Bendigo and Adelaide Bank Ltd v Dimitrov

Setting Aside the Default Judgment - under Rule 36.16

To set aside a default judgment pursuant to Rule 36.16, a defendant must establish that there is a defence on the merits and an adequate explanation for default and delay - Cohen v McWilliam (1995) 38 NSWLR 476.
In the present case the plaintiff made sensible and proper concessions that: 1. default and delay were not in issue; 2. the proposed Amended Defence disclosed arguable defences on the merits.
However, the plaintiff submitted that the effect of the approval in the Supreme Court of Victoria by Justice Croft meant that the defendant had released his rights to raise matters of the kind set out in the proposed Amended Defence.
The defendant was a group member in representative proceedings in the Supreme Court of Victoria. On 11 December 2014 the Supreme Court of Victoria approved the settlement of the proceedings. The settlement was subject to the terms of a Deed of Settlement. Clause 4 of this Deed contained releases of claims on behalf of the group members in favour of the current plaintiff and an acknowledgement on behalf of group members that all of the plaintiff's loans were valid and enforceable. The release was set out in simple terms in paragraph 4.1.10 of the Deed as a release "from all Claims".
Clause 1.1 of the Deed contained the definitions applicable within the document. The relevant definition of "Claim" was: "Claim" means any claim, demand, action, suite or proceeding for damages, debt, restitution, equitable compensation, account, injunctive relief, specific performance, declaratory relief or any other remedy, whether by original claim, cross-claim, claim for contribution or otherwise whether presently known or unknown and whether arising at common law, in equity, under statute or otherwise and whether involving a third party or party to this Agreement and all liabilities, losses, damages, costs (including legal costs on a full indemnity basis), interest, fees, and penalties of whatever description (whether actual, contingent or prospective) arising out of, or in connection with the contents of or the facts giving rise to, the PDSs, the Loan Agreements and or the allegations made in or the facts giving rise to each of the Proceedings."
The plaintiff in these proceedings submits that the release in the Deed is wide enough to encompass a release of the defendant's rights to raise the defences and claims set out in the proposed Amended Defence. It can be seen straight away that this contention throws up a need for a court to consider whether the matters raised by the defendant are matters "arising out of, or in connection with the contents of or the facts giving rise to, the PDSs, the Loan Agreements and or the allegations made in or the facts giving rise to each of the Proceedings".
Clause 1.1 of the Deed defines "Proceedings" to mean: "The Group Proceedings, the Contribution Proceedings, the M+K Counterclaim proceedings, the Other Proceedings, the Uplifted Proceedings and the Section 6 Proceedings."
It is plain that facts need to be determined, on the plaintiff's contention concerning the release, to determine what kind of proceedings were brought by or concerning the present defendant, and then whether the issues raised in those proceedings fall within the matters released, in accordance with the definition of "Claim" in the Deed.
In Karam v ANZ Banking Group Limited & 1 Ors [2001] NSWSC 709 [at 406] Santow J set out the principles applicable to construing releases or purported releases by reference to the following a series of propositions: "(1) In construing a release... the Court should ascribe to the release the meaning that the release would convey to a reasonable person having all the background knowledge which would reasonably have been available to the parties at the time that they signed the document containing the release: ICS v West Bromwich BS [1997] UKHL 28; [1998] 1 All ER 98 per Lord Hoffman at 114. (2) In order for the Court to give effect to what in an objective sense the contracting parties intended, it is clear that a party may agree to release claims or rights of which it is unaware and of which it could not be aware, provided clear language is used to make plain that that is its intention: see Salkeld v Vernon [1758] EngR 153; (1758) 1 Eden 64, 28 ER 608 per Lord Keeper Henley. (3) Consistent with this emphasis on intention, general words in a release are limited to what was specifically in the contemplation of the parties at the time when the release was given: Grant v John Grant and Sons Pty Ltd [1954] HCA 23; (1954) 91 CLR 112 per Dixon CJ, Fullagar, Kitto and Taylor JJ; Iletrait Pty Limited v McInnes (NSWCA, 17 April 1997, unreported) per Priestley JA with whom Grove AJA and Handley JA agreed). (4) Although there are no special rules of construction, such as a contra proferentem requirement, in the absence of clear language courts have been slow to infer that a party intended to surrender rights and claims of which it was unaware and could not have been aware: BCCL v Ali [2001] 1 All ER 961 at 966 per Lord Bingham, (contrast Lord Nicholls in BCCL v Ali(supra) at 971-72 who was of the view that for the purposes of construction a general release is simply a term in the contract). (5) Although each release should be considered against its own matrix of facts, an example of this line of "cautionary principle" (Lord Bingham's phrase) is the frequently cited judgment of the High Court of Australia in Grant v John Grant & Sons Pty Limited (supra), where Dixon CJ, Fullagar, Kitto and Taylor JJ (at 125) referred with approval to the proposition put by Sir Frederick Pollock in his "Principles of Contract" (Stevens: London, 1950) 13th ed at 412, that "in equity a release shall not be construed as applying to something of which the party executing it was ignorant." (6) Despite the fact that, strictly speaking, releases are subject to no special rules of construction, a transaction in which one party agrees in general terms to release another from any claims upon it does have special features: BCCL v Ali at 984 per Lord Hoffman. (7) In such circumstances it may well be appropriate to imply an obligation upon the beneficiary of such a release to disclose the existence of claims of which it actually knows and which it also realises might not be known to the other party: BCCL v Ali at 984 per Lord Hoffman, for such an obligation is consistent with a concern to protect parties from sharp practice, by preventing advantage being taken of the known ignorance of the conceding party; BCCL v Ali per Lord Nicholls at 973."
These principles make clear that there are factual matters which need to be taken into account in construing the effect and width of a release. Those matters are: 1. the background knowledge available to the parties at the time they entered into the release; 2. the matters specifically in the contemplation of the parties at the time when the release was given; 3. whether the parties were unaware or could not have been aware of certain rights and claims; 4. whether there was an obligation to disclose the existence of claims known to one party but not the other.
The plaintiff has drawn attention to a number of decisions, subsequent to the approval of the settlement of the group proceedings by Justice Croft, where the release has been held to be wide enough to deny a defendant the opportunity to raise individual defences. At the appellate level, there is the decision of the Court of Appeal of the Supreme Court of Victoria in Bendigo and Adelaide Bank Ltd v Pekell Delaire Holdings Pty Ltd [2017] VSCA 51. One of the first instance decisions is Bendigo and Adelaide Bank Limited v Zipevski [2018] NSWDC 54, a judgment of Judge Dicker SC of this court. His Honour found at [87] that the defendant was bound by the Deed of Settlement and was estopped from defending the plaintiff's claims in the proceedings. To come to that conclusion his Honour considered the nature of the defendant's claim in the Victorian group proceedings and the evidence in relation to the defences raised in the District Court. Consideration of those matters was of course necessary, to enable his Honour to come to an ultimate conclusion that the release was wide enough to operate to prohibit the defendant raising the matters put forward in defence of the plaintiff's claim. A similar approach was taken by the District Court of Queensland in Bendigo and Adelaide Bank Limited v Gaedtke [2017] QDC 28 July 2017 and the District Court of South Australia in ABL Custodian Services Pty Limited v Kunz [2016] SADC 145. In each of those cases the trial judge found it necessary to hear evidence surrounding the background facts, before coming to the view that the release operated to bar the defences raised.
It seems to me inevitable that there would need to be a hearing of the facts relevant to the construction of the release, before a finding could be made by a judge that the release operated to bar the defences and claims put forward by the defendant in these proceedings. This is particularly so when, as properly conceded, Mr Dimitrov has arguable defences and counter claims which he could bring forward, in the absence of such matters being released by the Victorian Deed of Settlement. In none of the first instance decisions cited has the judge simply looked at the terms of the Deed of Settlement and held that the defendant is out of court. In each case there has been detailed consideration of the evidence put forward upon which an ultimate finding of estoppel by deed of release can be based.
Because the claim of each claimant in the Victorian group proceedings could have different features, one cannot extrapolate a result in one case to an automatic result in another where there are different background facts.
For those reasons my conclusion is that the default judgment should be set aside and the defendant should be allowed to agitate the defences and counter claims set out in his proposed Amended Defence.
This was certainly the course foreseen by Justice Edelman in Dimitrov v The Supreme Court of Victoria [2017] HCA 51 at [37], although his Honour recognised that the defendant first had to get over the hurdle of obtaining an order in the District Court setting aside the default judgment - at [13].
A recent example of the importance of determining the necessary background facts before a conclusion can be reached that a claim has been released and a party is estopped from pursuing that claim or defence is the decision of Justice Lee in the Federal Court in Dillon v RBS Group (Australia) Pty Limited (No. 2) [2018] FCA 395. The court was asked to approve an overall settlement sum in group proceedings as fair, reasonable and adequate. One of the terms provisionally agreed to by the applicants was a proposed Settlement Deed which contained a release. The release was in the following terms: "The Applicants and Group Members release and discharge the Respondents and the Related Parties of the Respondents jointly and severally from all claims and actions (including any claim for costs), present and future, relating to the Dispute and the Proceeding."
His Honour indicated at the commencement of the hearing for approval of the settlement that he had "serious misgivings about approving a proposed settlement which required a participating group member to sign a document of the type proposed" - at [33].
His Honour pointed out that there may be a distinct claim of a participating group member which is not a claim for the purposes of the litigation and the release. Such a claim is not a claim with respect to the subject of the proceeding, but is a claim with respect to the claim available to an individual. His Honour pointed out that the whole focus of the mechanism for approval of the settlement of a group claim is upon the particular claim of the group members brought in the proceedings, and not "individual, distinct claims which do not arise out of the same, similar or related circumstances as the claims the subject of the proceedings" - at [40].
His Honour referred to the decision of the High Court of Australia in Timbercorp Finance Pty Limited (In Liquidation) v Collins [2016] HCA 44; (2016) 259 CLR 212 at [53] where the following was said: "The provisions of Part 4A therefore confirm that a plaintiff in group proceedings represents group members only with respect to the claim the subject of that proceeding, but not with respect to their individual claims. The lead plaintiff is not a privy in interest with respect to the respondents' claims. This is so regardless of whether they should have been raised in the group proceedings. That leaves for consideration the question whether the respondents themselves are estopped from raising them in these proceedings."
Justice Lee said at [50]: "There is a need to focus on the foundational notion that the representative person, or applicant, only represents group members with respect to the claim which is the subject of the proceeding, and not further. Put another way, the applicants have no role whatsoever in purporting to represent group members in respect of individual claims other than the claim of the individual group member that is the subject of the representative proceeding."
His Honour went on to consider the facts before him and reached a conclusion that the release was connected with the subject matter of the proceeding and with "very considerable reluctance" he was "grudgingly persuaded" to approve the inclusion of the release in the provision relating to the Deed. In doing so his Honour stressed at [62] "that representative applicants should understand that their role is restricted to the claim the subject of the proceeding and nothing else".
This judgment confirms my conclusion previously expressed - that before a finding can be reached that the release was intended to close off the defences and claims raised by the defendant in his proposed Amended Defence in this court, and that he is estopped from raising those matters, the factual matrix surrounding the Victorian group proceedings, their settlement and the approval must be the subject of evidence and consideration. As I have previously stated, this means that, since there is no problem concerning delay and since it is acknowledged that but for the purported release the defendant has arguable defences and cross-claims, the default judgment should be set aside and the defendant should be let in to defend.
It may well be that the same result is reached on a full hearing as was reached by Judge Dicker SC and other first instance judges. However, that point can only be decided after receipt and consideration of appropriate evidence.

At a glance

Court

Decision date

Source

Judgment (8 paragraphs)

Parties

Legislation Cited (1)

Cases Cited (19)