Moore trading as Piper Alderman v Hyland

Representation: Counsel:
Mr J Parrish (Plaintiff/Respondent)
Mr A Mohseni (Defendant/Applicant)
Solicitors:
Piper Alderman (Plaintiff/Respondent)
Panetta Lawyers (Defendant/Applicant)

File Number(s): 2025/69768

Publication restriction: Nil

JUDGMENT

Background

1. By Notice of Motion filed 14 July 2025 the defendant moves the Court for orders setting aside default judgment entered against her on 15 June 2025.

2. The plaintiff is a legal firm operated by the members of a partnership.

3. In June 2023 the plaintiff entered into a costs agreement with Care A2 Pty Ltd (Care A2) to provide legal services in relation to certain Federal Court litigation. The defendant, who was a director of Care A2, dealt directly with the plaintiff in relation to the legal services it provided.

4. Over the next six months the plaintiff rendered invoices for work performed pursuant to its retainer. The plaintiff contends the costs agreement in its terms also bound the defendant as a recipient of those legal services. Consequently, invoices were rendered to both the defendant and Care A2.

5. In time, a dispute arose in relation to the fees claimed by the plaintiff which, as at December 2023, totalled $436,874.

6. Care A2 and the defendant retained new legal representatives who, in July 2024, filed a Costs Assessment Application in relation to the costs dispute, in accordance with prevailing regulatory legislation. In the body of that application, the legal representatives acting on behalf of the defendant and Care A2 contended the proper amount for costs payable to the plaintiff was the sum of $356,137.70.

7. By that time, Care A2 was the subject of an application for winding up pursuant to s 459A of the Corporations Act 2001 (Cth) consequent upon a statutory demand by another party in respect of an unrelated debt (the underlying winding up proceedings).

8. In August 2024, the plaintiff was substituted as plaintiff in those winding up proceedings. This arose pursuant to an agreement between the parties which was ratified by Black J in the Supreme Court in a judgment delivered on 26 August 2024. In that judgment his Honour noted the evidence that Care A2 was not contesting some of the legal costs being claimed by the plaintiff.

9. On 11 October 2024, the plaintiff entered into separate Deeds of Settlement and Release with Care A2 and the defendant.

10. The defendant in her Deed agreed to pay the plaintiff $200,000 in return for a release by the plaintiff of liability, inter alia, for the debt being claimed by the plaintiff in respect of legal fees.

11. The defendant also provided the plaintiff with a broad release of any liability related to the provision of legal services.

12. The defendant failed to make the payment provided for under the Deed and so, on 21 February 2025, the plaintiff commenced proceedings in this Court, suing for breach of the Deed.

13. The statement of claim was served personally on the defendant on 10 May 2025.

14. The defendant failed to file a defence within the 28 days provided for under the Uniform Civil Procedure Rules 2005 (NSW) (UCPR), and on 15 June 2025, 35 days after service, the plaintiff obtained default judgment.

15. On 21 June 2025, the plaintiff issued a bankruptcy notice against the defendant, relying upon that judgment.

16. On 13 July 2025 the defendant, through her current solicitors, filed the application presently before me to set aside the judgment pursuant to UCPR Pt 36 r 36.16.

17. The defendant also seeks leave to file a crossclaim against the plaintiff.

18. The defendant’s application is contested.

Prevailing Principles

19. The principles governing the exercise of the Court’s discretion in a case such as the present is ground well-travelled. Underlying the disposition of such an application is the question of whether it is in the interests of justice to allow a party in to defend a matter where default judgment has been obtained against it. [1]

20. As the authorities make clear, each case must be determined on its own facts. Nonetheless, three factors typically inform the exercise of the Court’s discretion. Firstly, and perhaps predominantly, a defendant must establish the existence of a bona fide defence to the claim being advanced. Secondly, the Court will consider the defendant’s explanation for the delay which gave rise to the default judgment. Thirdly, it is relevant to have regard to the respective prejudice to the parties arising from the outcome of the determination made by the Court. [2]

Existence of a Bona Fide Defence

21. The statement of claim involves a straightforward pleading of breach of the Deed by the defendant.

22. The proposed defence admits the Deed but denies liability on the basis that the Deed was:

“procured by duress and unconscionable conduct on the part of the plaintiff and is voidable at the election of the defendant, which election has been made”.

23. The defendant alleges the plaintiff was negligent in the provision of legal services which in turn exposed Care A2 to liability and the application to be wound up in the underlying winding up proceedings.

24. The defendant pleads the unconscionable conduct and duress to which she was subjected arose in circumstances where, having compromised Care A2 and placed it in a perilous position leading to the underlying winding up proceedings, the plaintiff then applied to be substituted as a creditor in those winding up proceedings – thereafter using its position as petitioning creditor to exert illegitimate pressure on the defendant to agree to the terms of the Deed.

25. The defendant contends the plaintiff’s actions were both negligent and in breach of its fiduciary duties. As noted earlier, she contends that being procured by duress and unconscionable conduct, the Deed is voidable at her election.

26. Additionally, the defendant argues the plaintiff’s conduct constituted unconscionable conduct in equity, such that the Deed ought not be enforced.

27. The defendant also provides a draft crossclaim upon which she seeks to rely. In that crossclaim, the defendant seeks a declaration that the Deed was void ab initio and has been validly rescinded, as well as damages for negligence and breach of contract, along with what is pleaded as “equitable compensation for breach of fiduciary duty and an indemnity against any liability the defendant is found to have to the plaintiff”.

28. The plaintiff strongly advanced the position that the proposed defence is not bona fide. In support of that argument, the plaintiff contends the arguments the defendant now seeks to advance were recently invented and arose only after the defendant was confronted with a bankruptcy notice. The plaintiff puts the position that the defence upon which the defendant proposes to rely is hopeless in the circumstances and, in the General Steel [3] sense, there is no prospect of the defence succeeding.

29. At the outset of the hearing of this application, I heard an application by the plaintiff to cross-examine the defendant. That application was opposed on the basis that it was not appropriate to cross-examine in the context of the determination of an interlocutory application.

30. For the reasons I gave at the time, I declined to allow cross-examination of the defendant. In short, I considered that in all the circumstances cross-examination would necessarily have gone to the merits of the defence in an effort to establish it was not bona fide. This, in my view, was beyond the scope of the interlocutory task at hand.

31. When the authorities speak of a defendant demonstrating a bona fide defence, the question engaged is whether there is an arguable or triable issue. [4]

32. Generally speaking, to make good a General Steel submission, hopelessness must be demonstrated on the face of objectively ascertainable facts. If it is necessary to weigh evidence, summary disposal will generally be inappropriate. In the present case, the plaintiff’s position is not based on a proposition that the defences advanced are not available as a matter of law or undisputed facts but, as I see it, is seated in the argument that weighing the evidence leads to the conclusion that there are no prospects of success. By definition it seems to me that is embarking upon a determination of the merits of the defence.

33. For example, the plaintiff argues the defendant’s allegations of unconscionable conduct and duress are so devoid of merit that one would conclude the defence is effectively a sham. Here the plaintiff relies on the fact the defendant was legally represented during negotiations, that the Deed achieved an outcome to the defendant’s benefit, that the defence has only been advanced in recent times and that the allegations made by the defendant could not, in any event, constitute unconscionability.

34. Those are, in my view, all matters for evaluation rather than demanding the interpretation the plaintiff advances. As the transcript of argument will show, the parties, with some vigour, advanced competing arguments as to the bona fides of the various aspects of the proposed defence. Those exchanges serve to demonstrate that the matters raised by the plaintiff said to go to the bona fides of the defence can only be determined after a contest and consideration on the merits of the matters pleaded. I am satisfied that in her proposed defence the defendant has established arguable, and thus bona fide defences, as understood by the authorities. The merits of the proposed defences are questions for another day.

Delay

35. The defendant’s explanation for delay is found in her affidavit evidence that she was not legally represented at the time the statement of claim was served and did not have the financial resources or capacity to engage lawyers. She also says she was under immense financial and personal stress related to concurrent bankruptcy proceedings brought by the plaintiff against her.

36. I consider the defendant’s explanation for the delay to be less than persuasive. One of the factors relied upon by the defendant in support of this application is the relatively short period of time between the date of default and her application to set aside the judgment, being a period of little more than one month. That is something of a two-edged proposition for the defendant. If the defendant was in a position to retain lawyers to make an application to set aside judgment one month after the date of default, it is in my view highly questionable, without further explanation, whether she was genuinely not in a position to obtain legal representation prior to the expiry of the time for filing a defence.

37. In any event, the inability to obtain legal representation does not explain the defendant’s failure to take any steps to protect herself against judgment, bearing in mind the statement of claim expressly gives notice of the need to file a defence within 28 days and directs a defendant as to various steps that can be taken in response to the statement of claim.

38. The defendant is clearly not unsophisticated, having regard to her business background disclosed in the evidence before me. Simply referring to the fact the defendant was without legal representation, even if that is accepted, begs the question why she did nothing to protect herself. She appears to answer that question by reference to the fact she was under immense stress due to the concurrent bankruptcy proceedings. However, as the plaintiff points out, that explanation is hardly believable given the bankruptcy proceedings did not come about until after the default judgment was entered.

39. Accordingly, I place very little store on the defendant’s explanation.

Prejudice

40. The plaintiff argues that if the defendant establishes an arguable defence, which in my view she has, setting aside the defence would nonetheless be futile. This is because:

41. The position would then revert to the defendant facing a claim by the plaintiff for the outstanding costs exceeding $400,000, and

42. The defendant, through her former legal representatives, has made an admission in the Costs Assessment Application that she is indebted to the plaintiff for substantially more than the amount the subject of the current judgment.

43. Therefore, it is inevitable that the defendant will have a liability to the plaintiff for the costs in question exceeding the judgment she seeks to set aside.

44. The defendant does not accept the premise of the plaintiff’s submission. She argues the matters she seeks to agitate in her crossclaim, particularly the negligence of the plaintiff, are matters which she would call in aid of her defence to any subsequent claim for the costs which were the subject of the Deed.

45. More significantly, says the defendant, if the judgment is not set aside, then the Deed, which underlies the judgment, would not be open to challenge and would effectively merge with the judgment. It is argued that in those circumstances, because of the releases provided to the plaintiff in the Deed, the defendant would be unable to bring a subsequent claim against the plaintiff in respect of the causes of action she contends would otherwise be available to her.

46. The defendant says if the judgment were set aside and she ultimately succeeded in defending the plaintiff’s present claim on the Deed, the outcome of a subsequent action by the plaintiff to recover the outstanding costs is not a foregone conclusion and she has substantial defences to such a claim.

47. The defendant says the plaintiff is well resourced to pursue any entitlements it has once these proceedings are concluded, whereas if the judgment is not set aside, the consequences for her would be dire. The defendant says not only would she be visited with a liability she contends is unjust, but effectively her hands would be tied in exercising rights she would otherwise have under the proposed crossclaim.

48. At the end of the day, the prejudice the plaintiff faces is delay and additional costs. [5] However, in circumstances where it is arguable the defendant has a defence to a further claim by the plaintiff, it cannot be said that setting aside the judgment is futile. In my view, any prejudice to the plaintiff is not such as would override the potential preclusion of rights contended by the defendant.

Disposition

46. I am left with the situation where I am satisfied the defendant has a bona fide defence, in the sense of an arguable defence, to the claim brought against her by the plaintiff in these proceedings.

47. Whilst I am not satisfied the explanation given by the defendant for the delay is reliable, nonetheless, although relevant, I consider that to be a subsidiary factor in the circumstances. The interests of justice are no doubt best served by parties being able to advance and defend claims on their merits.

48. For the reasons I have outlined, I do not consider the plaintiff would suffer prejudice were the judgment set aside such as to displace the objective of a determination on the merits.

49. Accordingly, the defendant has satisfied me that judgment ought be set aside.

50. In the circumstances, it is appropriate that the defendant also have leave to file the proposed crossclaim.

51. I observe that in the course of argument it was generally acknowledged the crossclaim proposed by the defendant in seeking equitable relief raises issues which go to this Court’s jurisdiction to grant the remedies sought. However, that has not been fully explored and is an issue for another day.

Costs

52. As I indicated during the course of argument, I propose to reserve the question of costs to allow for any arguments the parties wish to ventilate in light of these reasons.

Orders

53. Accordingly, I make the following orders:

54. Pursuant to Uniform Civil Procedure Rules 2005 (NSW) r 36.16 the default judgment entered against the defendant on 15 June 2025 is set aside.

55. The defendant has leave to file a defence and any crossclaim upon which she proposes to rely by 20 November 2025.

56. I reserve the question of costs and will make directions in consultation with the parties for the determination of that issue.

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Endnotes

See Dai v Zhu [2013] NSWCA 412 at [83] referring to Adams v Kennick Trading (Int) Ltd (1986) 4 NSWLR 503 at 506-7 per Hope JA.

See J & M McNamee Holdings Pty Ltd v Mungerie Vale Pty Ltd (t/as Greenwood Group Realtors) [2019] NSWCA 283 at [48]-[52].

General Steel Industries Inc v Commissioner for Railways (NSW) (1964) 112 CLR 125; [1964] HCA 69.

See J & M McNamee Holdings Pty Ltd v Mungerie Vale Pty Ltd (t/as Greenwood Group Realtors) supra at [51] quoting from the decision of Sackville AJA in Dai v Zhu supra at [89].

It was accepted in argument that the plaintiff is not at any time limit risk if fresh proceedings are pursued to recover the outstanding fees.