Rory McDonnell v Mehanna Holdings Pty Ltd as Trustee for the Mehanna Discretionary Trust

By summons dated 13 June 2019, Rory McDonnell seeks leave to appeal under ss 39 and 40 of the Local Court Act 2007 (NSW) against a decision of Magistrate Greenwood on 20 December 2018 striking out his defence and cross-claim and entering summary judgment against him. Mr McDonnell contends that the learned Magistrate erred by, inter alia, incorrectly applying r 13.1 of the Uniform Civil Procedure Rules 2005 (NSW) (“UCPR”) and denying him procedural fairness.

Mr McDonnell initially also sought judicial review of the Magistrate’s decision under s 69 of the Supreme Court Act 1970 (NSW). He contended that the magistrate failed to afford him procedural fairness, failed to have regard to a relevant fact (the merits of the defence) and that her Honour’s decision was unreasonable. I will deal with Mr McDonnell’s failure to properly commence that aspect of the proceedings invoking this Court’s supervisory jurisdiction below at [65]-[67].

The evidence before me on this appeal consisted of all the material that was before Magistrate Greenwood in the Local Court. This included the plaintiff’s chronology, pleadings consisting of the statement of claim filed on 15 August 2017, the defence filed on 6 October 2017, the amended defence filed on 12 January 2018, the first cross-claim filed on 22 May 2018, the defence to the first cross-claim filed on 19 October 2018.

Fresh affidavits of Rory McDonnell dated 20 May 2019 and 17 July 2019 (with the exhibit “RM-1”) and the affidavit of Joseph Antoun dated 5 July 2019 (with the exhibit “JA-1”) were read on this appeal on the question of the need for an extension to bring these proceedings. It emerged during the hearing that the plaintiff’s affidavits of Charles Mehanna dated 27 February 2018 and Joseph Antoun dated 27 February 2018 filed in the Local Court and the schedule of damages (which were before the learned Magistrate) were not part of the Court Book before me and Ms Merkel had not seen them before. They were subsequently provided.

Based on this evidence, the uncontested factual background is as follows.

Mr McDonnell is a mortgage broker. On or about March 2017, he (as the director of York Street Capital) was engaged by Mehanna Holdings Pty Ltd as Trustee for the Mehanna Discretionary Trust (“Mehanna”) in relation to financing for properties intended to be bought by Mehanna.

By statement of claim filed in mid-August 2017, Mehanna brought proceedings in the Local Court alleging a breach of contract and negligence on the basis that Mr McDonnell (the second defendant) and York Street Capital (the first defendant) had mispresented the amount of finance that could be obtained for Mehanna.

In the statement of claim, Mehanna pleaded that these breaches occurred in relation to the purchase of a property in Newtown. Mehanna required a loan of up to $3,000,000 to complete the purchase, pay the stamp duty and meet other purchase costs. The statement of claim stated that between on or about 8 February 2017 and on or about 10 February 2017, Mr McDonnell made an oral representation that he or York Street Capital could arrange a loan to enable Mehanna to complete the purchase, for a commission of $16,500. On 2 March 2017, Mehanna Holdings entered into a contract to purchase the property. Mehanna then paid the commission to York Street Capital by cheque on 14 March 2017 in the sum of $16,500.

Although Mr McDonnell was the second defendant in the Local Court and his company, York Street Capital, was the first defendant for ease of reference I propose to refer to the defendants below collectively as Mr McDonnell.

Under the contract for the sale of land, Mehanna was obliged, if the sale was not completed in time, to pay interest on the balance of the purchase price, any other amount payable and half the deposit to the vendors.

Subsequently, York Street Capital did not arrange a loan. On 18 April 2017, the solicitors for the vendor of the Newtown property served a Notice to Complete on the solicitors for Mehanna. This required completion of the sale by 4 May 2017. On or about 26 April 2017, Arch Finance provided Mehanna with an offer of finance from Perpetual Trustee Company Limited for a maximum amount of $1,658,800.

On 28 April 2017, Mehanna and York Street Capital entered into an agreement where Mehanna accepted the finance from Perpetual Trustee and York Street Capital refunded Mehanna’s commission. This agreement was partially oral and partially in writing.

Mehanna was unable to complete the purchase of the Property by 4 May 2017. Mehanna and the vendors then entered into an agreement to extend the time for completion to 5 June 2017. By 4 May 2017, Mehanna had paid interest of $10,919.34 to the vendors. York Street Capital did not repay its commission.

In relation to the contract claim, Mehanna claims that York Street Capital and/or Mr McDonnell breached the oral agreement to provide adequate finance. The loss and damage claimed is:

Alternatively, Mehanna claimed that York Street Capital breached the 28 April 2017 agreement and that its $16,500 commission was a debt due.

In relation to the claim in negligence, Mehanna claimed that York Street Capital and/or Mr McDonnell failed to exercise reasonable care and skill in arranging a loan of up to $3,000,000 to enable Mehanna to purchase the Newtown property. Alternatively, Mehanna claimed that York Street Capital and/or Mr McDonnell engaged in misleading and deceptive conduct, contrary to s 18 of the Competition and Consumer Act 2010 (Cth), Sch 2 - Australian Consumer Law, in representing that it could obtain such a loan.

After the statement of claim was served on 5 September 2017, Mr McDonnell engaged his first solicitor, Anthony Margiotta, on or about 25 September 2017, following which a defence was filed on 6 October 2017 on behalf of both defendants which indicated that Mr Margiotta was Mr McDonnell’s solicitor.

Mr McDonnell’s solicitor failed to appear at court on 22 November 2017.

An amended defence was filed by Mr McDonnell’s solicitor on 12 January 2018 which pleaded the following at [21], [21A], [22] and [26]:

On 16 January 2018, Mr McDonnell’s solicitor failed to appear at court for further directions.

On 16 May 2018, Mr McDonnell filed a notice of change of solicitor. His new solicitor was Mr Michael Foley. It was common ground that Mr Foley was a competent solicitor and no fault for any delay is to be directed at him.

On 22 May 2018, Mr McDonnell filed a cross-claim claiming misleading and deceptive conduct by Mehanna in relation to their financial circumstances. Mr McDonnell’s cross-claim asserted that he was engaged by Mehanna on 13 March 2017 to assist in completing a purchase of the property in Newtown they had already bought and representations (four in total) Mr Mehanna made to Mr McDonnell in a telephone conversation on 21 June 2016 in relation to his and Mehanna Group’s financial position that Mr McDonnell relied upon as continuous representations.

According to the cross-claim, the first representation was that Mehanna’s gross income was in the order of over $750,000 annually. The second representation was that that the combined liabilities of the Mehanna Group were in the order of $5,000,000. The third representation was that the Mehanna Group structure was relatively simple and straightforward. The fourth representation was that that the Mehanna Group was “awash with money” and would not have any difficulty in satisfying lenders that it could repay loans in the amount being sought by Mr McDonnell.

On 17 September 2018, Mr McDonnell’s new solicitor, Mr Foley, suffered an aneurysm and was in the ICU until December 2018.

On 26 September 2018, 10 October 2018 and 24 October 2018, there was no appearance on behalf of Mr McDonnell at further directions hearings. There was some correspondence between Mr McDonnell and Mr Mehanna’s solicitor during that time.

On 24 October 2018, Mr McDonnell notified Mehanna that he had found a new solicitor to replace Mr Foley.

On 7 November 2018, Mr McDonnell failed to appear in person or by way of his new solicitor at court for further directions. A costs order in the amount of $500 was made against him that day for both failing to appear and failing to comply with a notice to produce for the fourth time. The Court timetable further required Mr McDonnell to file evidence on his cross-claim by 16 November 2018. The evidence was not filed by that date.

On 11 December 2018, Mehanna filed a notice of motion seeking that Mr McDonnell’s defence and the cross-claim be struck out under UCPR r 12.7(2) on the basis of his failure to conduct proceedings with due dispatch as well as the costs of the motion and the costs of the proceedings.

On 20 December 2018, Mr McDonnell and Mehanna appeared before Magistrate Greenwood in the Local Court. A solicitor, Mr Olzomer, appeared for Mehanna. Mr McDonnell was unrepresented.

When the motion was filed, the outstanding issues were that Mr McDonnell’s evidence on the cross-claim (due to be filed by 16 November 2018) had not been filed, documents had not been provided pursuant to a notice to produce and there had been no reply by Mr McDonnell to a request for further particulars. The hearing was listed as a special fixture on 29-30 January 2019 for two days.

After Mr Olzomer outlined the delay, Magistrate Greenwood heard from Mr McDonnell in his capacity as both the second defendant and the only shareholder of the first defendant (York Street Capital). Mr McDonnell explained that the delay had been due to several changes of solicitors and the fact that his latest solicitor had suffered an aneurysm on 17 September 2018.

He explained that a bundle of documents had been provided to the court comprising of an “unfinished” affidavit with several annexures and medical records. Mr Olzomer acknowledged that although some evidence had been filed, the request for further and better particulars still had not been compiled with. Her Honour then clarified with Mr McDonnell that he had a bundle of documents measuring approximately 2 centimetres in depth and an additional 4 centimetres’ worth of documents contained on a USB stick. Mr McDonnell explained that he had approximately another 500 pages of documents on the USB stick in response to the notice to produce that had not as yet been provided to Mehanna in hard copy because Mr McDonnell “had a bit of trouble with [his] printer”. I provide further details about these exchanges below at [99]-[102].

Magistrate Greenwood then delivered judgment striking out Mr McDonnell’s defence and cross-claim.

Her Honour indicated that the first matter for her consideration was s 58 of the Civil Procedure Act 2005 (NSW) (“CPA”), having regard to s 56 and s 57. When considering s 57, her Honour noted the gap between the filing of Mehanna’s statement of claim in mid-August 2017 and the proceedings in late 2018. When considering the need for the efficient disposal of the court’s business, her Honour had regard to a chronology handed up by the plaintiff and stated:

Her Honour was satisfied that there had not been a timely disposal of the matter in a way that was affordable for the parties. Her Honour then turned to the factors contained within s 58 of the CPA. In terms of the complexity of the proceedings, her Honour did not consider that Mehanna’s action posed a particularly complex or difficult set of issues; it simply concerned whether Mr McDonnell had done what he had undertaken to do under the contract and whether accurate information was provided to Mehanna.

Her Honour then turned to consider s 58(2)(b)(ii) of the CPA, namely the degree of expedition with which the respective parties had approached the proceedings. Taking into account the six occasions where the defendant failed to appear in the proceedings, her Honour stated “I have to say I cannot recall a case where there has been such a flagrant disregard of the Court's timetables and of attention to this matter and of respect towards the proceedings and the plaintiff and the Court.” While acknowledging the catastrophic medical incident that had befallen the plaintiff’s solicitor in September, her Honour noted that this had occurred more than a year after proceedings were instituted. Furthermore, although Mr McDonnell appeared to have a new solicitor, this solicitor was not on the record. Her Honour noted that a timetable was set on 16 January 2018 and a cross-claim was filed in May, but that Mr McDonnell had not filed any evidence. It was further noted that a costs order remained unpaid and that there had been four prior return dates for the notice to produce. Furthermore, Mr McDonnell had conceded that the defence that he had filed was merely a holding defence. (I pause here to note that this is incorrect, it was Mehanna that had only filed a holding defence to the cross-claim).

Her Honour acknowledged Mr McDonnell’s explanation that the lack of expedition on his behalf was his solicitor’s aneurysm and thus beyond his control. However, she noted that he had had 12 months during which to organise proceedings before this and, after the accident, should have immediately engaged a new solicitor. She found that the plaintiff had facilitated the just, cheap and quick resolution of proceedings but that the defendant had not. In terms of s 58(2)(v), she again noted the multiple instances of non-appearance by Mr McDonnell. Finally, she noted that great injustice would be done to the plaintiff if she did not make the order. She thus struck out Mr McDonnell’s defence and the cross-claim.

After striking out Mr McDonnell’s defence and cross-claim, the transcript reflects that the following occurred:

The matter was then stood in the list whilst her Honour dealt with other matters. The transcript reflects that when the proceedings resumed, Mr McDonnell was not present in court. It is difficult to glean from the transcript when he entered court as the transcript does not record him saying anything before her Honour ordered summary judgment against him. Mehanna’s solicitor, Mr Olzomer, appeared and the following exchange occurred:

What appears to have happened here is that her Honour was taken to the plaintiff’s affidavits filed with the statement of claim setting out how the amount claimed was arrived at. The transcript in the Local Court then reflects the following:

Sections 39, 40 and 41 of the Local Court Act are as follows:

The time limit for instituting an appeal to this court is 28 days, as set out in UCPR r 50.3. The last day for instituting such an appeal, excluding days where the Supreme Court Registry was closed (see UCPR r 1.11(3)), was 1 February 2019. An extension of time can be granted under r 50.3(1)(c). UCPR r 50.3 is in these terms:

An application for an extension of time was included in the summons and Mr McDonnell relied upon an affidavit of 20 May 2019 to explain the delay in commencing this appeal. He was not required for cross-examination.

Mr McDonnell explained that after his defence was struck out, there were only two working days before Christmas and it was difficult for him to find a solicitor. He was advised by a friend, who was a legal consultant not currently practising, that he should appeal to the District Court. On 17 January the relevant documents were filed in the District Court appealing the Magistrate’s decision.

In early February, Mr McDonnell was issued with a letter of demand and a wind-up application by Mehanna in respect of York Street Capital.

On 11 February 2019, Mr McDonnell was granted a stay of the wind-up application in the Local Court. On 20 February 2019 he engaged Danielle Phair, solicitor, to appear in the District Court, who immediately advised him that he was commencing his appeal in the wrong jurisdiction. Mr McDonnell’s appeal in the District Court was dismissed with costs.

On 12 March 2019, Mr McDonnell was served with a bankruptcy notice based on the debt to Mehanna. Around this time, he also had to have a biopsy for a medical concern. The results for this arrived on 29 March 2019 and were clear.

On 2 April 2019, Mr McDonnell filed a notice of motion in the Federal Circuit Court seeking to have the bankruptcy notice set aside. At this time, he was also making arrangements to have a copy of the transcript of the Local Court proceedings sent to him.

On 16 April 2019, Mr McDonnell was granted an extension of time for compliance with the bankruptcy notice.

On 7 May 2019, Mr McDonnell appeared in the Federal Circuit Court in relation to the notice and his proceedings were adjourned until 21 May 2019 so that he could file an appeal in this court.

On 13 June 2019, Mr McDonnell filed a summons in this court, which was 148 days out of time. On 30 July 2019, he was granted leave to file an amended summons seeking leave to appeal and commencing an appeal.

Mehanna opposed time being extended to bring the appeal out of time. Reliance was placed on the fact that Mr McDonnell had first engaged lawyers in September 2017. It was submitted that he knew from that time the importance of having good lawyers. This submission was based on the fact that in his affidavit of 17 July 2019, he deposes to this at [15]. Reliance was also placed on the fact that in spite of that knowledge he refused to obtain lawyers and this forced Mehanna to incur the time, cost and effort of a misconceived appeal to the District Court.

It was further submitted that Mr McDonnell’s explanation for the five-month delay was inadequate and that Mehanna would suffer further prejudice given the delay thus far.

I have had regard to the principle, noted by Garling J in McLennan v Sukh [2011] NSWSC 26 at [26] that:

Despite this, it seems to me that this is an appropriate matter in which an extension of time should be granted. In Tomko v Palasty (No 2) (2007) 71 NSWLR 61; [2007] NSWCA 369; Basten JA, with whom Hodgeson and Ipp JJA agreed expressed the relevant principles at [55] and [56] in this way:

I have had regard to all of these factors. The delay of five months is somewhat lengthy. The reasons for the delay were poor legal advice and the distraction of being put into bankruptcy by Mehanna over this judgment debt. Significantly, for the reasons I provide below, I am not only satisfied that Mr McDonnell has an arguable case I am also satisfied that he must succeed. It is to be accepted that prejudice will flow to Mehanna by further delay and I propose to deal with this prejudice with an appropriate costs order. The prejudice to Mr McDonnell should I not extend time is also significant given that a bankruptcy motive was served on him as a result of summary judgment being entered against him in this matter.

For these reasons, I would extend the time for bringing this appeal.

Mr McDonnell relied upon a second affidavit of 17 July 2019 on this appeal.

In his second affidavit he explained the delay in the Local Court proceedings. Although I am satisfied that some of this evidence is relevant to what he was attempting to submit to her Honour in the Local Court, I am not otherwise satisfied that it is relevant to whether the Magistrate erred. I propose to only have regard to those aspects which were touched upon before her Honour.

Mr McDonnell explained that he met with a solicitor, Anthony Margiotta, in September 2017. In December, he met with a barrister. On 12 January 2018, he met with Mr Margiotta to discuss the amended defence. In March, it appears that the cost of defending the claim became prohibitive and Mr McDonnell had to engage a new solicitor. On 14 May 2018, Mr Margiotta indicated that he was ceasing to act. Mr Foley then began acting for Mr McDonnell. Leave to file a cross-claim was granted on 17 May 2018 and this cross-claim was filed and served on 22 May 2018. Mehanna then requested further and better particulars on 1 June 2018. A hearing date was vacated because Mr Mehanna would be overseas.

On 1 September 2018, Mr McDonnell corresponded with Mr Foley in relation to the notice to produce. Mr Foley was then ill from late September 2018 and unable to be contacted. Unrepresented, Mr McDonnell received a number of notices to produce. The following events are detailed in his affidavit as follows:

After filing the notice to produce he took a copy of his draft affidavit which was not yet sworn to Uther Webster & Evans Solicitors and the front counter signed a receipt for it.

The amended summons that Mr McDonnel moved on at the hearing on 26 July 2019 set out four grounds of appeal under ss 39 and 40 of the Local Court Act and five grounds of judicial review.

At the commencement of the hearing in this matter, I raised with Ms Merkel, who appeared for Mr McDonnell, that insofar as judicial review of the Magistrate’s decision was sought, there had been no compliance with UCPR r 59.3(4), which provides, inter alia, that the person responsible for the decision to be reviewed must be joined as a defendant. Mr McDonnell had not joined the decision-maker, in this case, the Local Court of NSW, as a party to the proceedings. Although it is customary for the Local Court to file a submitting appearance in proceedings for judicial review, the fact remains that the matter had been listed for hearing without notice being given to the Local Court that it was a purported party to the proceedings.

When I raised this with Ms Merkel, she accepted it and submitted that she wished to proceed with the claim for judicial review. So as to avoid the need for an adjournment in order for this to occur I raised with her why alternate proceedings for judicial review were brought in circumstances where a statutory appeal was available. It was submitted that a claim of a denial of procedural fairness is a matter for judicial review. I pointed out that there is authority for the proposition that a denial of procedural fairness is an error of law: see for example Warkworth Mining Limited v Bulga Milbrodale Progress Association Inc [2014] NSWCA 105 at [39]. Further, s 39(2) of the Local Court Act expressly states that the only statutory appeal to this court from a decision in the small claims division is for a want of jurisdiction or a denial of procedural fairness.

Ms Merkel was content for the grounds of review to be treated as grounds of appeal. Although Mr Bennett, counsel for Mehanna, opposed any addition of the Local Court as a party at this late stage, there was no opposition to the relevant grounds of review being considered as statutory grounds of appeal under the Local Court Act.

I indicated to the parties at the time that I was satisfied that the grounds of judicial review relying upon a denial of procedural fairness are capable of amounting to questions of law as was the ground of review alleging misconstruction of a statutory provision, I indicated that I would grant leave for Mr McDonnell to filed an amended summons reflecting this.

On 30 July 2019, a further amended summons was filed by Mr McDonnell without objection from Mehanna. The grounds of appeal in this document were expressed in terms which were consistent with how they were argued before me at the hearing. Thus the nine grounds of appeal were as follows:

In written submissions, the plaintiff submitted that, in relation to the first ground of appeal, the transcript discloses a failure to give due consideration to the other relevant matters including the merits of the case. Similarly, in relation to the second and third grounds, the plaintiff submitted that there was a reasonable explanation for the delay (namely the “series of misfortunes which dogged him from about September 2018”) and this also justified an adjournment.

In relation to the fourth ground of appeal, the plaintiff submitted that it was never put before Magistrate Greenwood by Mehanna in the Local Court that Mr McDonnell had no defence, as is required by r 13.1(1)(b).

It was submitted that her Honour’s “prime preoccupation” was the delay and that the subsequent refusal of leave to allow Mr McDonnell to file evidence was a denial of procedural fairness.

It was further submitted that that her Honour did not advert to the merits of the claims articulated in the defence and cross-claim, as required by UCPR r 13.1. Nor did her Honour take into account that Mehanna had the burden of proof in terms of showing that Mr McDonnell had no arguable case. It was submitted that her Honour failed to take into account “the evident purpose” of r 13(1) when she determined to dispense with the formal requirement for its exercise.

Reliance was placed on the fact that Mr McDonnell was not on notice on 20 December 2018 that there might be an application for summary judgment.

In oral submissions, it was submitted that the summary judgment worked a “very very substantial prejudice” to Mr McDonnell. It was thus a “significant error” for her Honour not to examine the merits of the case on the pleadings because there was a clear question of law raised by the contract question and the corresponding claim by Mr McDonnell under s 18 of the Competition and Consumer Act 2010 (Cth), Sch 2 - Australian Consumer Law.

It was conceded that the nub of the complaint was a denial of procedural fairness as well as reliance upon a misconstruction of UCPR r 13.1. That is, her Honour failed to deal with the merits of the case before summarily dismissing it and the fact of striking out the defence was not enough for her Honour to discharge her judicial duty to consider the merits before entering summary judgment.

The defendant submitted that in appeals from the Local Court, the appellant is limited to questions of law or, with leave, a question of mixed law and fact: ss 39(1) and 40(1) of the Local Court Act. To the extent that any leave was required it should not be granted.

In response to the first ground of appeal, the defendant submitted that Mr McDonnell clearly failed to prosecute his defence. He did not comply with orders of the court or follow directions of the court. It was submitted that the “breaches are too voluminous to repeat”. It was submitted that there was a 16-month delay from the time proceedings were commenced, there were significant costs being incurred, that the defendant had been kept out of funds to which it would otherwise be entitled and that the defendant was severely prejudiced because there was no payment of the costs orders the Local Court had made.

In relation to the failure to adjourn, it was submitted that s 66 of the CPA was correctly exercised, given the overriding objective in s 57 of the Act for courts to be efficient in their use of resources.

In relation to the requirements of UCPR r 13.1, it was submitted that there was evidence making out the claim and no evidence of a viable defence, namely in the statement of claim, the verifying affidavit of 7 August 2017, the affidavit of Charles Mehanna and Joseph Antoun’s affidavit. These materials were before her Honour.

In relation to the fourth ground of appeal, which concerned the merits of Mr McDonnell’s defence, the defendant submitted that was no evidence as to the merits of a defence. Mr McDonnell’s affidavits of 20 May 2019 and 17 July 2019 only concerned his reasons for delay.

Overall, it was submitted that the delay in the Local Court was excessive, there was no error in the manner in which her Honour disposed of the matter in the Local Court, there has been further delay since the judgment and that Mehanna should have the benefit of its judgment.

This appeal was expressed to be brought under ss 39 and 40 of the Local Court Act on the basis that the decision of the Magistrate was an interlocutory judgment and some of the grounds relied on error on a question of mixed law and fact. Although the decision of the Magistrate to strike out the defence and cross-claim under UCPR 12.7 was interlocutory in nature, the subsequent decision entering summary judgment was a final order: Macatangay v NSW (No 2) [2009] NSWCA 272 at [13] and thus falls within s 39 of the Local Court Act. Mehanna’s counsel did not submit otherwise.

The relevant distinction between ss 39 and 40 is the question of leave. If an appeal is from a final order and involves a “question of law alone” no leave is required. On the other hand, if an appeal is brought against an interlocutory decision and/or is one based on a question of mixed law and fact then leave is required.

Whether an alleged error involves “a question of law alone” is not always straightforward. Justice Johnson summarised some of the statements of principle on this issue in Director of Public Prosecutions (NSW) v Illawarra Cashmart Pty Limited (2006) 67 NSWLR 402; [2006] NSWSC 343 at [58]-[60]:

I am satisfied that some examples of a ground of appeal asserting error a “question of law alone” include matters of statutory construction, the elements of an offence, denials of procedural fairness and the inadequacy of reasons provided by the Magistrate.

As for a question of mixed fact/law, in R v PL (2009) 199 A Crim R 199 at 205 [25]–[26], Spigelman CJ (McClellan CJ at CL and RA Hulme J agreeing) held that the process of applying a legal principle to the facts of a case involves a mixed question of fact and law. A number of grounds relied upon by Mr McDonnell in relation to the decision under r 12.7 fall into this description.

As for the relationship between the requirements for leave to appeal on both a question of mixed fact/law and an interlocutory judgment, Schmidt J observed the following in Ciszek v Enterprise Financial Solutions Pty Ltd [2010] NSWSC 1265 at [10]:

In Sayed v Deng [2012] NSWSC 851, Beech-Jones observed the following at [28]-[29]:

His Honour further observed in Café Du Liban Pty Ltd v Bespoke Garage Pty Ltd [2017] NSWSC 779 at [4]:

With these principles in mind I turn to consider the three grounds of appeal concerning the first interlocutory decision to strike out the defence and cross-claim for want of prosecution. They can be summarised as follows:

Leave is required to argue these grounds on two bases: first, because this is an interlocutory decision, and, second, because the grounds rely on error based on a question of mixed fact and law. I am satisfied that leave to argue these grounds should be granted because of, inter alia, the close connection between these grounds and the remaining grounds of appeal which do not require the leave of the court as well as the fact that I am satisfied they have been made out.

These grounds contend that her Honour erred in the application of the relevant principles to the facts before her by placing too much weight on the question of delay and refusing a short adjournment. UCPR r 12.7(2) provides that:

As at the date of the motion on 20 December 2018, the matter was listed for a two-day special fixture on 29-30 January 2019. That is, the hearing was a month away.

It is to be accepted that the delay was considerable. This was the third time the matter had been listed for hearing, although one of the previous adjournments had been on application by Mehanna. It is understandable that when faced with the bald facts of the chronology, her Honour was entitled to be satisfied that the delay was excessive. On the other hand, Mr McDonnell had shown up that day with most of the relevant documents and her Honour had before her an explanation for some of the delay.

The relevant transcript recording the submissions made by Mehanna’s solicitor and the attempts by Mr McDonnell to explain the delay runs to eleven pages. It is not practical to extract all of them. I have briefly summarised the argument above at [29]-[37] but it is necessary for me to extract some of the exchanges between Mr McDonnell and the bench in order to explain my reasons for upholding these grounds.

It was submitted on behalf of Mehanna’s solicitor that there had been four sets of solicitors in the matter. That was not accurate. The record showed that he had a solicitor from early after commencement of the proceedings until that solicitor ceased to act in May 2018, then he had Mr Foley who was diligent until he had an aneurysm and then Mr McDonnell had engaged a final solicitor for the hearing (Ms Phair). When Mr McDonnell sought to clarify this, the following exchange took place:

Although her Honour appeared to accept that Mr Foley’s aneurysm explained some of the delay since September 2018, she was not satisfied that it explained all of it nor that it explained any of the delay before that time. It was common ground that there was a solicitor on the record prior to Mr Foley who had failed to attend court. Her Honour clearly sheeted the blame for this home to Mr McDonnell. Another example of Mr McDonnell trying to explain the delay before Mr Foley’s aneurysm is as follows:

And later when he was trying to explain that his affidavit was almost ready:

Mr McDonnell’s evidence had been due on 16 November (after a number of extensions). At the motion on 20 December 2018 he brought his almost-finalised unsworn affidavit to court as well as the documents for the notice to produce to court on a USB. The following exchange took place:

And later Mr McDonnell stated, “I could have this affidavit sworn today if it assisted the court”. He also submitted that the matter was ready for hearing, a fact denied by Mehanna’s solicitor on the basis that a request for further and better particulars was outstanding to which Mr McDonnell responded:

Before proceedings to strike out the defence and cross-claim, her Honour was thus aware that the notice to produce, although it had been extended four times, had been answered on 18 December and emailed to the parties. Her Honour was also aware that Mr McDonnell was able to file his affidavit that day, which was all of his evidence. Her Honour was also aware that Mr Foley had been gravely ill and uncontactable. He was the solicitor on the record so the Local Court notice to produce “upload link” blocked Mr McDonnell’s efforts because Mr Foley was the solicitor on the record. Mr McDonnell was unable to upload certain documents until he ceased to act and most of Mr McDonnell’s documents were with Mr Foley.

Despite Mr McDonnell’s request for a short adjournment until later that day, her Honour did not stand the matter down so the affidavit could be finalised. What her Honour did was to commence to give her reasons allowing the motion whilst Mr McDonnell was attempting to get a short adjournment to finalise and swear his affidavit. The transcript records this as follows:

Although it is to be accepted that her Honour afforded Mr McDonnell the opportunity to explain his position regarding delay, she did not ask any questions directed at the delay by the solicitor acting prior to Mr Foley. Nor did she at any time engage with Mr McDonnell on the merits of his defence, nor was any reference made to those merits in her reasons for striking out his defence and cross-claim. Nor did her Honour avert to the prejudice to Mr McDonnell if his case would not be heard. The only factor raised by her Honour was delay.

I am satisfied that these grounds are established.

The remaining six grounds pertain to the decision to enter summary judgment against Mr McDonnell and can be summarised as follows:

I propose to deal with these grounds compendiously as I am satisfied that grounds 4 to 8 have been made out and there is no need to consider ground 9 as it relies on the other grounds.

The notice of motion before the Local Court that day was to have the defence and cross-claim struck out for want of prosecution. Mr McDonnell had shown up with his affidavit almost finalised and with the documents to be produced under the notice to produce. Rather than permitting Mr McDonnell the short adjournment to file his evidence after which time the matter could have been listed for hearing, her Honour waived the requirement for a notice of motion and proceeded to grant summary judgment against Mr McDonnell.

It is important to have regard to the requirements of UCPR r 13.1(1). It provides that, if on application by the plaintiff in relation to the plaintiff’s claim for relief or any part of the plaintiff’s claim for relief:

The principles governing an application for summary judgment are well established. In order to obtain summary judgment Mehanna had to establish in the Local Court that any defence Mr McDonnell intended to rely upon was “untenable and cannot possibly succeed”: Spellson v George (1992) 26 NSWLR 666 at 678–679 per Young AJA, with whom Handley JA and Hope AJA agreed. The relevant principles were summarised by Emmett AJA (with whom Macfarlan and Simpson JJA agreed) in State of New South Wales v Williams (2014) 242 A Crim R 22; [2014] NSWCA 177 at [71], albeit in the context of an application to strike out a defence, as follows:

In Shaw v State of New South Wales [2012] NSWCA 102 at [32]:

The process by which summary judgment was entered against Mr McDonnell must be viewed in the context that Mr McDonnell was unrepresented. He placed reliance in this court on the decision of Beazley JA (as her Honour then was) in Hamod v State of New South Wales and Anor [2011] NSWCA 375 regarding the duties of a judicial officer when dealing with unrepresented litigants.

As her Honour explained, the Court has an overwhelming duty to ensure that a trial is fair, Dietrich v R (1992) 177 CLR 292; [1992] HCA 57, which means that a self-represented litigant does not suffer a disadvantage. This means that a trial judge should ensure that unrepresented litigants are sufficiently informed about court practice and procedures. At [312], her Honour summarised the relevant principles:

Having regard to the principles concerning both summary judgment and unrepresented litigants, I am satisfied that four of the remaining five grounds of appeal are established arising from the manner in which her Honour ordered summary judgment in this matter. I am also satisfied that they are all errors of law.

The first error that her Honour dispensed with the requirement for notice that such an application would be made in circumstances where Mr McDonnell was unrepresented. A similar issue arose in Aldous v NSW [2014] NSWCA 280. In that matter the District Court had made orders for summary judgment without formal notice and without an affidavit deposing to belief that the defendant had no defence. Barrett JA (with whom Emmett JA and Tobias AJA agreed) allowed the appeal on the basis that there was a clear denial of procedural fairness and natural justice. His Honour observed the following at [11] and [12]:

Although the facts in that matter differed slightly, I am nonetheless satisfied that, consistent with these principles, her Honour erred in proceeding straight to summary judgment that day as this denied procedural fairness to Mr McDonnell. This is an error of law. No question of leave arises.

The second error arises from the fact that UCPR r 13.1(b) was overlooked. That provision mandates that before summary judgment can be entered there must be evidence, “given by the plaintiff or by some responsible person, that, in the belief of the person giving the evidence, the defendant has no defence to the claim or part of the claim, or no defence except as to the amount of any damages claimed”. No such evidence was before her Honour on this day. What her Honour had before her were the affidavits made on behalf of Mehanna setting out the basis of their claim but that is insufficient to comply with the requirements of UCPR r 13.1(b).

Although Mr Olzomer did advert to the requirements of the rule (see above at [39]), her Honour did not do so in her Reasons

I am satisfied that the failure to have regard to r 13.1(b) was an error of law in that her Honour misconstrued the relevant provision. No question of leave arises.

The third error is that her Honour appears to have commenced determining summary judgment when Mr McDonnell was outside of the court room. I have extracted the relevant transcript above at [39]. Although there is some reference by Mr Olzomer to “my learned friend” later down the page, which may well be a reference to Mr McDonnell, there is no acknowledgment by her Honour of when Mr McDonnell re-entered the courtroom nor any indication to him of what she was about to do.

I am satisfied that this failure to afford procedural fairness is an error of law. No question of leave arises.

The fourth error is that her Honour did not invite any submissions from Mr McDonnell once the matter resumed. There is no record on the transcript that the unrepresented Mr McDonnell was afforded the opportunity to say anything on the application. Nor did he in fact say anything after court resumed and before summary judgment was given. Prior to the matter being stood down in the list he had sought to challenge the question of quantum relied upon by Mehanna in the schedule of damages but was denied the opportunity to do so orally or by the tender of any documents.

A high onus is placed on a party seeking summary judgment. Even though the defence had been struck out her Honour still had to be satisfied that no defence existed at law. I am satisfied that the pleadings disclosed a serious question to be tried which was not addressed by the Magistrate in her brief reasons.

It is to be accepted that there is authority for the proposition that the traditional reluctance to enter summary judgment has diminished to some extent by the enactment of the CPA. As Beazley JA (with whom Basten and Hoeben JJA agreed) observed in State of New South Wales v Plaintiff A [2012] NSWCA 248 at [17]:

Despite this, and having regard to the relevant case management principles, I am nonetheless satisfied that her Honour erred in the manner in which she entered summary judgment in this matter.

It must be acknowledged that her Honour determined this matter ex tempore in a busy list and was operating under time pressures. This Court has repeatedly observed that, in appeals to this Court, full allowance must be made for the demands on a Magistrate in a busy Local Court. As Johnson J observed in Director of Public Prosecutions (NSW) v Illawarra Cashmart Pty Ltd (2006) 67 NSWLR 402; [2006] NSWSC 343 at [15] (albeit in the context of the hearing of criminal charges):

I would allow this appeal.

As for the question of the appropriate costs order, s 98(1)(a) of the CPA provides that costs are in the discretion of the court and s 98(1)(b) provides that the court has “full power to determine by whom, to whom and to what extent costs are to be paid”. This discretion is of course subject to the qualification that it must be exercised judicially “in accordance with established principle and factors directly connected with the litigation”: per McHugh J (in dissent but not relevantly for present purposes) in Oshlack v Richmond River Council (1998) 193 CLR 72; [1998] HCA 11 at 96 [65].

One relevant fetter on the court’s discretion to award costs is the rules of the court contained in Part 42 of the UCPR. The usual rule is that costs follow the event, unless it appears to the court that some other order should be made: r 42.1 of the UCPR.

I am satisfied that in this case some other order should be made. Although Mr McDonnell has been successful, he has come to this court five months late seeking an indulgence. Although it is to be accepted that costs are compensatory rather than punitive, there is also authority for the proposition (extracted above at [55]) that when considering whether to extend time, any prejudice to the respondent can be addressed, at least in part, by an appropriate costs order. I am satisfied that this principle provides a sound basis for declining to make any costs order in this matter against Mehanna.

I am further satisfied that it is appropriate that Mehanna be granted a certificate under the Suitors Fund Act 1951 (NSW) if it is otherwise eligible.

I make the following orders: