Perpetual Trustees Victoria Limited v Xiao [2012] VSC 65

For the Third Defendant by Counterclaim/First Third Party and for the Fourth Defendant by Counterclaim/Second Third Party

1 By a summons filed on 6 January 2012, Xiao Hui Ying (also known as Hui Ying Xiao), the defendant/plaintiff by counterclaim, sought an order:

That the Orders made on 14 December 2011 and Judgment in Default made on 15 December 2011 by the Honourable Justice Habersberger be set aside.

2 Although not stated in the summons, the application was made under r 49.02(2) of the Supreme Court (General Civil Procedure) Rules 2005 ("the Supreme Court Rules") to set aside the order made by me on 14 December 2011 dismissing Ms Xiao's counterclaim and the judgment given by me on 15 December 2011 allowing the plaintiff's claim for possession of the land situated at and known as 18 Frances Avenue, Vermont in the State of Victoria ("the Property"), on the ground that they were both made in the absence of Ms Xiao. The application was supported by an affidavit affirmed by Ms Xiao on 5 January 2012, and an affidavit in reply affirmed by Ms Xiao on 1 February 2012. The second of these affidavits was in response to an affidavit in opposition by the plaintiff's solicitor, Cathryn Prowse, sworn on 19 January 2012.

3 The summons was returnable before the Practice Court on 20 January 2012. In accordance with the normal practice, Judd J adjourned the summons to be heard by me as I was the Judge who made the orders sought to be set aside.

4 A very brief summary of the factual background is as follows. In 2009, the plaintiff commenced this proceeding against Ms Xiao seeking possession of the Property. The plaintiff alleged that Ms Xiao had mortgaged the Property to it in 2004 as security for a loan agreement between them pursuant to which the plaintiff had advanced moneys to Ms Xiao.

5 In her final amended defence and counterclaim, Ms Xiao:

(a) denied entering into the loan agreement and the mortgage and alleged that her signature had been forged;

(b) pleaded in the alternative that if she did mortgage the Property to the plaintiff she was under a special disability in dealing with the plaintiff by reason of many factors including her extremely limited ability to speak English and her inability to read or write English; and

(c) made claims for relief against the Registrar of Titles, the second defendant by counterclaim, the broker Capital Securities (Aust) Pty Ltd ("Capital Securities") and its sole director, Bernhard Seifert, the third and fourth defendants by counterclaim, and a solicitor, Harry Szmerling, the fifth defendant by counterclaim.

6 Ms Xiao's counterclaim against an accountant, Leslie Woodland, the sixth defendant by counterclaim, was dismissed on 4 November 2011 pursuant to a self-executing order of Daly AsJ made on 28 October 2011.

7 Ms Xiao's husband, Craig Fitzgerald, was joined as the seventh defendant to the counterclaim on the application of Mr Szmerling to enable him to take advantage of the proportionate liability regime.

8 The proceeding came on for trial before Whelan J on 21 November 2011. Ms Xiao was present in Court and was represented by a pro bono duty barrister who applied for an adjournment to enable Ms Xiao to obtain new solicitors and an interpreter. Ms Xiao relied in support of the adjournment application on an affidavit affirmed by her on 16 November 2011, which was in English and not interpreted. In that affidavit, Ms Xiao said that on 14 November 2011 she had asked her husband to instruct Mr Lim of the firm of Francis Lim Barristers & Solicitors, who had been acting as her solicitor, to cease acting "as a result of a number of difficulties" she had had with Mr Lim "over the conduct of the matter on my behalf". These "difficulties", it appeared from Ms Xiao's affidavit, related to the circumstances surrounding the dismissal of Ms Xiao's counterclaim against Mr Woodland.

9 Ms Xiao also supported her application for an adjournment by referring in her affidavit to an appeal in another proceeding said to be relevant to an issue in her proceeding, namely the question of agency between the plaintiff and Capital Securities. The appeal was said to be listed for hearing on 16 April 2012.

10 After the luncheon adjournment, Whelan J explained to Ms Xiao through a Mandarin interpreter, whose services had been arranged for and paid for jointly by the other parties, that he proposed to adjourn the hearing to 5 December 2011. He refused her request for a longer adjournment, telling her that if she did not have a lawyer by then, she would have to represent herself. His Honour also commented that:

one never says never but this trial is going on on 5 December 2011.

11 In her affidavit in support of the application to set aside the orders and judgment, Ms Xiao stated as follows:

In my Affidavit in support of my Application for an adjournment of the hearing listed for 21 November 2011, although I was sick with medical certificate issued by Dr Hancock certifying I am unfit until 15 January 2012, I did not produce it in Court. My reason was I was only concerned about getting a firm of Solicitors and Barrister to act for me and didn't understand the significance of and I felt self conscious and embarrassed to let the Court or other people know that I have ongoing physical conditions, depression and or psychological sickness.

As will be seen, this statement by Ms Xiao was not correct. The medical certificate she referred to was not issued by Dr Hancock until 1 December 2011, some ten days after the hearing before Whelan J.

12 On 1 December 2011 Ms Xiao engaged a Sydney firm of solicitors to represent her solely for the purposes of obtaining a further adjournment. By a summons filed on 2 December 2011 Ms Xiao sought to adjourn the trial on the ground that she was unwell. By the summons she also sought:

(a) leave to amend her defence and counterclaim to make a claim under ss 109 and 110 of the Transfer of Land Act against the Registrar of Titles;

(b) leave to proceed against the third defendant by counterclaim which was in liquidation; and

(c) leave to rely out of time on a report by a handwriting expert dated 30 November 2011.

13 Whelan J was part heard in another matter on 5 December 2011 so the trial was listed before me on that day. Neither Ms Xiao nor her husband were present in Court. Ms Xiao's counsel, who was only briefed to seek an adjournment, tendered a medical certificate dated 1 December 2011 from Dr Paul Hancock, Ms Xiao's general practitioner, in which he certified that she was "unfit for work" from 15 October 2011 to 15 January 2012 because she was suffering from "migraine/chronic tension headache". In the certificate Dr Hancock stated that he had seen Ms Xiao on 18 August 2011 and again on 1 December 2011.

14 Counsel also tendered a letter which Dr Hancock had written to Ms Xiao in which he relevantly said:

I confirm that Hui Ying Xiao suffers from debilitating migraine and chronic tension headaches. The condition has been particularly severe in recent times and is being further investigated with CT scan and neurological assessment.

I have been her treating doctor since 1998.

In my opinion she is not medically fit to present herself and her case before the court. She will be medically reviewed in early January 2012.

15 The summons filed on 2 December 2011 was rather overtaken by events in that on 4 December 2011 Ms Xiao was admitted to the Emergency Department of St Vincent's Hospital where she was, according to a document provided by St Vincent's Hospital and which was tendered by Ms Xiao's counsel, required to stay overnight for observation and investigations including blood tests and neurological imaging. She was discharged from the hospital to return home on the afternoon of 5 December 2011. A medical certificate signed by a hospital medical officer with respect to Ms Xiao certified that she would be unfit to follow her daily occupation from 4 December to 12 December 2011 inclusive, but would be able to resume her daily occupation on 12 December 2011. I read that as meaning that the dates when she was being certified as being unfit for her daily occupation were 4 December to 11 December 2011, and that she was fit to resume on 12 December 2011.

16 Because of the evidence relating to Ms Xiao's ill-health, at the request of her counsel I adjourned the hearing to 12 December 2011. I also gave directions concerning the orders sought in the summons so that the parties could be in a position to consider these issues at the start of the adjourned trial. It is sufficient for present purposes to indicate that Ms Xiao did not comply with any of the directions. In particular, she did not file and serve on any of the other parties any of the documents referred to in the proposed expert handwriting reports which had not already been discovered to those parties.

17 On 12 December 2011, Ms Xiao was again represented by a barrister appearing pro bono under the Victorian Bar Duty Barristers Scheme. Counsel sought another adjournment on the ground of Ms Xiao's continued ill-health. Neither Ms Xiao nor her husband were present in Court even though Mr Fitzgerald had been present in the court precincts earlier in the morning to arrange on behalf of his wife for counsel's assistance through the duty barrister scheme. Having learnt of these events, I did, through my associate, make contact with Mr Fitzgerald asking him to come to court in order to provide further information. He did not do so. As he said, it was not his application.

18 Counsel tendered a medical certificate dated 9 December 2011 from Dr Hancock in which he certified that she was "unfit for work" from 9 December 2011, the date of the consultation, to 23 December 2011 because she was suffering from "migraine, vomiting, electrolyte disturbance and dehydration".

19 Counsel also tendered a letter from a Dr Hancock in which he said that Ms Xiao had "recently been suffering from debilitating migraine with severe headache and associated vomiting". He mentioned that she had been referred to a neurologist for further investigation and treatment. He also said that on Sunday, 4 December 2011, Ms Xiao had become "particularly unwell with dizziness, weakness and fatigue" and had been admitted overnight into the Emergency Department at St Vincent's Hospital. Dr Hancock continued:

She was found to be suffering from dehydration and electrolyte disturbances, predominantly hypokalaemia (low blood potassium) probably related to vomiting associated with the migraine. She was treated with intravenous fluid and electrolyte replacement.

She remains debilitated and fatigued and has not yet completely recovered from that episode. Her immediate management consists of monitoring her electrolytes (ongoing blood tests), correction and maintenance of electrolyte imbalance and the neurology assessment. She is, in my opinion, medically unfit for work or for court attendance for the period 9/12/11 to 23/12/11.

20 The adjournment application was opposed by the other parties. It was submitted that the medical evidence was weak and untested. It was also submitted that the history of the proceeding indicated a pattern of manoeuvring by Ms Xiao and her husband to avoid the trial coming on for hearing. Finally, it was submitted that a further adjournment prejudiced all of the other parties, in particular the plaintiff, whose debt of nearly $1 million exceeded the value of the secured property of approximately $700,000. This potential deficiency also meant that costs orders in favour of the other parties would probably be unrecoverable.

21 I adjourned the trial to the following day. As part of the order I noted that:

any further application for adjournment of the trial on 13 December 2011 must be supported by medical evidence on oath with the doctor being available for cross-examination.

22 On 13 December 2011, Ms Xiao was represented by another pro bono duty barrister arranged that morning by her husband. Neither Ms Xiao nor Mr Fitzgerald were present in Court. As Dr Hancock had advised that he was not available to attend Court on that day, due to the short notice, but would be able to do so the following morning, I adjourned the trial to 14 December 2011.

23 On that date Dr Hancock did attend. Yet another barrister appeared pro bono under the Victorian Bar Duty Scheme on behalf of Ms Xiao to lead evidence from Dr Hancock and to seek an adjournment to the new year.

24 Dr Hancock said that Ms Xiao had a long history of what might be called chronic tension headache, but in recent weeks it had been more severe with classical migraine involving more severe debilitating headaches, nausea and vomiting. He had seen Ms Xiao on 1 December 2011 and given her the documents referred to in paragraphs 13 and 14 above. He had referred her for further tests but the events of 4 December 2011 had overtaken that step. Dr Hancock said that he had been provided with a report by St Vincent's Hospital which indicated that Ms Xiao was suffering from hypokalaemia or low blood potassium. Her reading, according to the tests performed at the hospital on her admission, was 2.9. Dr Hancock said that a normal person's level would be between 3.5 and 5.5. He said that he regarded the reading of 2.9 as clinically significant evidence of hypokalaemia. He said that in a very severe case, such a condition could lead to paralysis, but agreed in cross-examination that Ms Xiao's case was not in that category. The effects of her condition were that she would be tired, fatigued, would have difficulty concentrating and following the proceedings, and some difficulty moving. The common causes of such a condition were said by Dr Hancock to be vomiting, diarrhoea or use of diuretic pills. He also gave evidence that Ms Xiao had been treated at the hospital with intravenous fluids in order to replace the potassium deficiency and that the result of the tests carried out on her discharge from the hospital was that her level had increased to 3.2 or 3.3. The CT scan carried out at the hospital had not revealed any intracerebral pathology causing the worsening of headaches.

25 Dr Hancock said that he saw Ms Xiao again on 9 December 2011. He gave her the documents referred to in paragraphs 18 and 19 above. He maintained his opinion that she was unfit for work from 9 December to 23 December 2011. Dr Hancock said in cross-examination that Ms Xiao was better on 9 December than she was on 4 December 2011. He said that the prescribed potassium tablets should "in a fairly short period of time restore the imbalance" in Ms Xiao's potassium level. He agreed that when he saw Ms Xiao on 11 and 13 December 2011 she did not have a migraine, but explained that migraine was a fluctuating or relapsing condition and that she was still stressed, frail, debilitated and depressed. Dr Hancock's notes for those two consultations record that on 11 December 2011 Ms Xiao remained tired, fatigued, stressed and depressed, and that on 13 December 2011 the only reference was about a referral to a psychologist.

26 Dr Hancock also said in cross-examination that he had previously provided Ms Xiao with several three monthly unfit for work certificates and that he had seen Ms Xiao prior to 1 December only on 11 May and 18 August 2011.

27 The evidence-in-chief and cross-examination of Dr Hancock and the submissions concerning the application for an adjournment finished just before 1.00 pm on 14 December 2011. I indicated to the parties straight away that I had decided to refuse the application for an adjournment. I did so in order that Ms Xiao and/or her husband could be advised that the matter would be proceeding at 2.15 pm. In order not to delay matters further, at that stage I gave a very brief indication of my reasons for refusing the adjournment and indicated that I would expand on those reasons at a later date. I did so in my reasons for judgment given on 15 December 2011.

28 After the luncheon adjournment on 14 December 2011 I commenced the trial. There was no appearance by or on behalf of Ms Xiao. Accordingly, I granted the applications by counsel for the first, second, fourth and fifth defendants by counterclaim that the counterclaim against them be dismissed and made orders accordingly. This meant that the only parties remaining in the proceeding were the plaintiff/first plaintiff to third party notice, the second plaintiff to third party notice (who were both represented by the same firm of solicitors and counsel), the defendant and the second third party (who had also been the fourth defendant by counterclaim).

29 The trial continued the following day, 15 December 2011. On that day, after the conclusion of the plaintiff's case and hearing submissions, I gave judgment for the plaintiff for possession of the Property.[1] I also made an order dismissing the third party notice against the second third party.

30 As previously stated, Ms Xiao issued her summons to set aside the orders and judgment on 6 January 2012. In her affidavit in support of that application Ms Xiao gave an additional reason for terminating the services of her solicitors shortly before the trial was due to commence, namely, that she did not have the funds to meet Mr Lim's demand that she pay money into his trust account to cover the costs of an interpreter, Court transcript and handwriting expert. Mr Lim had agreed that he would wait one year for payment of his costs. Subsequently, sufficient funds were received to enable Mr Lim again to be instructed to act on behalf of Ms Xiao. In her principal affidavit Ms Xiao gave two different dates for receipt of the moneys to pay Mr Lim - "the fourth week of November 2011" and "on 19 December 2011".

31 However that may be, Ms Xiao said that "after some discussion" with Mr Lim "at his offices" on 23 December 2011 he agreed to act for her to apply to set aside the orders and judgment, and "if we are successful, he would also act for us at the hearing".

32 Rule 49.02(2) of the Supreme Court Rules provides as follows:

(2) The Court may set aside or vary any judgment, order or verdict obtained where a party is absent at the trial.

33 Mr Lim, who appeared on behalf of Ms Xiao, submitted that r 49.02(2) did not place any restriction on the matters that the Court may consider when it considered an application to set aside a judgment or order under that rule. Accordingly, the written outline of submissions listed the following grounds for setting aside the order and judgment:

(a) The Judgment made on 15 December 2011 was tainted by fraud, and

(b) With all due respect, it is submitted that the Defendant was denied natural justice because she was not afforded a fair trial on 14th and 15th December 2011 for the following reasons:

(i) the Defendant was not given the opportunity to properly present her defence and counterclaim because she was sick;

(ii) the Defendant was not given the opportunity to properly present her defence and counterclaim because of her low level of English and she was unable to obtain legal representation to present her defence and counterclaim which is complex in fact and law;

(iii) the Defendant was not given the opportunity to place before the Court credible evidence in support of her defence and counterclaim;

(iv) 2 of the witnesses who gave evidence may have perjured themselves because of paragraphs (i) to (iii) above;

(v) some credible evidence before the Court was not considered; and

(vi) the Court did not order other witnesses who had not given their evidence to leave the court room when a witness was giving evidence.

34 Mr Lim referred to the decision of the Full Court in Rosing v Ben Shemesh.[2] In that case, it was held that a County Court judge erred when he refused to set aside his judgment given in the absence of the defendant. At the trial the defendant's application for an adjournment had been refused. The learned trial judge also refused an adjournment until 2.15 pm to enable the defendant's solicitor to communicate with him as he could not be contacted by telephone. The Full Court held that the trial judge had erred in the exercise of his discretion in refusing the defendant's application to set aside the judgment on the ground that the defendant had failed to satisfy him that there was a bona fide issue to be tried.[3]

35 In its judgment, the Full Court followed the Court of Appeal decision of Grimshaw v Dunbar[4] in holding that the relevant considerations on such an application were:

(a) the reason why the party failed to appear when the case was heard;

(b) whether there had been any delay by the absent party in launching the application for a new trial;

(c) whether there was a bona fide issue to be tried; and

(d) whether the other party would be prejudiced by a new trial in any respect which could not be adequately compensated by a suitable award of costs and the giving of security.[5]

36 I note that in Grimshaw v Dunbar, Jenkins LJ had made the following comment with respect to the question of delay:

delay in itself would not be important, but delay prejudicing the other party, or delay enabling rights of third parties to intervene, would be most material.[6]

37 I also note that the third of the above considerations was expressed by Jordan CJ in Vacuum Oil Pty Co Ltd v Stockdale as:

whether any useful purpose would be served by setting aside the judgment.[7]

38 I indicated to Mr Lim at the outset of the hearing that I was prepared to proceed on the basis that Ms Xiao had raised bona fide issues which if accepted might give her a defence on the merits to the plaintiff's claim or might mean that her counterclaim against one or more of the defendants might succeed. I was well aware at the time I refused to adjourn the trial on 14 December 2011 that if Ms Xiao did not attend the trial, there would be no submissions in support of the serious issues of fact and law raised by her pleadings and reiterated by her counsel at the hearing on 5 December 2011. But this does not mean that I did not consider such issues in deciding that the plaintiff should have judgment for possession of the Property. Thus, in my reasons for judgment given on 15 December 2011 I considered and upheld an alternative submission from the plaintiff which led to the same outcome even though it was not dependent on any finding about the signing of the documents by Ms Xiao. In her first affidavit Ms Xiao denied sending or receiving the letters and emails in question. Thus, Ms Xiao raised bona fide issues about the merits of this reasoning as well.

39 I also agreed that there had been no delay on the part of Ms Xiao in commencing her application for a new trial. By virtue of r 3.04 of the Supreme Court Rules, the application was well within the 14 day period prescribed in r 49.02(3).

40 Thus, in this application the most important matter to consider is the reason why Ms Xiao failed to appear at the trial. None of the other parties sought to argue that Ms Xiao was not "absent at the trial". This was the correct position, in my opinion, because even though counsel was instructed to appear on the morning of 14 December 2011 to call evidence from Ms Xiao's general practitioner, Dr Hancock, and seek a further adjournment of the trial, this did not mean that Ms Xiao was present at the trial. As I understand it, counsel's instructions were limited to the making of the adjournment and accordingly she did not appear when the trial commenced immediately after the luncheon adjournment.[8]

41 Nevertheless, there is a very real question whether r 49.02(2) applies to a situation such as this, where a party fails to attend after an unsuccessful application for an adjournment. Counsel for the plaintiff submitted that primarily the rule provided a basis for setting aside a judgment where a party could demonstrate that it had no notice of the trial or had some other good reason for being absent from the trial and that it did not apply to a party who was aware of the date of the trial but chose not to attend.

42 In the case of In re Barraclough, decd,[9] Payne J referred to the then English equivalent of r 49.02(2) as relating to a decision where:

by mistake or by accident it had been given in the absence of somebody who genuinely wished to come to court and oppose it.[10]

43 That passage from the judgment of Payne J was referred to with approval by Oliver J in Midland Bank Trust Co Ltd v Green (No 3).[11] His Lordship gave as examples of the sort of circumstances where it was appropriate for the court to exercise its discretion where the failure to attend at the trial was due to "a genuine mistake" or "through illness". He contrasted those examples with the situation where the failure to oppose the judgment sought to be set aside was "attributable to the applicant's own informed and deliberate choice".[12] However, in the "very exceptional" circumstances of the case before him, his Lordship did set aside the judgment on the application of a defendant who was in contempt of court.[13]

44 In Conrea Nominees Pty Ltd v Doherty,[14] Southwell J held that the critical question in the application before him under r 49.02(2) was whether or not the applicants "knew of the hearing date". As his Honour held that there was knowledge of the hearing date, the application to set aside the judgment was refused.

45 In Adams v Cronin,[15] Winneke ACJ, with whom Phillips and Hayne JJA agreed, said as follows:

... a party who has judgment entered against him or her, in his or her absence, is given a right to move the court to set aside the judgment within 14 days (see O.49.02 (2) and (3)). However, the court, in the exercise of its discretion under this rule, will rarely set a judgment aside which has been properly entered against an absent party where that party, being aware of the date of the trial, has failed to attend at court (see Conrea Nominees Pty Ltd v Doherty ...)

46 I am satisfied that Ms Xiao knew on 14 December 2011 that her application for an adjournment of the trial had been refused and that the trial was proceeding in the afternoon. One would be entitled to infer that this information was conveyed to her or her husband by counsel instructed to appear in support of the application. Further, as mentioned in my reasons for refusing the adjournment, Ms Xiao's husband sent to my associate late that night an email attaching a report dated 14 December 2011 from Dr Helen Kalaboukas, a consulting psychologist, concerning Ms Xiao's state of health.[16] Mr Fitzgerald's email read:

This should have been made available to his Honour.

47 Finally, it is significant that in neither of her affidavits in support of the application did Ms Xiao suggest that she was unaware that the trial started once her adjournment application was refused. On the contrary, she said in the first of her affidavits:

I could not attend Court on the 12th to 15th December 2011 not because of any disrespect for the Court but because I was sick. With my very limited knowledge of the English language and my physical and psychological sickness which makes it difficult for me to concentrate, it would be impossible for me to follow and participate in a hearing without legal representation and a Mandarin interpreter.

48 In Brygel v Stoneham,[17] Batt J (as his Honour then was) accepted a plaintiff's explanation for his absence from the trial and set aside the judgment, even though the plaintiff knew the date of trial. His Honour said that the explanation brought the case "within the rare exception spoken of by Winneke ACJ"[18] in Adams v Cronin. The reason given by the plaintiff in his affidavit in support of the application was that "he was ill and in no fit condition to attend court". Batt J said that he was:

satisfied by the plaintiff on a narrow balance of probabilities that the reason for his non-attendance was that he was in truth ill.

His illness is not migrainous, so far as it appears to me from the evidence (except for one passing reference by the plaintiff), but one's knowledge of migraine enables one to understand the possibility that a person suffering a bout of a particular illness may find himself or herself unable to make decisions, to concentrate or even to communicate coherently in a way in which in hindsight the person can have confidence.[19]

49 An important point to note about both Brygel v Stoneham and Rosing v Ben Shemesh is that the application to set aside was supported by evidence which had not been before the judge who entered judgment in the absence of one of the parties. In Brygel v Stoneham, all that the trial judge, Hampel J, knew about the reason for the plaintiff's absence was that the plaintiff had telephoned the Court to say that he had a migraine and was not well enough to come to Court. Despite being informed that he must either appear or present some evidence to the Court to support an adjournment application, he did nothing. As described above, Batt J had before him an affidavit from the plaintiff concerning his illness. This was in contrast to the position of the trial judge who had stated when dismissing the summons that there was "no material before me to justify an adjournment".

50 Although it is not particularly clear, it seems that the Full Court in Rosing v Ben Shemesh regarded the defendant's affidavit in support of his application to set aside the judgment as raising fresh issues not brought to the attention of the judge at the trial. In particular, the defendant's affidavit referred to the fact that the plaintiff's affidavit of documents had only been served on either the morning of the hearing or the previous day. The Court stated:

It was clearly not available in time to enable defendant to make use of it, if the case was to be heard on the day fixed.[20]

51 Counsel for the plaintiff submitted that the application to set aside the judgment was in effect an abuse of process because Ms Xiao was doing no more than attempting to re-argue the grounds of the adjournment application.[21] It was for that reason that I suggested to Mr Lim that Ms Xiao should have appealed against my refusal of the adjournment rather than applying to me to set aside the orders and judgment. In my opinion, my decision was either correct or not and r 49.02(2) is not available for a party to attempt to re-argue the grounds of an unsuccessful adjournment application. However, Mr Lim submitted that the application was not simply a repetition of the earlier unsuccessful application because there was now material before the Court which had not previously been taken into account.

52 The first allegedly new piece of evidence relied on by Mr Lim was the report referred to in paragraph 46 above from Dr Kalaboukas. It read as follows:

I first saw Ms Xiao briefly in October 2008 with her husband regarding the financial problems they had at that time. Today I saw Ms Xiao again with her husband, Ms Xiao reported that she has been having financial and legal issues since 2006. According to the World Health Organisation's (WHO) International Classification of Diseases (ICD)-10th Edition, Ms Xiao is diagnosed with Major Depression Disorder (MDD), severe Anxiety and acute stress because:

• she has been suffering with severe insomnia,
• she has lost a considerable amount of weight, (more than 5 kilograms),
• she experiences anxiety and she suffers with severe headaches and dizziness,
• she experiences acute stress and worries about how much her whole life has irreversibly changer for the worst [sic],
• she is unable to go out and do her shopping,
• she is socially withdrawn and lives in isolation,
• she has lost pleasure in most things,
• she feels helplessness and hopelessness and has black and pessimistic views of the future.

In my professional opinion I don't think that Ms Xiao is currently able to stand in court as a witness. I believe that Ms Xiao will need long term psychological treatment in order to be able to overcome depression, anxiety and stress.

53 Mr Lim submitted that this uncontradicted evidence established that Ms Xiao was suffering from "Major Depression Disorder", a recognised sickness, which had not been considered or taken into account by the Court in refusing to adjourn the trial.

54 In my opinion, the report from Dr Kalaboukas was not fresh evidence. As explained above, it was received by my associate late on 14 December 2011 and referred to in Court on the following morning. At that time, I considered whether the letter changed anything and decided that it did not. The suggestion that Ms Xiao was suffering from depression was not new. Dr Hancock had referred to depression when giving evidence on 14 December 2011. It was mentioned in his oral evidence and was referred to in his note of his consultation with Ms Xiao on 11 December 2011.

55 As I said in my reasons for refusing the adjournment concerning receipt of the letter from Dr Kalaboukas:

In the circumstances, no further application having been made on behalf of Ms Xiao that the trial should not proceed, I decided to continue with the hearing.[22]

What Dr Kalaboukas ... did not know was that Ms Xiao was apparently able to attend court before Whelan J on 21 November 2011 and to give evidence through an interpreter about why she no longer had a lawyer acting and why she needed an adjournment[23]

Dr Kalaboukas, who has diagnosed Ms Xiao as suffering from Major Depression Disorder, had not, prior to yesterday, seen her since October 2008.[24]

56 Mr Lim tendered a further letter from Dr Kalaboukas dated 6 February 2012 in which she said:

Further to my letter dated 14/12/2011, I saw Ms Xiao today. I am of the opinion that she has not shown any improvement during the last seven weeks. In addition Ms Xiao has reported that she experiences reduced energy and fatigue and difficulties in concentration.

In my professional opinion I believe that Ms Xiao is currently unable to stand in court as a witness I believe that Ms Xiao will need long term psychological treatment in order to be able to overcome depression, anxiety and stress.

57 However, Mr Lim only relied on this letter as evidence in support of a submission that if the judgment were set aside, the proceeding should not be re-fixed for trial for at least two or three months. In any event, this letter added nothing to what the Court already knew from Dr Kalaboukas' earlier report.

58 The second allegedly new piece of evidence relied on by Mr Lim were the two reports by the handwriting expert, in which he stated that the signature on the mortgage of the property was not written by Ms Xiao and that it was highly probable that the signatures on other relevant documents were not written by Ms Xiao. Mr Holland had examined the original of the mortgage but only photocopies of the other documents.

59 In my reasons for judgment given on 15 December 2011 I said:

I do know by virtue of applications that were made on 5 December that one step that had been taken by the defendant was the obtaining of an expert handwriting report. However, that report was not in evidence before me and no witness was called to give any evidence about those signatures. In the absence of any such evidence and in the absence of any evidence from Ms Xiao that this was not her signature on the loan or the transfer or the statutory declarations, it would be a very bold conclusion to reject the evidence of Mr Seifert and Mr Woodland. Each of them would know in giving the evidence that they did that they would be exposing themselves to possible prosecution for perjury if that evidence was false. In addition I bear in mind the statement in Briginshaw v Briginshaw that a court should not lightly make adverse findings about people without proper proofs. Therefore, I am not prepared to make such a finding for the reasons I have given. Indeed, as I have said, I accept their evidence.[25]

60 Thus, although it may be correct to describe Mr Holland's reports as fresh evidence, they do not add to the evidence concerning the reason why Ms Xiao failed to appear at the trial. Instead, this evidence goes to the question of defence on the merits and, as stated above, I was prepared to assume in Ms Xiao's favour that there was an arguable defence.

61 Therefore, I have concluded that the parties other than Ms Xiao were correct in submitting that the Court should not be satisfied that Ms Xiao had given an adequate reason for failing to appear at the trial. No new evidence concerning Ms Xiao's health was presented. Rather, the submissions on this point were simply a repetition of the submissions unsuccessfully made in support of the adjournment application. In my opinion, there was nothing which should cause me to reconsider my refusal of the adjournment and it would be quite wrong if I were now to reach a different conclusion on the same evidence.

62 There remains the fourth consideration listed in Rosing v Ben Shemesh, namely, whether the other party would be prejudiced by a new trial in any respect which could not be adequately compensated by a suitable award of costs and the giving of security.

63 The prejudice to the other parties as a result of a further adjournment of the trial had been an important factor in my decision to refuse the application for an adjournment on 14 December 2011. As I said in my reasons for granting an adjournment on 12 December 2011, which I referred to and incorporated in my reasons given on 15 December 2011, each of the parties, apart from Ms Xiao and Mr Fitzgerald, were suffering prejudice each time the trial was adjourned.[26] Because of the dire financial position of Ms Xiao, any order for costs against her was not going to be of any benefit to those other parties in the event that the plaintiff was successful in the claim for possession.

64 Even the plaintiff was potentially prejudiced by an adjournment because its alleged debt was now well and truly in excess of the value of its claimed security, so that an order for costs in favour of the plaintiff only added to the amount which it was extremely unlikely to recover from Ms Xiao even if it obtained a judgment for possession of the Property. In addition, not only was the alleged debt increasing each day the trial was delayed, Ms Xiao and her husband were also benefiting from the delay in that they continued to live in the Property even though nothing had been paid in reduction of the debt since May 2009.

65 Further, an adjournment was likely to prejudice the position of the third defendant to the counterclaim and the fifth defendant to the counterclaim in other ways. They were both professional people, against whom serious accusations had been made. Delay would only increase the stress and tension they felt as a result of their involvement in the litigation.

66 Thus, it seems to me that there is no way in which the other parties can be adequately compensated for the costs thrown away if an order is made setting aside the orders and judgment.

67 This means that Ms Xiao has not satisfied either the first or the fourth of the relevant considerations set out in Rosing v Ben Shemesh. Accordingly, after weighing up the competing considerations, I consider that it would not be in the interests of justice to grant the application.

68 There were, however, other grounds listed in the written outline of submissions filed on behalf of Ms Xiao, although some were hardly referred to in argument. As set out in paragraph 33 above, ground (a) was that "the Judgment made on 15 December 2011 was tainted by fraud". Presumably this was a reference to the evidence of Mr Seifert and Mr Woodland that Ms Xiao signed documents in front of them. A related ground was ground (b)(iv), namely that Ms Xiao was "denied natural justice because she was not afforded a fair trial ... [because] 2 of the witnesses who gave evidence may have perjured themselves ..."

69 However, Ms Xiao's denial that she signed any documents was evidence that was available at the trial but was not given because she did not appear. Clearly, therefore, this is not a case of fresh evidence not available at the original trial notwithstanding the exercise of reasonable diligence.[27] Moreover, resolution of the conflict between the witnesses and the deponent, none of whom have been cross-examined, was not possible on this application. As stated previously, I proceeded on the basis that Ms Xiao had raised bona fide issues by her affidavits.

70 Mr Lim indicated that another contemplated course of action open to Ms Xiao was to bring a separate proceeding alleging that the judgment had been obtained by fraud and perjured evidence. I say nothing as to the merits of such a step. It is sufficient for present purposes simply to conclude that neither ground supported setting aside the orders and judgment under r 49.02(2).

71 Next, ground (b)(v) stated that there had not been a fair trial because "some credible evidence before the Court was not considered". Mr Lim submitted that the Court was in error in not having regard to the reports of the handwriting expert. He described them as having been "tendered". In my opinion, those reports were not in evidence at the trial. The fact that Ms Xiao's counsel handed up those reports when he applied, at the hearing on 5 December 2011, for leave to rely on those reports out of time did not make them evidence at the trial. No ruling was made on that application because it was deferred, until 12 December 2011, pending Ms Xiao serving on the other parties the documents referred to in the reports which had not already been discovered to those parties. More importantly, no one appeared at the trial seeking to tender the reports of the handwriting expert, Mr Holland. At the very least, this would have involved the calling of Mr Holland so that he could be cross-examined.

72 Mr Lim submitted that even if a document was not properly tendered in court if it was relevant it should still be considered by the court and if it was not there had not been a fair trial. He referred to the decision of the New South Wales Court of Appeal in Hodder Rook & Associates Pty Ltd v Genworth Financial Mortgage Insurance Pty Ltd[28] as support for this proposition. In my opinion, the facts in that case were quite different. Young JA, with whom Beazley JA and Handley AJA agreed, held that the learned trial judge had erred in refusing to allow the appellant to rely on two expert reports because of initial non-compliance with the Expert Code of Conduct, despite the fact that the respondent had not advised the appellant that the supplementary reports of its experts would be the subject of objection and that the opposing experts had held two joint conferences[29] and the joint report was in evidence.[30] This meant that there was not a fair trial because "there were not the materials before the court for a proper adjudication".[31] However, unlike the present case, the appellant had appeared at the trial and unsuccessfully sought to rely on the expert reports. In my opinion, therefore, the decision of the Court of Appeal does not affect the conclusion I reached in the previous paragraph.

73 Ground (b)(vi) was that there had not been a fair trial because "the Court did not order other witnesses who had not given their evidence to leave the court room when a witness was giving evidence". In my opinion, this ground was misconceived because normally the Court only makes an order such as this on the application of one of the parties and no such application was made. Moreover, the evidence was not of such a nature that the Court, in the exercise of its discretion, would have been justified in making an order of its own motion.[32]

74 This leaves grounds (b)(i), (ii) and (iii) which are to the effect that Ms Xiao was denied natural justice and not afforded a fair trial because the refusal of the adjournment application meant that she did not have the opportunity to properly present her defence and counterclaim because she was sick, could not speak or understand English, and was unable to obtain legal representation.

75 It is true that the effect of my refusal of the adjournment application is that, unless overturned on appeal, Ms Xiao will not have presented her evidence and arguments about why the plaintiff's claim should not succeed. But that is the result of her choosing not to attend the trial for reasons which I have, rightly or wrongly, not regarded as sufficient given the prejudice to the other parties of again adjourning the trial. In my opinion, she did have the opportunity to present her defence and counterclaim, albeit under difficulties, but she chose not to attend Court and attempt to do so. The language problem could have been overcome if Ms Xiao had taken up the offer by the other parties to pay for an interpreter if the trial proceeded with Ms Xiao present. At the very least Ms Xiao could have given evidence at the trial denying she signed any of the documents or had anything to do with the loan agreement. She could also have called Mr Holland to give evidence about the signatures.

76 The summons filed on 6 January 2012 also sought a stay of execution of the orders and judgment. However, on reflection Mr Lim agreed with my suggestion that the question of a stay was a matter for the Court of Appeal should any appeal be brought from one or both of my decisions. Therefore, I did not have to consider whether or not a stay should be granted.

77 In my opinion, for the reasons given above, the application to set aside the orders made on 14 December 2011 and the judgment given on 15 December 2011 should be dismissed. I will hear from the parties on the question of costs.

[1] Perpetual Trustees Victoria Limited v Xiao [2011] VSC 680.

[2] [1960] VicRp 28; [1960] VR 173.

[3] [1960] VicRp 28; [1960] VR 173, 176 (Herring CJ, O'Bryan and Dean JJ).

[4] [1953] 1 QB 408 (Jenkins and Morris LJJ and Roxburgh J).

[5] [1960] VicRp 28; [1960] VR 173, 176-177 (Herring CJ, O'Bryan and Dean JJ).

[6] [1953] 1 QB 408, 415.

[7] (1942) 42 SRNSW 239, 243.

[8] Crotty v Clarke (1896) 22 VLR 594, 606 (Williams, Holroyd and Hood JJ); Linprint Pty Ltd v Hexham Textiles Pty Ltd (1991) 23 NSWLR 508 (Kirby P, Samuels and Clarke JJA).

[9] [1967] P 1.

[10] [1967] P 1, 11.

[11] [1979] 1 Ch 496.

[12] [1979] 1 Ch 496, 503.

[13] [1979] 1 Ch 496, 505-506.

[14] Supreme Court of Victoria, Southwell J, unreported 22 July 1992, BC9203273.

[15] Supreme Court of Victoria Court of Appeal, Winneke ACJ, Phillips and Hayne JJA, unreported 6 September 1996, BC9604401, p 7.

[16] [2011] VSC 680, [22].

[17] Supreme Court of Victoria, Batt J, 4 April 1997, BC9701264.

[20] [1960] VicRp 28; [1960] VR 173, 175 (Herring CJ, O'Bryan and Dean JJ).

[21] DA Christie Pty Ltd v Baker [1996] VicRp 89; [1996] 2 VR 582.

[22] [2011] VSC 680, [24].

[23] [2011] VSC 680, [23].

[24] [2011] VSC 680, [24].

[25] [2011] VSC 680, [29].

[26] [2011] VSC 680, [5].

[27] McDonald v McDonald [1965] HCA 45; (1965) 113 CLR 529 (Barwick CJ, Kitto, Taylor, Menzies and Windeyer JJ).

[28] [2011] NSWCA 279 (Beazley and Young JJA and Handley AJA).

[29] [2011] NSWCA 279, [65].

[30] [2011] NSWCA 279, [67].

[31] [2011] NSWCA 279, [71].

[32] R v Bassett [1952] VicLawRp 75; [1952] VLR 535, 539 (Lowe, Martin and Barry JJ); Moore v Registrar of Lambeth County Court [1969] 1 All ER 782, 783 (Edmund Davies LJ).