Aberdeen Group Pty Limited v Bluestone Property Services Pty Limited

Judgment (Ex Tempore) 1HIS HONOUR: By originating process filed on 14 January 2013 the plaintiff Saracen Holdings Pty Limited seeks an order pursuant to (Cth) Corporations Act 2001, s 459G, 459H(1)(a), and s 459J(1)(b) that a statutory demand dated 27 November 2012 and served on it by the defendant Walter Nazloomian on 24 December 2012 be set aside. 2The statutory demand claimed a debt of $326,576.67 being a judgment debt recovered in the Common Law Division of this Court in proceedings 2011/404385 of $312,289.67, plus interest to 27 November 2012 being the date of the demand, amounting to $12,184. The judgment in question was a default judgment. The s 459G affidavit of Mahmood Elali sworn 14 January 2013 is relevantly as follows: 5. The judgment debt, relied on by the defendant in his affidavit was a default judgment arising out of proceedings in the Supreme Court of New South Wales, case number 2011/404385. 6. The plaintiff was one of three defendants in those proceedings. The plaintiff did not enter a defence nor attend court. 7. I understand that the defendant is now settling its case with the first defendant, the Commonwealth Bank of Australia, in those proceedings and that the case has been stood over until 29 January 2013. Annexed and marked "C" is a copy of the court record in relation to those proceedings. 8. On the basis of the settlement between the defendant and the Commonwealth Bank of Australia, I have instructed my solicitor to put on a notice of motion to set aside the default judgment against the plaintiff, as I do not believe that the default judgment was entered in good faith nor that the plaintiff now owes the quantum of monies as claimed. 9. I have given instructions to my solicitor, who has just returned from the Christmas Break, to have the Notice of Motion filed within 7 days. 3The present plaintiff filed an application in the Common Law proceedings to have the default judgment set aside. That application was heard by Bellew J in the Common Law Division on 25 March 2013, when judgment was reserved. The present application was adjourned from time to time while the application to set aside the judgment remained undetermined. On 4 June 2013, Bellew J dismissed the application to set aside the default judgment; see Nazloomian v Commonwealth Bank of Australia Limited [2013] NSWSC 681. In a detailed and thorough judgment, his Honour found first, that the present plaintiff had not provided an adequate explanation for its failure to file a defence; and secondly, that the present plaintiff had not established a bona fide defence on the merits. On 28 June 2013, the present plaintiff filed in the Court of Appeal a notice of intention to appeal from Bellew J's decision. 4The only basis on which the plaintiff submits that the statutory demand should be set aside now is that the pendency of its intended appeal from Bellew J's decision affords "some other reason" within s 459J(1)(b) for setting aside the demand. As the creditor's statutory demand relies on a judgment debt, the plaintiff does not establish a bona fide dispute within s 459H merely by showing that an application has been made to set aside the default judgment [Timberland Property Holdings Pty Ltd v Schindler Lifts Pty Ltd [2011] NSWSC 466; In the matter of World Square Realty Pty Limited [2013] NSWSC 307, [22]]. This is analogous to the rule that the pendency of an appeal from a judgment does not of itself establish a genuine dispute as to the existence of a judgment debt [Numina Investments Pty Ltd v Westpac Banking Corporation (1998) 84 FCR 454; Barclays Australia (Finance) Limited v Mike Gaffikin Marine Pty Limited (1996) 21 ACSR 235]. 5However, pendency of an appeal - and, by analogy, pendency of an application to set aside a default judgment - can constitute "some other reason" to set aside a creditors statutory demand within s 459J(1)(b) [World Square Realty Pty Limited, [22]]. In this respect, a relevant factor is whether an application for a stay is available, and if so, whether such application has been made or refused [Aberdeen Group Pty Limited v Bluestone Property Services Pty Limited [2011] NSWSC 137; Barclays Australia v Gaffikin; Eagle Homes Pty Limited v LED Builders Pty Limited [1999] NSWSC 1049; Scope Data Systems Pty Limited v BDO Nelson Parkhill [2003] NSWSC 137; World Square Realty Pty Limited, [22]]. 6The defendant submitted that the s 459G affidavit set out above makes no reference to any appeal from an unsuccessful application to set aside the default judgment, and that on the Graywinter principle, the plaintiff is precluded from relying on that matter. I disagree. It seems to me that, where the application clearly relied on the circumstance that there was to be an application to set aside the default judgment, an appeal from such an application, if unsuccessful, is by inference within the scope of what was notified by the affidavit. 7In considering whether the pendency of an appeal from an application to set aside the default judgment provides "some other reason" to set aside the demand, there are a number of relevant considerations. First, it is well established that neither an application to set aside a default judgment, nor a pending appeal from a judgment, provides of itself sufficient reason to set aside a demand [see Cranney Farm Pty Limited v Corowa Fertilizers Pty Ltd [2011] NSWSC 9, [18]; Barclays Australia v Mike Gaffikin; Midas Management Pty Limited v Equator Communications Pty Ltd [2007] NSWSC 759; Timberland Property Holdings Pty Limited v Schindler Lifts Pty Limited [2011] NSWSC 466]. Relevant considerations include whether reasonable and arguable grounds for the application to set aside the judgment or the appeal have been shown; whether a stay is available, and if so, has been sought or refused; and whether there has been an offer to pay into court the amount of the demand pending the outcome of the application or appeal. 8This case begins in a weaker position than many, because the initial application to set aside the judgment has already been the subject of a judicial decision. In many such cases, the application to set aside a default judgment has not yet been determined, and the court approaches the matter uninformed as to the outcome of that application. In this case, it is known that the plaintiff has already failed in that application. Such application being of an interlocutory nature, any appeal requires the leave of the Court of Appeal. Such leave is ordinarily not granted unless error of principle is shown. 9In this case, at least at first sight, it appears that Bellew J has carefully reviewed the evidence, perhaps in considerably more detail than is often the case on an application to set aside a default judgment, formed some views as to the credibility of some of the evidence that was before him, and then reached the essential conclusions to which I have referred. This is not a promising start for an application for leave to appeal. Moreover, all that has been filed at this stage is a notice of intention to appeal, which does not specify any grounds of appeal. Indeed, even before me, the grounds of appeal could not be articulated, except to say that it was thought that they lay in the area of his Honour's conclusion that the plaintiff had some notice of the proceedings. 10Let it be accepted that there were arguable grounds to appeal from the conclusion that the plaintiff had not given a sufficient explanation for default in the filing of a defence in the common law proceedings. That still leaves on foot his Honour's conclusion that no bona fide defence on the merits was established. It would be insufficient to disturb only the first finding for the appeal to succeed. Success would require also that the second finding be overturned. All that could be put to me in that respect was that it might be necessary to amend the defence. It would be a rare case indeed in which the Court of Appeal would permit an appeal to succeed on an amended defence which had not been put before the trial judge and which the trial judge had not had an opportunity to consider. In addition, his Honour's conclusion that there was no bona fide defence on the merits was founded, not on contested facts, but on the evidence of Mr Elali himself, who at the end of his cross-examination conceded that he did not know that Saracen was owed any money at all by the Commonwealth Bank in January 2009. In those circumstances, it seems to me that it has not been established that this is an arguable or reasonable appeal from Bellew J's judgment. 11Further, this is a case in which an application could have been made for a stay (of the default judgment, pending the appeal), and has not been made. That is a strong factor against deciding to set aside the notice. 12In those circumstances, the only matter which might incline the court to set aside the notice on account of the pendency of the appeal from Bellew J's refusal to set aside the default judgment would be an offer to pay into court or otherwise secure the amount of the demand, but no such offer has been forthcoming. 13I am therefore not satisfied that there is "some other reason", within the meaning of s 459J(1)(b), to set aside the notice. 14I order that the originating process be dismissed, with costs assessed in the sum of $7500.