By notice of motion dated 27 February 2019 the Defendant, Asset HQ Australia Pty Ltd ('Asset HQ'), [1] seeks to set aside a default judgment entered on 03 October 2019 against it. The claim was brought by the Defendant's former solicitors, Mills Oakley, for fees owing which together with interest and costs totalled $180,395.25.
The application was expressed to be pursuant to UCPR 36.15 and 36.16. These rules relevantly provide:
36.15 General power to set aside judgment or order
(1) A judgment or order of the court in any proceedings may, on sufficient cause being shown, be set aside by order of the court if the judgment was given or entered, or the order was made, irregularly, illegally or against good faith.
(2) A judgment or order of the court in any proceedings may be set aside by order of the court if the parties to the proceedings consent.
36.16 Further power to set aside or vary judgment or order
(1) …
(2) 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), or
(b) it has been given or made in the absence of a party, whether or not the absent party had notice of the relevant hearing or of the application for the judgment or order, or
(c) …...
(3) - (3B)……
Mr G. McDonald appeared on behalf of Asset HQ and Mr M. Lapirow appeared for Mills Oakley.
In support of its motion Asset HQ relied on affidavits from Daniel Rappoport, solicitor for Asset HQ, dated 27 February 2019 and 29 March 2019, and the affidavit of Craig Adams, general manager of Asset HQ, dated 29 March 2019.
Mills Oakley relied on the affidavit of its solicitor, Coleman Moloney, dated 08 March 2019.
The background to this matter is as follows.
On 19 July 2018 Mills Oakley commenced proceedings against Asset HQ asserting that between December 2014 and January 2017 there was an agreement for Mills Oakley to provide legal services to Asset HQ in relation to property development. Mills Oakley assert that they rendered invoices addressed to Asset HQ bearing the reference number 3112522 "LRPS Development at Castle Hill".
Five sets of costs were listed between 22 February 2014 and 31 January 2017, totalling $174,758.84. The statement of claim asserts that the set sum remains unpaid and Asset HQ has refused to pay. The claim was added for pre-judgment interest pursuant to section 195(2) of the Legal Profession Uniform Law Application Act 2014 (NSW), 30 days after the amount was said to be payable to the date of the statement of claim.
Mr Moloney appends to his affidavit an affidavit from Trish North from his office dated 24 July 2017. Ms Worth swears that on 20 July 2017 she served the statement of claim by placing it in an envelope addressed to DBW (NSW) Pty Ltd, [2] Level 6, 1 Pacific Highway, North Sydney, and by posting it by ordinary pre-paid post. It was not in issue that that was the Defendant's registered office at the time. [3]
On 12 September 2017 the Mills Oakley's solicitors sent correspondence to the registered office of Asset HQ asserting that judgment had been entered in the proceedings demanding payment of $180.395.71. [4] That letter went on to advise Asset HQ that instructions had been received to commence winding up proceedings unless payment was received by 18 September 2017. Mr Adams stated that he thereafter instructed Clinch Long Woodbridge Lawyers ('CLW'). [5] On 19 September 2017, CLW asked DWB to forward any other court or legal documents received for Asset HQ in the past few months. That was responded to on 21 September 2017. According to Mr Adams, what was forwarded was a vast array of documents primarily related to Greenviews Castle Hill Pty Ltd and Bargo Developments Pty Ltd, being other companies in which he was involved. Mr Adams acknowledged that one attachment included a letter dated 20 July 2017 from the Plaintiff's solicitors enclosing the statement of claim.
Notwithstanding this correspondence, on 29 September 2017, CLW wrote to the Plaintiff's solicitors stating:
Our client's accountant, DBW (NSW) Pty Ltd, has provided our office with a copy of your letter dated 12 September 2017 which was received by their office in regular post on 18 September 2017.
Your letter suggests that the District Court of New South Wales has recently made an order against our client company.
Neither our client nor our client's accountant has any records or recollection of any originating proceedings, demands or correspondence in relation to this matter from your office.
We are instructed to request that you forward to our office:
1. Copies of all documents in relation to the above matter, including seals originating proceedings;
2. Advise us how any of the above documents were served on our client;
3. A copy of the court orders referred to in your letter.
The matters raised in the letter are quite serious, and our client does not take these lightly and will be seeking our firm's advice as soon as the above documents are received.
In the circumstances we assume that your client would take no further action against our client until our firm has had the opportunity to receive and review the documents referred to above. Please correct us if we are wrong in this assumption.
We look forward to your reply.
It is not apparent why CLW asserted that neither it, Asset HQ nor DBW had any records or recollection of the originating proceedings. Mr Adams in his affidavit admits that they were forwarded by DBW to CLW on 21 September 2017. Furthermore, the attachment included the accompanying service of 20 July 2017, including the statement of claim.
Despite having earlier represented to Asset HQ's solicitors that judgment had been entered, as at the date of their correspondence of 12 September 2017 this was plainly incorrect. What had transpired was that an application had been made on 07 September 2017 for judgment, which was entered on 03 October 2017. A copy of the default judgment was received by DBW in or around the same date by post and was emailed to asset HQ on 10 October 2017. So much was made clear from the response from Coleman Maloney dated 12 October 2017 to the CLW's letter of 29 September 2017. Enclosed with that correspondence was said to be the following documents:
1. Statement of claim filed 19 September 2017;
2. Affidavit of service sworn by Trish North on 24 July 2017;
3. Notice of motion - default judgment for liquidated claim filed on 07 September 2017; and
4. Notice of Order made 03 October 2017. [6]
On or about 22 October 2017, Mr Adams sent an email to DBW seeking the actual dates the documents were received. Although the response is not in evidence, Mr Adams states that he was informed on 23 October 2017 to the effect that the statement of claim was received by it on 27 July 2017 and that it was forwarded along with the cover letter dated 20 July 2017 to Mr Adams by way of email on 27 July 2017. [7]
According to Mr Adams it was around this time that he was attempting to formulate instructions to CLW regarding a defence to the statement of claim (as part of an application to set aside the default judgment). He stated that he gave instructions as best he could concerning a potential negligence claim against the Plaintiff by Greenviews Pty Ltd due to a failure to advise as to the application of a GST clause in the sale of a land contract that it had entered into. [8]
On 16 November 2017 Mr Maloney on behalf of Mills Oakley issued a creditor statutory demand under paragraph 459 E (2) (e) of the Corporations Act 2001 (Cth) to Asset HQ This he says, was served by Trish North by prepaid post the same day. An affidavit of service by Ms North was sworn on 19 December 2017, together with a creditor statutory demand. [9] Notwithstanding this, Mr Adams says that he did not have a record of receiving the statutory demand from the registered office at the relevant time. [10]
According to Mr Moloney, the Defendant did not make an application to set aside the statutory demand dated 16 November 2017, nor pay the sum demanded or compromised the debt to the satisfaction of the Plaintiff.
Mr Adams asserts that in or around 13 December 2017, CLW advised that they were too busy to act on its behalf. On 21 December 2017 an originating process to wind up Asset HQ on ground of insolvency under s 459 of the Corporations Act 2001 (Cth) was issued in the Supreme Court of Victoria, That originating process was returnable on 07 February 2018.
Mr Adams asserts that the originating process was emailed to him on 04 January 2018. [11] He further states that in around January of 2018 he caused the Defendant to instruct Mercantile Legal, who on 31 January 2018 contacted the Plaintiff's solicitors to commence without prejudice communications.
On 07 December 2018 the Plaintiff's application before the Supreme Court of Victoria was adjourned to 07 February 2018.
Over objection, I allowed the Defendant to rely on evidence of correspondence relating to the settlement discussion as the correspondence fell within the relevant exception in section 131(c) of the Evidence Act 1995 (NSW).
Mr Moloney in his affidavit asserts that on 16 February 2018, his office received an email from Mercantile Legal attaching a letter offering to compromise the judgment as follows:
Dear Sir/Madam,
Asset HQ Australia Pty Ltd ats Mills Oakley (A Partnership)
1. We refer to your letter dated 06 February 2018.
2. Our client makes the following offer.
3. Our client pay your client an amount of $187,057.13 inclusive of your client's costs of the proceedings by way of the following instalment.
3.1 $21,490.07 on or before 28 February 2018.
3.2 Monthly instalments of $10,000.00 commencing on 28 March 2018.
4. The proceedings listed for 21 February 2018 is adjourned by consent until a date after 28 February 2018.
5. Upon the payment referred to in paragraph being 3.2 being received, your client dismisses the proceedings on the basis that each party pay its own costs.
6. This offer remains open for acceptance until 2:00pm, 19 February 2018.
On 21 February 2018 the proceedings before the Supreme Court of Victoria were adjourned until 21 March 2018.
On 05 March 2018 the Plaintiff's solicitors submitted a counter offer to Mercantile Legal by letter, which relevantly read as follows:
…We confirm that you have offered to settle this matter with payments of:
(i) $21,490.07 by 28 February 2018.
(ii) $10,000.00 per calendar month commencing on 28 March 2018.
If the sums are paid our client will consider this matter an end.
If final payment is made, our client will discontinue the proceedings on 21 March 2018.
We advise that if the payments are not paid, our client will use any payments made to pay its costs of those proceedings. Our client will then continue to enforce the order it has against your client for the full debt less any payment made in reduction of the debt. [12]
Mr Moloney states that the Defendant did not accept that offer. However, he subsequently reviewed the offer and considered that its terms were uncertain. In these circumstances, a further offer was communicated on 19 March 2018 to Mercantile Legal by a letter which read as follows:
We confirm that this matter has been adjourned to 21 March 2018.
We confirm that you offered to settle this matter with payments of:
(i) $21,490.04 by 28 February 2018; and
(ii) $10,000.00 per calendar month commencing 28 March 2018; to a total amount of $187.057.13.
If these sums are paid, our client will consider this matter at an end.
If first payment is made, our client will discontinue the proceedings on 21 March 2018.
We advise that if the payments are not paid, our client will use any payments made to pay its costs of those proceedings. Our client will then continue to enforce the order it has against your client for the full debt less any payment made in reduction of the debt. [13]
On 19 March 2018 Mercantile Legal wrote to the Plaintiff's solicitors seeking clarification of the terms of its offer. [14]
On 20 March 2018 it is accepted that a settlement agreement was reached between the parties. This was confirmed by Mercantile Legal in correspondence in an email dated 20 March 2018 to the Plaintiff's solicitors, which reads as follows:
We confirm the following agreement.
1. Our client pay your client by $187,057.13 in the following instalments.
a. $21,490.04 by trust cheque payable to Mills Oakley picked up from our office today.
b. $10,000.00 per calendar month commencing on 20 April 2018.
2. Upon receipt of the cheque, your client will discontinue the winding up proceedings listed on 21 March 2018 against Asset HQ Australia Pty Ltd. [15]
On 20 March 2018 a representative of the Plaintiff attended upon Mercantile Legal and collected a cheque for $21,490.04, being the first instalment under the settlement agreement. [16] On 21 March 2019 the winding up proceedings against the Defendant were dismissed with no order as to costs in accordance with the settlement. [17]
Thereafter, it is not in issue that further instalments were not paid by the Defendant in accordance with the settlement agreement. [18]
On 08 November 2018 a second statutory demand was sent to the Defendant's registered office, and on 13 December 2018 the Plaintiff filed and served an originating process in the Supreme Court of Victoria seeking orders that the Defendant be wound up and a liquidator appointed.
On 30 January 2019 Mr Adams caused the Defendant to instruct new solicitors, who on 31 January 2019, filed a notice of appearance. Further evidence was subsequently filed for both parties. On 27 February 2019, the originating process dated 13 December 2018 was dismissed and an order for costs was made against the Plaintiff. [19]
[2]
UCPR 36.15(1)
The Defendant's argument under UCPR 36.15 (1) is that the Plaintiff's solicitor, in writing to the Defendant on 12 September 2017 and stating that an "order" had been obtained "against you for $180,395.71", involved obtaining a judgment against good faith, as in fact the judgment was not obtained until 03 October 2017; denying the Defendant the opportunity to defend the proceedings. This, it was said, assumes particular significance since on 29 September 2017, CLW wrote to the Plaintiff advising "we assume that your client will take no further action against our client until our firm has had the opportunity to receive and review the documents referred to above". In fact, no correspondence subsequent to the Plaintiff's solicitor's letter of 12 September 2017 was forwarded until 12 October 2017, where it became perfectly clear that an order had been obtained on 03 October 2017.
The Defendant argued that Coleman Moloney should have corrected the earlier letter of 12 September 2017, particularly once he had become aware of the matters raised by CLW on 29 September 2017, but instead he allowed the orders to be made which was to the prejudice of the Defendant. As such, the judgment was obtained against good faith contrary to UCPR 36.15(1), justifying the relief which the Defendant seeks.
The Plaintiff contended that when Coleman Moloney wrote to the Defendant he thought that statement was true and that at times, solicitors in Victoria would write to their opponents and state that their client had obtained judgment before they know that that is to be the fact.
Despite the lack of evidence as to the circumstances in which the letter of 12 September 2017 was written, attention was drawn to the solicitor's rules, [20] which state:
22. COMMUNICATION WITH OPPONENTS
22.1 …
22.2 A solicitor must take all necessary steps to correct any false statement made by the solicitor to an opponent as soon as possible after the solicitor becomes aware that the statement was false.
The relevant principles which guide the application of UCPR 36.15 were set out in Kendle v Carnegie. [21] Referring to the predecessor rule, Bryson JA (with whom Hodgson and McColl JJA agreed) stated:
44 The operation of Pt. 31 r.12A was considered in Coles v Burke (1987) 10 NSWLR 429 in the leading judgment of Kirby P with whom Samuels JA and McHugh JA concurred. See pages 436F-437G. Kirby P said (at 437):
The genus which is involved in the phrase "irregularly, illegally or against good faith" appears to me to be misconduct or dishonourable conduct of the person who procured the judgment which it is suggested undermines the authority of that judgment warranting the exceptional course for which r 12A provides. Here, there was no such lack of good faith on the part of the claimants. The signing of the judgment was made in accordance with the authority of the order earlier consented to and after a warning had been given by the letter to which I have referred. It is perhaps undesirable, in the modern practice of the legal profession (where much give and take is required) that judgment should be signed in this way without a final telephone call or other warning. However, the failure to give such a final and further warning could not, on any view, amount to a lack of good faith. Therefore, r 12A, likewise, has no application to these circumstances.
45 I add that r.12A(1) requires "sufficient cause", recognising the need for finality by protecting judgments from being set aside for slight or uncertain causes. (emphasis added)
His Honour thereafter distinguished the decisions in Roach v B&W Steel Pty Ltd [22] and M.W. Campbell AJA in Smith v Budandan Enterprises [23] accepting what was said by Fitzgerald JA in in Shirriff v Nominal Defendant. [24] Bryson JA added:
52 In my respectful opinion Fitzgerald JA's observations show clearly that the reference in Roach to its being contrary to good faith to attempt to retain the benefit of an order if it had been obtained contrary to a promise or representation binding on the client was not the real basis for decision, and was not an exposition of the reference to "against good faith" in r.12A. The reference in Roach v B&W Steel to unconscionability in later relying on a judgment which had been entered up as a result of a mistake is not in my respectful opinion authorised by the terms of r.12A, which relates good faith to the circumstance in which the judgment was given, and does not extend to lack of good faith in reliance on the judgment at some later time.
At [53] Bryson JA stated that the force of the words 'against good faith' in the context of the rule was well expressed in Coles v Burke by Kirby P. His Honour thereafter added:
60 There is not and could not, I would think, ever be an exhaustive judicial definition of what is against good faith; only very broad limits are set by proceeding by analogy from circumstances in which judicial remedies are based on good faith, unconscionability, or other concepts closely related to good faith. I would include the passage cited from Taylor v Johnson among the many conceivably available sources from which to proceed by analogy. "Against good faith" is an expression which requires the impeachment of the intention or behaviour of the person whose good faith is impugned.
In the context of the current case, it cannot be doubted that Coleman Maloney's letter of 12 September 2017, despite having been sent sometime after the time the prescribed time for filing defence had passed, falsely asserted that an order for payment of the judgment debt had been obtained when in fact an application was still pending before the Court. Notwithstanding the correspondence forwarded by the CLW on 29 September 2017, there was no response until 12 October 2017, by which dates judgment had been entered on 03 October 2017.
It may well be that the letter forwarded by the CLW was sent under an erroneous belief that judgment had been obtained as opposed to it having applied to obtain judgment. Be that as it may, it communicated to the Asset HQ that at that point, it was not able to file a defence. This in circumstances where CLW had already requested that no action be taken pending clarification of matters referred to in its letter of 29 September 2017. Whilst I accept that that letter might be seen as disingenuous or at the very least inaccurate, in light of the fact that that CLW was already in possession of some of the documents it requested, nevertheless CLW and Asset HQ continued to operate under the impression that the relevant order had been obtained and it was precluded from filing a defence or seeking a direction under UCPR 14.3 for further time in order to file a defence. Filing a defence was in either case open pursuant to UCPR 16.2(1)(c) In those circumstances, I would accept that the judgment was obtained against good faith within the terms of UCPR 36.15.
Asset HQ argued that the Court should not countenance this conduct, even if it was partly accidental or simply erroneous, and should set the judgment on this basis alone. [25] This argument seeks to gloss over the events that followed in terms of demonstrating sufficient cause for the exercise of discretion.
In this case, the order was forwarded to the Defendant on the date that it was entered and a further copy was forwarded by the Plaintiff's solicitors under cover of a letter dated 12 October 2017. At least after receipt of the notice of judgment, Asset HW had the capacity to seek to have it set aside or at least protest to Cameron Maloney over the circumstances in which it was made. This was not a course undertaken until 22 February 2019, when the present motion was filed.
It can be accept that in some instances a fundamental irregularity that will entitle the person aggrieved to set aside a orders a matter of unconditional right. However in circumstances where there has been a lengthy delay more needs to be established in the context of demonstrating 'sufficient cause.' [26]
Such were the circumstances in Violi v Commonwealth Bank of Australia, [27] where Emmett JA stated at [76]:
Under r 36.15(1) of the UCPR, the Court has a discretion, notwithstanding that a judgment was entered irregularly, as to whether or not to set the judgment aside. As the case was conducted in the District Court, there were two questions involved in the exercise of that discretion. The first was whether there was any explanation for the delay in moving to set aside the judgment. The second question was whether the defendant has a reasonably arguable defence. Those two matters must be weighed in the balance to determine whether the merits and strength of the proposed defence outweigh any explanation for the failure to file a defence in time and for any delay in applying to set aside the default judgment. Ultimately, the question is whether it is in the interests of justice to allow the party seeking to set aside the default judgment to be permitted to defend the proceedings on the merits. [4]
Although his Honour's judgment was a dissenting one, the relevant questions appear to be accepted by Bergin CJ in Eq and Sackville AJA subject only to his Honour's characterisation of the "merit and strength of the of the proposed defence."
To those matters the dictates of justice in the particular case by reference to s 58 (2) must also be accounted for bearing in mind also the requirements of s 59 of the Civil Procedure Act 2005 (NSW)
In this case, Mr Adams asserts that at no time did the Plaintiff perform work or services for the Defendant. He states that his understanding as a matter of fact was that all relevant services were performed by Hole 11 Projects Pty Ltd or alternatively Greenviews Pty Ltd. According to his evidence, there was a property development for 49 apartments and town houses at a site in Castle Hill. The company, Hole 11 Projects Pty Ltd, entered into a put and call option with the vendor. In or around March 2015, a deed of variation of the put and call option was entered, whereby Hole Projects had nominated Greenviews to be the grantee. That option was exercised and Greenviews was named as the purchaser under the sale of land contract, which was dated 13 March 2015. Mr Adams asserts that the only involvement that the Defendant had in the property development may have been the payment of invoices by way of loans to either company. He acknowledges that a costs and disclosure agreement was entered into with the Plaintiff by Hole 11 Projects, a copy of which is exhibited at page 61 of CA1. That agreement refers to a property at Lots 90-91 Sourway Drive, Baulkham Hills. [28]
There is appended to Mr Adam's affidavit a statement of account addressed to Hole 11 Projects Pty Ltd, referring to the reference number 3112522 MNMS Development at Castle Hill. Mr Adam's affidavit does intimate in terms of instructing Mercantile Mutual that there had been no disclosure made by Mills Oakley to Asset HQ in accordance with the Legal Profession Uniform Law Act 2014 (NSW). This forms part of the pleadings advanced in the proposed defence, which denies the liability alleged on the part of Asset HQ and asserts that any liability to Mills Oakley for the Hole 11 Projects invoices is denied.
Mr Adams was not cross examined on his evidence, and nor was Mr Rappoport. Much of the argument concerning the bona fide defence rested on the circumstances in which Mr Adams instructed settlement negotiations, culminating in an agreement with the Defendant. Mills Oakley argued:
There is no basis in law, and no application before this Honourable Court, to set aside or impeach the Agreement in any application made under Division 4, part 36 of the Uniform Civil Procedure Rules. Indeed, the making of the Agreement can be, and in this case is, relevant to the recognized limited power to consider matters after the entry of judgment (See Ritchies Uniform Civil Procedure NSW @ 36.16.110) Also see National Australia Bank Ltd. V. McCann [2010] NSWSC 766 (unreported) see BC21005100 as to factors, short of an express agreement. [29]
If anything, the facts of the matter before this Court as to the inutility of setting aside an acknowledged, part paid judgment in which there was a settlement between the parties, which the Defendant being represented by a 2 firms of Solicitors and by 2 members of the Victorian Bar at the time puts less of a burden on the Court in refusing the application under Part 36. The agreement gives rise to principles of estoppel than would a less formal series of inconsistent acts following entry of the judgment - such as written acknowledgements, or transfer of property or unexplained payments. (footnotes omitted)
Asset HQ's submission is that whilst the subject matter of the settlement agreement must have involved the subject matter of the statement of claim, they are not the same cause of action. It asserts that there is no judgment on the settlement agreement and no application which can be made to this Court to set aside or impeach it.
Mr Adams stated in his affidavit at [7]-[8]:
Mercantile Legal were not instructed as to any issue concerning whether the Default Judgment could be set aside on the basis that no contract was entered into by the Defendant with the Plaintiff and/or no disclosure had been made by the Plaintiff to the Defendant in accordance with the Legal Profession Uniform Law 2014 (NSW).
As the representative of the Defendant, dealing with this claim by the Plaintiff, I simply did not know that there were issues because I have no legal training or awareness of such legal concepts. I would have told Mercantile Legal of the issues if I was properly aware of the facts, or had been allowed more time to consider the facts.
I do not see any implausibility in this evidence in circumstances where Mr Adams earlier described formulating instructions to CLW around 23 October 2007 about setting aside the judgment. That has to be seen in the context of what immediately preceded it particularly the correspondence from Coleman Maloney to CLW of 12 October asserting that an order had been entered for $180,395.71 against Asset HQ when in fact no such order had been made.
On an application of this nature, the Court is not required to embark on a determination of the truth or otherwise the issues of fact arising in the proposed defence. The test is whether on the facts sworn on behalf of the Defendant, if established at trial, would afford a defence as pleaded. [30] In Adams v Kennick Trading, Hope JA stated at 506-7:
In the present case a problem arises because of the course taken by
Williams DCJ in deciding whether a bona fide defence on the merits had
been disclosed. In Simpson v Alexander (1926) 26 SR (NSW) 296 at 301; 43
WN 76 at 78, Street CJ, in whose judgment Gordon and Campbell JJ
concurred, said: (1986) 4 NSWLR 503 at 507
"… In considering whether a defendant, who seeks to be let in to
defend, discloses a defence upon the merits, the Court or a Judge is not to try the issues of fact arising upon the alleged defence. That is for the jury at the trial. All that is required on an application of this kind is that the defendant should swear to facts which, if established at the trial, will afford a defence; and should establish his bona fides in setting up that defence. Although, however, issues of fact cannot ordinarily be gone into on an application of this kind, and although it is not usual to go beyond the evidence put forward by the defendant for the purpose of disclosing a defence on the merits, there is, so far as I know, no inflexible rule of law or of practice preventing affidavits in answer from being received."
Whatever else this statement means, in my opinion it means that evidence
can be received, by cross-examination or otherwise, as to the bona fides of the applicant in seeking to rely upon the defence, even though the evidence
adduced relates to the issues which would be determined if the matter went to
trial. However the question to which this evidence is directed is not simply
whether the applicant has shown a defence on the merits; it goes rather to the
composite question whether the applicant has shown a bona fide defence on
the merits. If the judge hearing the application concludes that the applicant has deliberately lied about the alleged defence and is thus dishonest in raising it, the applicant would fail to establish that he had a bona fide defence on the merits. But if in such a case the judge merely concluded that he preferred the evidence of the respondent to that of the applicant, or anything as to credit short of a disbelief by the applicant in the facts he relied on to found the defence, he would not on that account alone be entitled to find that the applicant had failed to establish that he had shown a bona fide defence on the merits. If he did so, he would be trying the issue to be determined at the trial, and this would be an error of law (emphasis added).
On the proposed pleading, as confirmed by the unchallenged evidence of Mr Adams, I am satisfied that there is a bona fide defence. The question of the agreement is not one that I consider can be determined definitively in favour of Mills Oakley on the limited evidence presented. Whether or not the circumstances constitute some form of admission [31] as Mills Oakley contended is a matter not appropriate for determination at this point. The correspondence relating to the settlement negotiations does not indicate the basis on which Asset HQ entered into the relevant agreement. Whilst Mills Oakley cited in argument reliance on Bera Enterprises v Gadens as authority in support of its submission both the facts of that case and the legislation in issue are in my view distinguishable to the instant circumstances.
Moving on to the question of delay, it has two parts. Firstly, the failing to file a defence in time and secondly the delay in seeking to set aside the default judgment.
On 21 September 2017, Asset HQ received a copy of the statement of claim under cover of the letter of 20 July 2017 from DWB registered office. At that point, it was led to the view by Coleman Maloney that an order for judgment had been entered. After the judgment was obtained in circumstances earlier described there was a delay in filing an application to set aside the default judgment. It is accounted for in part by the potential negligence action that was being contemplated earlier described. Beyond that, CLW was taking action prior to the involvement of Mercantile Legal, in respect of the statutory demand and the proceedings in the Victorian Supreme Court.
Mr Adams' evidence however, in relation to instructions given to Mercantile Legal and his understanding of the time of the "issues", was not contested. What is relevant is that there were a number of proceedings that were taking place at this time and Asset HQ was giving instructions to its lawyers to negotiate settlement with the instructions being, "there is already a judgment, we can't be wound up and we can't have receivers appointed - ask Mills Oakley their lawyers what is owed and if we can pay it off in instalments."
The agreement was not followed through with the required payments after the first and a further statutory demand was made and originating process issued. This was successfully defended.
Counsel for Mills Oakley conceded that the setting aside the judgment in this Court was not a prerequisite for the defence of the originating summonses in the Supreme Court of Victoria. In light of the effect on Asset HQ's operations it prioritised its defence of the action.
In all there has been delay and a lack of diligence on the part of Asset HQ explained in part by what appears to be a failure to identify a defence at an earlier time and a need to defend the Victorian proceedings against it. I have also noted that two other companies Mr Adams was involved in came to be wound up in 2018, although the significance of that in terms of distracting from the defence of the proceedings is not articulated with any precision. Nevertheless I am satisfied on the uncontested evidence of Mr Adams that there is a bona fide defence.
No issue of prejudice was identified in argument.
I have regard to the difficulty and complexity to which the issues in the proceeding giving rise. To an extent the lack of expedition of Asset HQ has arisen from circumstances outside its control as earlier outlined. Had the taking of further action on behalf of Mills Oakley been delayed as requested then it was conceivable that a defence would have been filed after investigating the status of the account.
What followed was a prioritisation of consideration of other action brought by Mills Oakley including a settlement agreement the precise basis of which is in dispute.
Even taking into account this delay the matters in dispute are such that that in my view an injustice would be suffered if the judgment was allowed to stand. In so stating I have not overlooked to overriding purpose in s 56 nor the considerations in s57 of the Civil Procedure Act 2005 (NSW). However for the reasons indicated there is an importance in the just determination of the proceedings. Accordingly I am satisfied that the discretion should be exercised and I would accordingly set aside the judgment.
[3]
UCPR 36.16 (2) (a)
It is strictly unnecessary for me to consider the alternate basis of the application under UCPR 36.16(2) (a)
That rule differs from UCPR 36.15 in that it applies to default judgments which engages the judgment in this instance. The discretion is expressed to be at large and is not expressed as requiring a demonstration of "sufficient cause" if the judgment of was given or entered or the order was made irregularly illegally or against good faith.
Nevertheless in the context of UCPR 26.16 (2) (a) Sackville AJA in Dai v Zui [32] accepted that factors relevant to the exercise of the discretion
1. Whether the applicants had an arguable defence;
2. Whether they had provided an adequate explanation for the delay in filing the defence; and whether
3. Whether the respondents would be prejudiced if the default judgment were set aside
To those matters one must add the provisions of the Civil Liability Act 2005 (NSW) above referred to.
The circumstance of the application under UCPR 36.15(1) required the court to examine the above mentioned matters in the context of the application to set aside the judgment as the delay meant that the absence of good faith alone was insufficient to justify the demonstration of "sufficient cause"
It is unnecessary in this context to revisit the consideration of those same factors for the purposes of the application under s UCPR 36.16.
It suffices to reiterate that I am satisfied that there is a bona fide defence. The circumstances of the delay as accounted for are such that bearing in mind absence of identified prejudice and the provisions of the Civil Procedure Act 2005 (NSW) referred to, the dictates of justice support the favourable exercise of the discretion sought.
[4]
ORDERS:
For these reasons:
1. I set aside the judgement in favour of the Plaintiff entered 3 October 2017.
2. I direct the Defendant to file a Defence within fourteen days.
3. I will hear the parties as to costs.
[5]
Endnotes
Hereinafter referred to as 'Asset HQ'.
Hereinafter referred to as 'DWB'
See affidavit of Craig Adams (29 March 2019) at [5].
Affidavit of Craig Adams (29 March 2019); Exhibit CA1P1.
Hereinafter referred to as 'CLW'.
Affidavit of Craig Adams (29 March 2019) Exhibit CA1 p 9.
Affidavit of Coleman Moloney (08 March 2019), CFM10.
Affidavit of Coleman Moloney (08 March 2019), CFM 11.
Affidavit of Coleman Moloney (08 March 2019), CFM 12.
Affidavit of Coleman Moloney (08 March 2019), CFM 13.
Affidavit of Coleman Moloney (08 March 2019) at [20].
Affidavit of Coleman Moloney (08 March 2019) at [21]; Affidavit of Craig Adams (28 March 2019) at [5(u)].
Affidavit of Coleman Moloney (08 March 2019) at [22]; Affidavit of Craig Adams (28 March 2019) at [5(v)].
Affidavit of Craig Adams (28 March 2019) at [5(aa)]; affidavit of Coleman Moloney (08 March 2019) at [22].
Legal Profession Uniform Law Australian Solicitors' Conduct Rules 2015
[2006] NSWCA 302.
(1991) 23 NSWLR 110 at [46]-[53].
[2002] 55 NSWLR 367 at 374 [60] to 375 [67].
[1999] NSWCA 152.
Defendant's submissions in reply at [25].
Ritson v Commissioner of Police, New South Wales Police Force [2018] NSWSC 1999 at [53].
[2015] NSWCA 152.
Affidavit of Craig Adams (28 March 2019) at [25]-[31].
Plaintiff's written submissions at [4]-[5].
Simpson v Alexander (1926) 26 SR (NSW) 296 at 301; Adams v Kennick Trading (Intl) Ltd (1986) 4 NSWLR 503 at 507.
The Plaintiff's counsel referred to an estoppel
[2013] NSWCA 412 [83]-[93] (Barrett and Leeming JJA agreeing).
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Decision last updated: 15 April 2019