Federal Court Sets Aside Default Judgments in Civil Litigation Case

OUTCOME: Allowed

CATCHWORDS

PRACTICE AND PROCEDURE - Interlocutorv judgment ~ Application to set aside default judaement dismissed - Whether leave to appeal should be granted - Substantial delays by applicant - Principles governing exercise of discretion ~ Relevance of general concern

about delavs in prosecution of civil litigation.

Rules of Supreme Court (NT) 0.31 F£.14

Cases considered: Evans v Bartlam (1937) A.C. 473, [NAME_1] v [NAME_2] (1966) 117 C.L.R. 423. [NAME_3] v [COMPANY_30]. (1981) 147 C.L.R. 246, Adam P.

[NAME_5]. Ltd. v Philip Morris Inc. (1981) 148 c.L.R. 170, S.C.I. Operations Ptv. Ltd. v Trade Practices Commission (1984) 53 A.L.R. 283. [NAME_6] v [NAME_5] [18781 3 Q.B.C. 722, [NAME_7] v_ [NAME_8] (19603 V.R. 173, National Mutual

Life Association of Australasia Limited v [COMPANY_9]. £19831 2 Qd.R. 441, Patsalidies v Magoulias (1984) 29 NTR 1.

No. NTG 18 of 1985 [NAME_11] v [NAME_12]

No. NIG 19 of 1985 [NAME_11] v [NAME_13]

No. NTG 20 of 1985 [NAME_11] v [NAME_13] (by his next friend [NAME_13]) .

Morling, Beaumont and Wilcox JJ Darwin 10 April 1986

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IN THE FEDERAL COURT OF AUSTRALIA

) ) [NAME_14] ) No. NTG 18 of 1985 ) DISTRICT REGISTRY GENERAL DIVISION }

BETWEEN: [NAME_11]

Appellant

AND: [NAME_12]

Respondent CORAM: MORLING, BEAUMONT and WILCOX JJ PLACE: DARWIN DATE: 10 APRIL 1986

MINUTES OF ORDER

THE COURT ORDERS THAT: 1. Leave to appeal be granted. 2. The appeal be allowed. 3. The orders made by the Supreme Court of the Northern

Territory on 16 July 1985 be set aside and in lieu

thereof it be ordered that:

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(a) The default judgment entered on 29 June

1984 be set aside.

(b) The [NAME_15] pay to the respondent the costs of the respondent incurred in entering the said default judgment and in relation to the application to set aside the said

judgment in the Supreme Court.

(c) The hearing of the action be expedited and that the matter be listed forthwith before a judge or master of the Supreme Court for the purpose of giving such directions as may be necessary or desirable to ensure an early hearing of

the action.

The respondent pay the [NAME_15] costs of the appeal.

The respondent have a certificate in respect of the

costs of the appeal under s.6(1) of the Federal

Proceedings (Costs) Act 1981.

Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.

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IN THE FEDERAL COURT OF AUSTRALIA

) ) [NAME_14] ) No. NTG 19 of 1985 ) DISTRICT REGISTRY GENERAL DIVISION )

BETWEEN: [NAME_11]

Appellant

AND: [NAME_13]

Respondent

CORAM: MORLING, BEAUMONT and WILCOX JJ PLACE: DARWIN DATE: 10 APRIL 1986

MINUTES OF ORDER THE COURT ORDERS THAT: 1. Leave to appeal be granted. 2. The appeal be allowed. 3. The orders made by the Supreme Court of the Northern

Territory on 16 July 1985 be set aside and in lieu

thereof it be ordered that:

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The respondent pay the [NAME_15] costs of the appeal.

The respondent have a certificate in respect of the

costs of the appeal under s.6(1) of the Federal

The default judgment entered on 29 June 1984 be set aside.

The [NAME_15] pay to the respondent the costs of the respondent incurred in entering the said default judgment and in relation to the application to set aside the said

judqment in the Supreme Court.

The hearing of the action be expedited and that the matter be listed forthwith before a judge or master of the Supreme Court for the purpose of giving such directions as may be necessary or

desirable to ensure an early hearing of

the action.

Proceedings (Costs) Act 1981.

Note:

Settlement and entry of orders is dealt with in

Order 36 of the Federal Court Rules.

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IN THE FEDERAL COURT OF AUSTRALIA

) ) [NAME_14] ) No. NTG 20 of 1985 ) DISTRICT REGISTRY GENERAL DIVISION )

BETWEEN: [NAME_11]

Appellant

AND: [NAME_13] (by his next friend [NAME_13] an [NAME_13]) :

Respondent a

CORAM: MORLING, BEAUMONT and WILCOX JJ PLACE: DARWIN . DATE: 10 APRIL 1986

MINUTES OF ORDER

' THE COURT ORDERS THAT:

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1. Leave to appeal be granted. 3 on 2. The appeal be allowed. K (" 3. The orders made by the Supreme Court of the Northern *

Territory on 16 July 1985 be set aside and in lieu thereof it be ordered that:

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(a) The default judgment entered on 29 June 1984 be set aside. 7

(b) The [NAME_15] pay to the ' respondent the costs of the respondent

incurred in entering the said default

judgment and in relation to the

application to set aside the said ~

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judgment in the Supreme Court.

(c) The hearing of the action be expedited and that the matter be listed forthwith

before a judge or master of the Supreme Court for the purpose of giving such

directions as may be necessary or

desirable to ensure an early hearing of

the action. ts

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4. The respondent pay the [NAME_15] costs of the appeal. ' 5. The respondent have a certificate in respect of the

costs of the appeal under s.6(1) of the Federal

Proceedings (Costs) Act 1981.

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IN THE FEDERAL COURT OF AUSTRALIA

[NAME_14]

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DISTRICT REGISTRY GENERAL DIVISTON

ON APPEAL FROM THE SUPREME, COURT OF THE [NAME_14]

No. NTG '18 of 1985

BETWEEN: [NAME_11]

Appellant AND: [NAME_12]

Respondent

{ No. NTG 19 of 1985 BETWEEN: [NAME_11]

Appellant AND: [NAME_13]

Respondent

No. NTG 20 of 1985

BETWEEN: [NAME_11] Appellant AND: [NAME_13] (by

his next friend [NAME_13])

Respondent

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CORAM: MORLING, BEAUMONT and WILCOX JJ. PLACE: DARWIN

DATE: 10 APRIL 1986

REASONS FOR JUDGMENT

THE COURT: The appellant seeks leave to appeal from orders of a Judge of the Supreme Court of the Northern Territory dismissing applications by the appellant that interlocutory judgments entered in default of defence be set aside. The judge heard together three separate applications, relating to judgments obtained in each of three separate actions instituted by the three respondents. The three matters share a common history and

raise similar issues. They have been heard together.

The history of the matters is as follows. In November and December 1983 each of the respondents issued writs out of the Supreme Court claiming damages from the appellant. The statement of claim endorsed on each writ alleged negligence by the appellant in the driving of a motor vehicle near Tennant Creek on 17 July 1983 causing it to collide with a vehicle in which each of the respondents were riding. The writs were served on the

appellant on 6 December 1983.

On 27 February 1984 the [NAME_15] entered an appearance on her behalf. By telex dated 16 March 1984 the respondents' solicitors informed the [NAME_15] that,

if they proposed to file defences, they should do so within seven

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days "in default of which we will apply for judgment". Reference was also made to medical expenses then being incurred by the respondents. On 18 April 1984, the [NAME_15] sent a

telex to the respondents' solicitors informing them that defences

were being "forwarded" that day.

No defences were filed or served. On 14 June the respondents' solicitors wrote again, and after referring to the fact that the defences had not been delivered they stated:

"Nearly half a year has now expired since your

client was served with the Summonses issued on

behalf of our client. In our opinion there

can be no excuse for your client's failure to

deliver Defences. Accordingly, unless the

same are delivered shortly application will be

made to have this matter set down for hearing."

The implication was clear that judgments would be sought. There being no response, praecipes for judgment were filed and on 29 dune 1984 judgment was entered in each action in default of defence. Four months thus elapsed between the date of appearance and the date of judgment during which period two letters requiring delivery of defence were received by the

[NAME_15].

On 3 July the respondents' solicitors forwarded copies of the interlocutory judgments obtained to the [NAME_15]. They then stated:

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"We are seeking instructions as to the likely amount of quantum prior to listing these

proceedings for hearing as to the assessment of damages".

There were subsequent telephone conversations between the solicitors. By letter dated 15 November 1984 the [NAME_15] wrote to the respondents' solicitors stating:

"We refer to previous correspondence and discussions herein. We have now been advised by our [NAME_16] that an

application to set aside the judgment entered

by the plaintiff will be made towards the end of November."

This letter came from the [NAME_17] of the [NAME_15], being signed by a partner in the firm. However, no application was in fact filed in November or, indeed, until the

following May; almost eleven months from the date when the

judgments were entered.

The respondents' solicitors on the record, who were acting as agents for principals outside the Territory, set about obtaining instructions as to matters relevant to the assessment

of damages. In December 1984 they learned that the injuries

sustained by [NAME_12] might have more severe consequences than were initially anticipated so that further medical examination was desired, involving some delay. Although they prepared a draft Certificate of Readiness, no steps were taken to set the matter down for assessment of damages prior to the filing of the application to set aside the interlocutory judgments on 20 May

1985.

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In support of the application, an affidavit was filed by

the appellant giving her version of the accident as follows:

On 17 July 1983 I was driving a [NAME_18] registered number N.T. 178-978 north on the [ADDRESS].

I had left Alice Springs that morning at about 11.30 a.m. to travel to Tennant Creek, and had been driving at about 100 km per hour for most of the way except when I had to overtake other vehicles when my speed would have risen to about 120 km per hour.

At about 3.30 p.m. I was 60 km south of Tennant Creek and I saw ahead of me a vehicle towing a trailer in the form of a small caravan.

I caught up with this vehicle and caravan and followed behind for a few minutes before deciding to overtake it.

I think the other vehicle was travelling a little below 100 km per hour or I would not have caught up with it.

I pulled over to the right-hand side of the bitumen surfaced road and saw that there was not another vehicle in sight. I then accelerated past and my speed would have risen to about 120 km per hour.

I did not sound my horn as I relied upon the vigilance of the other driver.

When I commenced to overtake, my vehicle had all four wheels on the bitumen but seeing the road was

only some 12 to 15 feet wide, I pulled further right with the two right wheels on the gravel shoulder.

As I drew up to the caravan, I saw that the caravan was fishtailing and I gained the fleeting impression that both the caravan and the towing vehicle were unstable. I believe that the vehicle and caravan were probably grossly overloaded which caused the driver to have steering problems.

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12. Suddenly the caravan hit the side of my vehicle and I was conscious of a very hefty bump on my left side. The bump caused my car to veer to the right and roll over on the shoulder to the east of the road. I think I probably tried to correct the sharp turn to the right after I was hit and in doing so rolled the car.

13. I was trapped in the car as I was unable to open the door. The car was on its roof at the time but a few minutes later another north-bound vehicle stopped and got me out. It was then that I saw the other vehicle and caravan were also on the shoulder just a little further to the north of where my car came to rest.

14. I later looked at the tyre marks on the road and they clearly showed that the other vehicle had veered right, hit my car and literally forced me off the road."

Although, on the appeal, it was suggested that para.14 might be inadmissible evidence, no objection to its reception was made at the hearing of the application. The appellant was not

cross-examined on her affidavit.

None of the respondents gave evidence on the

application, although their solicitor gave evidence, again

without objection, of their case as follows: '

"20. I am informed by my instructing principals that the vehicle in which the Plaintiff was driving was not grossly overloaded nor overloaded at all in the circumstances.

L 21. j%I am informed the Plaintiff's vehicle was a brand new 1983 Nissan Patrol.

22. %I am informed that at the time of the accident the Plaintiff's caravan was fitted with an antisway device involving a draw bar on the Plaintiff's vehicle and special fittings on the tow bar.

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23. I have been informed by an officer of the NT Police re Force that there was no statutory or regulatory obligation for the Plaintiff's vehicle to be fitted with caravan towing mirrors.

24. Iam informed that shortly before the accident the r Plaintiff noticed the Defendant's motor vehicle in re his rear vision mirror approaching the Plaintiff's vehicle at a high speed.

25. I am informed that the Plaintiff believes that the t Plaintiff's vehicle and caravan did not sway as the | Defendant's vehicle overtook it but that the

Defendant's vehicle collided with the Plaintiff's i

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caravan. 26. I am informed that at the time of the accident the

Plaintiff was driving at a speed of about 80 kilometres per hour.

27. %I am informed and verily believe that the Plaintiff had driven in the vehicle in which he was driving at the time of the accident from Dubbo to the scene | of the accident with much the same load that he was . carrying at the time of the accident and that until [. the Plaintiff was involved in the accident the ' actual driving involved in his journey had been ' uneventful.

28. I am further informed and verily believe that the scene of the accident was a straight flat roadway, that at the time of the accident visibility was clear and that at the time when the accident happened the only two vehicles anywhere in sight Pa were those of the Plaintiff and the Defendant." Ls

Order 31 v.14 provides that a judgment obtained by default may be set aside by the Court or by a judge upon such

terms as to costs or otherwise as the Court or the judge thinks

fit. a

In considering whether the discretion conferred by Order 31 £.14 should be exercised in the present case, the learned 7 Judge cited the following well-known statement of principle by

Lord Wright in Evans v Bartlam (1937) A.C. 473 at p.489:

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"A discretion necessarily involves a latitude

of individual choice according to the particular circumstances, and differs froma case where the decision follows ex debito justitiae once the facts are ascertained. In a case like the present there is a judgment, which, though by default, is a regular judgment, and the applicant must show grounds why the discretion to set it aside should be exercised in his favour. 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."

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After referring to the authorities in this area, the learned

Judge summed up the relevant considerations 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 adequately be compensated by an order for costs."

His Honour acknowledged that these considerations indicated a philosophy that a defendant, who demonstrates that he

may have a defence, should not suffer judgment without the

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opportunity of putting his case and being heard. But the learned

Judge refused the application because of a type of prejudice

which he described as follows:

"But there is in my view another type of prejudice which falls for consideration and it is a prejudice which cannot really be ameliorated by way of costs. I refer to the anxieties which accompany litigation in which ordinary people become involved. The delays experienced in our civil courts are a threat to the administration of civil justice, they tend to bring the law into disrepute. Such delays promote confusion and frequently impede the ultimate fact finding processes, as time dulls memory. The Rules of Court were designed to promote the orderly procedures of litigation and the time limits imposed are intended as an aid to reasonably prompt disposal. Simple procedures are available to gain extensions of time and the courts, as the authorities illustrate, are very ready to set aside orders based on minor infringements of the rules or misunderstandings. But the courts, in my view, will not serve the community if they do not allow litigants to utilise (within reason) the procedures available, by the Rules, albeit such procedures may lead to interlocutory judgment. Frequently in these matters the courts will be reluctant to bind persons who suffer by their solicitors' omissions, but in the long run it must be a matter of degree and where solicitors are negligent clients may have their remedies."

His Honour concluded that the delays of the [NAME_15] in failing to file a defence and in failing to move expeditiously to set aside the default judgment were so "gross

and inexcusable" as to warrant the dismissal of the application.

The first question which arises is whether leave to appeal should be granted since the dismissal of an application to

set aside a default judgment is, strictly speaking, an

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interlocutory, not a final judgment; even if, in its practical operation, it may well finally determine the position of the

parties (see [NAME_20] v [NAME_2] (1966) 117 C.L.R. 423 at

p.440; [NAME_3] v [COMPANY_21] (1981)

147 C.L.R. 246). The question raised by the application, relating as it does to the type of prejudice which will justify a yefusal of an application by a defendant to be let in to defend upon the merits, is a general question of some importance. It is worthy of the grant of leave to appeal and we propose to grant

that leave.

The resultant appeal is an appeal against the exercise of a judicial discretion, so that the appellant can succeed only

if it be demonstrated that the judge at first instance acted upon

a wrong principle or allowed irrelevant matters to guide or affect him or that his Honour did not take into account some material consideration or that the result reached is unreasonable

or plainly unjust (see Adam P. [NAME_5]. Ltd. v

Philip Morris Inc. (1981) 148 C.L.R. 170 at P.176; S$.C.I.

Operations Pty. Ltd. v Trade Practices Commission (1984) 53

A.L.R. 283 at P.354).

Since the decision of the House of Lords in Evans v

Bartlam, supra, the settled course of authority in England and in this country has emphasised, as fundamental to the exercise of

the judicial discretion to set aside a default judgment, the need

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for a defendant to show a prima facie defence on the merits. In

the language of Lord Wright, in the passage cited by the learned

Judge, this is "the primary consideration".

It is true, as Lord Atkin said in Evans v Bartlam (at

' p.480), that it is inappropriate to lay down rigid rules to

govern the exercise of the discretion. On the other hand, speaking generally, the cases show that 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 (see [NAME_6] v [NAME_5] [18781 3 0.B.D. 722; [NAME_7]

v_ [NAME_8] £19601] V.R. 173; National Mutual Life Association

of Australasia Limited v [COMPANY_9]. £1983] 2

Qd.R. 441 at p.449.

In the present case, a total period of about 17 months was lost by reason of the default of the [NAME_15]. However, the respondents disclaimed any specific prejudice on this account. It was common ground that the ultimate disposition of the principal proceedings was delayed because of other factors, notably the need for further medical examinations. The [NAME_15] agreed to pay the costs thrown away because of their default.

Accordingly, the case was one in which

the appellant showed a prima facie defence and in which the respondent was unable to demonstrate any particular prejudice by

reason of the delay of the [NAME_15] in filing her

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defence. As we have indicated, the traditional view is that, under such circumstances, a proper exercise of the judicial

discretion calls for the setting aside of any default judgment.

His Honour did not apply the traditional view. In the passage in his reasons which we have already quoted he referred to the delays commonly experienced in civil litigation, which he rightly described as being a threat to the administration of justice and as tending to bring the law into disrepute. He referred, in general terms and without suggesting that his remarks were particularly applicable to the plaintiffs in these proceedings, to "the anxieties which accompany litigation in which ordinary people become involved". He rightly emphasised

the role intended to be played by the Rules of Court in the

efficient disposal of litigation and the importance of adherence

to the time limits prescribed by the Rules.

We agree entirely with his Honour's description of the delays in this case as "gross and inexcusable". Each of the defences intended to be filed in these actions is in a common form. The drafting of such defences should have occupied little of the time of a competent solicitor. The solicitors for the appellant had ample opportunity to prepare and file their defences even before they were -- twice -- warned by the

respondents' solicitors that, in default of defences,

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interlocutory judgments would be entered. Those warnings should have alerted them to the necessity to enter defences immediately.

No satisfactory explanation has been given as to their failure to

do so.

The 11 month delay in making the application to set aside the interlocutory judgments -- a matter which weighed heavily with his Honour -- is even more inexcusable. Any competent solicitor would have been aware of the importance, in the interests of his or her client, of making such an application forthwith. But not only did the particular solicitor handling the matter in the [NAME_15]' [NAME_16] -- apparently an associate of the firm -- neglect his obvious duty; no action -- certainly no effective action -- was taken by the partner in the [NAME_17] of the firm, who was aware that the application had not yet been made, to ensure that the omission

would speedily be rectified.

It is, however, another question whether concern about the extent of delays, either ina particular case or generally, should, in the absence of prejudice in the particular case, be taken into account in exercising a discretion to set aside a default judgment. 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

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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 umpose 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 pre-trial procedures which enable the Court to supervise progress -- and, more pertinently, non-progress -- in all actions. In this respect we note, and respectfully endorse, the remarks made

py O'Leary J, as the Chief Justice then was, in Patsalidies v

Magoulias (1984) 29 NIR 1 at p.7.

In our opinion the discretion exercised by his Honour

miscarried. It being established that there was, in each action, a prima facie defence upon the merits and prejudice in none of the particular cases having been shown, the learned Judge should have set aside the judgment in accordance with the approach

indicated by the reasoning in Evans v Bartlam, supra.

In the result, we would allow the appeal but impose terms as to costs and make orders to minimize any further delay in finalising the proceedings. We propose to order first that

the [NAME_15] pay the costs of entering the judgment

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and of the application before the learned Judge and, secondly, that the hearing of the actions be expedited, that the matters be listed forthwith before a judge or master of the Supreme Court for the purpose of giving such directions as may be necessary or

desirable to ensure early hearings of the actions.

As to the costs of the appeal itself, costs must follow

the event. However, the respondents should have a certificate in

respect of these costs under s.6(1) of the Federal Proceedings

(Costs) Act 1981.

I certify this and the fourteen (14) preceding pages to be a true copy of

the Reasons for Judgment of

their Honours Mr Justice Morling,

Mr Justice Beaumont and Mr Justice Wilcox

Associate: [NAME_22],

Date: 10 April 1986 Counsel for Appellant: [redacted]

with [NAME_24] Solicitors for Appellant: [redacted] Counsel for Respondents: [redacted] Solicitors for Respondents: [redacted] Date of Hearing: 7 April 1986

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