Defendants File Application to Set Aside Default Judgment
The proceedings arise out of a building dispute between the Plaintiffs and the Defendants concerning a contract for construction. By Notice of Motion, the Defendants applied to set aside a default judgment entered against them. The Court, in ruling on this dispute, assessed whether sufficient cause was shown to set aside the default judgment.
Facts:
By Notice of Motion filed 2 February 2022, the Defendants, Glega Pty Limited and Liza See, apply under Rule 36.15 Uniform Civil Procedure Rules 2005 (“UCPR”) to set aside a default judgment entered against them on 7 April 2021 in proceedings commenced by the Plaintiffs, Jason James Parker Stephens and Scott Alec Harman.
The proceedings arise out of a building dispute between the Plaintiffs and the Defendants concerning a contract for construction of residential premises at 3 and 3a Coolabah Close, Fletcher, under a home building contract entered into on about 18 September 2018. The Plaintiffs allege that the premises have been constructed without the necessary council approval, relevant certification or a construction certificate. The Plaintiffs allege that, during the construction of the premises, the Plaintiffs required production of a construction certificate and the name of the certifier, but no such certificate was forthcoming.
On 23 December 2020, the Plaintiffs filed a Statement of Claim in this Court which sought an award of Damages relief against the First and Second Defendants. The Statement of Claim asserted that the claim was for “liquidated damages”. It was conceded by counsel for the Plaintiffs on the present application that the Plaintiffs’ claim was for unliquidated, and not liquidated, damages. On 9 February 2021, an order was made for personal service to be dispensed with, and with service of the Second Defendant to be effected by email. On 6 April 2021, the solicitors then acting for the Plaintiffs filed a Notice of Motion seeking default judgment for a liquidated claim in the amount of $962,069.00 together with an order that the First and Second Defendants pay the Plaintiffs’ costs.
On 7 April 2021, default judgment was given in favour of the Plaintiff against the Defendants in “the sum of $962,069.47 inclusive of costs”. On 12 May 2021, Notice of Change of Solicitor was filed on behalf of the Plaintiffs and the firm now appearing for the Plaintiffs commenced to act for them. On 15 June 2021, based upon the default judgment, the Court issued a Writ for Levy over Property with respect to a property located at Thornton, with a similar Writ issued as well with respect to a property at Butterwick. Efforts by Sheriff officers to execute these Writs were unsuccessful.
On 30 July 2021, the solicitors for the Plaintiffs filed a Notice of Motion seeking an examination order with respect to the Second Defendant. The Second Defendant was not legally represented until 21 December 2021. Prior to that date, neither Defendant had filed a Notice of Appearance nor had a Defence been filed for either of the Defendants. The Second Defendant had appeared in person before the Registrar on 9 February 2021 and had appeared again on various days for examination hearings, but that had been the extent of her engagement in the proceedings. The hearing of the Notice of Motion proceeded upon the basis that there was a conceded irregularity in that, as this was not a liquidated claim, default judgment under Rule 16.6 UCPR should not have been given.
Mr Batley, for the Defendants, contends that the pleaded claim could not support a default judgment, the judgment was given irregularly and ought to be set aside. Mr McMahon, for the Plaintiffs, argued that, in the circumstances of this case, the Defendants had not shown sufficient cause so that the Notice of Motion ought to be dismissed.
Issue:
I. Whether or not sufficient cause was shown to set aside default judgment.
II. Whether or not default judgment should be set aside as to quantum but not liability.
Applicable law:
Civil Procedure Act 2005 - provides that the real issues in the proceedings could be determined in a just, quick and cheap fashion, and in the interests of justice.
Uniform Civil Procedure Rules 2005 - provides as follows:
“16.6 Default judgment on debt or liquidated claim (cf SCR Part 17, rule 4; DCR Part 13, rule 1; LCR Part 11, rule 1)
(1) If the plaintiff’s claim against a defendant in default is for a debt or liquidated claim or for a claim for unliquidated damages of the kind referred to in rule 14.13(2), judgment may be given for the plaintiff against the defendant for—
(a) a sum not exceeding the sum claimed, and
(b) interest up to judgment, and
(c) costs.”
ACN 057 690 034 Pty Limited v Wykrota [2020] NSWSC 1430 - provides that where a judgment has been entered irregularly for any of these reasons, the Court is not obliged to enquire whether or not there is a good defence on the merits.
Arnold v Forsythe [2012] NSWCA 18 - provides that since the plaintiff had a contractual right to recover his reasonable expenses incurred at the inquiry and since the expenses could be readily quantified, his claim was for a liquidated amount.
CJD Equipment Pty Ltd v A & C Constructions Pty Ltd [2009] NSWSC 1362 - provides that in a claim of economic loss caused by negligence, vulnerability of the Plaintiff is an essential element which must be pleaded.
Garzo v Liverpool/Campbelltown Christian School Limited [2011] NSWSC 292 - where the alleged “risk of harm” which must be pleaded was not identified at all.
Perpetual Trustees Australia Ltd v Heperu Pty Ltd (No. 2) (2009) 78 NSWLR 190; [2009] NSWCA 387 - provides that the focus of Pt 36.15(1) is on the judgment or order that is attacked, and the question is whether it was ‘given, ... entered or ... made’ irregularly etc.
Peters v Magistrate Pat O’Shane and Ors [2006] NSWSC 1329 - provides that if the Court was minded to set aside the default judgment, it was argued that the Court should allow default judgment with respect to liability to stand, but set aside the quantum, thereby allowing the matter to go forward by way of hearing as to assessment of damages only.
Analysis:
There is little doubt that the drafter of the Statement of Claim in this case intended to plead a claim for liquidated damages. The pleading specified the amount of the claim, something that is not permitted in a claim for unliquidated damages. However, the specification of the precise amount does not convert what is otherwise a claim for unliquidated damages into a liquidated claim. Where a judgment has been entered irregularly, the Court is not obliged to enquire whether or not there is a good defence on the merits, although it remains necessary for the moving party to show “sufficient cause” for the judgment to be set aside.
There was a clear irregularity in this case so that default judgment should never have been granted for a liquidated sum. The Statement of Claim pleads several alternative causes of action against the Defendants and, in particular, the Second Defendant. The fact that the Statement of Claim asserted that it was a liquidated claim is not to the point. On the face of the claim itself, the causes of action gave rise to a claim for unliquidated damages.
The affidavit in support of the application for default judgment was limited in its content. Mr Batley accepted that the affidavit of Mr Stephens satisfied the formal requirements where default judgment is sought. The irregularity here arose from the use of the default judgment procedure with respect to what was clearly an unliquidated claim dressed up as a liquidated claim.
Conclusion:
The Court concluded that the Plaintiffs’ alternative submission that the default judgment as to quantum ought be set aside, but the judgment as to liability should stand effectively as default judgment under Rule 16.7 UCPR. The Court is satisfied that it is appropriate that an order be made for the Defendants to pay the costs of the Plaintiffs thrown away by reason of their failure to enter an appearance and file a Defence.
