National Bank Australia Limited v Viziteu

On 21 April 2015 the Plaintiff commenced proceedings against the Defendant seeking possession of land at 266 Todkill Road, Greenwich Park and judgment in an amount of $119,719.22. The Plaintiff experienced difficulties serving the Defendant and on 2 December 2015 filed a notice of motion for substituted service. However, by that time the statement of claim was no longer valid for service: r 6.2(4)(a) Uniform Civil Procedure Rules 2005 (NSW). No application was made to extend time for service.

On 4 December 2015 an order was made under r 10.15 for substituted service of the statement of claim. That service was duly effected on 8 January 2016 and on 22 February 2016 the Plaintiff filed a motion for default judgment. On 23 February 2016 default judgment was entered.

On 9 March 2016 a notice of motion seeking leave to issue a writ of possession to enforce the judgment was filed. On 11 March 2016 the writ issued. The writ was never executed because the parties entered into an arrangement for the Defendant to pay monies to the Plaintiff. The Defendant ultimately failed to comply with the agreement and on 10 April 2017 a further notice of motion was filed for leave to issue a further writ. At that stage it came to the attention of the Court that when default judgment was entered the statement of claim was stale for service. A requisition was raised giving the Registrar’s view that the default judgment should be set aside and that an application should then be made for an extension of time to serve the statement of claim.

Correspondence passed between the Court and the solicitors for the Plaintiff in the form of Notices of Requisition and Responses to Requisition. The Plaintiff resisted the suggestion that it should, in effect, go back to the position where the judgment had been set aside and it needed to seek an extension of time under r 1.12 to serve the statement of claim. The last response to the final requisition made submissions in reliance on three cases.

In Arthur Andersen Corporate Finance Pty Ltd v Buzzle Operations Pty Ltd (in liq) [2009] NSWCA 104 Ipp JA said that considerations had to be given to ss 56-59 of the Civil Procedure Act 2005 (NSW) when the Court was exercising its discretion under r 1.12.

Attention was drawn to what Harrison AsJ said in Berger Investments Group Limited v Coccoon Pty Limited [2010] NSWSC 1015 where her Honour said that, in deciding whether an order should be made under the rule, consideration could be given to the defendant’s evasion of service and the diligent attempts that the plaintiff had made.

Finally, reference was made to the decision of Johnstone DCJ in Judd v Warwick [2007] NSWDC 299 where his Honour stressed that a failure to serve a statement of claim within the time prescribed had to be treated as a procedural irregularity that did not invalidate the proceedings. Further, r 1.12 should be given a beneficial interpretation as wide as language could permit.

In oral submissions today Mr Mir for the plaintiff drew my attention to the decision of the High Court in FAI General Insurance Co Limited v Southern Cross Exploration NL (1988) 165 CLR 268. In that case the Court was considering the equivalent to r 1.12 UCPR in the Supreme Court Rules 1970, that being part 2 rule 3. That rule, like r 1.12, gave power to the Court to extend time after the time for the doing of anything had already expired.

In FAI, self-executing orders concerning the provision of security for costs had been made that had not been complied with. The failure to comply with the orders meant that the proceedings stood dismissed. The plaintiff made application to the court for an extension of time to comply with the self-executing order. Waddell CJ in Eq dismissed the application for an extension holding that as the proceedings had been dismissed by a self-executing order the court had no power to extend the time. The Court of Appeal set aside the Judge's dismissal of the application and said that in the circumstances the power in part 2 rule 3 was wide enough to enable an extension of time for compliance even with a self-executing order. The High Court dismissed the defendant’s appeal from the Court of Appeal's judgment. In the course of so doing, Wilson J (with whom Brennan J and Deane J agreed, and with whom in a separate judgment Gaudron J agreed) said at 283:

The Plaintiff submitted that the costs which had been incurred to date and which would ordinarily be payable by the mortgagor under the mortgage were considerable and would be greatly increased if the Plaintiff was required to start back at the position where it needed to seek an extension of time for service. A reference was made also in that regard to section 56 of the Civil Procedure Act 2005 (NSW).

The Registrar referred the matter to me because the present matter was not the only one where, by inadvertence, default judgment had been entered in circumstances where the statement of claim was no longer valid for service. The matter should be regarded as an application by the Plaintiff to extend time for the service of the statement of claim.

In my opinion, the approach taken by the Registrar in the requisition requiring the default judgment to be set aside and a further application made for an extension of time is correct. A default judgment entered in circumstances where the statement of claim was no longer valid for service when it was served on the Defendant is a judgment entered irregularly.

In Zakaria v Dr Noyce [2012] NSWSC 981 I said this:

Arnold v Forsythe [2012] NSWCA 18 concerned a default judgment given in court on a statement of claim that had intended to plead a debt or liquidated claim but in fact only pleaded a claim for unliquidated damages. Acting Justice Sackville (with whom McColl and Young JJA agreed) said:

It was not suggested in Arnold, and it would have been inimical to the judgment, that the statement of claim could be amended without the judgment, irregularly obtained, being set aside. The principal reason why it was too late to amend the pleadings was that judgment had been given. The pleadings were no longer on foot. The only continuing purpose of the pleadings after judgment is that resort can be had to them to see on what basis judgment has been given for the purpose of any issue of res judicata. When the cause of action pleaded merges into the judgment, so too the pleadings cease to be operative and remain as no more than a record of the basis upon which judgment was obtained.

The three cases relied upon by the plaintiff all concerned applications before judgment had been entered. Rule 1.12 enabled the Court do validate retrospectively, if necessary, the statement of claim for the purpose of service. However, after judgment is given or entered on the causes of action in the statement of claim, the statement of claim is spent. It has no further work to do. The causes of action in it have merged in the judgment.

I do not consider that anything said in FAI v Southern Cross makes it possible to amend pleadings or make any order in respect of an originating process where judgment has been entered on that originating process or those pleadings. That case concerned whether orders could be made after proceedings had been dismissed to enliven those proceedings. The rules make provision for that to happen in certain circumstances: r 36.16 and see Commonwealth Bank of Australia v Kingston Bake Pty Ltd (Rothman J, 11 February 2016, Unrep). That is a fundamentally different process from obtaining an order which affects an interlocutory process in proceedings which have advanced to judgment.

In my opinion rule 1.12 does not permit an extension of time to be granted for service of a statement of claim where judgment has been entered unless that judgment is first set aside. The present application is therefore refused.