Plaintiff v Defendant

2 The plaintiff relied upon an affidavit of service of Thomas Banfield affirmed on 28 September 2023, an affidavit of the plaintiff's solicitor, Julia Stewart, sworn 28 September 2023, and an affidavit of Peter Xu affirmed on 27 June 2023 that was previously relied upon in support of the plaintiff's earlier successful substituted service application.

3 The plaintiff also relied upon an outline of submissions filed on 30 September 2023, and revised outline of submissions that was provided to the court shortly before the hearing today and corrected two minor matters.

5 The principal amount alleged to be owing is $277,012.01 (Principal Amount). It is alleged in the statement of claim that it was a term of the underlying goods supply agreement between the plaintiff and ABC Manufacturing Pty Ltd (ABC) (Supply Agreement) that was the subject of the defendant's guarantee in favour of the plaintiff, that interest would accrue on overdue payments under the Supply Agreement at a rate of 4% above the rate prescribed by the Penalty Interest Rates Act 1983 (Vic) from time to time (Contract Interest Rate).

6 At all relevant times the penalty interest rate prescribed under the Penalty Interest Rates Act 1983 (Vic) has been 10% per annum.

7 In other circumstances the administrative step of seeking to enter judgment in default of appearance would be taken by the plaintiff through the Prothonotary in accordance with the Rules without first making an application to the Court for leave to take that step. However, this proceeding is managed by a Commercial List Judge, so r 2.07(1) of ch II of the Rules of the Supreme Court - being the Supreme Court (Miscellaneous Civil Proceedings) Rules 2018 (Vic) - is engaged. It may be noted that this rule is also expressly referred to in r 21.01(2) of the Rules.

8 Paragraph 16.5 of Commercial Court Practice Note SC CC 1 reinforces the position by providing that judgment may not be entered administratively in a proceeding within a Commercial List unless the List Judge gives leave to do so.

9 When introduced, each of these requirements was primarily based upon case management, cost and efficiency considerations, including preventing what is colloquially known as 'snapping on' judgment in default. That said, the requirements do not otherwise alter the essentially administrative process for entering judgment where leave is granted to pursue that course, or change the character of the act of the Prothonotary in entering judgment in default.

10 It follows from the above that, before the plaintiff can seek to enter judgment in default of appearance pursuant to rr 21.01 and 21.03 of the Rules, it is necessary for it to obtain an order from the Court granting it leave to take that step, which is what the plaintiff seeks in this application made by summons filed 30 September 2023.

11 If leave is granted, it will then be open to the plaintiff to utilise the procedures under rr 21.01 and 21.03(1)(a) of the Rules to seek to enter judgment in default of appearance through the Prothonotary in the usual way.

12 For the reasons that follow it is appropriate to grant the plaintiff leave to enter judgment in default of appearance against the defendant for the Principal Amount, together with interest at the Contract Interest Rate from the commencement of the proceeding until the date of entry of judgment, and costs.

13 Having regard to the content of the affidavits referred to above I am satisfied that the writ and statement of claim (and related documents and notices) were served on the defendant on 4 August 2023 as permitted and required by the substituted service orders made on 25 July 2023 by Judicial Registrar Caporale.

14 The summons and supporting materials were also sent to the defendant at the email address the subject of the substituted service orders even though the defendant has not filed an appearance. The Court was informed by the plaintiff's solicitor that no response regarding the application or other relevant communication had been received from the defendant and that neither the plaintiff nor its solicitors have received a notice of appearance from the defendant.

15 The fact that no notice of appearance has been filed by the defendant is consistent with the search of the court file carried out by my chambers immediately before the hearing of this application. The matter was also called inside and outside the courtroom before the hearing and there was no appearance for the defendant. A file search by the Prothonotary will also take place in accordance with the requirements of r 21.01(3)(a) of the Rules prior to the entry of default judgment pursuant to the leave granted by this ruling.

16 As I noted in Victorian WorkCover Authority v White & Anor,[1] it is well established that where there has been no appearance filed, or where there is no defence to a statement of claim,[2] each of the allegations in the statement of claim is taken to be admitted, with the defendant being treated as though they had not defended the claim at all.[3]

17 In Yang v Finder Earth Pty Ltd,[4] the Court of Appeal observed that, where for any reason the contingency of judgment in default is to be anticipated in respect of what is said to be a claim against a defendant for a debt, '... the pleader must take care to ensure that any claim for the recovery of a debt is clearly pleaded as such. As in every case, care must be taken to ensure that all of the material facts necessary to establish the cause(s) of action are pleaded'.

18 In the context of the operation of r 21.03 of the Rules, the same observation may also be made in relation to claims for the recovery of damages or the recovery of property.

19 That said, and as was referred to by the Court of Appeal,[5] the courts do not take an unduly technical or restrictive approach to pleadings.[6]

20 As noted, the plaintiff's claim is for an alleged debt (together with interest and costs) due and payable pursuant to the defendant's guarantee of the payment obligations under the Supply Agreement between the plaintiff and ABC. The defendant is alleged to have been a director of ABC at all relevant times.

21 Upon a review of the statement of claim in a manner consistent with the approach earlier referred to, and taking into account the observations of the Court of Appeal in Yang v Finder Earth Pty Ltd,[7] it is evident that the existence and terms of the Supply Agreement and guarantee, and the debt, interest and costs obligations of the defendant are sufficiently pleaded. Among other things it is alleged that:

(a) there were terms of the Supply Agreement that interest would accrue at 4% above the rate prescribed by the Penalty Interest Rates Act 1983 (Vic) and that the plaintiff may recover from ABC all legal costs and expenses incurred by the plaintiff in collecting payments that are overdue;

(b) as at the date of the issue of the writ the principal amount outstanding under the Supply Agreement was $277,013.01, and that interest on that amount has accrued at the Contract Interest Rate from 16 February 2023;

(c) legal costs have been incurred and are continuing to be incurred in seeking to recover the Principal Amount together with interest;

(d) the defendant entered into a guarantee with the plaintiff pursuant to which the defendant guaranteed payment to the plaintiff of all amounts due under the Supply Agreement;

(e) in January 2023 the plaintiff made a demand under the guarantee for payment of all amounts owing under the guarantee; and

(f) the defendant is liable to pay to the plaintiff the Principal Amount together with interest calculated at the Contract Interest Rate, and costs.

22 The court was responsibly informed during the hearing that the principal amount referred to in the statement of claim was overstated by one dollar. For present purposes this is immaterial, noting also that the amount in respect of which leave is sought and is to be granted is the lower amount, being the Principal Amount of $277,012.01 defined earlier in these reasons.

23 I am satisfied that the claim against the defendant has been sufficiently pleaded as a debt claim. Consistent with the observations made earlier, the allegations in the statement of claim are taken to be admitted by the defendant because the defendant has not filed an appearance. He is therefore to be treated as though he has not defended the claim at all.

24 I add for completeness that it is also the case that the claim in the statement of claim is not in any way framed as a claim for damages so as to engage r 21.03(b) of the Rules.

25 In the circumstances it is therefore appropriate to grant leave to the plaintiff to seek to enter judgement in default of appearance through the Prothonotary in the ordinary way. In this context it is desirable to keep in mind the observation of McInerney J in The City Mutual Life Assurance Society Ltd v Giannarelli,[8] that '... the entry of judgment in default of appearance by the Prothonotary is an act of "ministerial character" ... and cannot be regarded as being, or as being equivalent to, a judge in the exercise of powers committed to him [or her or they] in relation to the trial.'[9]

26 Given the character of the act of entering judgment in default of appearance by the Prothonotary, it is of course not appropriate for the court itself to give judgment in this hearing in respect of all or any of the amounts claimed.

27 Subject to addressing the precise terms of the orders with the solicitor for the plaintiff, I propose to make an order in favour of the plaintiff to the following effect:

The plaintiff has leave pursuant to r 2.07 of Chapter II of the Rules of the Supreme Court - being the Supreme Court (Miscellaneous Civil Proceedings) Rules 2018 (Vic) - to seek to enter judgment in default of appearance against the defendant pursuant to rr 21.01 and 21.03(1)(a) of the Rules for:

(a) the Principal Amount, namely $277,012.01;

(b) interest on the Principal Amount at 14% per annum from the date of the commencement of the proceeding on 4 April 2023, until the entry of judgment in default against the defendant;[10] and

(c) costs in accordance with r 21.03(2) of the Rules.

28 As to the calculation of interest and the amount to be claimed with respect to costs, these should be left for the plaintiff to calculate and deal with through the Prothonotary in the usual way when seeking to enter default judgment against the defendant.

[1] [2021] VSC 458, [13]-[14].

[2] Including where a defence has been struck out and there is no grant of leave to re-plead.

[3] See, for example, the decision of the Court of Appeal in Yang v Finder Earth Pty Ltd [2019] VSCA 22, [24] (Maxwell P, Tate and Emerton JJA). See also Kirk v PBP Accounting Solutions Pty Ltd [2015] VSC 173, [20] (Macaulay J).

[4] [2019] VSCA 22, [7] (Maxwell P, Tate and Emerton JJA).

[5] When referring to aspects of the reasons at first instance and Thomson v STX Pan Ocean Co Ltd [2012] FCAFC 15 in Yang v Finder Earth Pty Ltd [2019] VSCA 22 (Maxwell P, Tate and Emerton JJA).

[6] I also refer more generally to my observations regarding pleadings set out in Business Service Brokers Pty Ltd v Optus Mobile Pty Ltd & Ors. [2021] VSC 310, [16]-[22].

[7] [2019] VSCA 22 (Maxwell P, Tate and Emerton JJA).

[8] [1977] VicRp 53; [1977] VR 463, 469.

[9] See also Bass Coast Council v Hollole [2017] VSC 803, [1] (Mukhtar AsJ).

[10] Which is the period referred to in r 21.03(1)(a) of the Rules.