Lennock Motors Pty Limited v Robert John Pastrello [1990] ACTSC 42; (1990) 101 FLR 405 (2 November 1990)

SUPREME COURT OF THE ACT

LENNOCK MOTORS PTY LIMITED v. ROBERT JOHN PASTRELLO
S.C. No. 54 of 1987
Appeal from decision of Registrar
[1990] ACTSC 42; (1990) 101 FLR 405

COURT

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

CATCHWORDS

Appeal from decision of Registrar - Nature of Appeal - rehearing - Registrar exercising discretion to refuse to set aside judgment in default - Delay between interlocutory judgment and application to set aside - Delay inordinate - No advice as to available defences - Accord and satisfaction - Whether seriously arguable - Right of subrogation lost by Insurer - Insurer real plaintiff - loss of subrogation rights by virtue of s.65 Insurance Contracts Act 1984 (Cth) - Credit of defendant - Relevance thereof - Consideration of authorities - Primary importance of seriously arguable defence - Reversal of Registrar's decision.

Supreme Court Rules ACT,

ACT Supreme Court Act 1933 (Cth) sub-s. 8(4), O31 r14, O61 r5, r3(a),

Insurance Contracts Act 1984 (Cth), s.65

Rothwells Limited (in liquidation) v Entity Group Ltd and Ors (Higgins J; SC 401/90; ACTSC; 12/10/90)

Sherrin v Sagacio (Miles C.J.; SCA 24/89; ACTSC; 16/10/90; unreported)

Evans v Bartlam [1987] UKPC 2; (1937) AC 473

Davies v Pagett (1986) 70 ALR 793

Collins Book Depot Pty Ltd v Bretherton (1938) VLR 40

Kostokanellis v Allen (1974) VLR 596

Perry v St Helens Land and Construction Ltd (1939) 3 All ER 113

Taylor v Taylor [1979] HCA 38; (1979) 143 CLR 1

Noja v Civil and Civic Pty Ltd and Others (1990) ALR 224

Department of Transport v Chris Smaller (Transport) Ltd (1989) 2 WLR 578

Hewitt v Mirror Newspapers (1977) 17 ACTR 1

Glasson v Fuller (1922) SASR 148

White v Northern Territory of Australia (1989) 97 FLR 122

HEARING

CANBERRA
2:11:1990

Counsel for the Plaintiff: Mr A. Tsirimakis

Instructing solicitors: Messrs Vandenberg Reid

Pappas and MacDonald

Counsel for the Defendant: Mr R. Thomas

Instructing solicitors: Messrs Gary Robb and Assoc.

ORDER

The decision of the Registrar delivered 30 July 1990 to dismiss with costs a Notice of Motion by the defendant dated 12 June 1990, be set aside.

In lieu thereof, that Interlocutory Judgment, entered on 22 April 1987, and the assessment of damages made on 17 December 1987, be set aside and the defendant let in to defend.

DECISION

This is an appeal from the Registrar's decision, delivered 30 July 1990, to dismiss with costs a Notice of Motion by the defendant dated 12 June 1990.

2. The Motion sought to have interlocutory judgment, entered on 17 December 1987, set aside and liberty for the defendant to be let in to defend. In fact, interlocutory judgment was entered on 22 April 1987. Damages were assessed and final judgment entered therefor on 17 December 1987. However, nothing turns on this.

3. Sub-section 8(4) of the Australian Capital Territory Supreme Court Act 1933 (Cth) permits a person dissatisfied with a decision of the Registrar to appeal, in the prescribed manner, to the Court constituted by a single Judge. The prescribed procedure is to be found in Order 61 rule 5 of the Rules of the Supreme Court of the Australian Capital Territory.

4. Order 31 rule 14 permits the Court to set aside any judgment by default "upon such terms as to costs or otherwise as the Court...thinks fit". That jurisdiction is permitted by Order 61 rule 3(a) to be exercised by the Registrar.

5. Nature of Appeal: The Court has, in my view, as wide a discretion to deal with appeals from the Registrar as from the Master (see Rothwells Limited (in liquidation) v Entity Group Ltd and Ors (Higgins J; SC 401/90; ACTSC; 12/10/90; unreported) and cases cited therein). It is an appeal by way of rehearing, based on the material before the Registrar and any additional material tendered before the Judge. The Judge will give due weight to the Registrar's exercise of discretion. He or she will also, of course, carefully consider and give weight to views as to credibility of witnesses, where those views are relevant (see also Sherrin v Sagacio (Miles C.J.; SCA 24/89; ACTSC; 16/10/90; unreported) - particularly re review of findings as to credibility of witnesses).

6. The Registrar has, most helpfully, set out the relevant facts. It is convenient to set out in full her reasons for deciding as she did.

"This is an application pursuant to Order 31
Rule 14 of the Supreme Court Rules to set aside
interlocutory judgment. A brief history of
this matter is as follows:-
1. On 19 January 1987 a Writ of Summons was
issued against Robert John Pastrello. In its
Statement of Claim the plaintiff, a motor
vehicle dealer, alleges that on 24 May 1986 it
entrusted a motor vehicle to the defendant for
test driving. The plaintiff further alleges
that, as a consequence of the defendant's
negligent driving, a collision occurred and the
motor vehicle was extensively damaged. The
plaintiff claims damages.
2. On 27 March 1987 the defendant, through
his solicitors, entered an appearance to the writ.
3. There is in evidence a letter dated
1 April 1987 from the defendant's solicitors to
the defendant advising the defendant in essence
that liability is not in issue and that the
only contest between the parties is the quantum
of damages. A letter of even date to the
plaintiff's solicitors to the same effect was
forwarded to the defendant.
4. There is in evidence a letter dated
13 April 1987 in which the defendant's
solicitor seeks a further 10 days to obtain
instructions from his client before the
plaintiff takes the matter any further.
5. On 22 April 1987 the plaintiff entered
judgement against the defendant for damages to
be assessed. A letter of even date from the
defendant's solicitor to the plaintiff's
solicitor consenting to the entry of
interlocutory judgment is in evidence.
6. There is in evidence a letter dated
4 May 1987 from the plaintiff's solicitors to
the defendant's solicitors enclosing a
certificate of readiness for signing.
7. By letter dated 25 May 1987, which is in
evidence, the defendant's solicitor returned
the executed certificate of readiness.
8. On 9 June 1987 the certificate of
readiness was filed.
9. On 19 October 1987 an order was made by
the Registrar removing the defendant's
solicitors from the record.
10. On 17 December 1987 the matter came on
before the Chief Justice. The defendant
appeared in person. The Chief Justice ordered
that judgment be entered for the plaintiff in
the sum of $10,501.59 and further ordered that
the defendant pay the plaintiff's costs at two
thirds of the Supreme Court scale. The
judgment order was taken out.
11. On 12 June 1990 the defendant appointed a
solicitor on the record.
12. On 12 June 1990 the defendant filed its
Notice of Motion the subject of this
application, together with an affidavit in
support. The defendant was cross examined at
the hearing of the Notice of Motion.
13. Between the 31st May 1986 and 15 July 1987
the defendant made regular payments to the
plaintiff amounting to $500.00. They were
receipted as "Excess of Insurance".
This chronology shows that there has been a long delay on the part
of the defendant in applying to have the judgment set aside. The
judgment, though by default, is a regular judgment. The applicant
must therefore show grounds why I should exercise my discretion to
set it aside.
The factors to be taken into account by the Court when considering
whether or not a judgment should be set aside in the exercise of its
discretion are:-
A. As stated by Lord Wright in Evans v Bartlam [1987] UKPC 2; (1937) AC 473 at
489:- "The primary consideration is whether he has merits to which
the court should pay heed; if merits are shown the court will not
prima facie desire to let a judgment pass on which there has been no
proper adjudication." The relevant considerations were summed up as
follows -
"(1) The length of delay between the time for
delivery of defence and the date of
interlocutory judgment. On this aspect
the giving of notice of intention to apply
for judgment may be a relevant factor.
(2) The length of delay between the entering
of such judgment and the application to
set it aside.
(3) The reasons for such delay. The defendant's own contribution
to the delay, as contrasted with delay caused by his legal advisers,
may fall for consideration.
(4) The evidence as to whether or not the defendant may have a
defence. The probability of a successful defence need not be
demonstrated and the fact that the defendant's case may appear weak,
will seldom be a bar.
(5) Whether the plaintiff will be prejudiced by setting aside the
judgment the nature of the prejudice being such that it cannot be
adequately compensated for in costs."
B. As expressed by the Full Court of the Federal Court in Davies v
Pagett 70 ALR 793 at 798:-
"...a defendant who has an apparently good defence should not be
refused the opportunity of defending, even though a lengthy interval
of time has elapsed, provided that no irreparable prejudice is
thereby done to the plaintiff."
Mr Thomas of Counsel for the defendant submits that in this matter
the defendant ought to be allowed in to defend because he can
establish 2 defences - he could have pleaded equitable estoppel in
respect of the instalment payments made by him, and he has a defence
under Section 65 of the Insurance Contracts Act of which he was
never advised.
The defendant filed an affidavit in the proceedings. He was cross
examined by Counsel for the plaintiff. Mr Pastrello did not strike
me as an altogether satisfactory witness. He was vague as to
whether instalment payments had been offset in the final calculation
of damages and as to the actual advice he received from his former
solicitors. He also appeared to me to be rather evasive about the
circumstances in which the accident occurred - this would be
relevant to establishing a defence under Section 65 of the Insurance
Contracts Act.
I propose to exercise my discretion in favour of the plaintiff and
not set aside the judgment. The defendant had legal advice, he
consented to damages being assessed, he appeared before the Chief
Justice, and two and (a) half years have elapsed since judgment was
entered against him.
There are no extenuating circumstances which explain this delay.
Nor has there been any real explanation for the delay. Further, I
have doubts as to the merits of the proposed defence because of the
view I have taken of the defendant's credibility as a witness.
The Notice of Motion dated 12 June 1990 is dismissed and the
defendant is to pay the plaintiff's costs of and incidental to the
Notice of Motion."

7. There was filed in support of the Notice of Appeal of 6 August 1990, an affidavit of Mr Richard Thomas, (defendant's solicitor) sworn 3 September 1990. That affidavit assists to summarise and identify the material before the Registrar. It does not add any new material. An affidavit of Mr John Pappas (formerly and at the relevant time, plaintiff's solicitor) sworn 20 September 1990, was filed in reply. It addresses the early history of the matter. It reinforces the Registrar's summary of the evidence, particularly at para 3 of her Reasons, where she notes that the defendant up to entry of judgment had indicated liability would not be contested. The defendant was then, at least at relevant times, legally represented. Mr Pappas annexes to his affidavit the text of letters from the defendant's solicitors and from him to them. He deposes to some conversations with the defendant which are consistent with that correspondence.

8. It clearly emerges from the correspondence that, at all relevant times, the defendant had asserted that Lennock Motors Ltd, the named plaintiff, had represented to him that by paying the excess of $500.00 he would discharge his liability for the damage he did, due to his negligence, to a vehicle owned by the plaintiff. Annexure A to the defendant's affidavit of 9 July 1990 was a written and signed statement from a salesperson employed by the plaintiff. That statement verified that the defendant had been driving the damaged vehicle with the plaintiff's express previous permission for a "test drive" when the damage was caused.

9. It says in part:-

"...after a week or two Robert was asked to pay
an Access (sic) (excess) on the car by
Victor Trotter and that would be it as the car
was written of (sic) (off)."

10. This certainly provides prima facie support for the defendant's contention as to an agreement with the plaintiff limiting the extent of his liability independently of any view about his credit.

11. There was argued before the Registrar another basis for there being a prima facie defence. This is by way of reference to s.65 of the Insurance Contracts Act 1984 (Cth). That Act came into operation on 1 January 1986.

12. Section 65 provides:

"65. (1) Subject to sub-section (2), this
section applies where -
(a) an insurer is liable under a contract of
general insurance in respect of a loss;
(b) but for this section, the insurer would be
entitled to be subrogated to the rights of
the insured against some other person (in
this section called the "third party"); and
(c) the insured has not exercised those rights
and might reasonably be expected not to
exercise those rights by reason of -
(i) a family or other personal
relationship between the insured
and the third party; or
(ii) the insured having expressly or
impliedly consented to the use, by
the third party, of a road motor
vehicle that is the subject-matter
of the contract.
(2) This section does not apply where the
conduct of the third party that gave rise to
the loss -
(a) occurred in the course of or arose out of
his employment by the insured; or
(b) was serious or wilful misconduct.
(3) Where the third party is not insured in
respect of his liability to the insured, the
insurer does not have the right to be
subrogated to the rights of the insured against
the third party in respect of the loss.
(4) Where the third party is so insured, the
insurer may not, in the exercise of his rights
of subrogation, recover from the third party an
amount that exceeds the amount that the third
party may recover under his contract of
insurance in respect of the loss.
(5) An insured need not comply with a
condition requiring him to assign those rights
to the insurer in order to be entitled to
payment in respect of the loss and an insurer
shall not purport to impose such a condition on
the making of such a payment or before making
such a payment, invite the insured so to assign
those rights, or suggest that he so assign them.
Penalty: $5,000.
(6) An assignment made in compliance with such
a condition or in pursuance of such an
invitation or suggestion is void.
(7) In sub-section (1), "road motor vehicle"
means a motor vehicle that is so constructed as
to be capable of carrying by road at least one
person other than the driver."

13. Clearly, the defendant was driving the vehicle with the consent of the plaintiff if annexure A is to be accepted at its face value. This is relevant because, as was conceded, the vehicle was at all relevant times insured by VACC Insurance Limited (VACC). VACC was and is the real plaintiff, suing in the name of the nominal plaintiff pursuant to a right of subrogation purportedly given by the Insurance Policy (no. PAC/1067). There was also evidence that the plaintiff and the Insurer had entered into a Deed of Release with the plaintiff being paid its claim by VACC less credit for the $500.00 received by the plaintiff from the defendant and for the salvage value of the vehicle.

14. This, prima facie, suffices to raise a seriously arguable case that would prevent the Insurer from recovering from the defendant. The plaintiff's claim had, of course, been satisfied by the Insurer (VACC) and the defendant. It is not necessary to express a concluded view about the effect of s.65. It is enough to say that it is clearly seriously arguable that it provides a defence. That prima facie application is independent of any question as to the credit of the defendant.

15. Clearly, the delay between the interlocutory judgment being entered and the application to set it aside is "inordinate". The defendant appeared without demur on 17 December 1987 (in person) when damages were assessed. It is not accurate, however, to say that the defendant consented to that assessment. He had allowed interlocutory judgment to be entered without objection. He did not object to damages being assessed. However, the Registrar is wrong, with respect, to characterise that conduct as "consent".

16. I turn to the respects in which the Registrar found the defendant "not...altogether satisfactory" as a witness.

17. She referred to his vagueness as to whether instalments he paid had been offset against damages. Those facts were already established aliunde. He did pay (see receipts). It was for the excess (see receipts). The amount he paid was set-off against damages. On no view of it could his lack of certainty reflect adversely on his credit, but even if it did, the lack of credit that may be afforded his testimony was irrelevant to the decision as to what the facts were concerning his payment of money, the terms on which he paid those monies or how they were applied.

18. That the defendant was apparently "evasive" about the circumstances of the accident was not irrelevant. If he had been guilty of "serious or wilful misconduct" in causing the loss, the right of VACC to subrogation would not be lost.

19. However, the accident was investigated by police. There was a witness. The insurer no doubt interviewed that person. It still can. The witness has not disappeared. There was no motive for "wilful misconduct". It was not suggested that there was some extraordinary degree of negligence that could be said to amount to such "misconduct".

20. In any event, it must be seriously arguable that s.65(2)(b) does not apply whatever the "evasiveness" of the defendant as the Registrar perceived it.

21. It seems to me, therefore, that the operative reasons supporting the Registrar's conclusion are flawed to the extent that, irrespective of his showing as a witness, the defendant had, prima facie, a seriously arguable defence to the plaintiff's claim. The criticisms of his credit were, in this case, irrelevant to the strength of his prima facie defence. Indeed, cross-examination as to credit can only very rarely be of relevance to the question whether there is a prima facie case. It may affect its strength.

22. It remains to consider whether the delay, its circumstances, including legal advice received, should disqualify the defendant from being now let in to defend notwithstanding that he has a seriously arguable defence.

23. It should be noted that the plaintiff does not contend that, apart from the delay itself, there is any consequential prejudice to it.

24. In Evans v Bartlam [1987] UKPC 2; (1937) AC 473, Lord Atkin noted that to set aside a default judgment it is not necessary both to satisfactorily explain the delay and to show a prima facie defence on the merits of the case.

25. In some cases, of course, whilst it cannot be said that there is no defence, there are good reasons why a defendant could not be expected positively to verify the existence of such a defence (see Collins Book Depot Pty Ltd v Bretherton (1938) VLR 40).

26. In both Kostokanellis v Allen (1974) VLR 596 and Taylor v Taylor [1979] HCA 38; (1979) 143 CLR 1, the primary importance of allowing a party with a prima facie defence to have it argued was strongly asserted. It may, of course, be countervailed by "considerations of delay, acquiescence or prejudice" (see Murphy J, Taylor v Taylor (supra), 20).

27. The defendant's excuse for the inordinate delay is that he was not advised by his solicitors of the availability of the two defences of which he has more recently been advised.

28. If that is right, his delay would be personally excusable but his solicitors, possibly, negligent (see Perry v St Helens Land and Construction Ltd (1939) 3 All ER 113). If he is not right about that, his delay would be inexcusable. I have to note, however, that the pre-judgment correspondence from the solicitors the defendant consulted betrays no awareness of any defence (nor does that of the plaintiff's solicitors, though that is not surprising).

29. It was not claimed that the defendant should be left to a supposed remedy against solicitors. Although in Noja v Civil and Civic Pty Ltd and Others (1990) 93 ALR 224 the Full Federal Court (Sheppard, Neaves and Miles JJ.) accepted that to be a relevant factor, so little weight was given to it so that it can be regarded as usually irrelevant save as to considerations of acquiescence and prejudice. In White v Northern Territory of Australia (1989) 97 FLR 122, Asche C.J. described such a matter as "not...usually of any great significance" (130). The House of Lords has recently declared that, in the analogous situation of dismissal for want of prosecution, the existence of a remedy against the defaulting party's solicitors is not relevant (see Department of Transport v Chris Smaller (Transport) Ltd (1989) 2 WLR 578).

30. That latter case also noted, though it is of no importance here, that the relevant delay is that after the relevant time limit has expired. Noja (supra) is consistent with that view.

31. No prejudice being claimed, it is relevant to examine whether the Registrar's decision can be supported on the basis that the defendant has been guilty of such "delay" or "acquiescence" as to be deprived of the right to pursue his defence.

32. In Hewitt v Mirror Newspapers (1977) 17 ACTR 1, the defendant applied to set aside an interlocutory judgment entered on 6 September 1976. Blackburn J had refused so to do on 17 December 1976. A fresh application was made, being heard on 28 August 1977. At 9, Connor J referred to the "serious delay" by the defendant's solicitors in pursuing their applications to set aside judgment but nevertheless did so. In the circumstances, it could fairly be said to have been "inexcusable".

33. In this case there is serious delay. It is lengthy. Notwithstanding this, even if it can be described as "inexcusable", it has led to no "irreparable prejudice" (see Davies v Pagett (supra)). Accordingly, this could not have been a consideration sufficient for the Registrar to have refused the application even if the delay was not satisfactorily excused.

34. It may have been that the Registrar considered the fact that there had been legal advice etc. (see the third last paragraph of her Reasons) leading to a choice to "stand by" amounted to acquiescence in the same sense as equity would refer to that term (see Glasson v Fuller (1922) SASR 148). If so, it would have had to include a finding that the defendant had full knowledge of his rights when he "stood by" and permitted judgment to be entered nevertheless.

35. In my opinion, no such conclusion was open on the evidence. The most likely conclusion is that the defendant did not know of his available defences. Whether it was his fault or his solicitor's fault or the fault of neither, he was, clearly, not aware of his available defences before default judgment and assessment of damages.

36. It follows from the above that not only do I consider that, giving due weight to the Registrar's Reasons, I would exercise my discretion differently but I consider that her Reasons reveal a fundamental flaw which would, in any event, have required her decision to be set aside. I consider that she gave undue weight to and was unduly influenced by her unfavourable impression of the defendant and was thereby distracted from considering the implications, or lack of them, relevantly arising from that dissatisfaction.

37. The question of the conditions upon which leave should be granted next follows. Whilst leave to defend should itself usually be unconditional (see Rothwells Limited (in liquidation) v Entity Group Ltd (supra)), justice demands that the defendant pay the costs of and incidental to the application before the Registrar and thrown away by the setting aside of the interlocutory judgment and the assessment of damages which followed.

38. I will hear the parties as to costs of this appeal and directions for the speedy resolution of the matter.