switches for wall
were stored on the premises of the defendant as at
November 1981.
(8) All other items in paragraph 1 of the Statement of
Claim have been returned to the Plaintiff. ...
(9) ...
(10) ...
(11) The Defendant, in addition to seeking to have the
judgment in this matter set aside, also seeks
leave to file a counter-claim based on the
Plaintiff's failure to comply with clause 7 of the
Agreement ..."

23. Mr Grocott also gave oral evidence on the hearing of the application. He said that the judgment debtor first knew about the judgment having been entered in the matter when it received a notice under s.364 of the Companies Act on Friday, 6 May 1988. He did not engage the judgment debtor's present solicitor until 11 May 1988, having collated such documents as were available. Mr Grocott then gave extensive evidence designed to establish that the judgment debtor has a good defence to the judgment creditor's claim in the action. At that stage no draft defence had been produced on behalf of the judgment debtor, which counsel for the judgment debtor attempted to explain by what he described as the extremely short time which the judgment debtor's present solicitor had had to prepare the defence.

24. In cross-examination Mr Grocott disputed most of the contents of Mr Snell's affidavit. I was not impressed with his evidence in this respect and where it differs from the contents of the affidavit, I accept the statements in the affidavit. He conceded that the judgment debtor knew for a long time that the action was coming on for hearing on 3 May 1988. He outlined how busy he was in the period leading up to 3 May 1988, particularly in regard to a takeover offer, sale of part of the judgment debtor's business and the purchase of half the business by a public company in Adelaide. He knew as early as 18 April 1988 that the previous solicitors had ceased to act for the judgment debtor in the action.

25. He communicated with Mr Finlayson of Messrs Boardman Allport Bell & Finlayson, solicitors of Queanbeyan on Friday, 22 April. Mr Finlayson referred him to another partner in that firm, Mr Bell, who handled this type of litigation. Mr Bell was not available on Friday, 22 April and Mr Grocott was not able to speak to him until Monday, 25 April. Instructions were given to Mr Bell to try to negotiate a settlement of the claim. Because the previous solicitors were holding the judgment debtor's documents relevant to the claim, the Queanbeyan solicitors informed Mr Grocott that the only way to prepare properly for the hearing was to pay the previous solicitors' costs in order to obtain the release of the papers and that those costs, together with the costs of the action, would be in the order of $20,000. Mr Grocott's understanding was that the previous solicitors were asking for $7,500 before they would hand over the papers and that the judgment creditor's solicitors were asking for $6,500 as the costs which would be thrown away if the matter was adjourned. Mr Bell was asking for $6,000 on account. That is how the total of $20,000 was made up, according to Mr Grocott's understanding. An amount of $20,000 was beyond the resources of the judgment debtor and it was in those circumstances that the Queanbeyan solicitors were instructed to try to settle the case.

26. Mr Grocott understood that there were difficulties about getting instructions from the judgment creditor about the offer of settlement because he would not be available until the following Monday. As things turned out, Mr Grocott heard nothing further and took the risk about whether the action would be heard and judgment entered against the judgment debtor on the allotted hearing date - 3 May 1988. He agreed that he had not provided his previous solictors with an advance on costs because he was dissatisfied with their performance in collecting amounts payable to the judgment debtor in respect of other litigation.

27. It was also conceded in the cross-examination of Mr Grocott that Mr Woods, another director, could have taken responsibility for the litigation and given instructions to the judgment debtor's legal advisers as required.

28. At the conclusion of Mr Grocott's evidence on 10 June 1988 the motion was adjourned until 11 July 1988. In the absence of any assurance that the judgment debtor would not endeavour to levy execution on the judgment in the meantime, I granted a stay of execution until judgment on the motion was delivered. At the same time I drew to counsel's attention certain matters which appeared to me to be of fundamental importance in any application of this nature, including:

(a) the fact that a Notice of Appeal to the Federal
Court of Australia had been lodged on 24 May 1988;
and
(b) the terms of the proposed defence had not been
formalised even in draft form.

29. When the hearing of the motion resumed on 11 July 1988, counsel for the judgment debtor announced that the appeal to the Federal Court of Australia would not be prosecuted further and produced a draft amended defence to be filed in the event of the judgment being set aside and the judgment debtor let in to defend. By that amended defence the judgment debtor would also make a counter-claim for breach of clause 7 of a deed between the judgment debtor, the judgment creditor and Catherine Graham, the wife of the judgment creditor, made on 5 November 1981, which reads:

"7.The shareholder hereby agrees to execute any
documents required to be executed by him for
registration with the appropriate authorities of
the transfer of the patent usage to the company as
agreed. The shareholder will forthwith supply the
company with a copy of the letters patent taken
out in New Zealand as referred to in the Agreement
between the company and Catherine Graham dated
6th April 1981 and it is agreed between the
parties hereto that those New Zealand letters
patent are to be transferred into the name of
Catherine Graham and the company shall have the
right to make use of those letters patent as
agreed in the Agreement dated 6th April, 1981
between the company and Catherine Graham."

The shareholder referred to is the judgment creditor.

30. It is to be noted that the counter-claim was referred to in paragraph 11 of Mr Grocott's affidavit, and he gave evidence about it on 10 June 1988 as follows:

"Now, it appears that some items were not collected by
Mr Graham until 1985, February and March 1985. What
happened between 1982 and 1985?---It was after May 1982
when we still had not got satisfaction of the
arrangements entered into in the agreement of November
1981 and clause (vii) to that agreement sets out fairly
clearly what had to be supplied by Mr Graham, none of
which was supplied.
That is, clause (vii) of the agreement that he agrees
to execute any documents required to be executed by him
for registration at appropriate authorities---?---Yes.
What he had to do was to register the assignment of the
patterns to supply - in fact, had registered the New
Zealand patent and supplied us with a copy of the
patent and details of it, including the registration of
Mrs Graham as the owner of those patents, because we
had a licence agreement with her. We were unable to
obtain those details from him and that was the whole
basis of the negotiations in trying to gain some
leverage to get him to complete.
You say 'negotiations'. What were you referring to?
Contact between which people?---Simply in discussion
with him that all he had to do was do that for us and
then there was no problem."

31. By way of evidence in reply the judgment creditor relied upon an affidavit by his solicitor, Mr Ian Gillespie-Jones, sworn 3 June 1988 in the following terms:

"1. I am the solicitor for Peter Bernard Graham the
respondent in this matter.
2. I first spoke to Mr Jonathon Bell from Messrs
Boardman Allport Bell & Finlayson, solicitors of
Queanbeyan, on 28th April 1988. Mr Bell did not
have a file, and advised me words to the effect 'I
am not instructed to represent the defendant on
the hearing'. I conducted settlement negotiations
on a without prejudice basis with Mr Bell on 28th
and 29th April 1988. Nothing that I said to
Mr Bell could have made Barkable Pty. Limited
confident that the matter would be settled. On
29th April 1988 (a Friday) I was informed by
Mr Bell words to the effect 'Grocott will not be
available until Monday evening. He is going on a
long arranged wine tasting trip to the Hunter
Valley, and will not be back in telephone contact
until Monday evening'. I said words to the effect
'well my client is not on the telephone, and I
won't be able to contact him again until Monday
morning, when he will be in my office. However, I
think it is most unlikely that the offer of
settlement will be accepted'. Bell replied words
to the effect 'well I won't be here myself on
Monday, but I will be here on Tuesday morning'.
3. I subsequently telephoned Mr Bell's office on 3rd
May 1988, but was unable to speak to him."

32. The principles which govern the discretion to set aside a judgment regularly entered are conveniently collated in Surfers Paradise International Convention Centre Pty Limited v. National Mutual Life Association of Australasia Limited (1984) 2 QdR 447. In that case Andrews S.P.J., as he then was, acknowledged the particular assistance he obtained from the dicta of Jordan C.J. in Vacuum Oil Pty Co. Limited v. Stockdale (1942) 42 SR(NSW) 239. The headnote to the report of the Surfers Paradise case crystallises the following matters to be considered in relation to the exercise of discretion:

(1) the applicant's conduct in the action before and
after judgment;
(2) the applicant's good faith;
(3) whether the applicant shows a case on the merits;
and
(4) whether, if the applicant be let back in,
irreparable wrong will be done to the party who
has obtained judgment.

33. As a matter of general approach in relation to such an application as the present, when the plaintiff is in no respect in default, a new trial will not be granted save in very special circumstances (Chitty's Archbold, 10th ed., 1457; 12th ed. 1526, referred to by Jordan C.J. in the Vacuum Oil case at p 243).

34. As in the Vacuum Oil case, judgment was not entered in this matter by default through some procedural omission on the part of the defendant or his legal advisers. The action followed the ordinary course despite the delay in its coming on for trial through the failure of the judgment debtor's solicitor to sign the certificate of readiness, which in turn was due to its failure to give appropriate instructions to its previous solicitors. However, having been given a date for trial the case took its ordinary place in the list but no one was in court to conduct it for the judgment debtor. It therefore proceeded in the judgment debtor's absence.

35. No criticism could be made of the judgment creditor in bringing the matter on for hearing and no suggestion has or could be made that the judgment debtor did not have full and timely notice of the hearing date. The judgment debtor, through Mr Grocott, who had the responsibility for the litigation on behalf of the judgment debtor, took a risk about an offer of settlement being accepted and if not about the trial being held on the due date and about the result thereof. Even after judgment had been entered, the judgment debtor, though its directors, continued to show very little interest in the litigation until such time as the s.364 notice was served.

36. Nor am I impressed with the judgment debtor's defence on the merits. Its justification for withholding delivery of the judgment creditor's compressor was, on the evidence, to put pressure on and obtain some leverage against the judgment creditor in relation to the judgment debtor's perceived operation of clause 7 of the deed made on 5 November 1981. That perceived operation is not demonstrably correct. In my view, the merits of the defence are insubstantial even though they may be thought to be faintly arguable. In any event, if the judgment debtor has a counter-claim based upon the judgment creditor's failure to comply with his obligations under clause 7 of the said deed, the judgment debtor's rights to litigate that claim are preserved.

37. Having considered all the circumstances, I am of the view that this is not a proper case in which to set aside the judgment.

38. As I have considered the application for an extension of time within which to make the application to set aside the judgment and the application to set aside the judgment at the same time and being persuaded that the short delay in making the application has been satisfactorily explained, the appropriate order is to grant the extension of time to make the application until 17 May 1988, and I so order. The application to set aside the judgment is dismissed.

39. I order that the judgment debtor pay the judgment creditor's costs in respect of the Notice of Motion dated 17 May 1988.