Td Godfrey Holdings Pty Limited (In Liquidation) v Lloyd Douglas Godfrey As Trustee of the Illawong Trust, Julie Leslie Godrey In Her Own Capacity and As A Trustee of the Derwent Trust, Adrienne Godfrey, Alexandra Godfrey, Thomas Douglas Godfrey and [1995] ACTSC 98 (31 August 1995)

SUPREME COURT OF THE ACT

T.D. GODFREY HOLDINGS PTY. LIMITED (IN LIQUIDATION) v. LLOYD DOUGLAS GODFREY
AS TRUSTEE FOR THE ILLAWONG TRUST, JULIE LESLIE GODREY IN HER OWN CAPACITY AND
AS A TRUSTEE FOR THE DERWENT TRUST, ADRIENNE GODFREY, ALEXANDRA GODFREY,
THOMAS DOUGLAS GODFREY AND GAIHO PTY. LIMITED
No. SC816 of 1993
Number of pages - 7
Practice and Procedure

COURT

IN THE SUPREME COURT OF THE AUSTRALIAN CAPITAL TERRITORY
MASTER A HOGAN

CATCHWORDS

Practice and Procedure - Default Judgment - Default of Defence - Application to set aside - Excuse for failure not sufficient - Possible grounds of defence - Application refused.

HEARING

CANBERRA, 28 July 1995
31:8:1995

Counsel for the Plaintiff: Mr B. Meagher

Instructing Solicitors: Crossin Barker Gosling

Counsel for the Defendants
(other than the 5th): Mr R. Mildren

Instructing Solicitors: Brown and Partners
by their Canberra agents:
Higgins Solicitors

ORDER

THE COURT ORDERS THAT:

1. The application to set aside default judgment is dismissed.
2. 1st, 2nd, 3rd, 4th and 6th defendants to pay plaintiff's costs
of the application.
3. Liberty is reserved to all parties to apply on reasonable
notice.

DECISION

MASTER A HOGAN This is an application to set aside a default judgment, and for consequential orders.

2. The matter has had a long and complicated history.

3. The Writ was issued on 13 December 1993, naming only the first defendant. The claim was that the defendant, as trustee for the Illawong Trust, was indebted to the plaintiff company in the sum of $1,047,676. A claim was made for interest pursuant to s.69 of the Supreme Court Act 1933.

4. The first defendant entered an appearance on 12 January 1994. He not having filed a defence, Default Judgment was signed against the first defendant on 11 May 1994.

5. On 23 May 1994 the defendant applied for an order setting aside that default judgment. After consent adjournments on 27 May, 10 June and 1 July, on 8 July 1994 Mr Justice Higgins gave certain directions, restrained the defendant from further dealings with any remaining assets, and adjourned the application to 22 July 1994.

6. On 22 July 1994 Mr Justice Higgins made the following orders:

1. The default judgment entered the 11th day of May 1994 be set
aside on the condition that the defendant as trustee for the
Illawong Trust obtains reimbursement from the beneficiaries of the
Trust of all moneys distributed to beneficiaries since the 13th day
of December 1993 such moneys once reimbursed to be subject to the
order made herein on the 8th day of July 1994 that:-
"4. Subject to the plaintiff by his counsel filing in court and
undertaking to pay to any party adversely affected by the
interlocutory injunction contained in this order such compensation
as the court thinks just, in such manner as the court directs, the
defendant trust is restrained from dealing with any remaining assets
of the trust."

2. Gaiho Pty Limited be restrained from disposing of or encumbering
any property transferred to it by the defendant until further order.

3. The defendant pay the plaintiff's costs thrown away as a result
of the setting aside of default judgment and the plaintiff's costs
of this application.

4. The defendant to file a defence within 14 days.

5. Each party has liberty to apply on 2 days notice to the other
side for further directions, or if these orders need to be further
settled.

6. This matter to be listed for the next directions list in any
event.

7. On 29 July 1994 the first defendant lodged a Defence, denying liability. It alleged, as I understand it, that the first defendant had acted as agent for the plaintiff company in payment of accounts and repayments of indebtedness, that the defendant had made advances to or on behalf of the plaintiff company which had not been acknowledged or credited, and that the financial records of the plaintiff were so unreliable that they did not afford a basis for establishing any liability between the plaintiff and the defendant. It also raised a Statute of Limitations and an allegation that the plaintiff's receivership did not entitle it to act in relation to the assets of a trust called "The Godfrey Trust", and was not therefore entitled to bring the action.

8. There were further adjournments of the listing for directions on 29 July, 19 August and 2 September 1992.

9. On that date I adjourned the matter to 9 September 1994, noting that on that date the parties were to have agreed on further directions for the conduct of the action, or be prepared to argue about them.

10. There was a further consent adjournment on 9 September 1994.

11. On 12 September 1994 the plaintiff filed a Notice of Motion seeking declarations that the defendant had failed to fulfill the conditions imposed by Mr Justice Higgins on 23 July 1994, and that the Default Judgment should be restored.

12. Final directions were given by Mr Justice Higgins on 16 September 1994, in which leave was given to the parties to approach the list clerk for a date, and it was directed that the matter be listed before Mr Justice Higgins as soon as practicable after 6 October 1994.

13. On 14 October 1994 the matter came on before Mr Justice Higgins, and there was lengthy cross examination of the first defendant and of Mr Peter Godfrey and the present second defendant.

14. It is clear from the transcript of those proceedings that His Honour came to the view that there was a debt shown on the books of the Illawong Trust as being owing to the plaintiff company. It might be possible to contest the bona fides of the debt, but there was at least a prima facie case of indebtedness.

15. His Honour raised the question whether other beneficiaries should not be defendants to the action.

16. His Honour directed the plaintiff and the defendant to give discovery and inspection, gave directions about the filing of any amended defence or further evidence by the defendant, and made further and amended restraining orders.

17. On 16 December 1994 I made consent orders adding the second, third, fourth, fifth and sixth defendants to the action and consequential orders about amended pleadings.

18. The plaintiff's solicitor was absent from work through illness, and the Amended Statement of Claim was filed 7 days late. The defendant's solicitor was informed by letter dated 20 January 1995 that there would be no objection to the delivery of the Defence 7 days later than the period limited by the Court.

19. The Amended Statement of Claim was forwarded to the solicitor for the defendants on 24 February 1995, in the expectation that he would obtain instructions to act for all except the fifth defendant.

20. On 24 April 1995 the defendants' solicitor informed the plaintiff's solicitor that he had not yet received instructions to act for them. The plaintiff's solicitor asked for the return of the documents so that he could arrange service. They were returned on 20 April 1995.

21. On 11 May 1995 the plaintiff's solicitor advised that arrangements were being made for service, and informing him that time limits for filing of appearances and defences were to be strictly observed.

22. On 26 May 1995 the solicitor for the defendants informed the plaintiff's solicitor that he had been instructed to file appearances on behalf of all defendants except the fifth. The appearances were filed on 1 June 1995.

23. By letter dated 29 May 1995 the plaintiff's solicitor wrote to the defendants' solicitor a letter which contained the following:

"We further confirm your advice that you will be conferring with
Senior Counsel on 29 May 1995 with a view to taking advice in
relation to the matter and we look forward to hearing from you
shortly thereafter.

In relation to the filing of Defences, we confirm our advice to you
that given the extensive delays which have occurred in the matter to
date, our client has instructed us to enforce strict compliance with
the time limit set out in the Supreme Court Rules. This is
particularly relevant in the case of Lloyd Godfrey who has been
served some time ago with the Amended Writ and Statement of Claim
and is in default of the time limits for the filing of a Defence.
In the circumstances we would be pleased if you could file a Defence
on his behalf as a matter of urgency and on behalf of the other
Defendants within the time limited under the Supreme Court Rules.
Our instructions are that if these steps are not taken, we are to
make appropriate applications to the Court without further notice."

24. By letters dated 5 June 1995 the solicitor for the defendants sent by facsimile letters to the plaintiff's solicitor seeking detailed particulars of the plaintiff's amended Statement of Claim. The letters concluded, "We assume that no further action will be taken against our client until a reasonable time has elapsed after the provision of replies to these requests for further and better particulars. If our assumption is incorrect, please notify the writer immediately."

25. The response from the plaintiff's solicitor was dated 9 June 1995. It read as follows:

"We refer to your facsimile of 5 June 1995 received in our office on
6 June 1995 in which you request further and better particulars of
the Plaintiff's claim.

The assumption in the penultimate paragraph of your letter is
incorrect. The Plaintiff's Amended Statement of Claim was forwarded
to you under cover of our letter of 20 January 1995, nearly six
months ago. Both sides have given full discovery and in addition
have filed copious Affidavit material dealing with the issues
relating to the case. The Orders of the Supreme Court made on 16
December 1994 by consent required the First Defendant to file a
Defence to the action on or before 3 February 1995. Whilst we are
prepared to provide answers to such of your request for further and
better particulars as constitute proper requests, we are not
prepared to tolerate any further delay in the pleading process and
on behalf of our client require you to file a Defence on behalf of
your clients within the time limited by the Rules of the Supreme
Court. If a Defence has not been filed on or before 16 June 1995,
we hold instructions to take steps to enter Judgment without further
notice."

26. The defendant's solicitor responded that he assumed that the comments related only to the first defendant. That elicited the following immediate response, dated 14 June 1995:

"We refer to your facsimile of 13 June 1995 and to our telephone
conversation of the same date.

We confirm that we are requiring Defences on behalf of each of the
Defendants to be filed within the time limited by the Rules of the
Supreme Court. We confirm that we will provide appropriate
responses to the request for further and better particulars in due
course however in relation to each of your clients, it ought to be
apparent whether they have a defence and if so, what it is in view
of the enormous amount of Affidavit material which has been provided
by both sides to date. You will be aware that notwithstanding the
length of time that this matter has been pending, we have never
received any comprehensive or any statement as to precisely what it
is that the Defendants wish to raise by way of defence."

27. There had also been a telephone conversation between the solicitors on 13 June 1995, the plaintiff's solicitor's file note of which is as follows:

"I advised him we were requiring a Defence in relation to each of
the Defendants and that our client would take the view that there is
sufficient particularisation through Affidavits etc to enable this
to be done. I indicated that we would provide particulars in due
course however the situation was still quite academic as no one had
ever said to the Bank in any form whatsoever what defence would be
raised. This made it impossible to discuss settlement. He
indicated they would file a Defence within the time limited but it
may be confined to a mere denial. I advised him that this wasn't
really what I was after but it was a matter for him how he dealt
with the matter."

28. On 21 June 1995 the plaintiff filed praecipes for default judgment against each of the defendants for the respective amounts claimed in the amended Writ and Statement of Claim. I note that this is 5 days later than the date of 16 June mentioned in the latter dated 9 June 1995.

29. On the same date the solicitor for the defendant wrote that he anticipated forwarding by facsimile to his agent on that day defences for filing, and reserving the right to amend them following provision of the particulars sought.

30. Also on the same date the plaintiff's solicitor informed the solicitor for the defendant that he had attended to enter judgment.

31. Judgment in default of defence was entered on 23 June 1995.

32. The draft defence of the first defendant which was submitted consisted in the main of admissions and simple denials. Those submitted by the other defendants put the substantive facts giving rise to the claim in issue, and denied that the particular defendant had any knowledge of the insolvency of the trust at the time of the relevant distribution. The second defendant also admitted that she received funds, but said that she received them in her capacity as trustee of the Derwent Trust, they being repayment of moneys advanced by the Derwent Trust to the plaintiff.

33. The defendant solicitor deposed that on 13 June 1995 he had prepared draft defences. On 14 June 1995 he attempted to arrange a conference in order to discuss them. He continued, "Due to their various work commitments and the fact that two of my clients reside in Goulburn and one in Canberra, it was decided to postpone the conference until the weekend."

34. On Friday 16 June he telephoned the office of the plaintiff's solicitor and left a message that he was meeting with his clients on the following day.

35. The conference was held on Saturday 17 June. He finalised the defences and sent them to his Canberra agent by facsimile on 21 June 1995.

36. In many cases, particularly where an obviously arguable defence is shown, a short period of non-compliance with a time limit might mercifully be overlooked. Appropriate costs orders usually enable justice to be done.

37. But in this case the facts that might found a defence had been substantially litigated before Mr Justice Higgins in October 1994.

38. The solicitor for the plaintiff could hardly have made it clearer that his instructions were to insist on compliance with time limits. The excuse offered for non compliance is simply not satisfactory, in my view.

39. So far as a defence on the merits is concerned, I am not in the same position as Mr Justice Higgins. I have not heard the deponents being cross examined on their affidavits, and detailed argument was not addressed to me on the issues.

40. The draft defences do advert to triable issues. I am not able to say that the defendants could not possibly succeed on them. But I am also not persuaded that they have such a chance of success that the plaintiff should be deprived of the fruits of the default judgments in its favour. They were regularly entered up, upon the clearest and most express notice, and the whole history of the litigation casts sufficient doubt upon the genuiness of the defences to cause me to decline to exercise my discretion in their favour.

41. The application to set aside default judgment is dismissed.

42. I order the defendants, other than the firth defendant, to pay the plaintiff's costs of the application.

43. There have been many occasions on which the costs of various proceedings have been reserved. Unless the parties are able to agree on them it will be necessary for further application to be made for consequential orders. I reserve liberty to apply to all parties on reasonable notice.