Melbourne Used Vehicles Pty Ltd v Cars & Co Pty Ltd

District Court of NSW|2019-11-15

Introduction

By Notice of Motion filed 30 October 2019, the second and third defendants seek an order setting aside default judgment entered against them on 24 June 2019.
The first and fourth defendants seek an order that the judgment entered be varied in relation to the amount of legal costs awarded in it and that the judgment be stayed on condition that it is paid by instalments in the sum of $10,000 per month.
I have referred to the relevant individuals in the proceedings by their first names because the familial relationships involved in the case may lead to confusion. I intend no disrespect by doing so.

Evidence on the Notice of Motion

The defendants read the following affidavits: 1. Mahan Kalimi Chadorchi affirmed 29 October 2019. 2. Natasha Finlay affirmed 29 October 2019. 3. Shervin Kalimi Chadorchi affirmed 29 October 2019.
The plaintiff read the following affidavits: 1. Christian de Palma sworn 14 November 2019. 2. Stefan de Palma sworn 14 November 2019.

Relevant Law

In Dunwoodie v Teachers Mutual Bank Ltd [2014] NSWCA 24, McColl JA at [44] summarised the principles as follows: The court's jurisdiction to set aside the default judgment is found in the bald terms of Uniform Civil Procedure Rules 2005 (NSW) ("UCPR") 36.16(2)(a), providing the "court may set aside or vary a judgment or order after it has been entered if … (a) it is a default judgment) other than a default judgment given in open court)". The fundamental (but not the only) principles guiding a court asked to exercise the unfettered discretion UCPR 36.16(2)(a) confers, are whether the applicant has a bona fide ground of defence, an adequate explanation for the failure to defend and the length of any delay: Adams v Kennick Trading (Int) Ltd (1986) 4 NSWLR 503 (at 506) per Hope JA (Glass JA agreeing). In the final analysis, it is necessary to consider whether it is in the interests of justice to allow the party seeking to set aside a default judgment to be permitted to defend the proceedings on the merits: Reinehr Industrial Lease & Finance Pty Ltd v Jordan (New South Wales Court of Appeal, 4 June 1974 unreported) cited with approval by Sackville AJA (Barrett and Leeming JJA agreeing) in Dai v Zhu [2013] NSWCA 412 (at [83]).
The Second and Third defendants each need to establish that they have a bona fide defence, there is an adequate explanation for failing to file a Defence on time and the length of delay in bringing the application to set aside the default judgment.
The Court must be satisfied that the defence is "fairly arguable in law or fact" and that the applicant is bona fide in seeking to rely upon that defence": Dunwoodie (at [45]), citing Reinehr Industrial Lease & Finance Pty Ltd v Jordan per Street ACJ.
In Dai v Zhu [2013] NSWCA 412, Sackville AJA at [89] stated: The second observation is that the authorities consistently state that, as a general rule, a defendant who seeks to set aside a judgment by default regularly obtained must show that he or she has a bona fide defence. This ordinarily requires the defendant to file an affidavit demonstrating a prima facie defence on the merits. The rationale for this requirement is that in the exercise of its "unfettered, though judicial, discretion" the Court will consider: (a) whether any useful purpose would be served by setting aside the judgment, and (b) how it came about that the applicant found himself bound by a judgment regularly obtained. Vacuum Oil Co Pty Ltd v Stockdale (1942) 42 SR (NSW) 239, at 243, per Jordan CJ (with whom Davidson and Roper JJ concurred), citing Evans v Bartlam [1937] AC 473, at 482, per Lord Russell; Magnate Projects Pty Ltd v Youma Constructions (No 2) Pty Ltd [2005] NSWCA 331, at [48]-[51], per Hodgson JA (with whom MW Campbell AJA agreed) (holding that the principles stated in Vacuum Oil have not materially been affected by the reasoning of the High Court in Taylor v Taylor [1979] HCA 38; 143 CLR 1, and Allesch v Maunz [2000] HCA 40; 203 CLR 172).

Variation of the Default Judgment

There is no evidence in the vast amount of material relied on by the plaintiff to justify the sum of $12,750 in legal costs included in the Statement of Claim. That part of the default judgment should be set aside pending the demonstration by the plaintiff of its entitlement to that sum.
The first and fourth defendants seek that the default judgment be varied by reducing it by the sum of $12,750 together with any interest claimed. That is an appropriate order in the circumstances.
I direct that the parties bring in Short Minutes of Order within seven days identifying the correct sum to which the default judgment should be varied.

Application to Set Aside the Judgment by the Second and Third Defendants

I am satisfied on the evidence that both the second and third defendants have a fairly arguable defence in law or fact and that they are both bona fide in seeking to rely on that defence.
The circumstances in which the Deed was executed give rise to a number of factual and legal questions as to its validity and enforceability against the second and third defendants. The evidence is capable of supporting an inference that both the second and third defendants objected to signing the document and incurring the personal liability contained in it for debts that had been incurred by C&C. No opportunity was given to the second and third defendants to negotiate the terms of the Deed or to get independent legal advice on it.
I am satisfied that the second and third defendants have an arguable defence based on unconscionable conduct, misrepresentation, undue influence and/or the provisions of the Contracts Review Act 1980.
I am not satisfied that the course of events after the execution of the Deed was sufficient to demonstrate that either the second and/or third defendant should be deprived of the arguable defences available to them.
I place very little weight on the evidence of Stefan because of his involvement in the negotiations as an interested party to them.
Overall, I do not think that the delay in bringing the application to set aside the default judgment was significant. In Mahan's case she had the care of her mother and sister during the relevant period, which occupied much of her time. The evidence in general does not indicate that she had a significant involvement in the operation of C&C.
In Natasha's case the evidence explaining the delay is not as convincing. She appears to have taken an interest in trying to organise payment of the debt, during the period after the proceedings were commenced. That explains part of the delay. Further, the enforcement action taken by the plaintiff seems to have been concentrated on Mahan through the bankruptcy proceedings rather than on Natasha. This also goes to provide some reason as to why she may not have acted as promptly as she could have. However, in normal circumstances, the factual and legal issues raised by the circumstances under which the Deed was signed are such that I am comfortably satisfied that default judgment against Natasha should be set aside.

Application to Pay by Instalments

The first and fourth defendants have made an application to pay the judgment sum by instalments in the sum of $10,000 per month. The first and fourth defendants seek an order that enforcement of the judgment sum be stayed whilst the instalment order is in place.
The evidence demonstrates a number of attempts to pay the debt owed by C&C throughout the course of 2019. It is fair to say that those promises have not come to fruition.
I am not satisfied on the evidence that C&C and/or Shervin have demonstrated a capacity to meet the instalment order for which they contend. The proposed order intended the first payment to be made on or before 30 November 2019.
I am not satisfied that it is appropriate to make the instalment order and accordingly, enforcement of the judgment against C&C and Shervin should not be stayed.

Costs

I am satisfied on the evidence that the plaintiff's position on the setting aside of the default judgment against the second and third defendants and the amount of the default judgment was not a reasonable one to take, resulting in the need for the hearing on the basis of a relatively large volume of material which was for the most part irrelevant to the matters to be decided. The usual costs orders on setting aside a default judgment are not appropriate in this case.

Orders

The orders I make are as follows: 1. The default judgment entered against the first and fourth defendants is varied. 2. I direct that the parties bring in Short Minutes of Order within seven days setting out the correct amount of the default judgment to be entered against the first and fourth defendants. 3. The default judgment against the second and third defendants is set aside. 4. I direct that the second and third defendants file a Defence to the Statement of Claim within 14 days. 5. I order that the plaintiff pay the second and third defendants' costs of the motion relating to the setting aside of the default judgment. 6. I order that the plaintiff and the first and fourth defendants pay their own costs of the remainder of the Notice of Motion.

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: 25 November 2019

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