Consideration
22 In the course of argument it was accepted by the defendant that the purchase price, which had been negotiated for the sale of the property, was a good one and she withdrew her application to injunct the sale. It was agreed between the parties in general terms that the sale price was to be placed into an interest bearing deposit pending the outcome of the substantive proceedings.
23 Accordingly, the only matter to be decided was the defendant's application to set aside the default judgment. In that regard I should note that an open offer was made in Court by the plaintiff that it would accept the proceeds of the sale of the property in full settlement of all of its claims against the defendant under the mortgage. That offer was refused by the defendant.
24 The relevant rule is UCPR 36.16(2)(a) of the Uniform Civil Procedure Rules 2005 (UCPR). This provides that a court may set aside or vary a judgment or order after judgment is entered if the order or judgment is a default judgment. The principles applicable for setting aside a default judgment were recently stated by Hislop J in Hamafam Pty Limited & Ors v Saadullah & Anor [2007] NSWSC 818 at [7] as follows:
"(a) Whether the defendant has shown a satisfactory explanation for the delay in filing a defence or moving to set aside the judgment.
(b) Whether the default judgment was obtained without notice to the defendant.
(c) Whether the proposed defence is asserted bona fide.
(d) Whether, if the judgment were set aside, prejudice would be occasioned to the plaintiffs.
(e) Whether the proposed defence presents an arguable or triable issue.
(f) Whether it would be futile to set aside the judgment."
25 I am satisfied that the defendant has provided a satisfactory explanation for the delay in filing the defence, or moving to set aside the judgment. I appreciate that there is a lack of specific explanation for the delay between the beginning of November and the first consultation with the Legal Aid solicitor on 10 December 2009. I believe this is explained by the obvious lack of knowledge on the part of the defendant of legal affairs. I found her to be a somewhat naïve person who has little understanding of legal or business affairs. Once she consulted the Legal Aid solicitor, the delay has been adequately explained by the failure on the part of the solicitor to provide advice to her concerning the filing of a defence.
26 There was, as I have indicated, no issue that the statement of claim was served and that the defendant was aware of that fact. As also indicated, I do not believe that the defendant had any real understanding of the effect of the service of the statement of claim.
27 The question of the existence of a bona fide defence and a triable issue should be considered together. The evidence on this issue is obviously incomplete and will need to be significantly amplified when the matter comes on for hearing. It is not possible on the present state of the evidence for there to be any concluded view reached as to the prospects of success of the defence which has been raised.
28 Nevertheless, there is sufficient material available to satisfy me that there is a genuine issue to be litigated under the Contracts Review Act 1980 and/or the Fair Trading Act 1987. There is also the application of the equitable doctrine of unconscionable conduct to be considered. The matters I have particularly had regard to in reaching that conclusion are the patently excessive interest rate, the difference in bargaining positions between the plaintiff and the defendant, the difference in commercial acuity between the plaintiff and the defendant, the defendant's patent inability to meet the repayment obligations under the mortgage and the indicia that this was in reality an asset lending exercise.
29 The benefits flowing to the defendant from this transaction were largely illusory and although the defendant did receive legal advice, the precise nature and terms of that legal advice will in due course need to be explored. I have already indicated my preliminary finding that the plaintiff was well aware of the defendant's impecuniosity and inability to service the loan. I am also satisfied that it was not reasonably practicable for the defendant to negotiate for the alteration of any of the provisions of the loan or mortgage. In particular, there was no evidence that any of the provisions of the loan or mortgage were the subject of negotiations at the time they were entered into.
30 The question of prejudice, if the judgment is set aside, is fairly evenly balanced. Much of the force of that consideration has been removed by the agreement between the parties for the property to be sold and for the proceeds of the sale to be held in an appropriate account. From the plaintiff's point of view there is the delay in obtaining access to the principal sum and interest, although its prospects of recovering anything more than the principal sum from the defendant in any event seems remote. From the defendant's point of view, if the judgment is allowed to stand she has lost any chance of retaining any moneys from the sale of the property. Given the defendant's parlous financial state, any financial benefit she receives from the sale of the property will be of considerable benefit to her. I am of the opinion that when considering prejudice, that likely to be incurred by the defendant outweighs that of the plaintiff.
31 The final consideration is perhaps the most difficult and that is whether it would be futile to set aside the judgment. The resolution of this question depends upon what benefit the defendant received from the mortgage and loan transaction. Clearly she received a benefit in having the debt owed to the Northern Inland Credit Union discharged. The moneys which were taken by the plaintiff for an establishment fee and service fees, were clearly of no benefit to her. The real question is whether a court would ultimately decide that the moneys which were paid to Vision Bloodstock Pty Limited should be considered to have been for the plaintiff's benefit in the relevant sense. There is insufficient evidence available to me to decide that question, even on a preliminary basis. It is sufficient to say that if the defendant were successful on that issue and successful under the Contracts Review Act the amount of the principal debt which she will be required to repay would be significantly reduced, as would her interest payments. She would in a real sense obtain a substantial financial benefit from the sale of the property.
32 Taking into account all of those matters, it seems to me that the setting aside of the default judgment is not a futile exercise and that subject to ultimate fact finding by the court which determines the matter, there could be a real financial benefit for the defendant.
33 Most of the matters relevant to setting aside a default judgment favour the defendant and I propose to make orders setting aside the default judgment.
34 That leaves outstanding the question of the costs of the hearing before me. As counsel for the plaintiff correctly pointed out, the usual order for costs in a matter such as this is that the defendant should pay the plaintiff's costs of the application, even where the defendant has been successful. This is because the defendant is seeking an indulgence from the Court, usually for the consequences of his or her own inaction.
35 In this case there is no real explanation for the lack of activity on the part of the defendant between the beginning of November and 9 December when she first consulted Legal Aid. I suspect that the defendant in reality tried to put the matter out of her mind in the hope that it would go away. The cases relied upon by the plaintiff, in particular Permanent Custodians Limited v El Ali (No 2) [2008] NSWSC 1391, a decision of Rothman J, in very similar circumstances, set out the principles. An application of those principles, subject to one matter which I will come to, favours a costs order being made in favour of the plaintiff.
36 The matter to which I have referred is the highhanded extra curial conduct on the part of the plaintiff in entering the defendant's property without permission on 4 November 2009 and removing her property. That conduct appears to have been further exacerbated by a complete absence of any warning to the defendant that this assault upon her rights was going to occur and without any concern to place in storage, or otherwise preserve, the defendant's property. Such conduct is to be deplored and should not in any fashion be rewarded.
37 My firm inclination in this matter is to award costs against the plaintiff because of this conduct. I am mindful, however, that the application before the Court was an interlocutory one and that there may be some explanation for the plaintiff's conduct, other than that set out in Mr Hall's affidavit or in his evidence. In those circumstances, it would be unfair for me to make findings in this application when full evidence on the issue will undoubtedly be adduced when the defendant's cross-claim against the plaintiff is heard.
38 In those circumstances, the most appropriate costs order is that the plaintiff's costs of entering default judgment in January 2010 and the costs of the defendant's motion filed 22 March 2010 should be reserved, for decision by the Judge who ultimately hears the matter.