Gunns Finance Pty Ltd (R & M Appntd) (In Liq) v Storey & Anor [2014] VSC 260

2 The claims made in the Writ are extensively pleaded in the Statement of Claim and relate to an investment made by Mr Storey in June 2009 in 87 Walnut lots in a registered managed investment scheme called the Gunns Plantations Limited Walnut Project No.3 ARSN 136 845 022 (the Walnut Project). The plaintiff and Mr Storey entered into a Loan Agreement under which the plaintiff agreed to advance the sum of $561,273.55 (which included a loan establishment fee) to Mr Storey in order to fund his investment in the Walnut Project (Loan Agreement).

3 It was part of the terms of the Loan Agreement that Mr Storey agreed, and authorised, the plaintiff to apply the loan funds to part payment of his investment by paying those funds to Gunns Plantations Ltd. This, the plaintiff alleges in the Statement of Claim, it did. The terms of the Loan Agreement were in the usual form, requiring monthly re-payments during the term, and the payment of interest. There are acceleration provisions making the whole sum repayable on certain defaults.

4 Not long after the entering into of the Loan Agreement, the plaintiff and Mr Storey entered into a Fee Facility Deed for the purpose of funding the annual 'Ongoing Fees' payable under the Management Agreement, under which the Walnut Lots were managed for Mr Storey by Gunns Plantations Ltd. Each year the Ongoing Fees were drawn down under the Fee Facility.

5 The plaintiff alleges default in the repayment of the loans under the Loan Agreement and the Fee Facility Deed. There is no indication by Mr Storey that he disputes the alleged defaults. He questions, however, the payment by the plaintiff of the 'Ongoing Fees' because there was a claim by the plaintiff in 2012 that it had paid these fees and drawn down that payment under the Fee Facility which turned out not to have occurred.

6 Where judgment in default of appearance is regularly obtained, the circumstances relevant to the exercise of the discretion of the Court to set aside the judgment (under r 21.07 of the Supreme Court (General Civil Procedure) Rules 2005 include:[2]

(a) Whether the defendant has a defence on the merits;

(b) The reason for the default of the defendant in consequence of which the judgment was obtained;

(c) Whether the application to set aside the judgment was made promptly after the judgment came to the notice of the defendant; and

(d) Whether, if the judgment is set aside, the plaintiff would be prejudiced in a way which could not be adequately compensated by an award of costs or the giving of security.

7 Ordinarily speaking, the Court will not set aside a default judgment which has been entered regularly if the defendant has no possible defence, for that would serve no useful purpose.[3] The primary consideration is, therefore, whether the defendant has merits to which the Court should pay heed. If there are merits the Court will not usually let a judgment pass on which there has been no proper adjudication.[4]

8 Accordingly, a defendant will ordinarily be required to file an affidavit which discloses a defence. It is not sufficient that a defendant swears as to his or her belief in the existence of a defence.[5] The affidavit must set out all the defences sought to be relied upon and the facts by which a defendant seeks to establish them. The Court should not have to search for a defence by sifting through exhibits or other material.[6]

9 A defendant is not however, required to show that the defence is bound to succeed.[7] A prima facie defence is sufficient, that is to say one which is arguable and carries some degree of conviction.[8]

10 Mr Storey supports his application by an affidavit sworn 12 May 2014. That affidavit discloses evidence of his attempts to file a notice of appearance within the period after service of the Writ upon him (being 21 days from 16 January 2014, the date of service, because Mr Storey was served in New South Wales). He had considerable difficulty in achieving his aim of filing the notice of appearance, but none of the difficulties are attributable to the plaintiff. Nevertheless, he has adequately explained the reason for his failure to file the notice of appearance within time.

11 The application to set aside the judgment was not made until 16 May 2014, some three months after entry of judgment and a little less than that after Mr Storey became aware of the judgment. Although this is not a 'prompt application', having regard to the fact that Mr Storey lives in Sydney, is self-represented and is dependent on advice given gratis by a solicitor in Sydney, in my view this is not outside the reasonable bounds of a prompt application.

12 Mr Storey makes two points in support of his application to set aside the judgment.

13 The first is that, in the circumstances, the plaintiff entered default judgment knowing that Mr Storey desired to defend the proceeding and did so hastily. In this regard he relies upon the observations of Kearney J in Hogg v J Isherwood-Hicks where it was said:[9]

I should add that I consider that where, as here, a solicitor has entered an appearance, the practice of "snapping-on" a default judgment, without notice, immediately upon the expiration of a period prescribed by the rules, should be strongly deprecated. It serves no useful purpose. It increases the costs of litigation unnecessarily.

14 This decision was followed by Beach J in the case of Total Peripherals Pty Ltd v Kaplan.[10] However the circumstances in those cases were entirely different to the circumstances in this case. I will not stay to give an account of those circumstances.

15 Here the plaintiff had received from Mr Storey only requests for information as to the payment by the plaintiff to the responsible entity of facility fees payable pursuant to the Fee Facility Deed identified in paragraph 5 of the Statement of Claim. These requests for information as to payment of the Ongoing Fees under the Fee Facility Deed were a product of the fact that shortly prior to the appointment of Receivers and Managers to the plaintiff, and other companies within the Gunns Group, the plaintiff had advised growers in the position of Mr Storey that the Ongoing Fee (otherwise known as the Operating and Orchard Rights Fee) had been paid by the plaintiff to the Responsible Entity. It turned out that it had not been paid and, after the Receivers and Managers were appointed, the drawdown against the Fee Facility Deed by Gunns Finance to meet this payment was reversed.

16 The enquiry made by Mr Storey, which before the entry of judgment was (according to the evidence) limited to an enquiry made by email to the plaintiff's solicitors on 20 June 2013 (and earlier requests by telephone directly to the plaintiff), was for proof that the plaintiff had paid the responsible entity the principal of his loans. This is not a basis for saying that the plaintiff should have been aware that he desired to appear and defend the claims against him. This is particularly so where before the entry of the judgment the only enquiry was over 6 months old.

17 In the circumstances of this case, it seems to me that the solicitor for the plaintiff was under no obligation to warn Mr Storey of its intention to enter judgment in default of appearance.[11] This was not a case where Mr Storey was represented by solicitors who had been in correspondence with the plaintiff regarding the claim. The correspondence that had been entered into by Mr Storey with the plaintiff's solicitors prior to the entry of the default judgment was limited to email correspondence[12] in 2013. All the other correspondence to which Mr Storey referred post-dated the entry of the judgment.

18 The defence on the merits that was sought to be raised by Mr Storey was dependent upon the same matter of enquiry that he said justified the conclusion that the plaintiff knew he intended to defend the proceeding. That is, the fact that Gunns Finance had alleged it had paid the responsible entity the Ongoing Fees under the Fee Facility Deed when it had not. This, Mr Storey asserted, was a basis for contending that there was a question about whether the plaintiff had advanced any of the monies it had lent him to participate in the Walnut Project.

19 It seems to me that it is a very long bow indeed for Mr Storey to contend that one failed payment by the plaintiff giving rise to a draw down under the Fee Facility Deed entered into by Mr Storey, a payment which was reversed and corrected, is a basis for saying that other payments required to be made on behalf of the plaintiff were not made. This does not lead me to think that there is a question to be investigated. More evidence of such conduct is required.

20 For these reasons I refuse the application to set aside the judgment entered in default of appearance, and will dismiss Mr Storey's summons filed 16 May 2014.

21 The plaintiff claims costs on an indemnity basis. Under the Loan Agreement and Fee Facility Deed the plaintiff is entitled to the costs of enforcement on a full indemnity basis. In the circumstances, the provisions providing for that entitlement justify an award of costs on an indemnity basis.

[2] See Evans v Bartlam [1937] AC 473; Grimshaw v Dunbar [1953] 1 QB 408; Kostokanellis v Allen [1974] VicRp 71; [1974] VR 596.

[3] Evans v Bartlam [1937] AC 473 at 481-2; Collins Book Depot Pty Ltd v Bretherton [1938]VLR 40; Bayview Quarries Pty Ltd v Castley Development Pty Ltd [1963] VicRp 64; [1963] VR 445 at 446; Gamble v Killingsworth & McLean Publishing Co Pty Ltd [1970] VicRp 22; [1970] VR 161 at 170; op. cit. Williams, Civil Procedure Victoria, online ed. Paragraph 21.07.20.

[4] Kostokanellis v Allen at 603; op. cit. Williams, Civil Procedure Victoria, online ed. Paragraph 21.07.20.

[5] Williams, Civil Procedure Victoria, online ed. Paragraph 21.07.20.

[6] Lubura v Nezirevic [2013] VSCA 215, at [6]; Op Cit Williams, Civil Procedure Victoria, online ed. Paragraph 21.07.20.

[7] Evans v Bartlam [1937] AC 473; Rosing v Ben Shemesh, [1960] VicRp 28; [1960] VR 173.

[8] Day v RAC Motoring Services Ltd [1999] 1 All ER 1007; op. cit. Williams, Civil Procedure Victoria, online ed. Paragraph 21.07.20.

[9] [1992] NTSC 41; (1992) 108 FLR 262, 264; quoted in Total Peripherals Pty Ltd v Kaplan [1998] VSC 49.

[10] [1998] VSC 49.

[11] See Sargent v Veneris (VSC, Beach J, No 1303/95, 20 December 1995, unreported, BC9507179; op. cit. Williams, Civil Procedure Victoria, online ed. Paragraph 21.01.45.

[12] Exhibit AW-18 to the affidavit of Anne Morgan sworn 3 June 2014.