Mark James Ryan v John Charles Adams and Fay Lorraine Adams [1993] ACTSC 32; (1993) 112 FLR 474 (8 April 1993)

SUPREME COURT OF THE ACT

MARK JAMES RYAN v. JOHN CHARLES ADAMS and FAY LORRAINE ADAMS
No. SCA2 of 1993
Number of pages - 5
Appeal
[1993] ACTSC 32; (1993) 112 FLR 474

COURT

IN THE SUPREME COURT OF THE AUSTRALIAN CAPITAL TERRITORY
Miles CJ(1)

CATCHWORDS

Appeal - nature of appeal from Magistrates Court's refusal to set aside default judgment on special claim under s.41 Magistrates Court (Civil Jurisdiction) Act 1982.

Appellate Court - function of appellate court on an appeal by way of rehearing - principles apply - no new matter of principle.

Appeal - discretionary decision of inferior court must show error of law or fact.

Landlord and Tenant Act 1949, para. 62A(8)

Davies v. Pagett (1986) 70 ALR 793

HEARING

CANBERRA, 1 April 1993
8:4:1993

Counsel for the appellant: Mr. P. Sheils, QC

Solicitors for the appellant: Scott Sheils and Glover

Counsel for the respondents: Mr. J. Pappas

Solicitors for the respondents: Pappas, J. - Attorney

ORDER

The Court orders that:
1. The appeal be allowed, the default judgment of 23 October 1992 be

set aside and the appellant be allowed to defend the special claim by
filing a defence within 14 days.
2. The matter be remitted to the Magistrates Court.

DECISION

MILES CJ This is an appeal from a decision of a Magistrate refusing to set aside a final judgment entered by default on a special claim under s.41 of the Magistrates Court (Civil Jurisdiction) Act 1982 (the Act).

2. The power of the Magistrate to set aside such a judgment is conferred by s.219 of the Act. The Magistrates Court may "on sufficient cause being shown, order that the judgment or order be set aside on such terms as it thinks just".

3. The appeal comes to this Court under Part XIX A of the Act. The effect of ss.282G and 282J is that the appeal is by way of rehearing on the evidence received below with a power to receive further evidence. However, where the decision appealed against is in the nature of a discretionary decision, error on the part of the Magistrate must be shown: Petreski v. Cargill (1987) 79 ALR 235.

4. The respondents sued by way of special claim for arrears of rent due under a sublease. The relevant part of the particulars of the special claim was as follows:

"1. The plaintiffs were at all material times the owners of the land
comprised in Crown Lease Registered Volume 43 Folio 4241 being Block
13, Section 44 in the Division of Turner in the Australian Capital
Territory (the land).
2. By memorandum of sublease registered number 502502 dated
15 February 1985 (the sublease), the plaintiffs leased the property to
the defendant on the terms and conditions contained in the sublease.
The plaintiffs crave leave to refer to the terms of the sublease as if
set out in full herein.
3. The sublease expired on 31 January 1990.
4. By oral agreement between John Adams on behalf of the plaintiffs
and the defendant, the parties agreed that the defendant would
continue to lease the land from the plaintiffs on a month to month
term at a rental of $1,500 per month and otherwise on the same terms
and conditions as were contained in the sublease.
5. The defendant remained in occupation of the land until 31 August

1992."

5. A draft defence annexed to an affidavit sworn by the appellant denies in paragraph 2 that there was a valid oral agreement between the respondents and the appellant as alleged in paragraph 4 of the special claim. The draft defence asserts in paragraphs 3 to 5 that the appellant remained in occupation after the expiry of the sublease on 31 January 1990 as a tenant from week to week pursuant to sub-clause 5(c) of the sublease at the rental reserved in the sublease. It also asserts that the alleged oral agreement was in any event void and of no effect in consequence of para.62A(8) of the Landlord and Tenant Act 1949 (the Landlord and Tenant Act).

6. The alleged error on the part of the Magistrate is said to be the failure to recognize that the appellant was relying on two defences in the alternative. It was submitted that the Magistrate failed to recognize the defence raised by the denial of the oral agreement, and further failed to recognize that the factual material left it open to the appellant to argue that the premises in question were not "business premises" within the meaning of the Landlord and Tenant Act. In relation to the latter defence, the appellant alleged that he was holding over under the terms of clause 5(c) of the sublease at the rent reserved in the sublease and that an increase in rent could not be effective without compliance with the provisions of the Landlord and Tenant Act. The respondents, on the other hand, alleged that there was a new sublease or agreement for sublease by virtue of which an increased rent was payable.

7. There were other matters pleaded in defence but they are not relevant for the purposes of the appeal.

8. The principles whereby default judgment will be set aside are well known. As far as this Court is concerned, the most authoritative pronouncements are those of the Federal Court in Davies v. Pagett (1986) 70 ALR 793. A defendant must be able to point to evidence capable of proving facts which constitute an arguable defence and must explain the reasons for any relevant delay. It was properly conceded for the purposes of the appeal that delay was not a factor in the present case (it had something to do with a dispute over whether the appellant had been served with a copy of the special claim). It is clear that in an application to set aside a default judgment, the Court is required to look only at the facts as they may be proved. No finding of fact is called for on the issues raised by way of defence to the plaintiff's claim.

9. The Magistrate's reasons for dismissing the application to set aside the default judgment were brief. The Magistrate simply said that there was no defence set out in the appellant's affidavit and the annexures thereto, and that there were no factual grounds deposed to which were "capable of constituting the factual basis for any defence that I know of".

10. Strictly speaking, the Magistrate was quite correct in taking the view that there was no factual basis properly put forward for the defences relied on. The appellant's affidavit referred to a number of peripheral matters but did not include a verification on oath of the denials and assertions set out in the draft defence which was annexed to the affidavit. However, having regard to what is recorded in the transcript, I do not take the Magistrate to have been making that point. It was rather that the Magistrate took the view that the allegations and denials in the draft defence were incapable of supporting the defences relied upon. I do not think that the application should have failed because of the absence of direct verification of the appellant's denials and assertions. It is reasonably clear from the transcript that it was the intention of the Magistrate to allow the appellant to remedy this defect by giving oral evidence. However, the Magistrate appears to have been deflected from that course when he was invited to consider the issue raised in relation to s.62A of the Landlord and Tenant Act. The Magistrate and the solicitor for the respondents dealt with that issue very cursorily in discussion. The Magistrate concluded that the only evidence was that the premises were being used as business premises and were therefore not prescribed premises within the meaning of the Landlord and Tenant Act.

11. In this respect it is submitted on behalf of the appellant that the Magistrate did not give proper consideration to the question of whether the premises were capable of constituting prescribed premises, and did not consider the possibility that prescribed premises might include premises which, although used as business premises, are leased for residential purposes. It was submitted for the appellant that the respondents could not be heard to argue that the premises were used for any purpose other than the sole purpose stipulated in the sublease by clause 3(d), that is the purpose of "a residential lease". Whilst I do not think that the purpose clause raises an estoppel, as the submission seems to suggest, I think that it is relevant to the question of whether the premises, the subject of the sublease, were prescribed premises for the purposes of the Landlord and Tenant Act.

12. There was evidence before the Magistrate that the premises were used by the appellant for a non-residential purpose, that is for the purpose of carrying on the practice of chiropractics. There was no evidence, however, that this was the sole purpose for which the premises were in fact used. It was therefore possible that the premises were used for a non-business purpose and the issue was raised that the premises were not properly characterised as business premises. If they were not business premises, then they were prescribed premises.

13. In my view, it was therefore properly arguable that the premises were prescribed premises for the purposes of the Landlord and Tenant Act, and that the procedures of that Act not having been complied with, the landlord was not entitled to an increased rent. The Magistrate did not consider this issue and, in my view, in this respect, the Magistrate erred.

14. In Davies v. Pagett at 799 a Full Court of the Federal Court of Australia said as follows:

"The fundamental duty of the court is to do justice between the
parties. It is, in turn, fundamental to that duty that the parties
should each be allowed a proper opportunity to put their cases upon
the merits of the matter. Any limitation upon that opportunity will
generally be justified only by the necessity to avoid prejudice to the
interests of some other party, occasioned by misconduct, in the case,
of the party upon whom the limitation is sought to be imposed. The
temptation to impose a limitation through motives of professional
discipline or general deterrence is readily understandable; but, in
our opinion it is an erroneous exercise of the relevant discretion to
yield to that temptation. The problem of delays in the courts,
egregious as it is, must be dealt with in other ways: for example, by
disciplinary actions against offending practitioners and by a
comprehensive system of directions hearings or other pretrial
procedures which enable the court to supervise progress - and, more
pertinently, non-progress - in all actions."

15. In my opinion, the Magistrate fell into error in not recognizing that there were arguable defences that were available to be raised on behalf of the respondents. The appeal is allowed, the default judgment of 23 October 1992 is set aside and the appellant is allowed to defend the special claim by filing a defence within 14 days. The matter is remitted to the Magistrates Court. I think that the proper order for costs is that the costs of the appeal be costs in the proceedings in the Magistrates Court. However, I will hear from the parties if either of them wishes to argue costs.