These proceedings ("the Bank proceedings") commenced on 22 June 2017 with the plaintiff ("the Bank") seeking orders for the specific delivery up of certain motor vehicles and judgment against the defendants for what was said to be owing under equipment loan facilities. The various agreements were entered into by the first defendant as the customer and the second and third defendants as guarantors. The second defendant was the sole director and secretary of both the first and third defendants. I shall refer to the defendants as the Kol parties.
Before any defence was filed, the plaintiff filed an amended statement of claim on 6 July 2017. No substantive changes were made to the claim.
On 9 November 2017 the Kol parties filed a joint defence to the amended statement of claim. The defence made some admissions, some non-admissions and some denials of allegations. The only substantive defence was to be found in paragraph 12, which denied default and then stated that in the event that there was default by failing to pay instalments, such default occurred by reason of the conduct of the Bank. The particulars said this:
At all material times KOLInvest Pty Ltd and KOL Action Group Pty Ltd held banking accounts with the Commonwealth Bank. The relevant BSB and account numbers are known to the Commonwealth Bank. In March 2017, the Commonwealth Bank unlawfully debited the total sum of $500,270.00 from the accounts of KOLInvest Pty Ltd (including the sum of $393,000 reversed on 20 March 2017 from the account ending 5188) and KOL Action Group Pty Ltd (including the sum of $107,270 reversed on 14 March 2017 from the account ending 2595).
Commonwealth Bank of Australia v Prestigo Pty Ltd [2019] NSWSC 938 | Case summary | Zoe
Later paragraphs of the defence relied upon the matters set out in paragraph 12 of the defence for asserting that any default on the part of the defendants was caused by the Bank and for denying the validity of notices issued on the basis of the default.
When the proceedings were first before the Registrar on 26 September 2017, there was no appearance for the Kol parties. The proceedings were stood over for show cause on 23 February 2018. On that day, there was an appearance on behalf of the Kol parties. They indicated that they intended to file separate proceedings against the Bank apparently arising out of the same matters.
On 16 March 2018 the Kol parties and the other company referred to in paragraph 12 of the defence, KOL Action Group Pty Ltd, filed a statement of claim seeking damages against the Bank and various declarations under the Australian Securities and Investments Commission Act 2001 (Cth), seemingly related to the matters complained of in paragraph 12 of the defence. I shall refer to those proceedings as "the 2018 proceedings".
In substance, the claim was that amounts of money were deposited into the accounts of KOLInvest and KOL Action but that the Bank had debited or reversed those credits apparently on the basis that the deposits were made by mistake of the payers of the amounts. The debiting of the accounts meant that monies that would have been used to make instalment payments under the equipment facilities were not available. The statement of claim alleged that the Bank acted improperly and unconscionably in having debited the accounts in the manner alleged.
On 11 April 2018 the Kol parties filed an amended defence in the Bank proceedings. The significance of the amended defence was that, whereas previously there had been non-admissions and denials of various allegations made by the Bank, the Kol parties now admitted the allegations. However, they maintained the pleading of paragraph 12. What is set out at [3] above became Particular (A). Particular (B) was added as follows:
The defendants further rely upon the matters pleaded in the statement of claim filed in NSW Supreme Court proceedings 2018/00085439 (the 2018 proceedings).
On 24 May 2018 both proceedings were before the Registrar. In each of the proceedings an order was made that the proceedings were to be heard together and that the evidence in one case was to be the evidence in the other.
An examination of the court files show that thereafter all relevant directions were made in the 2018 proceedings. Although the Bank proceedings were listed with the 2018 proceedings, on each occasion the Bank proceedings were simply adjourned to the next directions date.
Significantly, on 18 October 2018 orders were made in the 2018 proceedings that the Kol parties were to serve their affidavit evidence in chief by 15 November 2018. Thereafter directions were made for evidence by the Bank and reply evidence by the Kol parties in the 2018 proceedings.
The Kol parties did not comply with the direction for the filing of evidence by 15 November 2018 or at all. On 5 December 2018 both proceedings were listed before the Registrar at the request of the Bank because of a failure of the Kol parties to file their evidence as directed. There was no appearance for the Kol parties. The Court relevantly made the following order:
Time for the plaintiffs [the Kol parties] to serve their affidavit evidence in chief is extended to 19 December 2018 and the plaintiffs are unable to adduce any evidence after that date without leave.
No evidence was served by the Kol parties in accordance with that order and no leave has been sought to serve evidence outside the terms of that order.
Both proceedings were stood over on a number of subsequent occasions where there was no appearance by the Kol parties.
In the meantime, on 15 February 2019 a liquidator was appointed to the first defendant and on 19 April 2019 the third defendant was deregistered.
On 23 April 2019 the matter was before the Registrar for directions. It is not clear from the Court record if there was any appearance on behalf of the Kol parties. I note that on that occasion the Registrar indicated that a notice under r 13.6 would be served on the Kol parties. That suggests that there was no appearance for the Kol parties on that occasion. On the same day, the solicitors who had acted for the Kol parties served a Notice of Intention to File a Notice of Ceasing to Act on 23 April 2019. On 24 May 2019 those solicitors filed a Notice of Ceasing to Act.
A further directions hearing was held before the Prothonotary on 30 April 2019. There was no appearance for the Kol parties. The Prothonotary directed that a r 13.6 notice was to be issued to the Kol parties and their solicitors in the 2018 proceedings. It appears that the notice was returned to the Court.
At the directions hearing on 30 April, the Bank indicated that it wished to strike out the defence of the Kol parties in the Bank proceedings. Leave was given to the Bank to file and serve a notice of motion for that purpose.
On 28 May 2019 both proceedings were again before the Registrar. There was no appearance for the Kol parties. The Registrar ordered that a r 13.6 notice was to be forwarded to the Kol parties in respect of the 2018 proceedings at a specified address in Victoria.
On 18 June 2019, in the absence of any appearance by the Kol parties, the Registrar dismissed the 2018 proceedings and ordered the Kol parties to pay the Bank's costs of those proceedings.
On 17 June 2019 the Bank had filed its notice of motion seeking to strike out the defence in the Bank proceedings. On 18 June 2019 the Registrar directed that the notice of motion was to be made returnable before the Duty Judge on 2 July 2019. The Bank proceedings came before me as Duty Judge on that day. There was no appearance for the Kol parties.
Rule 12.7(2) provides:
12.7 Dismissal of proceedings etc for want of due despatch
...
(2) If the defendant does not conduct the defence with due despatch, the court may strike out the defence, either in whole or in part, or make such other order as the court thinks fit.
When the matter came before me on 2 July 2019, there was evidence that the liquidator of the first defendant did not intend to defend the proceedings and did not oppose leave being given to the plaintiff to proceed against the first defendant notwithstanding the liquidation. Given the deregistration of the third defendant, the plaintiff did not seek to proceed further against the third defendant.
Accordingly, I made the following orders on that day:
Pursuant to section 471B of the Corporations Act 2001 (Cth) leave is granted to the plaintiff to proceed against the first defendant.
Pursuant to rule 12.7(2) of the Uniform Civil Procedure Rules 2005 the amended defence filed in these proceedings on 11 April 2018 is struck out as against the first defendant.
Leave is granted to the plaintiff to discontinue the proceedings as against the third defendant with no order as to costs.
I noted also that as a result of striking out the amended defence against the first defendant, that defendant was in default, and that the plaintiff was at liberty to apply for default judgment against the first defendant. The plaintiff has now sought default judgment against the first defendant for the delivery of the two motor vehicles specified in a notice of motion filed 15 July 2019.
The proceedings against the second defendant were adjourned to enable the plaintiff to give consideration as to whether it wished to amend its notice of motion to seek summary judgment against the second defendant.
The matter came before me again on 23 July 2019. There was no appearance for the second defendant. The plaintiff did not amend its notice of motion and sought that the amended defence be struck out as against the second defendant in reliance on r 12.7. At the conclusion of the hearing, I made an order striking out the defence as against the second defendant pursuant to r 12.7. I said that I would provide my reasons for so doing at a later time. These are my reasons for making that order.
In Pacific Clinical Research Group Pty Limited v Kona Medical Inc [2018] NSWSC 162 the plaintiff sued the defendant for amounts due under agreements between the parties whereby the plaintiff was to conduct clinical research trials for the defendant. The defendant filed and served a defence and a cross-claim. However, shortly after that was done the defendant's solicitors ceased to act. At five subsequent directions hearings before the Registrar the defendant failed to appear. The Registrar made an order under r 13.6(2) dismissing the cross-claim and made orders that the defendant was to serve any evidence on which it relied in relation to the plaintiff's claim by a specified date. No evidence was served in accordance with that direction.
Justice Johnson said:
[18] The pattern of non-appearance and non-compliance with Court orders by the Defendant over recent months leads to the irresistible inference that the Defendant is effectively not participating in this litigation, and has withdrawn from it. It no longer has instructing lawyers in this jurisdiction, and is not indicating any intention to become actively involved again.
[19] The first order sought in the Notice of Motion is that the Defendant's Defence filed on 22 August 2017 be dismissed pursuant to Rule 12.7(2) UCPR. That provision states that, if a defendant does not conduct the defence with due dispatch, the Court may strike out the Defence either in whole or in part or make such other order as the Court sees fit. The Court has a discretion as to whether to make that order. There is, in my view, an overwhelming case of lack of due dispatch on the part of the Defendant, certainly since September of 2017.
[20] To allow the Defence to remain on foot will lead to obvious prejudice to the Plaintiff. At this stage, the Plaintiff is the only party engaging in the litigation which has been on foot since 2016. The Plaintiff has taken every reasonable step to progress it. There have been some changes in solicitor for the Plaintiff, but that does not cause any complication so far as this application is concerned. The delay is significant. The amount of money involved is such that it is appropriate that the Court grant the relief sought in this respect. The provisions of s.56 Civil Procedure Act 2005 clearly point in that direction.
[21] In accordance with Rule 12.7(2) UCPR, the Plaintiff seeks that the Defence be struck out. I am well satisfied that this order should be made. In taking this approach, I express my satisfaction that nothing that the Plaintiff has done involves any acquiescence to the delay of the Defendant. In fact, the Plaintiff has been taking every reasonable step to progress this litigation.
In Commonwealth Bank of Australia v Fenwick [2018] NSWSC 615 the plaintiff made a claim based on defaults under facilities. The defence admitted entry into the facilities and a failure to repay but the substance of the defence to the claim was a cross-claim which was related to matters raised in representative proceedings in the Federal Court concerning managed investment schemes. The representative proceedings were compromised and, as a result, the defendant's cross-claim was dismissed. The Bank sought to proceed on its statement of claim but the solicitors acting for the defendant ceased to act. Thereafter the defendant took no part in the proceedings. He ignored emails and telephone calls directed to him concerning the proceedings.
Justice Leeming said at [6]:
The second order sought by the Bank is that the defence be struck out. Speaking only slightly generally, the only substantive allegations in the defence are those referring to and incorporating the cross-claim which turned upon the now resolved representative proceedings in the Federal Court and which itself has now been dismissed by consent. It is in my view quite plain that the defence in its current form, while adequate when the Federal Court proceedings were extant and the cross-claim was extant, is now embarrassing and is apt to be struck out, and I will make such an order in due course.
The dismissal of the cross-claim in the present matter is significant for a determination of the present application. The dismissal of the cross-claim leaves the second defendant with no defence on the pleading. Relevantly, all matters are admitted but for the defence in paragraph 12. What is set out in the particulars associated with paragraph 12 (set at [3] and [8] above) does not, without reliance upon the cross-claim, provide any defence to the claim. Those particulars do not make the link between the accounts that are referred to and the use of those accounts for the payment of the instalments. That link was made only by the pleading in the cross-claim.
Quite apart from that matter, the history of the proceedings clearly indicates a failure on the second defendant's part to advance his defence. The second defendant failed to appear on 18 October 2018, 5 December 2018, 23 April 2019, 30 April 2019, 28 May 2019, 18 June 2019 and on both occasions when the present motion was before me for hearing on 2 July 2019 and 23 July 2019. The second defendant has not complied with directions for the service of evidence. The second defendant did not respond to a notice issued pursuant to r 13.6 UCPR with the result that the proceedings commenced by the Kol parties were dismissed.
The evidence demonstrates that the second defendant has been personally notified of the present motion and its adjournment to 23 July and his former solicitors have similarly been notified. There is no indication that the second defendant intends to take any further part in the proceedings.
I am satisfied that the plaintiff would be prejudiced by listing the matter for a final hearing: Raymond Hoser v Christopher Hartcher [1999] NSWSC 527 at [20]. I am also satisfied that the Bank has not stood by in the face of the lack of due despatch by the Kol parties: Hoser at [24]. When the Kol parties failed to comply with the direction to serve their evidence, the Bank had the proceedings re-listed and further orders made. By the time the Registrar struck out the 2018 proceedings the Bank had already filed the present notice of motion.
Section 58(1)(a)(iii) of the Civil Procedure Act 2005 (NSW) provides that in deciding whether to make any order for the management of proceedings, the court is to act in accordance with the dictates of justice. Matters to which the court is to have regard in so acting include the provisions of s 56 and the matters set out in s 58 (2)(b). Those matters include:
(ii) the degree of expedition with which the respective parties have approached the proceedings, including the degree to which they have been timely in their interlocutory activities.
(iv) the degree to which the respective parties have fulfilled their duties under section 56 (3).
The second defendant, as part of the Kol parties, has not complied with his obligations under s 56. Further, I have detailed the failures which demonstrate that any discretion in making the order sought should be exercised in favour of the Bank.
Accordingly, the order I made on 23 July 2019 was:
Pursuant to rule 12.7(2) of the Uniform Civil Procedure Rules 2005 the amended defence filed in these proceedings on 11 April 2018 is struck out as against the second defendant.
In addition I made the following notation:
As a result of the order for the striking out of the amended defence, the second defendant is in default for the purposes of Part 16 of the Uniform Civil Procedure Rules 2005 and the plaintiff is at liberty to make an application for default judgment forthwith.
[2]
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Decision last updated: 26 July 2019