Ferguson v DDEC Detroit Specialists Pty Limited

By a summons filed on 19 January 2017 the plaintiff (who was the defendant in the proceedings in the Court below) appeals from two decisions delivered in the Local Court at Macksville. It is common ground between the parties that the plaintiff requires an extension of time in which to bring the present proceedings and the defendant raises no objection to such an extension being granted.

The first decision which is the subject of the appeal is that of Magistrate Walker of 22 September 2016. On that day, his Honour purported to make orders striking out a defence filed by the plaintiff and entering judgment against him.

The second decision is that of 22 December 2016 dismissing a Notice of Motion filed by the plaintiff seeking to set aside the orders of Magistrate Walker made on 22 September 2016. For reasons to which I will come it is not entirely clear whether it was Magistrate Walker, or a Registrar, who made the order of 22 December.

The summons is supported by the following affidavits which were read without objection:

There is some doubt about whether some of the contents of those affidavits are properly admissible in light of the relief sought. To the extent that such questions arise, I have limited the use of that evidence to evidence of context only.

The defendant has raised no objection to the relief sought and accepts that the proceedings must be remitted to the Magistrate.

The background to the present proceedings is not in dispute and may be summarised as follows.

The defendant commenced proceedings in the Local Court against the plaintiff seeking recovery of a sum of $66,124.80. It is not necessary, for present purposes, to detail the cause of action which formed the basis of those proceedings. An order was subsequently made in the Local Court referring the proceedings to arbitration. In October 2015 the arbitrator found in favour of the defendant.

Following the arbitrator's decision, the plaintiff made application for a rehearing of the matter pursuant to s. 42 of the Civil Procedure Act 2005 (NSW) (“the CPA”). On 17 August 2016 orders (“the consent orders”) were filed with the Local Court Registry. Those orders are annexure “D” to the plaintiff’s affidavit and were in the following terms:

Three particular matters should be noted about the consent orders.

Firstly, despite the terms of order (4), the matter was in fact listed on 22 September, 2016 and not 29 September 2016. So much is clear from the Listing Notice which was sent from the Court Registry on 25 August 2016 which is annexure “E” to the plaintiff’s affidavit.

Secondly, the consent orders made no provision whatsoever for the payment of the costs of the expert report. For reasons to which I will come, that is of particular significance in terms of the appeal against the Magistrate’s decision of 22 September 2016.

Thirdly, it is clear from annexures “D” and “E” to the plaintiff’s affidavit that the proceedings were listed before the Local Court on 22 September 2016 for directions/mention only.

The matter came before Magistrate Walker in the Macksville Local Court on 22 September 2016. On that day the defendant was represented by a Mr Davies. There was no appearance by, or on behalf of, the plaintiff. The reasons for the plaintiff’s absence are fully set out in his affidavit which was read in support of the orders sought.

In short, the plaintiff’s mother was seriously ill at the time. She died on 13 September 2016 and her funeral took place on 21 September 2016. Her illness, and her subsequent passing, necessitated the plaintiff spending time in Sydney, away from his home at Euengai Rail. As a consequence, he did not receive the Listing Notice referred to in [11] above, nor did he receive a Notice of Ceasing to Act which had been filed in the Court Registry by his former solicitor, a Mr Love.

Further, the plaintiff did not receive a letter of 14 September 2016 from the defendant’s solicitors advising him of the status of the expert report (referred to in order (3) of the consent orders) and seeking 50% of the costs of its preparation. It is of some significance that the letter closed with the following paragraph:

No suggestion was made that in the absence of a response from the plaintiff, an application would be made to the Court for the entry of judgment.

The plaintiff’s personal difficulties were compounded by the fact that his wife was also away at the time, as a consequence of having to assist the convalescence of their daughter who had only recently undergone surgery. This is confirmed by the plaintiff’s wife in her second affidavit. However, that affidavit has added significance. The applicant’s wife deposed (inter alia) to the fact that she received the Notice of Ceasing to Act on or about 15 September, at which time she telephoned Mr Love “pleading” with him to continue acting for the plaintiff. It was her understanding from that discussion that Mr Love would contact the Court Registry and explain that the plaintiff could not be present on 22 September. Obviously, that was not done.

The plaintiff’s wife also deposed to the fact that on 22 September 2016 she attempted, on no less than fourteen (14) occasions, to contact the Macksville Local Court Registry for the purposes of explaining that the plaintiff would not be able to attend Court on that day. Her affidavit annexes “screen shots” taken from her telephone corroborating that attempted contact, all of which was unsuccessful.

I emphasise that the matters in [15] to [19] above are set out by way of background only. It is not suggested that the Magistrate was privy to any of this information when the matter came before him on 22 September 2016.

A transcript of what occurred before the Magistrate on that day is annexed to the plaintiff’s affidavit. It is appropriate that it be set out in full:

The proceedings concluded at this point.

The plaintiff learned of the Magistrate’s orders of 22 September when he was served with a Bankruptcy Notice which had been issued on the basis of the judgment entered against him. He then filed a Notice of Motion in the Local Court seeking orders in the following terms:

The notice of motion was supported by an affidavit of the plaintiff setting out those circumstances to which I have already referred in [15] and following above.

As noted in [23] above, paragraph (4) of the plaintiff’s motion sought an urgent ex parte determination of a stay application in Chambers. Precisely what occurred after the motion was filed is not clear on the evidence before me. However it is common ground that on 22 December 2016, the Registrar of the Court advised the parties as follows:

Although it is not entirely clear on the evidence, I am left to assume that it was Magistrate Walker who made the decision which was the subject of the Registrar’s communication to the parties .

With the greatest respect, and leaving aside the lack of clarity in the terms of the orders which were eventually made, the Magistrate’s decision of 22 September 2016 is redolent of error.

To begin with, it is not at all clear what power(s) his Honour was purporting to exercise when he made the orders that he made. One possibility is that he was purporting to exercise the power contained in Part 13 of the Uniform Civil Procedure Rules 2005 (NSW) (“the Rules”). If so, there was no evidence whatsoever which justified the making of the orders. The Magistrate's determination of the matter in the complete absence of any evidence contravened the fundamental principle that a party will not be denied a contested hearing on the merits unless the absence of a defence is clearly demonstrated: General Steel Industries Inc v Commissioner for Railways (1964) 112 CLR 125; [1964] HCA 69 at 129.

The contravention of that principle was compounded by the fact that on any view of it, the proceedings were before the Magistrate for directions/mention only. Even if the plaintiff had received the letter from the defendant’s solicitors referred to in [16] above (and I accept his unchallenged evidence that he did not) that letter did not foreshadow the making of any application of the kind which was ultimately made. A combination of these circumstances, and the making of the order by the Magistrate, saw a gross denial of procedural fairness being visited upon the plaintiff.

A second possibility is that the Magistrate was purporting to enter default judgment under the power conferred by Part 16 of the Rules. If that is what his Honour was purporting to do, he did so in the complete absence of any evidence pursuant to r. 16.6.

A third possibility is that the Magistrate was purporting to strike out the defence pursuant to the power conferred by r. 12.7, on the basis that it had not been conducted with due despatch. If that is what his Honour had in mind, there was again a complete absence of evidence to support the making of such an order.

Moreover, and irrespective of what power(s) the Magistrate was purporting to exercise, it is apparent from the transcript that his Honour acted under the fundamental misapprehension that the plaintiff was in default of an order which required him to meet half of the costs of the expert report. It is clear from what his Honour said at the time that this was a primary factor in his determination. However, as evident from the terms of the consent orders, no order of the kind that his Honour asserted – namely, an order requiring the plaintiff “to pay half the costs” - was ever made.

A further error arises from the Magistrate's failure to consider the factors set out in s. 58 of the CPA which is in the following terms:

Consideration of the factors in ss. 56 – 58 is mandatory: see Hans Pet Constructions Pty Limited v Cassar [2009] NSWCA 230 at [43]. There is no indication from anything said in the course of the proceedings on 22 September 2016 that the Magistrate gave consideration to any of those factors. I am left to infer that he did not.

In light of these errors, the Magistrate’s orders of 22 September 2016 should be set aside.

On the evidence before me, the plaintiff was not afforded a hearing of the motion on the merits. Just how his motion was dealt with, and by whom, remains something of a mystery, although I am assuming it was determined by the Magistrate and not the Registrar. Importantly, it is clear that the decision not to grant the orders sought was informed by a view apparently held by the Magistrate that it was "more appropriate in the circumstances to lodge an Appeal to the District Court”.

To begin with, there was no right of appeal to the District Court from the Magistrate’s decision of 22 September. Appeals in matters of that nature lie to this Court under ss. 39-40 of the Local Court Act 2007 (NSW). On that basis alone, the Magistrate’s discretion miscarried.

Moreover, a determination of whether the judgment should be set aside was one to be made on the merits, not according to an erroneous view as to whether one particular course was preferable to another. Any further observation regarding the shortcomings of such an approach would be superfluous.

It follows that error has also been established in respect of this decision, and it should also be set aside.

The consequence of the various errors I have identified is that the proceedings must now be remitted to the Local Court to be dealt with according to law. That, to say the least, is unfortunate. The parties in this case should never have been put to the inconvenience and expense of having to bring the proceedings before this Court. They have agreed that in all of the circumstances they should each pay their own costs of the proceedings before this Court.

I therefore make the following orders: