Brannelly v Coates Hire Operations Pty Ltd [2011] FMCA 959 (2 September 2011)

Last Updated: 6 December 2011

FEDERAL MAGISTRATES COURT OF AUSTRALIA

BRANNELLY v COATES HIRE OPERATIONS PTY LTD

[2011] FMCA 959

BANKRUPTCY – Application to set aside bankruptcy notice upon basis no valid judgment in existence at the time of issue – question of whether or not an order setting aside judgment operated conditionally or not – not expressed conditionally so order remained valid – judgment relied upon had been set aside.

Uniform Civil Procedure Rules 2005 (NSW), r.36.4, r.36.15, r.36.16(2)(b), r.39.50

Bailey & Marinoff [1971] HCA 49; (1971) 125 CLR 529 King v Davenport (1879) 4 QBD 402 Samuels v Linzi Dresses [1981] QB 115 Script Phonography Co Ltd v Gregg (1890) 59 LJ Ch 406 Wallis v Hepburn (1878) 3 QBD 84 Whistler v Hancock (1878) 3 QBD 83 Atkin’s Encyclopaedia of Court Forms in Civil Proceedings Chitty & Jacob’s Queen Bench Forms, Practice & Procedure, Common Law Library, Sweet & Maxwell

Applicant:

MYLES MACKAY BRANNELLY

Respondent:

COATES HIRE OPERATIONS PTY LTD

File Number:

BRG 669 of 2011

Judgment of:

Burnett FM

Hearing date:

2 September 2011

Date of Last Submission:

2 September 2011

Delivered at:

Brisbane

Delivered on:

2 September 2011

REPRESENTATION

Counsel for the Applicant:

Mr A. W. Smith

Solicitors for the Applicant:

Irish Bentley Lawyers

Counsel for the Respondent:

Mr M. V. Sahade

Solicitors for the Respondent:

Oliveri Lawyers

ORDERS

1. That the Application be adjourned pending receipt of further correspondence.
2. That there be leave to file further submissions on or before 4.00pm, 9 September 2011.
3. That the matter be listed for mention on 14 October 2011 commencing at 10.00am.

FEDERAL MAGISTRATES COURT OF AUSTRALIA AT BRISBANE

BRG 669 of 2011

MYLES MACKAY BRANNELLY

Applicant

And

COATES HIRE OPERATIONS PTY LTD

Respondent

REASONS FOR JUDGMENT

(Revised from transcript)

1. This application turns upon the absence of the word “conditional” or a like word in orders made in September 2010. The applicant seeks to have a bankruptcy notice issued on 30 May 2011 and served upon him on 18 June 2011 set aside. That notice relies upon a judgment entered on 11 June 2010. On that date the creditor successfully obtained against the applicant a default judgment before the Local Court in New South Wales at its Downing Street, Sydney Court, in the sum of $29,411.43, inclusive of costs.
2. After becoming aware of the judgment, the debtor applied to have it set aside. That application was heard and determined on 9 September 2010 in the debtor’s favour. On that occasion the Court made orders in these terms:
   • “Notice of motion granted. The judgment/order of – is set aside. Defence be filed within 21 days. Plaintiff to pay the defendant costs of $450 within 14 days.”
3. A minute of order was produced in those terms and replicated in a letter entitled Notice of Order Made, and forwarded by the registrar to the debtor on the same date.
4. Contrary to the order, the debtor did not file a defence within 21 days. The debtor’s solicitors have received no notice of motion or other instruments or documents from the Court. Subsequently, the creditor caused a bankruptcy notice to issue, relying upon the judgment of
   11 June 2010.
5. It is also worthy of note that, in the meantime, as no defence had been filed, a further notice of motion was filed on 10 March 2011 for default judgment, which notice of motion was subsequently determined by the Court, with an entry of judgment on 30 March 2011.
6. A review of the judgment instrument dated 30 March 2011 notes the date of the original judgment order of 11 May 2010, notwithstanding that the instrument itself is dated 30 March 2011. To complicate matters further, the registry has in more recent times forwarded correspondence to the parties, dated 8 August 2011, noting that the matter is listed for trial, and noting that a defence had been filed that day. All of those later matters tended to suggest that there was, indeed, no judgment, a fact which is puzzling, not only in the presence of the creditor’s attitude to this application, but also the creditor’s conduct in seeking a further order for judgment on 30 March of this year.
7. In this case, the judgment relied upon for the bankruptcy notice is the judgment of 11 June 2010. Notwithstanding the later events that I’ve detailed, the creditor contends that the judgment of 11 June 2010 remains efficacious. It seeks to rely upon the judgment in support of the notice and, in particular, submits its efficacious nature is supported first by operation of Uniform Civil Procedure Rules 2005 (NSW) (UCPR) 36.4, which is in these terms:
   • “(1) A judgment or order takes effect:
     • (a) as of the date on which it is given or made, or
     • (b) if the court orders that it not take effect until it is entered, as of the date on which it is entered.
   • (2) Despite subrule (1), if an order of the court directs the payment of costs,
   • and the costs are to be assessed, the order takes effect as of the date when the relevant cost assessor’s certificate is filed.
   • (3) Despite subrules (1) and (2), the court may order that a judgment or order is to take effect as of a date earlier or later than the date fixed by those subrules”
8. In addition, the creditor relies upon UCPR 39.50. It provides that if a person is entitled under a judgment or order, subject to the fulfilment of a condition, but the condition is not fulfilled, then unless the Court orders otherwise:
   • “(a) the person loses the benefit of the judgment or order; and
   • (b) any other person interested may take any steps:
     • (i) that are warranted by the judgment or order; or

(ii) that might have been taken had the judgment not been given or entered, or the order not been made.”

9. The creditor claims the benefit of the judgment or order in terms of UCPR 36.4, but says that, by reason of a non-fulfilment of a condition, the debtor is not entitled to the benefit of the order made in its favour on 11 September 2010.
10. The question that arises for resolution then is, was the order of
    11 September 2010 conditional, in which event the debtor lost the benefit of that order by the non-fulfilment of the condition imposed therein. As I noted at the outset, the order of 11 September 2010 contained three sentences. The first sentence contained the operative order, setting aside judgment. The two further sentences each contained an order, one with respect to the filing of a defence, and one with respect to costs. The operative order was not expressly stated to be conditional upon the fulfilment of the two other orders.
11. The creditor contends that, by operation of the UCPR, they ought to be construed that way, that is to say, to be conditional. I do not agree.
    In applications to set aside judgments regularly entered there are commonly two features. First, the application must address the merits of the substantial proceeding. This is usually done by affidavit, and frequently by attaching a copy of the proposed defence. None of that occurred in this instance in the application before the Local Court on 11 September. In that sense, the order of 11 September addressed the, if you like, common garden variety material in support of an application to set aside a default judgment. I raise that matter for reasons that will become apparent shortly, in terms of the usual sorts of orders which Courts make in the context of applications to set aside default judgments.
12. Second, it is not uncommon in such applications that orders are expressed to be made setting aside judgments conditionally. In that regard I refer particularly, and generally, to observations to be found in LexisNexis online legal service at paragraph 325-6980, setting aside default judgment. The service provides as follows:
    • “Although the general rule is that a perfected order disposing of proceedings is beyond recall by the Court, the Court always retains the power to set aside default judgments in certain circumstances, and on such terms as it thinks fit.”
13. At that point the service refers, at footnote 3, to the following:
    • “The Court has wide discretionary powers to impose terms. The type of terms that are usually imposed are those that are considered to be sufficient to address the prejudice to the party who is not in default. Thus, where a judgment has been entered regularly, the usual order is for the defendant to pay all the costs that the plaintiff incurred in entering the judgment and setting it aside.
    • In some cases the court will also order that the judgment only be set aside after the defendant has complied with a condition, a condition precedent, usually the payment of some or all of the payment claimed in the judgment. The Court also has power to order that funds be paid into Court as appropriate, or that security for costs be given by the defaulting party.’”
14. I have omitted the relevant citations provided by the authors in support of those propositions.
15. I mentioned earlier that these applications, as a matter of rule and practice, require material supporting a substantive defence. It is because those kinds of applications require wide discretionary powers of the Court and, in particular, make no particular reference to the requirement for such matters as defences to necessarily constitute a condition precedent to the setting aside of the judgment.
16. In this case, it should be noted at the outset that UCPR 36.15, which is the relevant rule for setting aside judgments generally, provides a general power to set aside orders. More specifically, UCPR 36.16(2)(b) provides for setting aside of default judgments. It is in these terms:
    • “The Court may set aside or vary a judgment or order after it has been entered if:

(a) it is a default judgment, other than a default judgment given in open Court; or

(b) it has been given, or is made, in the absence of a party, whether or not the absent party had notice of the relevant hearing, or of the application for the judgment or order.”

17. The point of distinction, in my view, in the exercise of general powers, is in the matter of conditions. As the footnotes in the LexisNexis text suggest, there is some basis for distinction in the instance of orders for setting aside judgments between what could be described as the plain order for setting aside judgment on the usual terms, involving the filing of a defence and costs, and other judgments setting aside judgments on other conditions.
18. So much is evident by reference to texts dealing with forms of orders, such as can be found in Atkins Encyclopaedia of Court Forms in Civil Procedure, where for instance, and in volume 14, form 31 provides for a standard form of order in setting aside a judgment, and form 32 which deals with a conditional order setting aside a judgment. Likewise, in Chitty and Jacob’s Queen’s Bench Forms, Common Law Series, form 102 deals with the form of order for setting aside a regular judgment:
    • “102 Order setting aside Regular Judgment
      • [Title as in action]
    • Upon hearing –
    • And upon reading –
    • It is ordered that the judgment entered herein dated the ____ day of 19__ [and the execution issued thereon] be set aside.
    • And it is further ordered that the costs of and occasioned by the entering of the said judgment and of its setting aside, including the costs of this application [and the costs and charges of the said execution] be taxed [if not agreed] and paid by the defendant to the plaintiff [or be the plaintiff’s costs in any event].
    • And it is further ordered [set out any directions given as to the further conduct of the action, e.g. that the time for the defendant’s acknowledgement of service be extended for 7 days from the date hereof and that the defendant do serve his defence within 14 days thereafter and so forth].
    • Dated the ____ day of ___, 19__.”
19. Form 104 provides a form of order for a conditional order setting aside a regular judgment:
    • “104 Conditional Order setting aside Regular Judgment
      • [Title as in action]
    • Upon hearing –
    • And upon reading –
    • It is ordered that the costs of and occasioned by the entry of the judgment herein dated the ___ day of __, 19__, and of its setting aside, including the costs of this application [and the costs and charges of the execution issued thereon] be taxed, if not agreed.
    • And it is further ordered that [if the defendant do within [10] days bring into Court the sum of £__ and/or] if the defendant pays to the plaintiff the amount of the said costs within [10] days of taxation or agreement, the said judgment [and execution issued thereon] be set aside [and set out any directions given as to the further conduct of the action].
    • [If execution has been issued, the Master may add a further condition of setting aside the judgment, thus, that the defendant be restrained from bringing any action against the plaintiff in respect of the said execution].
    • And it is further ordered that if the defendant defaults [in bringing the said sum into Court within the time limited and/or] in paying the said costs to the plaintiff within the time limited, the said judgment [and execution] do stand and that the defendant do pay the plaintiff the costs of and occasioned by this application to be taxed and added to the judgment.
    • Dated the ____ day of ___, 19__.”
20. In broad terms, the forms are common in their introduction. Apart from the usual terms they provide orders that the judgment entered be set aside; that costs of the entering of judgment and of the application be paid by the defendant to the plaintiff; that the defendant have time to file entry of appearance and defence. They are common orders in each of forms 102 and 104. However, form 104 continues to provide an instance of a conditional order. It notes as a condition, for instance, that if the defendant defaults in paying the costs within the time, certain events will follow.
21. Although there appear to be no authorities dealing expressly with the issue, the closest illustration of the effect of conditional orders in the instances that I have been able to ascertain are those that are dealt with in the context of self-executing orders, particularly of the kind referred to by the High Court in Bailey & Marinoff [1971] HCA 49; (1971) 125 CLR 529.
    At page 532 his Honour, Menzies J, made the following statement. He referred to cases such as Whistler v Hancock,[1] Wallis v Hepburn,[2] King v Davenport,[3] and Script Phonograph Co Limited v Gregg,[4] and continued:
    • “...where it was decided that an order dismissing an action unless a condition is fulfilled within a specified time, exhausts the jurisdiction of the Court once the time has expired without fulfilment of the condition...”

There his Honour continued to provide that those decisions were unquestionably correct.

22. It can be seen from the orders made in each of those cases that the orders there were expressed conditionally, stating, for instance, that an order for dismissing an action for want of prosecution would be made unless other matters were addressed. See in particular Whistler v Hancock (supra) and Wallis v Hepburn (supra).
23. It should be noted that two of the authorities referred to by his Honour, Menzies J, have or were overruled by the English Court of Appeal in 1981. However, the basis for their being overruled does not adversely affect their application against the facts of this case and, indeed, arguably it could assist the debtor in the prosecution of its application in this particular matter. But, otherwise, see generally Samuels v Linzi Dresses [1981] QB 115 .
24. However, what follows from those authorities, in my view, is the fact that for an order to have a conditional character, it must be expressed as such. The order of 11 September 2010 was not expressed conditionally. On that basis, UCPR 39.50 does not, and did not, come to the aid of the creditor in this instance. The non-compliance with the actual directions did not constitute a failure to fulfil a condition in the sense contemplated by UCPR 39.50, and so it follows that a debtor did not lose the benefit of the primary order setting aside the judgment of 10 June 2010. In my view, it remains set aside. It follows no bankruptcy notice could issue in respect of that purported judgment.

I certify that the preceding twenty-four (24) paragraphs are a true copy of the reasons for judgment of Burnett FM

Date: 2 December 2011

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[1] (1878) 3 QBD 83
[2] (1878) 3 QBD 84n
[3] (1879) 4 QBD 402
[4] (1890) 59 LJ Ch 406