GCTR Investments Pty Ltd v DJD Family Holdings

BACKGROUND 1 By interlocutory application filed on 3 March 2023, the applicant, GCTR Investments Pty Ltd, seeks default judgment against the respondents, DJD Family Holdings Pty Ltd and Mr Daniel John Dean, the sole director of DJD Family Holdings, in the amount of $333,671.23. GCTR also seeks costs in the lump sum of $19,489.08. 2 I heard the application and granted the relief sought by GCTR on 16 March 2023. These are my reasons.

THE PROCEEDING 3 The application for default judgment is in respect of the originating application and statement of claim filed on 10 November 2022, in which the applicant seeks to recover an amount of $250,000 plus interest calculated in accordance with the terms as to interest in a contract between GCTR and DJD Family Holdings. The claim is framed as follows. 4 Pursuant to the contract, GCTR contributed $250,000 towards the principal of a loan by DJD Family Holdings to a third party borrower. GCTR paid its contribution to DJD Family Holdings on 22 October 2021. The contract provided that DJD Family Holdings would repay to GCTR the amount it had contributed within three business days after receipt by DJD Family Holdings of repayment of the loan. Further, that DJD Family Holdings would pay interest to GCTR on amount it had contributed at 12% per annum if the amount was repaid within six months; or 24% per annum if the amount it had contributed was repaid after six months. 5 GCTR alleges that the loan was made to the third party borrower, that the borrower has repaid the loan to DJD Family Holdings, and that in breach of the contract, DJD Family Holdings has not repaid to GCTR the contributed amount within six months or at all. Further, that DJD Family Holdings has not paid interest on the contributed amount to GCTR. Accordingly, GCTR claims it is entitled to interest on the contributed amount at the rate of 24% per annum from 22 October 2021 to the date of judgment. As against DJD Family Holdings, GCTR claims a judgment sum in the amount of $333,671.23 comprised of the contributed amount plus interest at the rate of 24% per annum. 6 GCTR further alleges that DJD Family Holdings and Mr Dean engaged in misleading or deceptive conduct in contravention of s 18 of the Australian Consumer Law (Sch 2, Competition and Consumer Act 2010 (Cth)) by making various representations in connection with the contract. The relief claimed is damages. GCTR particularises its loss and damage as being co-extensive with the claim under the contract, namely, $333,671.23, calculated in the same way. 7 GCTR has demanded payment of the contributed amount plus interest from the respondents but has not received any payment.

PROCEDURAL HISTORY 8 The applicant's genuine steps statement refers to GCTR making multiple requests for payment dating back to 28 March 2022 and to repeated broken promises to repay immediately or shortly thereafter, the first of which was on 21 March 2022. 9 The proceeding was commenced on 10 November 2022. The originating process, statement of claim, and the applicant's genuine steps statement have been served upon the respondents through service on Mr Dean. 10 The respondents initially appeared in the proceedings. A notice of acting was filed on 9 December 2022. Counsel appeared for the respondents at the case management hearing of 12 December 2022 when the Court ordered that the respondents were to file and serve their defence by 12 January 2023. 11 On 9 January 2023, shortly before the respondents were due to file a defence, the respondents' solicitors filed a notice of intention of ceasing to act and, on 18 January 2023, filed a notice of ceasing to act. 12 The respondents did not file their defence by 12 January 2023. The respondents are in default of the order made on 12 December 2022. 13 The respondents did not appear at a case management hearing on 23 February 2023. 14 There were a number of missteps by GCTR in filing and bringing forward the present application. The application was first foreshadowed on 22 February 2023 in an email from the lawyer for the applicant to the Registry. GCTR filed an affidavit of Mr Neil Kevin Hartley on 27 February 2023, which is directed solely to the quantum of the lump sum costs order for which it applies. The respondents, through Mr Dean, were notified on 2 March 2023 of the orders which GTCR intended to seek. GCTR succeeded in filing the present application on 3 March 2023 and a copy was sent by email to Mr Dean. 15 The proceedings came before me on 9 March 2023 for case management. On that occasion, Mr Dean, himself, appeared. He purported to also appear for DJD Family Holdings. Mr Dean informed the Court that he was in discussions with new legal advisers and sought a two week adjournment. The application for an adjournment was refused and the matter was listed for hearing on 16 March 2023. The hearing date was confirmed by email from the Court that same day.

LEGISLATIVE FRAMEWORK 16 GCTR brings its application under r 5.23(2)(b) of the Federal Court Rules 2011 (Cth) or in the alternative, pursuant to r 5.23(2)(c). 17 Rule 5.23(2)(b)-(c) of the Rules relevantly provides: If a respondent is in default, an applicant may apply to the Court for: … (b) if the claim against the respondent is for a debt or liquidated damages - an order giving judgment against the respondent for: (i) the debt or liquidated damages; and (ii) if appropriate, interest and costs in a sum fixed by the Court or to be taxed; or (c) if the proceeding was started by an originating application supported by a statement of claim or an alternative accompanying document referred to in rule 8.05, or if the Court has ordered that the proceeding continue on pleadings - an order giving judgment against the respondent for the relief claimed in the statement of claim or alternative accompanying document to which the Court is satisfied that the applicant is entitled; … 18 Rule 5.22 provides that a party is in default in the following instances: A party is in default if the party fails to: (a) do an act required to be done, or to do an act in the time required, by these Rules; or (b) comply with an order of the Court; or (c) attend a hearing in the proceeding; or (d) prosecute or defend the proceeding with due diligence.

LEGAL PRINCIPLES 19 In Deputy Commissioner of Taxation v Sibai [2015] FCA 1465, Gleeson J stated the principles relevant to the discretion to enter default judgment as follows (at [7]-[8]): 7 In Speedo Holdings BV v Evans (No 2) [2011] FCA 1227, the Court outlined a number of principles relevant to the discretion to enter default judgment, including the following (at [20]-[25]): First, the power … remains discretionary. … Just as the discretion must be exercised [cautiously] where it is the applicant that is in default … the same caution must be exercised where it is the applicant who is seeking orders as against a defaulting respondent. Second, the discretionary power to enter a default judgment is enlivened when (as in the present case) an applicant applies to the Court for an order. Rule 5.23(2) provides that where a respondent is in default "an applicant may apply to the Court". … Third, there is a difference in the terms in which the ambit of the power conferred by the former r 3(2)(c) ("the relief… that the applicant appears entitled to on the statement of claim") and the wording of the current r 5.23(2)(c) ("the relief claimed in the statement of claim to which the Court is satisfied that the applicant is entitled"). Notwithstanding that difference in language, the requirement imposed is not that an applicant prove by way of evidence the claim sought to be advanced; the requirement is that the Court needs to be "satisfied" on the face of the statement of claim that the applicant is entitled to the "relief" claimed…. The facts as alleged in the statement of claim are deemed to have been admitted by a respondent: Australian Competition and Consumer Commission v Dataline.net.au Pty Ltd [2007] FCAFC 146 at [42], 161 FCR 513 at 523 per Moore, Dowsett and Greenwood JJ. … Fourth, to be satisfied that an applicant "is entitled" to the relief claimed in the statement of claim, the Court needs to be satisfied that "each element of the relevant civil wrong involved is properly and discretely pleaded in the statement of claim": Macquarie Bank Ltd v Seagle [2005] FCA 1239 at [24], 146 FCR 400 at 406 to 407 per Conti J …. Fifth, in addition to the facts alleged in a statement of claim, the Court may permit recourse to limited further evidence. But it may not admit evidence which would alter the case as pleaded. 8 The above approach was followed in Placitum Pty Ltd v Andreotta [2014] FCA 726 at [12] and Electrolux Home Products Pty Ltd v Delap Impex KFT [2015] FCA 62; (2015) 110 IPR 164 at [24]. 20 Pursuant to r 5.23(2)(c), the Court must be satisfied that the applicant is entitled to the relief claimed in the statement of claim. In this respect, I note the observations of Yates J in Chamberlain Group, Inc v Giant Alarm System Co, Ltd (No 2) [2019] FCA 1606 (at [13]-[14]): 13 The power to give judgment against a defaulting party is undoubtedly discretionary. The discretion must be exercised cautiously. Where the defaulting party is a respondent to a pleaded claim, the giving of judgment for final relief on the application will deliver complete success to the applicant without investigation of the merits of the pleaded claim: ACOHS Pty Ltd v Ucorp Pty Ltd [2009] FCA 577 at [27]. There is no requirement that the act or acts of default be intentional or amount to contumelious conduct. There is no requirement that the act or acts of default result in inordinate or inexcusable delay. That said, such features, if present, will be relevant to the exercise of the Court's discretion. So too will conduct that persuades the Court that the defaulting party is manifesting an inability or unwillingness to cooperate with the Court and the other party or parties to the proceeding. 14 Rule 5.23(2)(c) requires the Court to be satisfied that the applicant is entitled to the relief claimed in the statement of claim. This requirement has been interpreted as meaning that the Court must be satisfied that "on the face of the statement of claim" the applicant is entitled to the relief that is claimed. It is not a requirement that the applicant prove its claim by way of evidence. Put another way, the facts alleged in the statement of claim are taken to have been admitted: Australian Competition and Consumer Commission v Dataline.Net.Au Pty Ltd [2007] FCAFC 146; 161 FCR 513 at [42]. If, on inspection of the statement of claim, the Court is satisfied that the applicant would be entitled to the relief sought then this requirement of r 5.23(2)(c) will be met: CNIP Pty Ltd v Chan & Naylor Norwest Pty Ltd (No 2) [2011] FCA 1170 at [18] - [19]; Speedo Holdings B.V. v Evans (No 2) [2011] FCA 1227 at [23]. The Court may permit further evidence to be adduced, but not evidence that would alter the pleaded case: Australian Competition and Consumer Commission v Dataline.Net.Au Pty Ltd [2006] FCA 1427; 236 ALR 665 at [45], [48] - [50]; United Broadcasting International Pty Ltd v Turkplus Pty Ltd (No 2) [2010] FCA 1413 at [42] - [44]; Australian Competition and Consumer Commission v Yellow Page Marketing BV (No 2) [2011] FCA 352; 195 FCR 1 at [62] - [63]. 21 I adopt and apply those principles.

CONSIDERATION 22 I am satisfied that the respondents are in default of the order of the Court of 12 December 2022 which required the respondents to file their defence by 12 January 2023: r 5.22(b). In addition, the respondents are in default by reason of their failure to attend the hearing on 16 March 2023: r 5.22(c). GCTR having brought the present application, the discretion under r 5.23 is enlivened. 23 GCTR brings its claim on two alternative bases, relying first on r 5.23(2)(b), which applies in relation to a claim "for a debt or liquidated damages", and alternatively on r 5.23(c) which would otherwise apply to the proceeding, being a proceeding commenced by originating application and a statement of claim.

Application under r 5.23(2)(b) 24 The Rules do not define the phrase "for a debt or liquidated damages". The ordinary meaning of "liquidated damages" is a sum fixed by the parties to a contract as a genuine pre-estimate of damage in the event of breach, whether as a pre-determined lump sum, or by means of a specified calculation or scale of charges or other positive data: Environmental Systems Pty Ltd v Peerless Holdings Pty Ltd [2008] VSCA 26; 19 VR 358 at [79], per Nettle JA (with whom Ashley and Dodds-Streeton JJA agreed) citing Spain v Union Steamship Co of New Zealand Ltd [1923] HCA 21; 32 CLR 138, 142. 25 GCTR submitted that the claims against the respondents were for liquidated damages on the basis that they are "damages in a sum ascertainable from the Claim alone without requiring an assessment of damages". GCTR did not point to any authority in support of this submission. There is authority to the contrary. 26 In Arnold v Forsythe [2012] NSWCA 18, Sackville AJA observed that a claim is not necessarily one for a liquidated amount merely because it can be readily quantified (at [45], McColl and Young JJA agreeing at [1], [2]). His Honour continued: …In Alexander v Ajax Insurance Co Ltd [1956] VLR 436, Sholl J held that a claim under a house insurance policy for ₤1,000, the maximum amount payable under the policy for lost contents, was not a claim for a debt or liquidated demand. His Honour, after a detailed historical analysis of the authorities, held (at 445) that the expression "debt or liquidated demand" covered any claim: "(a) for which the action of debt would lie; (b) for which an indebitatus (or 'common') count would lie - including those cases formerly covered by the quantum meruit or quantum valebat counts, notwithstanding that the only agreement implied between the parties in such cases was for payment at a 'reasonable' rate; (c) for which covenant, or special assumpsit, would lie, provided that the claim was for a specific amount, not involving in the calculation thereof elements the selection whereof was dependent on the opinion of a jury." 27 In the present case, I am not satisfied that the claim is for liquidated damages. The statement of claim does not allege that the contract provides a genuine pre-estimate of damage in the event of breach by which DJD Family Holdings is bound, that would usually be understood as a liquidated damages clause. 28 The contractual claim against DJD Family Holdings is for damages for breach of contract. On the facts alleged in the statement of claim, it is a claim for a debt, in the sense that it is claim because of, or directed to, a debt. On the face of the statement of claim, it is a claim in respect of money paid, which is past due for repayment, and in respect of which demand has been made. I am satisfied that the claim against DJD Family Holdings is a claim for which an action in debt would lie, and that the claim is, for the purpose of r 5.23(2)(b), a claim for a debt. Accordingly, the application for default judgment against DJD Family Holdings in so far as it is predicated on the breach of contract claim, may be determined under r 5.23(2)(b)(i). The award of interest and costs, if appropriate, is determined under r 5.23(2)(b)(ii). It is appropriate that there be judgment in the sum of $333,671.23, which reflects the principal and interest at the rate agreed in the contract. 29 If I am wrong in the way in which I have approached r 5.23(2)(b)(i), then I would have made an order for default judgment on this part of the claim against DJD Family Holdings pursuant to r 5.23(2)(c), being satisfied as I am, that GCTR is entitled to the relief claimed in the statement of claim.

Application under r 5.23(2)(c) 30 The claims against DJD Family Holdings and Mr Dean for damages for contravention of s 18 of the Consumer Law arise from the making of various representations in connection with the contract. The fact that GCTR particularises its loss and damage as being co-extensive with the claim under the contract does not convert what is otherwise a claim for unliquidated damages into a liquidated claim: Environmental Systems at [78]-[81], per Nettle JA (with whom Ashley and Dodds-Streeton JJA agreed). The claim for damages based on a contravention of the Consumer Law is not a claim for or in respect of a debt. Accordingly, GCTR's claim for damages under the Consumer Law is not a claim for a debt or liquidated damages to which r 5.23(2)(b) applies and falls to be determined under r 5.23(2)(c). The Court has power to make an order giving judgment against the respondent for the relief claimed in the statement of claim to which the Court is satisfied that the applicant is entitled. 31 In accordance with the principles stated by Yates J in Chamberlain, I am satisfied on the face of the statement of claim that GCTR has pleaded the necessary elements to establish that DJD Family Holdings and Mr Dean have engaged in misleading or deceptive conduct pursuant to s 18 of the Consumer Law and as a consequence GCTR has suffered loss and damage. Further, that it is appropriate to enter default judgment for GCTR in an amount equivalent to the amount it contributed under the contract with interest on that sum calculated in accordance with the rate stipulated in the contract. I am satisfied that on the face of the statement of claim GCTR is entitled to this relief.

Discretion exercised in favour of GCTR 32 Counsel for GCTR made some submissions concerning the principle that the discretion is one which must be exercised with caution. Counsel sought to emphasise that this principle had its origin in Native Title cases which arose in a different statutory context. It is not necessary for me to address these submissions because GCTR ultimately accepted, correctly, that the discretion was indeed to be exercised with caution for the reason that the consequence of exercising the discretion in favour of the applicant is that the respondent is shut out of defending the claim on the merits and, accordingly, caution is warranted. That principle has been repeatedly recognised in this Court. 33 I am satisfied on the evidence that there should be judgment in favour of GCTR against the respondents in the sum of $333,671.23. 34 The respondents' non-compliance with the Court's orders is clear. The respondents have not sought to apply to vary the timetable. They have not offered any evidence as to circumstances that objectively might justify default. Mr Dean said when he appeared on 9 March 2023 that he was then speaking to a lawyer. He offered no explanation for the default, which occurred at a time when he and his company were represented. The respondents, being on notice that the application would be determined on 16 March 2023, took no steps to remedy their default. Appearances were not filed. Mr Dean did not attend the hearing on 16 March 2023, which he was on notice would be in person. Very shortly before the hearing, by email to the Registry, he requested dial in details for the hearing. In that email, Mr Dean provided a mobile number under his sign-off. He did not answer that mobile when it was called in an attempt to dial him into the hearing, notwithstanding it was dialled repeatedly. 35 Taken in conjunction with the history recounted in the genuine steps statement filed and served by GCTR, which the respondents have not sought to rebut, I am satisfied that the respondents' default and failure to engage with the progress of the proceeding warrants the Court exercising the discretion to enter default judgement. GCTR has acted reasonably in its conduct of the proceeding. The respondents have had a reasonable opportunity to defend the proceeding, including for a period when they had the benefit of legal representation. GCTR is entitled to have the proceeding determined quickly, inexpensively and efficiently. To enter default judgment is consistent with the interests of justice and with s 37M of the Federal Court of Australia Act 1976 (Cth).

Costs 36 GCTR also seeks a lump sum costs order under r 5.23(2)(b)(ii) and/or r 40.02(b). In LFDB v MS S M (No 2) [2018] FCA 2062, Markovic J summarised the principles in respect of the Court's power to make an order that costs be awarded in a lump sum and their quantification (at [6]-[8]): 6 The Court's power to order lump sum costs is discretionary and may be exercised whenever the circumstances warrant it: Su v Australian Fisheries Management Authority (No 3) [2008] FCA 2018 at [1] (Reeves J). 7 A Full Court of this Court (Allsop CJ, Besanko and Middleton JJ) in Paciocco v ANZ (No 2) (2017) 253 FCR 403 at [16]-[17] explained the following in relation to the Court making orders for lump sum costs: 16 On 25 October 2016 the Chief Justice issued the Central Practice Note: National Court Framework and Case Management (CPN-1) ('Central Practice Note') and the Costs Practice Note (GPN COSTS) ('Costs Practice Note'). The Central Practice Note states that the determination of the quantum of costs of a successful party (in a proceeding) should not be delayed and, to this end, the Court will, where appropriate, facilitate the making of lump sum costs orders. The Costs Practice Note provides that the Court's preference, wherever it is practicable and appropriate to do so, is to make a lump sum costs order so as to finalise costs and avoid potentially expensive and lengthy taxation hearings. It makes clear that the Court should now proceed on the basis that taxation "should be the exception" and confined to matters which are unable to be determined otherwise: Costs Practice Note at [3.3]. The guiding principles are to reduce delay and cost when quantifying costs: Costs Practice Note at [3.1]. 17 The Costs Practice Note provides for the Court to make use of sophisticated costs orders and procedures, and to take such steps as it considers necessary to ensure that it has the requisite level of detail to make a costs determination that is fair, logical and reasonable and to avoid orders that lead to potentially expensive and lengthy taxation hearings: Costs Practice Note at [3.3]. 8 In Bitek Pty Ltd v IConnect Pty Ltd (2012) 290 ALR 288; [2012] FCA 506 at [18] Kenny J said the following in relation to the determination of the appropriate quantum of a lump sum costs order: 18 The starting point for the fixing of costs is the charges rendered by the applicants' solicitors: Beach Petroleum at FCR 124; ALR 165 and Hamod v New South Wales [2011] NSWCA 375 at [820] per Beazley JA (with whom Giles and Whealy JJA agreed). The sum of costs fixed should also be proportionate to the nature, including the complexity, of the case: see Canvas Graphics Pty Ltd v Kodak (A'asia) Ptd Ltd [1998] FCA 23. As Beazley JA said in Hamod, at [820], citing, among others, Beach Petroleum at FCR 123; ALR 164: [820] The approach taken to estimate the costs to be ordered must be logical, fair and reasonable … This may involve an impressionistic discount of the costs actually incurred or estimated, in order to take into account the contingencies that would be relevant in any formal costs assessment … [Citations omitted.] 37 GCTR relies on an affidavit of its solicitor in respect of the costs incurred to 27 February 2023, and further work in connection with the case management hearing of 9 March 2023, being in the sum of $19,489.08 and the basis upon which costs have been charged. Since that date, additional costs have been incurred in relation to, inter alia, a further appearance by counsel, the filing of the interlocutory application and the preparation of brief written submissions. In the ordinary circumstances, it would be appropriate to reduce the amount claimed to reflect party/party costs. In this instance, because the amount claimed does not include the whole of the work done to the date of judgment, I am satisfied that it is appropriate to award costs in the lump sum claimed.

CONCLUSION 38 For these reasons, I made orders granting the relief sought by GCTR. I certify that the preceding thirty-eight (38) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Justice Cheeseman.