National Australia Bank Limited v Zhang, Guang Qing

Supreme Court of NSW|2013-10-22

Judgment 1HER HONOUR: By amended notice of motion filed 30 September 2013, the defendant seeks, first, an order that the default judgment entered on 289 May 2012 be set aside pursuant to Rule 36.15(1) of the Uniform Civil Procedure Rules 2005 (UCPR); second, in the alternative an order that judgment entered by default on 29 May 2012 be set aside pursuant to UCPR 36.16(2); and third, that the enforcement of the judgment is stayed until the court determines the notice of motion.

Background 2On 11 May 2006, Ms Guang Qing Zhang entered into a loan facility agreement with National Australia Bank Limited ("NAB") by which she agreed to repay approximately $1.28 million, such loan being secured by way of registered mortgage over three properties then owed by her. 3The three properties at Blacktown are: (i) Lot 100 in deposited plan XXXXX ("Kent Street"); (ii) Lot 68 in deposited plan XXXXX ("Norfolk Street"); and (iii) Lot 466 in deposited plan XXXXX ("Janice Street"). 4The facility agreement provided for an "interest only repayment period" of 5 years. This meant the interest only repayment period expired in May 2011. It was a term of Ms Zhang's loan agreement that she make monthly repayments, initially interest only but subsequently (after the first 5 years of the loan) principal and interest. A failure to make a monthly repayment constituted a default event. Upon a default event occurring, NAB may give a default notice, requiring the default to be remedied within a certain period. Failure to comply with the default notice results in the entire amount owing under the loan becoming immediately due and payable: see Clause 19.1 of the loan agreement. 5Since 2007, Ms Zhang has largely resided in China. 6In or about November 2010 Ms Zhang sold Janice Street and applied the proceeds to reduce her loan facility. On 23 November 2010 the parties varied the credit facility such that the loan amount was reduced to $805,677, secured against Kent Street and Norfolk Street. 7In May, June, July and August 2011, Ms Zhang failed to make monthly repayments. On 11 August 2011. NAB sent Ms Zhang a default notice. This required Ms Zhang to pay an amount of $11,553.70 within 31 days. Ms Zhang failed to comply with the default notice. 8On 6 October 2011, NAB's solicitors wrote to Ms Zhang, informing her that the entire amount owing under the loan was due and payable, and demanding payment of this within 7 days. The letter also stated that any funds received after the date of the notice that are less than the full amount owing would be accepted without prejudice to NAB's right to pursue action for recovery of the balance of the indebtedness. 9Ms Zhang admits that she became aware in October or November 2011 that she had fallen behind in her loan repayments ([22] - [23] Aff, 21/9/2013). 10On 4 November 2011, NAB commenced these proceedings, seeking possession of the Norfolk St and the Kent St properties together with judgment for the outstanding amount of the loan. 11Between 10 February 2012 and 18 March 2012, Ms Zhang was in Australia. 12On 10 February 2012, upon her arrival in Sydney, Ms Zhang deposited $45,000 into her loan account. I shall refer to an alleged agreement between the parties in relation to this sum of $45,000 under the heading "Whether Ms Zhang has an arguable defence". 13The solicitors for NAB contacted Ms Zhang a number of times to arrange service of the statement of claim upon her. These attempts were ultimately unsuccessful. I shall refer to this topic in more detail later in this judgment. 14On 22 March 2012, NAB obtained orders dispensing with the need for personal service of the statement of claim and deeming service to have been effected following the sending of the statement of claim to two postal addresses for Ms Zhang (one in Australia and one in China) and to Ms Zhang's email address. The Gordon PO address was the last known address that NAB had for her and this was the address that she had nominated for service of documents in her loan application. 15On 29 March 2012, NAB's solicitors forwarded a copy of the above order for substituted service together with a letter explaining its effect to the address set out in the order. 16On 12 April 2012, service of the statement of claim was deemed to have taken effect. 17Ms Zhang had until 10 May 2012 to file a defence. No defence was filed. To date no draft defence has been prepared. 18On 29 May 2012, default judgment was entered. 19On 8 June 2012, a writ of possession was issued in relation to both the Norfolk and Kent Street properties. 20On 4 December 2012, NAB took possession of the Kent Street property. 21On 15 July 2013, Ms Zhang filed this notice of motion seeking to have the default judgment set aside. On 30 September 2013, an amended notice of motion was filed, the subject of this judgment.

Motions to stay writs of possession 22On 30 July 2012, Ms Zhang filed a notice of motion seeking to stay execution of the writ of possession. On 31 July 2012, orders were made staying execution of the writ of possession until 6 August 2012. An order was also made that any application to extend the stay must be made by motion, supported by an affidavit, to be filed by 2 August 2012. Ms Zhang did not apply for an extension of the stay in accordance with the orders and accordingly the stay lapsed. 23On 23 January 2013, Ms Zhang filed a further notice of motion seeking a stay of execution of the writ of possession with respect to the Norfolk Street property. A stay was granted on 24 January 2013 and remains in force until this judgment is delivered. 24On 6 August 2013, a further notice of motion was filed by Ms Zhang seeking various orders restraining NAB from dealing with both the Kent and Norfolk Street properties.

The law on setting aside default judgment 25Ms Zhang relies on UCPR 36.16(2). It relevantly reads: 36.16 Further power to set aside or vary judgment or order ... (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 ... (c) in the case of proceedings for possession of land, it has been given or made in the absence of a person whom the court has ordered to be added as a defendant, whether or not the absent person had notice of the relevant hearing or of the application for the judgment or order. 26The authorities on setting aside default judgment are Evans v Bartlam [1937] 2 All ER 646; Vacuum Oil Pty Ltd v Stockdale (1942) 42 SR (NSW) 239; Cuttle v Brandt (1947) 64 WN (NSW) 96; and Adams v Kennick Trading (International) Ltd & Ors (1986) 4 NSWLR 503. In Adams v Kennick Trading (International) Ltd, Hope JA (with whom Glass and Mahoney JJA agreed) held that in determining whether "sufficient cause" has been shown to set aside a default judgment, the court must look to the whole of the relevant circumstances which include inter alia the existence of a bona fide grounds of defence on the merits, an adequate explanation for the failure to defend and any delay; and in determining whether there are bona fide grounds of defence the court must not try the issues to be determined at the trial: what is required is that the court determine that the facts sworn to as providing a defence, if established at the trial, would afford a defence and that the defence is set up bona fide. 27One of the considerations to be taken into account when determining whether default judgment should be set aside was expressed by Priestley JA in Cohen v McWilliam (1995) 38 NSWLR 476 at 481 quoting from the Federal Court in Davies v Pagett (1986) 10 FCR 226: "It is, however, another question whether concern about the extent of delays, either in a particular case or generally, should, in the absence of prejudice in the particular case, be taken into account in exercising a discretion to set aside a default judgment. The fundamental duty of the court is to do justice between the parties. It is, in turn, fundamental to that duty that the parties should each be allowed a proper opportunity to put their cases upon the merits of the matter. Any limitation upon that opportunity will generally be justified only by the necessity to avoid prejudice to the interests of some other party, occasioned by misconduct, in the case, of the party upon whom the limitation is sought to be imposed. The temptation to impose a limitation through motives of professional discipline or general deterrence is readily understandable; but, in our opinion it is an erroneous exercise of the relevant discretion to yield to that temptation. ..." 28This court should look to the whole of the relevant circumstances including an adequate explanation for delay and the existence of a bona fide defence on its merits. Overall the fundamental duty of this court is to do justice between the parties. 29Consideration should now be had to the overriding purpose set out in s 56 of the Civil Procedure Act 2005 that is the just, quick and cheap resolution of the real issues in the proceedings: see CKM (Mortgages) Limited v Burtenshaw [2010] NSWSC 1044 at [12].

Explanation for delay 30On 4 November 2011, these proceedings were commenced. In November 2011, Ms Zhang admits that she knew that her loan was in arrears. I infer that in November 2011 Ms Zhang knew these proceedings had been commenced because on 10 November 2011, she emailed Kristy Imber, a paralegal for NAB's solicitors, "Please let me know when is the hearing date for this matter." Ms Imber replied, "There is no hearing date. A Statement of claim will be served upon you shortly, to which you will have 28 days to respond too." (sic). Ms Zhang replied, "Please email it to me, because I work in China." 31On 11 November 2011, Ms Imber, by email wrote to Ms Zhang confirming that her firm of solicitors acted for NAB in Supreme Court proceedings 2011/353537 and confirmed that Ms Zhang had agreed to accept service of the statement of claim via email. Ms Imber requested that Ms Zhang respond to this email confirming that she accepted service of the attached statement of claim filed in the Supreme Court on 4 November 2011 by this email. No such confirmation was forthcoming from Ms Zhang. 32On 24 November 2011 by email, Ms Zhang informed the solicitor acting for NAB that she would be in Sydney on 15 December 2011 and would be able to collect the statement of claim then. On 12 December 2011 Ms Imber reminded Ms Zhang of this arrangement by email. On 15 December 2011, Ms Imber telephoned Ms Zhang. Ms Zhang stated that she intended to pay arrears but that, if the bank would not hold off on its action, she would accept service "on Monday". Ms Zhang does not deny that this conversation occurred nor what was said. It appears that Ms Zhang decided not to accept service "on Monday". 33In December 2011, NAB agreed to hold off proceedings if Ms Zhang made a total payment of $45,000. The terms of the agreement are in dispute and are referred to under the next heading. 34On 2 February 2012 by email, Ms Imber asked Ms Zhang to provide her residential address in China for the purposes of service of the statement of claim. Ms Zhang denies this conversation occurred. On 10 February 2012, Ms Imber spoke to Ms Zhang where she informed Ms Zhang that the statement of claim needed to be served. Ms Zhang also denies that this conversation took place. 35On 7 March 2012 Ms Imber again spoke to Ms Zhang. It is not disputed that this conversation took place but its contents are in dispute. Ms Imber's version is that Ms Zhang confirmed both her postal address in Australia and her residential address in China, and that Ms Zhang also told Ms Imber that she was not prepared to make herself available to accept service. Ms Zhang's evidence is that the conversation largely concerned payment of the solicitor's legal costs incurred in these court proceedings. 36On 9 March 2012, Ms Imber by email wrote to Ms Zhang and enclosed by way of service upon Ms Zhang, the statement of claim filed in the Supreme Court of New South Wales. Ms Imber advised that a notice of motion would be filed seeking that the requirement for personal service be waived and outlined how the proposed modes of service to be adopted. 37Ms Zhang says that she was not served with the statement of claim. NAB submitted that whether or not Ms Zhang has in fact been served is, in one respect, irrelevant because of the order for substituted service had been made and no order has been made to set it aside. I disagree. The object of an order for substituted service is to ensure that in all probability if not certainly the document will be brought to the attention of the person to whom the document is directed. Hence, the issue to be decided is whether or not Ms Zhang knew that these proceedings had been commenced, when she acquired that knowledge and what steps she took after that to file a defence. 38Ms Zhang also submitted that she had not been served with the statement of claim by any of the three modes at the addresses set out in the order for substituted service. She says that she did not receive a copy of the statement of claim by delivery to her Australian PO Box at Gordon because she checked her mail on her return to Australia and it was not there. Nor, she says, did she receive it in the post at her Chinese address. She proffers an explanation for her failure to receive it. It is that a photocopy of a registered post envelope, addressed to her Chinese address shows that the spelling of the District on this envelope was incorrect. It was spelt correctly in the affidavit as "Tiexi District" but on the envelope it is spelt "Texi" District. Ms Zhang says if it arrived in China and was translated it had no prospect of ever reaching her. 39So far as the third method is concerned namely, receipt of the statement of claim at her email address, her evidence is ambivalent and raise a very technical point. Ms Imber, solicitor acting for NAB, emailed a letter that attached a copy of the statement of claim to Ms Zhang on three separate occasions. On each occasion Ms Zhang deposes that she either did not receive the email, or alternatively could not open the attachment. 40The main point is that it is clear that by November 2011, she was aware that these Court proceedings had been commenced and that NAB was attempting to serve her with the statement of claim. Her exercise that she could not open the attachment does not assist Ms Zhang. If that were so, she should have contacted Ms Imber and explained her difficulty opening the attachment. 41However, Ms Zhang's explanation for why she did not take any active role in these proceedings up until June 2012 is because she thought everything had been resolved upon her making the $45,000 payment on 10 February 2012. 42On her own evidence she had been told by NAB that she needed to pay $30,000 by 30 January 2012, with the remainder of the outstanding repayment of $15,000 to be paid by 15 February 2012. However, when she failed to pay $30,000 by 30 January 2012, she sent an email to Mr Tony Testafredda at the Burwood branch of NAB, asking him to pass on to the relevant person at NAB her request for a further extension of time to pay, to 15 February 2012. There is no evidence from Mr Testafredda that NAB or any other employee had any discussions with her that could give rise for her to believe that the matter had been resolved. NAB's evidence is to the contrary. For the purposes of this application, I accept Ms Zhang's evidence that she believed she had until 15 February 2012 to pay $45,000. Both parties agree that this sum would bring her payments up to date (although it may have been a few hundred dollars short but for the purposes of this application it is not an issue). 43NAB submitted that in light of the evidence, Ms Zhang's explanation that she believed the matter had been resolved cannot withstand scrutiny. Even if she subjectively held this belief, the objective circumstances show that such a belief was in no way reasonable. 44Later, on 7 March 2012, Ms Imber and Ms Zhang had the following conversation. I have only referred to the relevant portions. Ms Imber: I'm calling in relation to the loan with National Australia Bank Limited and the outstanding enforcement costs. Just wondering if and when you will be in a position to make payment of them. Ms Zhang: I'm not intending on payment them, I think that I have been unfairly treated and it is unfair that I should have to pay them as National Australia Bank agreed to accept payment of arrears and never asked for enforcement costs. I will tell the Court and let the Judge decide. The bank has put me in this position. I will be moving to another bank as I do not wish to stay with National Australia Bank. ... Ms Zhang: The agreement was to clear the arrears, this was the agreement, I was never asked for legal costs, I will be going to another bank, I don't want to deal with National Australia Bank... 45Ms Zhang's evidence is that she had at all times sufficient funds in her cheque account from which the mortgage repayments were supposed to be deducted, despite there being no direct deposit from her cheque account to her loan account being in existence (Aff, 15/7/13 [41]). In any event, a perusal of the cheque account records does not support Ms Zhang's contention that there was enough money to pay the continuing loan repayments. 46The statements for her cheque account show that, during the relevant period (from May to August 2011) the balance of the account ranged from $539.23 at its lowest to $2,539.25 at its highest, none of which was sufficient to meet her monthly repayments. 47In her explanation Ms Zhang does not address the issue of continuing arrears after 15 February 2012. Ms Zhang explained (Aff, 20/9/13 [34], [35] and [36]): After I resolved the issue of the arrears I then arranged for rental income from the properties that I own to deposit $5,000.00 on a monthly basis into my NAB cheque account which I believe would then be transferred across to manage the loan account. Whilst in China on or around June 2012 I received a call from the tenant in the property whose name I do not recall but he advised he had been served with a notice by the NAB advising that he had to vacate the premises. The notice was served by a Sheriff. ... Upon my return to Australia I contacted the Real Estate Agent and had a conversation with him as I formed the view that he had no deposit the money across to my cheque account being the $5,000.00 a month to cover the loan facility. 48It is my view that even if I accept that Ms Zhang has adequately explained her delay in not filing a defence up to shortly after 15 February 2012, she does not provide a satisfactory explanation for not filing a defence from March 2012. Nor has she provided an explanation for the delay in filing a notice of motion seeking to set aside this default judgment. It was on 30 July 2012 that Ms Zhang first filed a notice of motion seeking to stay the writ of possession. It was on 15 July 2013 (almost 12 months later) that Ms Zhang filed a notice of motion to have the default judgment set aside. I find Ms Zhang's explanation for delay to be most unsatisfactory.

Whether Ms Zhang has an arguable defence 49There is no draft proposed defence. The onus is upon Ms Zhang to demonstrate that she has a defence on the merits. NAB submitted that Ms Zhang has failed to satisfy her onus in the absence of putting forward any clear statement as to what that defence is. 50Nevertheless, counsel for Ms Zhang submitted that taking her evidence at its highest, the elements of an estoppel by representations are made out. 51Ms Zhang relies on a representation or representations made by NAB that in or about October or November 2011. Over that time she alleges that NAB represented to her that if she paid up all her arrears by 15 February 2012 then this would resolve all her issues with NAB regarding her loan. There is some documentary evidence on this topic. 52On 16 December 2011, by email, Ms Imber advised Ms Zhang: "I confirm that National Australia Bank will hold enforcement action on the basis that you to make payment of the arrears and enforcement costs in full, along with the instalment payment for December. The break down is as follows: Arrears as at today $34,661.10 Enforcements costs $5,286.49 December instalment Due 24 December 2011 $5,776.85

Total amount due by 4 January 2012 $45,724.44

Our client reserves its rights to proceed with enforcement action should the above payment not be made." 53On 5 January 2012, Ms Imber, by email, advised Ms Zhang as follows: "... The account has been reviewed today and we confirm that payment has not been received. We ask that you contact our office as a matter of urgency to discuss the payment of the amount outstanding. Should a response not be received by 12 January 2011 [sic], our client again reserves its rights to continue with enforcement action without further notice to you." 54Both parties agree that there was on 12 January 2012 a repayment proposal. However, the terms of the agreement are disputed. 55Ms Zhang's version of the agreement reached on 12 January 2012 appears in her email dated 1 February 2012 to Mr Testafredda at NAB. "I had conversation with your security (legal) department made the following agreement: 1 I will pay $30,000 to the loan before the 31 Jan 2012, 2 The bank will forward the title to land title's officer for subdivision propose. 3 The balance of $15,000 will be paid to the bank 15 Feb ..." 56At [25] of Ms Zhang's affidavit (Aff, 21/9/2013) she deposed: "At this stage the person I was speaking to on the telephone appeared to review my account and I had general conversation with him and it was during this conversation where words to the following effect were said: LZ: "I'm working in China at present and there is a difficulty transferring money across to the bank to get the arrears back on track." NAB REP: "When can you pay it back?" LZ: "Before 15 February 2012." NAB REP: "How can I stretch that, it's a few months away?" LZ: "I don't know, you work in there, is there anything you can do to assist me because I have difficulty to return to Australia before 15 February." NAB REP: "Why don't you apply for financial hardship." LZ: "That is a good idea." NAB REP: "If I approve this financial hardship you will not be able to borrow more money in the next few months. I think it is worth it for you because if helps you to fix this problem first." 57At [27] and [28] (Aff, 21/9/2013) Ms Zhang deposed that around mid January 2012, she received a telephone call from a person who used the name "Kieran" who informed her that he was from the National Australia Bank. She also received a text message from Kieran for her to contact him. She was in China and received the telephone call on her mobile. She and a conversation with this person in which words to the following effect were said: Kieran: I'm reviewing your accounts and your three months are almost up for your financial hardship, what is your plan." LZ: "No problem for me to pay, I'm coming back to Australia in February, ill pay it then. Why don't I pay you $30,000.00 up front and then release the consent and after that will pay you the rest." Kieran: "Okay." LZ: I will make the first payment of $30,000 by the end of January when 1 return as long as I can get the consent to sub-divide. I want to sub-divided the property I will then pay the rest on 15 February 2013 before 15 Feb." Kieran: "Make sure you pay back before 15 February, otherwise I have to pass to our legal department." 58As a result of the conversation with Kieran, it was Ms Zhang's understanding that she had until 15 February 2012 to finalise the payment but if she paid the first $30,000 earlier it would assist in her getting the consent that she wanted from the bank to allow the subdivision to proceed. 59On 12 January 2012, the bank records that an employee (unnamed) had a conversation with Ms Zhang as follows: "... ADV CUST THAT SHE WAS SUPPOSED TO PAY THE ARREARS IN THE FIRST WEEK OF JAN AS PER SUDE SH'S PREVIOUS NOTES, CUST ADV SHE WANTS TIM TILL END OF THE WEEK, ON 30/1 SHE WILL PAY 30000 AND THE REMAINING ARREARS AND JAN INST OF 16214 WILL HE PAID ON 15/2. BOTH PAYMENTS MADE IN BRANCH. I ADV WHAT ABOUT THE SERVICEABILITY GOING FORWARD, CUST ADV SHE WANTS TO EITHER SELL IT OR SUB DIVIDE IT. I ADV ACCT ALREADY IN LEGAL IF THE CURRENT ARRING NOT MADE THEN LEGAL WILL CONTINUE, CUST UNDERSTOOD. DEL OLD WN XX XXXX XXXX. CUST ALSO GAVE AN EMAIL ADD LYDIA_ZHANG@XXXX.COM. WILL MONITOR THE ARRANG. IF BROKEN WILL ADV LEGAL TO CONTINUE AT THE MOMENT ADV LEGAL TO HOLD THE ACCT. 60Ms Zhang asserts that she acted on those representations because on 10 February 2012 she made a payment of $45,000 to NAB on the faith of NAB's representation. She says that on 10 February 2012 Mr Testafredda from NAB, advised her that the account was in order and that she had solved her issue. She says that they also discussed what her future monthly repayments were likely to be, and she then made arrangements with her property agent to ensure that at least $5,000 would be paid every month to meet the mortgage repayments. Counsel for Ms Zhang submitted that all of this is consistent with NAB not taking any further action on the loan. I accept that what was said by Mr Testafredda in this conversation is disputed but for the purposes of this application, I will accept Ms Zhang's evidence. 61Ms Zhang has made payments of $45,000 and arranged for further payment of $7,000 on the Loan Account and at least $10,000 into her Cheque Account. She says she would not have arranged for all these payments to service the loan if she had known that NAB was going to proceed against her. However, these payments (assuming they were directed from her cheque account to her loan account) would not have kept her loan repayments up to date. 62Counsel for Ms Zhang submitted that in these circumstances, NAB's reliance on its strict legal rights to proceed with litigation (both in terms of obtaining orders for, in effect, substituted service and then default judgment) in the circumstances of having received the payment of $45,000 would be unconscientious. 63As to the matters which emerge from Ms Zhang's affidavits, NAB made the following submissions. 64It was a term of Ms Zhang's loan agreement that she make monthly repayments, initially interest only but subsequently (after the first 5 years of the loan) principal and interest. A failure to make a monthly repayment constituted a default event. Upon a default event occurring, NAB may give a default notice, requiring the default to be remedied within a certain period. Failure to comply with the default notice results in the entire amount owing under the loan becoming immediately due and payable. 65Ms Zhang failed to make monthly repayments in May, June, July and August 2011. NAB sent Ms Zhang a default notice on 11 August 2011. This required Ms Zhang to pay an amount of $11,553.70 within 31 days. 66Ms Zhang failed to comply with the default notice. On 6 October 2011, NAB's solicitors wrote to Ms Zhang, informing her that the entire amount owing under the loan was due and payable, and demanding payment of this within 7 days. 67Ms Zhang's defence is that she had $15,000 in her cheque account in May 2012, which she contends was sufficient to pay the $11,553.70 the subject of the default notice of 6 August 2011. The default arose in August 2011. She had to pay the sum of $11,553.70 in 30 days that is by 4 September 2011. She paid $14,500 by May 2012. 68She also gives evidence that she made a $45,000 repayment in February 2012. This is not in dispute. That payment is evidenced by the loan account statement, which shows a $45,000 payment into the loan account on 10 February 2012. 69She further gives evidence that this $45,000 payment was made pursuant to an agreement with NAB, although she does not then articulate how this constitutes a defence to NAB's claim. 70This assertion is entirely inconsistent with the contemporaneous evidence, both as adduced by Ms Zhang and by NAB. In particular: (a) On 16 December 2011, Ms Zhang was sent written advice that NAB would hold enforcement action on the claim provided Ms Zhang made a payment of $45,724.44 by 4 January 2012. (b) No payment was made by Ms Zhang by this date. (c) NAB's records disclose that on 12 January 2012 an officer in the bank's Collections department told Ms Zhang that she should pay $30,000 by 30 January 2012 and a further amount of $16,214 on 15 February 2012. (d) On 1 February 2012, Ms Zhang sent an email to Mr Testafredda (the manager at the Burwood branch of NAB), stating that she had agreed with the bank that she would pay $30,000 by 31 January 2012 and a further $15,000 on 15 February. This email also stated that Ms Zhang would only be able to make "full payment" on 15 February 2012 and asked Mr Testafredda to pass this request to the right department or person. (e) On 2 February 2012, the solicitors for NAB sent an email to Ms Zhang, noting that the account remained in arrears as no payment had been made as agreed, and stating that Kemp Strang was instructed to recommence the proceedings. 71On the evidence, the agreement with NAB was that Ms Zhang would pay $30,000 by 30 January 2012 (or perhaps 31 January 2012, on Ms Zhang's version), with a further amount (either $16,214 on NAB's version or $15,000 on Ms Zhang's version) to be paid on 15 February 2012. Ms Zhang did not comply with that. There can be no defence based on this agreement with NAB. In these circumstances, NAB submitted that Ms Zhang's application to set aside the default judgment should be dismissed. 72As previously stated, for the purposes of this application, I accept Ms Zhang's version that there was an agreement that Ms Zhang pay $45,000 by 15 February 2012 and that payment of $45,000 brought her payments up to date. So far as the alleged estoppel is concerned, it is difficult to discern how Ms Zhang acted to her detriment by paying the amount she was obliged to pay under the loan agreement. Even if I accept that somehow she did act to her detriment by paying what she owed, it has not been explained how the estoppel by representation covers her failure to make repayments since that date. 73Further, even on Ms Zhang's evidence there are no clear words that upon payment of the sum of $45,000, legal action would be finalised or that these proceedings would be withdrawn or dismissed. Ms Zhang knew that she had an ongoing obligation to make loan repayments but did not ensure that she complied with her obligations under the loan agreement. 74Ms Zhang (Aff, 21/9/2013 [50] also deposes that, "I believe I have a bona fide defence which I wish to seek legal advice and it includes the misleading and deceptive conduct of the NAB." There are no submissions or any pleading made in relation to misleading or deceptive conduct so this statement does not raise an arguable defence. 75It is my view that Ms Zhang does not have an arguable defence.

Prejudice and other matters 76So far as prejudice is concerned, Ms Zhang has not made repayments. She has filed three motions seeking that enforce action be stayed. NAB has had to meet two notice of motion seeking a stay in relation to the writ of possession. 77NAB submitted that so far as the Kent Street property is concerned Ms Zhang cannot contest the default judgment entered for its possession. Counsel for NAB submitted that an execution of the writ of possession means that, "as a matter of law, it is too late" and relied upon Perpetual Ltd v Kelso [2008] NSWSC 906 and JP Morgan Trust Australia Ltd v Bridge [2013] NSWSC 668. In Kelso, Johnson J at [15] stated: "[15] A further argument advanced by the Defendants is that they seek to be allowed in to defend the proceedings upon arguments identified in the affidavit, where it is said that the loan contract is, in various respects, unfair and unjust. In my view, the fact that the writ of possession has been executed and the Plaintiff has taken possession of the subject land means that, as a matter of law, it is too late for the Defendants to be seeking to be let back in to defend the proceedings." 78In JP Morgan Trust Australia Ltd v Bridge, Harrison J at [20] referred to Perpetual Ltd v Kelso and explained the rationale for the reasoning that after a writ of possession has been executed the default judgment could not be contested. It is: "20 It seems to me that the answer is to be found residing in the associated concepts of certainty and finality of judgments and orders of the courts. There is always power in the Court in a suitable case to grant the stay of execution of a judgment, even at the point where the writ for enforcement of the judgment or order has issued and where steps have been put in train in anticipation of it finally being executed. Once the writ has been executed, however, and practical effect has been given to the order of the Court, the force of the writ has been spent and the rights of the parties correspondingly subsist only in their respective legal and physical positions as the party in possession of the property on the one hand and the party who has been legally ejected on the other, together with all of, but only, the usual rights and obligations that come with those positions." 79On 4 December 2012, NAB took possession of the Kent Street property. I accept NAB's submission that the default judgment, in so far as it relates to the Kent St Property, cannot now be contested. It is too late to set aside the default judgment in relation to that property. 80Overall, I have not accepted that Ms Zhang has adequately explained her delay in filing a defence. Nor has she satisfied this court that she has an arguable defence. It is also my view that it is not in the interests of justice to set aside the default judgment. Ms Zhang's application to set aside the default judgment is refused.

Application under UCPR 36.15(1) 81The alternative ground on which Ms Zhang seeks to set aside the default judgment is UCPR 36.15(1). 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. 82There is no suggestion that the default judgment was entered illegally or against good faith. Ms Zhang relied on irregularity and submitted there were two irregularities that warrant the default judgment being set aside. 83NAB submitted that the mere existence of an irregularity would not necessarily require the Court to set aside the default judgment. Unless the defendant can show that they have a good arguable defence on the merits, the interests of justice will not be served by setting aside the default judgment. 84First, counsel for Ms Zhang submitted that the default judgment was entered irregularly because Ms Zhang was outside Australia at the relevant times and no leave was sought to proceed against her. 85As previously mentioned, Ms Zhang says that she was overseas from prior to the filing of the statement of claim up to 10 February 2012. She then returned to China on 18 March 2012. 86UCPR 11.4 provides: "If originating process is served on a defendant outside Australia, and the defendant does not enter an appearance, the plaintiff may not proceed against the defendant except by leave of the Supreme Court." 87NAB submitted that substituted or deemed service is not a form of actual service. It is, rather, an order made by the Court instead of service (ASIC v Sweeney (No 2) [2001] NSWSC 477 at [58]) and in the absence of any application to set aside the order for deemed service, it is not now open to Ms Zhang to argue that the ways in which the statement of claim was sought to be brought to her attention would not be proper service or would not, in fact, bring the matter to her attention. 88It is my view that as Ms Zhang had an address for service in Australia, a PO Box in Gordon, where service was ordered to be effected it was unnecessary for leave to be granted pursuant to UCPR 11.4. 89Second, counsel for Ms Zhang submitted that the order made on 22 March 2012 not complied with By Order 4 made on 22 March 2012, NAB was to send a copy of that order and a letter explaining its effect to Ms Zhang's address in China. Counsel for Ms Zhang submitted that this order was not complied with, in that order 4(b) specified the address to be "XX XXX XXX, Tiexi District Shen Yang City, Liaoning Province CHINA" but the address that the copy of the Court order and letter explaining its effect were instead sent to "XX XX XXXX, Texi District, Shen Yang City, Liaoning Province CHINA" (emphasis added). 90Counsel for Ms Zhang submitted that default judgment was entered irregularly because an order deeming personal service is an exceptional order, with serious ramifications, particularly if it is not strictly complied with to the letter. The purpose of making an order for submitted service is to ensure that the statement of claim is brought to Ms Zhang's attention. In my view, since November 2011 Ms Zhang was aware that there were legal proceedings against her. She admitted that she received the email attaching the statement of claim but says that she was unable to open the attachment. The fact that she was made aware of the statement of claim being served on her in these circumstances is sufficient. 91The third irregularity, that counsel for Ms Zhang is contained in the affidavit in support of default judgment where the particulars of default are recorded as being "non-payment of instalments totalling $11,553.70". However, counsel for Ms Zhang submitted that by payment of $45,000 on 10 February 2012, Ms Zhang had paid up those arrears. In my view this submission is incorrect. In Ms Kristina Fraser's affidavit of debt, she deposes that since the commencement of proceedings debits and/or credits have accrued as follows: Account Statement Item applied to loan Date item applied Debit Credit Account Balance Amount owing at commencement of proceedings as at 25/10/11 $830,311.66 Interest 31-Oct-1l $1,140.14 $0.00 $831,451.80 Interest 30-Nov-11 $4,788.25 $0.00 $836,240.05 Interest 31-Dec-11 $4,943.21 $0.00 $841,183.26 Interest 31-Jan-12 $4,972.43 $0.00 $846,155.69 Payment 10-Feb-12 $0.00 $45,000.00 $801,155.69 Interest 29-Feb-12 $4,323.13 $0.00 $805,478.82 Payment 1-Mar-12 $0.00 $5,000.00 $800,478.82 Payment 2-Mar-12 $0.00 $2,000.00 $798,478.82 Interest 30-Mar-12 $4,464.41 $0.00 $802,943.23 Interest 30-Apr-12 $4,487.68 $0.00 $807,430.91 Interest yet to be charged $2,336.02 $0.00 $809,766.93 Current Amount Owing as at 16 May 2012 $809,766.93

92The particulars of payment and the amounts owing are fully set out in the affidavit of debt. It is my view that there are no irregularities that warrant the setting aside of the default judgment. 93The result is that Ms Zhang's amended notice of motion filed 30 September 2013 is dismissed. 94Costs are discretionary. Costs normally follow the event. The defendant is to pay the plaintiff's costs as agreed or assessed.

The Court orders that: (1) The defendant's amended notice of motion filed 30 September 2013 is dismissed. (2) The defendant is to pay the plaintiff's costs as agreed or assessed. (3) The stay of the enforcement of the writ of possession of the Norfolk Street property is lifted.

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 October 2013

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