Cashflow Finance Australia Pty Ltd v Graham Lindsay Bennett [2024] NSWSC 632 | Case summary

Supreme Court of NSW|2024-05-20|Before: McGrath J, Robb J

INTRODUCTION

This is an application by way of notice of motion filed 10 May 2024 for default judgment for liquidated claims. The application is brought by the fourth defendant/cross-claimant, who is the Liquidator of Bennco Pty Ltd (in liquidation), against the second cross-defendant, Jodie Bennett.
Bennco operated a transport/haulage business from premises located in Wilton, New South Wales. At all material times, Jodie Bennett was the sole director and secretary of Bennco and was also the sole shareholder of Bennco prior to 1 December 2015 and after 12 April 2022.
The amount of the default judgment that is sought against Jodie Bennett totals $882,395.43, comprising: 1. the amount of $350,118.75 in relation to a director loan account; 2. the amount of $430,777.28 in relation to an insolvent trading claim; 3. interest in the amount of $99,839.40 from 20 July 2022 to 10 May 2024; 4. costs in the amount of $1,596.00; and 5. service fees in the amount of $64.00.

PROCEDURAL HISTORY & EVIDENCE

The proceedings have had a detailed history through different lists of this court.
On 18 August 2022, the proceedings were commenced by summons in the Real Property List by the plaintiff, Cashflow Finance Australia Pty Ltd, against the first defendant, Graham Lindsay Bennett, the second defendant, Norma Lindsay Bennett, and the third defendant, Jodie Bennett, by filing the summons in court before the Duty Judge. In the summons, Cashflow Finance Australia sought an order that the operation of a caveat over a property situated in Coniston, New South Wales (Coniston Property) shall not lapse.
It was alleged that on about 20 January 2021, Cashflow Finance Australia entered into two Secured Loan Agreements (Contracts) with Bennco as the borrower and Jodie Bennett and A Class Express Investments 2 Pty Ltd as guarantors, and that Jodie Bennett agreed to grant Bennco a security interest over all of her current and future personal and real property to secure the monies owing under the Contracts. Jodie Bennett held an interest in the Coniston Property.
On 6 April 2022, Cashflow Finance Australia sent letters of demand to each of Bennco and Jodie Bennett under the Contracts.
On about 30 April 2022, Graham Bennett and Norma Bennett lodged a caveat over Jodie Bennett's interest in the Coniston Property.
On about 11 July 2022, Cashflow Finance Australia registered a caveat over Jodie Bennett's interest in the Coniston Property.
On 20 July 2022, the Liquidator was appointed to Bennco following a resolution of Jodie Bennett as the sole member of Bennco to wind up Bennco.
On 12 August 2022, a notice of appearance was filed in the proceedings on behalf of each of Graham Bennett, Norma Bennett and Jodie Bennett which stated that Zoe Bojanac of wRIGHT LAW ILP was acting for all of them.
On 15 August 2022, the solicitors for Cashflow Finance Australia received a lapsing notice dated 2 August 2022 in respect of its caveat over the Coniston Property.
On 22 August 2022, the proceedings came before Robb J in the Duty List at which time, inter alia, an order was made by consent and without admissions to extend the operation of the caveat to allow for the settlement of the sale of the Coniston Property to occur, then scheduled for 6 September 2022.
On 11 October 2022, Henry J as Duty Judge ordered, inter alia, that the proceedings be transferred into the Real Property List and that Bennco be served with the orders as an interested party and directed to file any motion to be joined as a party to the proceedings by 21 October 2022 and listed the proceedings for directions on 11 November 2022.
On 11 November 2022, Peden J in the Real Property List ordered, inter alia, that the Liquidator file and serve any notice of motion and supporting affidavit relied on to be joined as a party to the proceedings by 8 December 2022 and listed the proceedings for further directions on 9 December 2022.
On 5 December 2022, Zoe Bojanac of wRIGHT LAW ILP filed a notice of intention to file notice of ceasing to act for Jodie Bennett dated 27 November 2022.
On 9 December 2022, Peden J varied the orders made on 11 November 2022, ordering, inter alia, the Liquidator to file and serve any notice of motion and supporting affidavit relied on to be joined as a party to the proceedings by 15 December 2022, and listed the proceedings for further directions on 17 February 2023.
On 16 December 2022, the Liquidator filed a notice of motion seeking, inter alia, to be joined as a plaintiff in the proceedings and for orders to be made regarding the filing and service of points of claim and any cross-claim (Liquidator's Motion).
On 17 February 2023, Peden J made directions regarding the Liquidator's Motion, including that it be heard on 24 March 2024.
On 24 March 2023, Peden J made orders by consent, inter alia, that: 1. the Liquidator be joined as defendant and cross-claimant in the proceedings; 2. the Liquidator file and serve points of defence and points of cross-claim by 21 April 2023; 3. the plaintiff/cross-defendant file and serve its defence to the cross-claim and any reply to the Liquidator's defence by 19 May 2023; 4. the proceedings be transferred to the Corporations List; and 5. the proceedings be stood over to the Corporations List for directions on 22 May 2023.
On 21 April 2023, the Liquidator filed the points of cross-claim against Cashflow Finance Australia as the first cross-defendant and Jodie Bennett as the second cross-defendant. The points of cross-claim were verified by the Liquidator. The relief claimed in the points of cross-claim included: 1. a declaration that Bennco was insolvent on and from 30 June 2019 or such earlier date as the court determines; 2. a declaration that the Contracts between Bennco and Cashflow Finance Australia are insolvent transactions for the purposes of s 588FE of the Corporations Act 2001 (Cth); 3. a declaration that the Contracts were "uncommercial transactions" for the purpose of s 588FB of the Corporations Act; 4. by reason of the Contracts being uncommercial transactions, an order that the Contracts are void pursuant to s 588FF of the Corporations Act; 5. by reason of the Contracts being void, a declaration that the caveat registered against the interests of Jodie Bennett in the Coniston Property was invalid; 6. a declaration that the proceeds of sale of the Coniston Property are held on constructive trust for and in favour of Bennco in the amount of $126,163.85 plus interest and costs; 7. an order that Jodie Bennett pay to Bennco the amount of $350,118.75 plus interest as a debt for the director loan account; 8. a declaration that Jodie Bennett breached her director's duty to prevent insolvent trading pursuant to s 588G of the Corporations Act; 9. an order that Jodie Bennett pay to Bennco the amount of $430,777.28 plus interest as a debt pursuant to s 588M of Corporations Act; and 10. Costs.
The claim against Jodie Bennett in relation to the director loan account in the points of cross-claim states: 24 Between 28 June 2012 and 15 July 2022, Bennco advanced and/or loaned to Jodie, or for Jodie's benefit, the amount of $350,118.75 ("Jodie's Loan account") Particulars a. Card Transactions [Accrual] Ledger for Bennett, Jodie for the period 1/7/2010 to 20/7/2022. b. Card Transactions [Accrual] Ledger for 'Bennett Loan Account' for the period 1/7/2010 to 20/7/2022. 25 Jodie is indebted to Bennco for the amount of $350,118.75 plus interest.
The claim against Jodie Bennett in relation to the insolvent trading of Bennco in the points of cross-claim is based on an alleged "Date of Insolvency" from at least 30 June 2019 (at [26]) and the date of the appointment of the Liquidator on 20 July 2022 (at [4]). The points of cross-claim then states: 45 Between the Date of Insolvency and the date of liquidation, Bennco incurred debts of $430,777.28 which remain unpaid. ("the Insolvent Trading Amount"). 46 At all material times, Jodie had a duty to prevent Bennco from incurring debts and trading whilst Bennco was insolvent. Particulars a. Section 588G of the Act. 47 At all material times after 30 June 2019, Jodie knew or had reasonable grounds for suspecting that Bennco was insolvent, or would become insolvent by incurring the Insolvent Trading Amount. Particulars a. Bennco repeats and relies on paragraph 27 of this Points of Cross-Claim. b. At all relevant times, Jodie was the sole director and secretary of Bennco. c. At all relevant times, Jodie had access to Bennco's books and records, and was involved in the day-to-day affairs of Bennco. 48 By virtue of Jodie failing to prevent the Insolvent Transactions from being incurred after the Date of Insolvency, Jodie contravened s 588G of the Act. 49 By virtue of Jodie's breach of s 588G of the Act, Bennco suffered loss and damage in the amount of $430,777.28. 50 Pursuant to s 588M of the Act, Jodie is liable to pay Bennco the amount of $430,777.28 plus interest, as a debt.
On 26 April 2023, an email attaching the points of cross-claim by way of service was sent by the solicitors acting for the Liquidator to the solicitors acting for Jodie Bennett. No response to this email was received.
On 22 May 2023, Black J made orders, inter alia, that Cashflow Finance Australia and Jodie Bennett were to file and serve a defence to the cross-claim by 31 May 2023, the Liquidator was to file any reply by 14 June 2023, Cashflow Finance Australia was to file and serve its evidence in chief by 28 July 2023, and the Liquidator was to file and serve his evidence in reply and evidence in chief on his cross-claim by 8 September 2023, and listed the proceedings for further directions on 23 October 2023.
On 8 June 2023, an email was sent by the solicitors acting for the Liquidator to Jodie Bennett by way of service which attached the points of cross-claim and the orders made in the proceedings since 5 December 2022, amongst other documents. No response to this email was received.
On 4 August 2023, by consent, Black J varied the orders made on 22 May 2023 by extending the time for Cashflow Finance Australia to file and serve its evidence in chief to 11 August 2023, extending the time for the Liquidator to file and serve his evidence in reply and evidence in chief on his cross-claim to 22 September 2023, and extending the time for Cashflow Finance Australia to file and serve any evidence in reply to the cross-claim to 3 November 2023, and listed the proceedings for further directions on 6 November 2023.
On 6 November 2023, the proceedings came before Black J for directions but there was no appearance by any party. As a result, the proceedings were stood over for directions on 13 November 2023.
On 10 November 2023, Black J made orders by consent, inter alia, that the directions hearing scheduled for 13 November 2023 be vacated, that the Liquidator file and serve any further evidence by 24 November 2023, that Cashflow Finance Australia file and serve any further evidence in reply by 6 March 2024 and the proceedings be listed for further directions on 11 March 2024.
On 6 March 2024, Black J made orders by consent that the directions hearing scheduled for 11 March 2024 be vacated, that leave be granted to Cashflow Finance Australia to file and serve any further evidence in reply by 13 March 2024 and the proceedings be listed for further directions on 18 March 2024.
On 15 March 2024, Black J was informed that a settlement had been reached between Cashflow Finance Australia and the Liquidator and the following orders were made by consent: 1. The principal proceedings in which Cashflow Finance Australia is the plaintiff be discontinued against all defendants with no order as to costs to the effect that each party pays their own costs and all prior costs orders be vacated. 2. The cross-claim in which the Liquidator is the cross-claimant be discontinued so far as they concern the relief sought against Cashflow Finance Australia with no order as to costs to the effect that those parties pay their own costs as against each other and all prior costs orders as between those parties are vacated. 3. The funds in court in the proceedings be paid to each of Cashflow Finance Australia and the Liquidator. 4. The proceedings listed for 18 March 2024 be vacated. 5. The proceedings, so far as they concerned the Liquidator as cross-claimant and Jodie Bennett as second cross-defendant, be relisted in the Corporations Directions List on 8 April 2024. 6. The Liquidator serve a copy of these orders on Jodie Bennett within 14 days.
On 8 April 2024, the proceedings came before Black J who noted that Jodie Bennett may be filing for bankruptcy and stood over the proceedings to the Corporations Directions List on 29 April 2024 with a view to determining whether the cross-claim would proceed or leave to discontinue the cross-claim should be granted.
On 29 April 2024, the proceedings came before Black J for directions but there was no appearance by any party. As a result, the proceedings were stood over for directions on 6 May 2024.
On 6 May 2024, the directions hearing was held at which Black J was informed that Jodie Bennett had not declared herself bankrupt, that she was not defending the proceedings and that she was ill. Black J directed the Liquidator to file and serve any application for default judgment by 13 May 2024 to be made returnable in the Corporations Motions List on 20 May 2024, and ordered the Liquidator to use his best endeavours to give notice to Jodie Bennett of the order.
On 7 May 2024, the solicitor for the Liquidator sent an email to Jodie Bennett which advised her that the proceedings were in court the previous day and that Black J made orders on 6 May 2024 that: 1. the Liquidator file and serve a notice of motion for default judgment by 13 May 2024; 2. the notice of motion be listed for determination on 20 May 2024; and 3. the parties have liberty to apply to relist the proceedings on two business days' notice.
On 9 May 2024, Jodie Bennett sent an email to the solicitor acting for the Liquidator stating: Thank you for letting me know the status of the proceedings. Unfortunately at this time I am in hospital for a long term issue and stay. I understand where the proceedings are up to and under the circumstances will not be contesting any default Judgement [sic]. I appolise [sic] for the lack of communication on my behalf. Yours truly, Jodie L Bennett.

PRESENT PROCEEDINGS

There has been no appearance by Jodie Bennett at the hearing today, including after she was called outside court immediately prior to the delivery of this judgment.
Jodie Bennett has failed to file any defence to the points of cross-claim as ordered on 22 May 2023 or take any other step in the proceedings.
Since the commencement of the proceedings, no payments have been received or credits accrued from Jodie Bennett to reduce the amount of the claims against her.
As at 10 May 2024, the solicitor for the Liquidator has sworn that the total amount owing to the Liquidator is $882,395.43, comprising debts of $780,896.03, interest claimed at the prescribed rate of $99,839.40, service fees of $64.00 and solicitors' fees of $1,596.00.

LEGAL PRINCIPLES

Rule 16.1 of the Uniform Civil Procedure Rules 2005 (NSW) (UCPR) states that Part 16 applies to proceedings commenced by statement of claim. By operation of r 9.1(3) of the UCPR, Part 16 applies to a statement of cross-claim in the same way as it applies to a statement of claim.
Rule 16.6 of the UCPR provides: (1) If the plaintiff's claim against a defendant in default is for a debt or liquidated claim or for a claim for unliquidated damages of the kind referred to in rule 14.13(2), judgment may be given for the plaintiff against the defendant for: (a) a sum not exceeding the sum claimed, and (b) interest up to judgment, and (c) costs. (2) The relevant affidavit in support: (a) must state the amount due to the plaintiff, in respect of the cause of action for which the proceedings were commenced, as at the time the originating process was filed, and (b) must give particulars of any reduction of that amount, and costs, as a consequence of any payments made, or credits accrued, since the time the originating process was filed, and (c) must state the source of the deponent's knowledge of the matters stated in the affidavit concerning the debt or debts, and (d) must state the amount claimed by way of interest, and (e) must state whether costs are claimed and, if so, how much is claimed for costs, indicating: (i) how much is claimed on account of professional costs (not exceeding the amount fixed by the regulations made for the purposes of section 59 of the Legal Profession Uniform Law Application Act 2014), and (ii) how much is claimed on account of filing fees, and (iii) how much is claimed on account of the costs of serving the originating process, and (f) must state when and how the originating process was served on the defendant.
Rule 16.2(1) of the UCPR provides that a defendant is in default for the purposes of Part 16: (a) if the defendant fails to file a defence within the time limited by rule 14.3(1) or within such further time as the court allows, or (b) if the defendant fails to file any affidavit verifying his or her defence in accordance with any requirement of these rules, or (c) if, the defendant having duly filed a defence, the court orders the defence to be struck out.
Rule 16.2(2) of the UCPR provides that a defendant is not in default if the defendant: (a) has made a payment towards a liquidated claim under rule 6.17, or (b) has filed an acknowledgement of claim under rule 20.34, or (c) has filed a defence after the time limited by these rules or allowed by the court, but before a default judgment is given against the defendant.
The principles stating the basis on which the court may make such a default judgment are well-established and are set out in Wily v King [2010] NSWSC 352, by Barrett J at [16]-[17] as follows: 16 The philosophy underlying r 16.6 is that, because provision is made for the filing of a defence in response to a statement of claim and the statement of claim, of its nature, should contain all allegations necessary to make good the entitlement to the asserted cause of action, failure to file a defence should be taken to represent acceptance of the statement of claim and admission of the several allegations in it. 17 The important word in r 16.6, for present purposes, is "may". The court is empowered to order judgment by default in cases within this rule but is not bound to do so. In Charles v Shepherd [1892] 2 QB 622, where judgment was sought upon default in delivery of a defence, Lord Esher MR said (at 624): … the Court is not bound to give judgment for the plaintiff, even though the statement of claim may on the face of it look perfectly clear, if it should see any reason to doubt whether injustice may not be done by giving judgment; it has a discretion to refuse to make the order asked for.
I note that even if Part 16 did not apply to these proceedings, the court has power under s 61(3)(g) of the Civil Procedure Act 2005 (NSW) to give such order as it considers appropriate if a party has failed to comply with a direction and that power may be exercised to enter default judgment against a defendant who has failed to file a defence contrary to a direction requiring any defence to be filed within a specified time. In that way, Part 16 of the UCPR may be applied by analogy to proceedings commenced by summons or originating process through orders made under s 61(3) of the Civil Procedure Act: In the matter of Blecker Property Group Pty Ltd (in liquidation) [2023] NSWSC 1071, Williams J at [12] citing Property Investors Alliance Pty Ltd v C88 Project Pty Ltd [2021] NSWSC 1175, Hammerschlag J (as the CJ in Eq then was) at [14].

CONSIDERATION

Rule 16.6 of the UCPR provides me with a discretion. I am satisfied, given the lack of the filing of a defence to the points of cross-claim and the lack of any step taken by Jodie Bennett in the proceedings, that a default money judgment should be issued by the court.
The supporting affidavit of the solicitor for the Liquidator complies with the requirements of r 16.6(2) of the UCPR.
In the circumstances, I consider it appropriate that the amount of the default judgment should be the amount of the claimed debts in the points of cross-claim as well as interest up to judgment, and I also award the Liquidator his costs in the amounts sought.

ORDERS

Accordingly, I make the following orders: 1. Judgment for the cross-claimant against the second cross-defendant for $350,118.75 in relation to the amount defined as "Jodie's loan account" in the points of cross-claim. 2. Judgment for the cross-claimant against the second cross-defendant for $430,777.28 in relation to the "insolvent trading amount" as defined in the points of cross-claim. 3. Judgment for the cross-claimant against the second cross-defendant for interest on each of the amounts in the default judgments expressed in paras 1 and 2 in the amount of $99,839.40 for the period from 20 July 2022 to 10 May 2024. 4. Judgment for the cross-claimant against the second cross-defendant for costs in the amount of $1,596. 5. Judgment for the cross-claimant against the second cross-defendant for the amount of service fees of $64.
I note that the making of these orders means that the proceedings have now come to an end. The points of cross-claim as against the first cross-defendant were previously dealt with by earlier orders in the proceedings.

DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated. Decision last updated: 24 May 2024

Cashflow Finance Australia Pty Ltd v Graham Lindsay Bennett

At a glance

Court

Decision date

Before

Source

Judgment (7 paragraphs)

Parties

Legislation Cited (3)

Cases Cited (3)