Decision
48 In my opinion, the following passage from the judgment of Jordan CJ in Vacuum Oil Pty. Co. Limited v. Stockdale (1942) 42 SR(NSW) 239 at 243 sets out the principles applicable to this case:
The present is not a case in which judgment was signed by default through some procedural omission on the part of the defendant or his legal advisers. The action followed the ordinary course, except that its coming on for trial was delayed through dilatoriness on the part of the defendant. It is one in which, the action coming on for trial in its ordinary place in the list, no one was present in Court to conduct it for the defendant, and it therefore proceeded in his absence. In such a case, when the plaintiff is in no respect in default, a new trial will not be granted save in very special circumstances: Chitty's Archbold, 10th ed., 1457; 12th ed., 1526. In every such case the Court has an inherent and unfettered, though judicial, discretion, in the exercise of which it will, however, necessarily consider (a) whether any useful purpose would be served by setting aside the judgment, and (b) how it came about that the applicant found himself bound by a judgment regularly obtained: Evans v. Bartlam [1937]AC 473 at 482 . As a general rule (although not necessarily in every case, if some reason exists for departing from it: Collins' Book Depot Pty Ltd. v. Bretherton [1938] VLR 49; Austn. Digest (1934-1939) 1859, the Court requires an affidavit showing prima facie that the defendant has a good defence on the merits: Evans v. Bartlam [1937] AC 473 at 480, 488-9, and also an explanation of his absence which shows that justice requires that in the circumstances it should be excused. And if there has been gross negligence on the defendant's part, the Court will be the more disposed to require at least a reasonably clear case of merits to be shown, to incline it to interfere: Nash v. Swinburne 3 M&G 630 at 632; Weitzel v. Friedenreich 14 WN 7; Austn. Digest 376 .
49 I do not read the cases of Taylor v. Taylor (1979) 143 CLR 1 and Allesch v. Maunz (2000) 203 CLR 172 as materially affecting the principles stated by Jordan CJ in Vacuum Oil.
50 In Taylor, orders were made in the absence of a party because of neglect of his solicitor, and this party applied to have it set aside, having "filed affidavit material which showed that the facts of the case were seriously in contest" (143 CLR at 8-9); and the various statements made by the judges of the High Court in that case have to be read in the light of that circumstance. Similarly, in Allesch, the party seeking to set aside a property settlement order made in his absence filed an affidavit that made claims "as to the value and extent of the property owned by him and his former wife and as to his reduced earning capacity" (203 CLR at 176), which was accepted by the primary judge in that case to be such that, if it was accepted even in part, "the result of [the wife's property settlement] application may well be substantially different" (203 CLR at 177).
51 In Allesch, it was stated in the joint judgment of Gaudron, McHugh, Gummow and Hayne JJ (at 182-3, after reference to Taylor) that "a court will, ordinarily, be satisfied that there has been a miscarriage of justice if a person has suffered an adverse order in circumstances where his or her failure to appear is adequately explained unless it also appears that no different result would be reached on a rehearing or that a rehearing would work an irremediable injustice to the other side". Having regard to the circumstances of that case and of Taylor, I do not read that sentence as intended, by implication, to do away with the long-established requirement that a person applying to set aside an order, regularly made in his or her absence, ordinarily bears an onus of showing an arguable case on the merits, that is, a case that might reasonably bring about a different result, as well as an explanation for his or her absence: cf. Allesch at 188-9 per Kirby J.
52 In my opinion, an applicant seeking to set aside a judgment obtained after an undefended hearing does not have to show that a different result is likely should the judgment be set aside and a new trial ordered. However, the circumstances may be such, as Jordan CJ says, as to require "a reasonably clear case of merits to be shown"; that is, that it appear reasonably clearly that there is a defence capable of producing a different result. If that defence depends on facts, then there should be some evidence of those facts; and the circumstances may be relevant to the quality of the evidence that is required to show a defence on the merits in particular cases. Among such circumstances could be the degree of the applicant's default, and hardship to the respondent.
53 In the present case, in my opinion there was no evidence from Youma going to its defence on the merits, except to the extent that evidence supporting its defence appeared in documentary material relied on by Magnate.
54 Although Youma's verified Defence and Cross-claim were part of the record of the Court, and did not need to be tendered on the question of what issues they raised, in my opinion they could not function as evidence on any issues unless appropriately put into evidence, for example, by the reading of the affidavit verifying them. If Youma had sought to read that affidavit, its evidentiary value could have been ruled on in response to objections taken; and then it would have been clear to what extent, if at all, that affidavit stood as evidentiary support for the defence and/or the cross-claim. As I have said, nothing like that happened.
55 Assertions in the affidavit of Mr. Nassif that was read, to the effect that he believed that the defence and cross-claim "have merit" or that the cross-claim is "valid", do not in my opinion appropriately support any assertions of fact so as to amount to evidence supporting a defence on the merits or a cross-claim.
56 In my opinion, there were errors in the primary judge's judgment which could possibly justify appellate intervention.
57 First, in my opinion financial hardship to Magnate and to Mr. Luu, at least to the extent that they would result from delay in determining Magnate's claim and from difficulty in continuing to finance the litigation, were relevant to the exercise of discretion whether or not to set aside the judgment, and not merely to the conditions to be imposed if judgment were set aside. If Youma showed it had a "reasonably clear case of merits", as well as explaining its absence, then it is unlikely that this hardship would be sufficient to prevent the Court setting the judgment aside; but in cases of hardship, the Court may look for greater clarity in the demonstration that there is a defence on the merits, and it would have been appropriate to do so in this case.
58 Second, in my opinion the primary judge was in error in giving weight to the affidavit verifying the defence and cross-claim, and to the circumstance that the matter sworn in that affidavit was not challenged in cross-examination. As mentioned earlier, the affidavit was not it evidence, and it was not for Magnate to cross-examine into evidence material that Youma had not put into evidence.
59 Third, in circumstances where there was no evidence led by Youma in support of its defence and cross-claim, and where the onus was squarely on Youma to show it had a defence on the merits, in my opinion it was not of material relevance that Magnate had not applied to strike out the defence and cross-claim.
60 However, the judgment was given ex tempore, and there is a real question whether these errors were material in the sense of affecting the result. The primary judge had heard careful submissions on issues raised by the defence, and it will appear later that in my opinion, even without evidence apart from the documents, Youma does have an arguable defence.
61 With some hesitation, I think the errors of the primary judge were material. Nowhere does he squarely address the real question as to whether, in the absence of any evidence apart from the documents, Youma had a defence on the merits; and he does not address the other question that this approach would raise, namely whether the requirements of justice would be satisfied by Youma's right to appeal from the Master's judgment, as had been submitted by Magnate.
62 I do not think this is a case where the errors identified can be said to be immaterial, for the reason that the judgment has an alternative basis which is not affected by error, as discussed in Yates Property Corporation Pty. Ltd. v. Darling Harbour Authority (1991) 24 NSWLR 156 at 177. The basis on which I decide below that the judgment should be set aside was not addressed or decided by the primary judge; and so it does not, in my opinion, provide a reason for saying that the errors were immaterial.