Plaintiff v Third Defendant [2026] VSC 36 | Case summary

On 9 September 2020, the plaintiff says that it entered into a loan agreement with the third defendant and Mr Tongliang Li ('Mr Li') ('September Loan Agreement'). The agreement was in writing. It provided that the plaintiff would lend the sum of $400,000 to the borrowers, namely: the third defendant and Mr Li. The principal was to be repaid by 9 November 2020. Interest on the loan amount was 10% per month for the period of the loan (in other words $80,000). According to the terms of the agreement the interest of $80,000 was to be paid up front and deducted from the amount to be paid to the borrowers, such that $320,000 was to be repaid by the plaintiff to the borrowers at the conclusion of the term.
The agreement provided that the borrowed funds were to be transferred from the plaintiff to the trust account of Hiways Pty Ltd ('Hiways' or 'the seventh defendant') the firm of solicitors who prepared the loan documentation for the plaintiff. Upon the transfer of the funds to the trust account, the borrowers became liable for repayment.
The agreement provided that each of the borrowers were jointly and severally liable to repay the loan.
The loan was secured by a guarantee given by the third defendant's wife[2] and second mortgages over properties in Box Hill, Truganina and Deer Park.

Plaintiff v Third Defendant [2026] VSC 36 | Case summary | Zoe

[4]

On 9 November 2020, the date for repayment under the September Loan Agreement, the loan had not been repaid.
On 10 November 2020, according to the plaintiff, the third defendant and his wife proposed to the plaintiff that the obligation to repay the loan given under the September Loan Agreement be transferred to another borrower, the first defendant.
On 13 November 2020, the first defendant and his wife[3] entered into a written loan agreement with the plaintiff ('November Loan Agreement').
The effect of the November Loan Agreement was to pass the debt under the September Loan Agreement to the first defendant and his wife, and render the third defendant and his wife guarantors.
Although the terms of the November Loan Agreement describe the arrangement as one in which the plaintiff agreed to lend $400,000 to the first defendant, the plaintiff paid no additional funds to the credit of the first defendant. The first defendant, in effect, assumed liability for the repayment of funds already paid under the September Loan Agreement, and liability for the payment of interest on that sum, but at different rates of interest as specified in the November Loan Agreement. No explanation was given for the first defendant's willingness to assume the obligation of repaying a debt incurred by others under the September Loan Agreement.
The period of the loan was five months from the date of the November Loan Agreement, with interest payable at a rate of 6.5% per month for the period of the loan. Failing payment of the interest, the November Loan Agreement fixed a rate of 5% per month on any unpaid interest. Failing repayment of the principal, the agreement required the first defendant to pay interest at 10% per month on the unpaid principal.
The documentation for the November Loan Agreement was also prepared by Hiways.
The third defendant and his wife personally guaranteed the loan under the November Loan Agreement. Security was also provided under the November Loan Agreement in the form of second mortgages over the same Box Hill property given as security under the September Loan Agreement and another property in Templestowe.[4]
The first and third defendants became jointly and severally liable to repay the loan (as borrower and guarantor, respectively).
The loan under the November Loan Agreement was repayable by 13 April 2021.
During the period of the loan, the plaintiff received $104,000 in part payment of interest due, but no repayment of any principal.

[36]

At the commencement of the hearing on 17 June 2025, the plaintiff informed me that it intended to seek final orders on the summons on that day against both the first defendant and third defendant. The plaintiff then informed me that the third defendant was present in court.
The third defendant appeared in person and without legal representation. He is of Chinese background and appeared to comprehend some English at a conversational level but had difficulty digesting the procedural and substantive issues. He did not have an interpreter.
When asked why he had not participated in the hearing up to that point, the third defendant said (as I understood him) that he had been aware of the proceedings, that he had received the materials which had been sent to him, but that he had understood that it was not necessary for him to attend. He said that he did not understand the claims made against him and was not sure whether he should contest the plaintiff's action.
The plaintiff made clear that despite the presence of the third defendant in court, it nonetheless sought to proceed with its application for final relief, but accepted that a short adjournment would be required.
Before adjourning the hearing, the plaintiff informed me that it had received some payments as part of the settlement of its other claims in the proceeding. The plaintiff foreshadowed its intention to rely upon the further affidavit of Mr Yang dated 14 May 2025, which contained various calculations seeking to bring to account payments which had been received by the plaintiff in the process of settling proceedings with other defendants. The Court was informed that the terms of settlement under which the plaintiff had received some payments were confidential. The plaintiff sought orders that the affidavit of Mr Yang dated 14 May 2025 be marked confidential pursuant to rr 28.05 and 28A.17 of the 2015 Rules until further order. I indicated that I would make those orders pending further consideration of the material in the context of the application.
On 18 June 2025, I made orders confirming the orders I pronounced at the conclusion of the hearing on 17 June 2025:

[44]

The plaintiff submitted that both the first and third defendants are liable for the costs of these proceedings on an indemnity basis under the loan agreements.
The plaintiff encouraged me to ignore the statement emailed by the third defendant ('the statement') on the basis that he had not complied with the orders of the Court by filing it out of time, and had failed to attend the hearing. In the alternative, the plaintiff submitted that, even if I were to have regard to the statement, the statement contains an admission supporting the plaintiff's case that the third defendant signed the agreements. The plaintiff submitted that taken at its highest, the statement raised complaints which are not directed to the plaintiff's conduct, but at others who the third defendant could have pursued separately. The plaintiff also submitted that the third defendant's statement includes allegations against former parties to the proceeding with whom the plaintiff has now settled and that if the third defendant were allowed to proceed it would give rise to considerable prejudice to the plaintiff.
The plaintiff properly assumed the responsibility of pointing out matters might be argued by the first and third defendants, had they been present. In that vein, the plaintiff submitted that it was open for this Court to characterise the interest clauses contained in the agreements as penalties. The plaintiff accepted that it was open to me to make that finding and that it would follow upon such a finding that the interest clauses would be unenforceable against the defendants. While the plaintiff does not expressly abandon its claims to interest calculated under the agreement, the plaintiff's solicitor properly accepted that he could not make any submission in defence of the clauses and that they are in the nature of a penalty. The plaintiff submitted that if the Court were to find that the interest clauses in the loan agreements are penalties, then the plaintiff would nonetheless be entitled to claim statutory interest on the unpaid principal.
As to the total amount of the plaintiff's claim, there was a further complicating feature. As already discussed, in reaching settlement with the remaining parties, the plaintiff received payment of some monies. The plaintiff submitted that the rule against double recovery prevented the plaintiff from claiming the whole amount owing under the loan agreements against the first and third defendants in circumstances where it had received funds from other defendants.[8] The plaintiff accepted that the monies already received must be brought to account in the assessment of their claim. As it foreshadowed at the hearing on 17 June 2025, the plaintiff relied upon the affidavit of Mr Yang dated 14 May 2025 for this purpose.
The entry of judgment in default of appearance under Order 21 of the Supreme Court (General Civil Procedure) Rules 2025 (Vic) ('Rules') normally proceeds on the mere failure of a defendant to enter an appearance in response to a writ and statement of claim, without curial intervention of any kind, and certainly without any supplementing affidavit material. The usual rule in applications made under r 45.03 is that the moving party may not use in evidence any affidavit which was not served with the originating motion unless the Court otherwise orders: r 45.03(3). For the reasons which I set out later, I indicated that I would not make orders for judgment in default of appearance under Order 21. I considered whether to permit the filing of the further affidavit material in the context of the plaintiff's application under r 45.03 and concluded that, in the circumstances, the plaintiff ought to be permitted to rely upon the affidavit because:

[50]

With the benefit of the interpreter, the third defendant was asked to explain why he had not participated in or taken any steps in the proceeding since its commencement.
The third defendant explained that Mr Li had told him that he did not need to participate in the proceeding. The third defendant said that he was generally aware of the proceeding, that he had personally received all of the documents served upon him by mail, but had understood from Mr Li that matters were being handled by others. He said that it was his understanding that he did not need to respond. He further said that he had not been informed that a mediation had been arranged to attempt to settle the matter in October 2024. He explained that on the day of the mediation he received a call from his ex-wife's (the fourth defendant's) lawyer, who was present at the mediation and who told him that he should participate in the mediation in person, and so he went to the location at which the mediation was being conducted. The third defendant did not take any part in the mediation. He did not inform the plaintiff or its representatives that he was even present. The third defendant said that neither his ex-wife nor anyone else present at the mediation explained to him what had happened as a result of the mediation.
As events transpired, the proceedings between the plaintiff and the third defendant's ex-wife (the fourth defendant) were settled in about January 2025, with final orders giving effect to that outcome made in April 2025.
The third defendant claims that after the mediation, a solicitor Yunfei (Payne) Wu ('Mr Wu') of the firm Hiways told him that the proceedings had been settled against the second and fourth defendants, and that Mr Wu's insurer would pay the plaintiff. I make no finding as to the truth of this statement, but merely record that this is what the third defendant said in the hearing.
Hiways was the plaintiff's solicitor at the time the loan agreements were made, prepared the loan documentation, and was a witness to the signatures of a number of the parties to the various loan agreements. While various claims had been made against Hiways (as the seventh defendant) in the proceedings, all of those claims had been settled.
The third defendant claimed not to have further discussed the matter with Mr Wu after the mediation, and understood that the proceedings had been settled and there was nothing more to be done.
The third defendant said that the first he knew that the plaintiff persisted with its claims against him was on 10 June 2025, when he received the documents served by the plaintiff, being the documents which sought to amend the statement of claim and originating motion, and sought orders for judgment in default of appearance. The plaintiff accepts that the third defendant would not have received any written communication from the plaintiff about the progress of the broader proceeding between October 2024 and 10 June 2025.
The third defendant was asked to explain why he did not attend court on 3 July 2025. He explained that he had failed to respond to an email from the Court asking him to indicate who would be attending the hearing. He said that he assumed that because of this omission he was not able to join the proceeding in person on that day. I took him to be saying, in substance, that he is not familiar with court procedure and that when he realised that he had overlooked the requirement to respond to the email, he thought he should send a note which explained his position in writing.
According to the plaintiff, the statement filed on 2 July 2025 did not comply with my written orders of 18 June 2025 and verbal direction to file material by 30 June 2025 because it was filed late, and the plaintiff complained that the third defendant had provided no proper explanation for this non-compliance. This may be so, but the delay was two days and must be viewed in the broader context of the third defendant's position.
The third defendant confronted two significant impediments, amplifying his difficulties comprehending the nuances of legal proceedings. First, in this complex matter he was unassisted by legal representation. He maintained that legal representation was beyond his means. Second, up to that point in the proceeding, the third defendant had been unassisted by an interpreter. For these reasons I was prepared to give the third defendant the benefit of the doubt and accept his explanation for not attending the hearing on 3 July 2025.
Taking the third defendant's written statement of 2 July 2025 and the matters raised in the hearing into account, I was satisfied that the third defendant might have a basis to resist the plaintiff's claim, and at the very least, that he should be given some accommodation in articulating his basis for doing so.
The matters raised by the third defendant at the directions hearing were not supported by any affidavit material and were merely asserted in Court and were not on oath or affirmation. I took the explanations proffered by the third defendant to be an elaboration of some of the matters which he had tried to convey on 17 June 2025 (without an interpreter). I was mindful that many of the matters addressed by the third defendant were raised for the first time and without notice, giving the plaintiff no opportunity to consider its position or respond.
I formed the view that past efforts to require the third defendant to produce a written statement of position had not been successful, but that fairness demanded that the third defendant should have an opportunity, as best he could, to fully explain his position with the assistance of an interpreter, and that this would be best achieved by requiring him to make submissions and give evidence on oath or affirmation. Adopting that course, it followed that the plaintiff should be given a proper opportunity to consider and respond to those submissions and evidence.
A significant difficulty in this case is the complexity of the history of the proceeding arising from the fact that there were originally multiple defendants. In the circumstances, I formed the view that it would be neater and fairer on the third defendant if the plaintiff's claims were reduced to the allegations made only against the third defendant, and that the third defendant be given an opportunity to answer the allegations made against him so that I could ascertain whether or not the plaintiff's application for relief should proceed in any way.
On 1 August 2025 I made orders that the plaintiff file and serve a third revised statement of claim containing only those allegations now made against the third defendant and specifying the precise sums sought by way of relief.
I also made an order that the third defendant file a response to the revised statement of claim by no later than 29 August 2025.
I referred the parties to mediation following the exchange of these documents and listed the matter for directions following the mediation on 12 September 2025.

[57]

The plaintiff informed the Court that it would likely pursue its applications despite the submissions and evidence of the third defendant. The parties were informed that if the matter were to proceed to a final determination by this Court, whatever the outcome, it would be necessary to provide both Hiways, and the individual solicitor Mr Wu, with an opportunity to address the Court on the allegations made by the third defendant. At the very least, it would be necessary for the Court to contact Hiways, the seventh defendant, and invite it to consider whether it wanted to address the Court. In the interests of fairness, I also invited the plaintiff to take the opportunity to consider how it wanted to proceed.
Accordingly, I made orders on 22 September 2025. The orders required the plaintiff to notify the Court of its intended course by 26 September 2025. The time was extended by order dated 26 September 2025 to 3 October 2025. The orders gave the plaintiff the opportunity to consider how it wanted to proceed, before the Court took the step of contacting the seventh defendant to advise it of the matters which had been raised in the hearing on 18 September 2025.
On 3 October 2025, the plaintiff informed the Court that it intended to issue subpoenas to Hiways and the individual solicitor, Mr Wu, to produce documents with respect to text messages and WeChat communications with the third defendant, and to Hiways with respect to any file notes made by Mr Wu or any other solicitor at Hiways relating to the execution of documentation by the third defendant. The plaintiff foreshadowed an application to recall the third defendant after any evidence given by Mr Wu. The plaintiff also issued subpoenas for various bank records.
The matter was later listed for hearing on 27 November 2025.
I have been deliberately neutral and broad in describing the substance of the submissions and evidence given by the third defendant. It is important to observe that the allegations made by the third defendant against the solicitor and the firm remain wholly untested and that I have made no finding in respect of them whatsoever. The third defendant has not yet taken any step to pursue the seventh defendant or Mr Wu, has not pleaded or particularised his allegations against them, and at the hearing before me, no one was present on behalf of either of them to cross‑examine the third defendant. They remain no more than untested allegations advanced by the third defendant which I have taken to be the thrust of his defence to the plaintiff's claims against him, and his opposition to the plaintiff's applications for judgment.

[65]

The third defendant re-entered the witness box to make submissions or give any evidence in support of his email seeking a further extension or adjournment. On this occasion the third defendant was again without the assistance of an interpreter. He explained that he did not have sufficient funds to engage an interpreter. Given the substance of the application for adjournment and the stage of the proceedings, I formed the view that it was necessary to proceed as best as possible without an interpreter.
The third defendant confirmed that he had sent the email seeking an extension to obtain legal assistance, but that no lawyer had yet been engaged. When asked how he was able to now afford a lawyer, having previously informed the Court that he was without funds, the third defendant explained that in the time since the last hearing he had been in touch with Mr Li, the eighth defendant. The third defendant said that Mr Li was prepared to provide funds for a lawyer.
At the hearing on 18 and 19 September 2025, the third defendant gave a considerable amount of evidence concerning Mr Li, including evidence that he was the person who originally suggested and arranged the loans at the centre of these proceedings. The third defendant had reported Mr Li to the police for illegally using the third defendant's identity, and had variously claimed that Mr Li was partially responsible for the third defendant's present predicament. The third defendant provided no corroboration of Mr Li's willingness to fund legal representation for the third defendant.
Leaving those considerable matters to one side, there was no proper basis upon which the matters should be adjourned.
The submissions and evidence given by the third defendant in relation to the plaintiff's present application were completed on 19 September 2025, subject to the possibility of the third defendant being recalled to answer any further questions upon which the plaintiff might rely. As the subpoenas had been set aside, there was nothing left to do on the plaintiff's application other than to hear the plaintiff's submissions in reply.
For all of those reasons, I declined to grant the adjournment.

[78]

As a matter of construction, the language, context and purpose of r 21.01 militates against it being applied to proceedings commenced by originating motion but progressed as if commenced by writ. Rule 21.01 confers a significant benefit, permitting the plaintiff to obtain judgment in default of appearance without a hearing of any kind and without the need to establish by evidence the basis of the claim. The process is entirely administrative. Order 21 permits a plaintiff, on a claim like the one made here for the recovery of a debt, to simply enter judgment, on proof of the defendant's default of appearance.
The ability of a plaintiff to proceed in this way is authorised by the Rules themselves, and not from a judgment of the Court. Where a plaintiff commences a proceeding by writ, it must be in Form 5A. Form 5A gives specific instructions to a defendant as to the filing of an appearance and expressly states that if a defendant fails to file an appearance within the timeframe included in the writ, a plaintiff may obtain judgment without further notice. It is a plaintiff's conformance with the Rules, coupled with a defendant's failure to take the required steps, which enlivens the right to enter judgment conferred by r 21.01.
Proceedings commenced by writ, where there is only one prescribed form, and where that form stipulates the manner of engagement by a defendant, are to be contrasted with proceedings commenced by originating motion. An originating motion may be commenced by any of several prescribed forms, each of which provides its own manner of engagement for potential defendants. For example, Form 5C merely provides that if a defendant intends to defend the proceeding they must attend before the Court at the time and place named in the summons. There is no obligation upon that defendant to formally enter an appearance. Form 5C states that a plaintiff cannot continue except by order of the Court. This is to be contrasted with Form 5A and the procedure contemplated by Order 21, which together are designed to permit a plaintiff to enter judgment without any curial intervention, provided that the originating process is compliant.
The prescribed difference in initiating processes indicate that the effect of an order under r 4.07(1)(a) is not to convert or deem the proceeding to have been commenced by writ. No order in this context could cure the absence of the notice required by Form 5A. The utility of a notice bound to the point of initiation would be compromised by a retrospective order after the proceeding has commenced. Indeed, the scope of the orders that could be made under r 4.07(1)(a) are a matter of discretion, to be exercised in the interests of convenience for the efficient management of the litigation.
By contrast, the operation of r 21.01 proceeds on the basis that careful compliance with the Rules gives rise to the remedy, and as such sits uncomfortably with the broad nature and scope of orders that can be made under r 4.07(1)(a). Under r 4.07(1)(a), the Court might form the opinion that a proceeding should continue as if commenced by writ in some respects, but is not necessarily compelled to order that a statement of claim be produced, or that the usual rules of pleadings apply. The Court may instead order that the affidavits filed in support of the originating motion stand as the pleadings. Further, an order made under r 4.07(1)(a) does not necessarily result in a requirement that a defendant file an appearance.
Furthermore, there is an entirely separate process for obtaining judgment in default of appearance for proceedings commenced by originating motion under r 45.03.
In my view, these are all textual indications that support the conclusion that r 21.01 is not available where the proceedings were commenced by originating motion.
Even if I am wrong, and that as a matter of construction r 21.01 is available where the proceeding is commenced by originating motion, the factual context in which the orders of McCann JR were made on 13 and 21 August 2024 militates against the conclusion that r 21.01 could apply in the present case.
It is important to note that all versions of the originating motion in these proceedings adopted Form 5C.[10] That is, the originating process adopted in these proceedings never imposed an obligation for a defendant to file a notice of appearance.
This stands in stark contrast to a proceeding commenced by writ in Form 5A, or even one commenced by originating motion in Form 5B, 5E or 5G.
As I have stated, the orders made by McCann JR did not convert the proceeding to one commenced by writ. Rather, the effect of the orders was that the proceeding was to continue as if commenced by writ. There was no order requiring any party to file an appearance. While the orders made by McCann JR (and before her Keith JR) embraced the procedural features of a proceeding commenced by writ, they did not alter the manner in which the proceeding was initiated. At all times a defendant need only to have attended court to participate in the proceedings.
Leaving aside the initiating process, the shifting nature of the plaintiff's claims is inconsistent with the operation of r 21.01. On its own case, the plaintiff invites curial intervention to decide whether the interest clauses in the loan agreements are properly characterised as penalties, and therefore unenforceable. If the clauses are penalties, the plaintiff invites a decision by a judge of this Court to permit a claim for interest under the statute. The plaintiff also invites a judge of this Court to make a final determination on evidence which was not served until 7 July 2025 as to the quantum of the first and third defendants' liability arising from adjustments necessary to avoid double recovery.
The premise of r 21.01 is that an administrative application for judgment can be made on the strength of the initiating process alone, without recourse to any evidence, or curial involvement of any kind. If the 'context' referred to in r 4.07(1)(a) includes the factual context of the specific claim in question, then the substance of the plaintiff's claims is inconsistent with the intended operation of r 21.01.
I therefore dismiss the plaintiff's application for judgment in default of appearance under r 21.01.

[80]

In the alternative, the plaintiff applied for default judgment where no appearance under r 45.03. The principal problem confronted by the plaintiff on this application is that, in the end, the third defendant appeared.
It is true that these proceedings were first commenced on 16 December 2021, and that until very recently the third defendant failed to take any step in the proceedings. The third defendant's explanation for his failure to take steps is not convincing in every detail, but in the context of what appears to be the underlying circumstances of this case I am satisfied that he should have an opportunity to properly address the case against him.
The third defendant admits that he was served with the documents over the life of the proceedings to date, but did not take a step to defend the matter because he says he was told by Mr Li and others that he did not need to, as the matter was being defended by others. It might be said that this behaviour was unreasonable. While it seems extraordinary for a person to ignore court proceedings issued against them on the advice of others, some of whom had an interest in the loans at the centre of the dispute, given the third defendant's lack of English and apparent absence of means, I am prepared to accept that the third defendant may have laboured under the false impression that others were handling this matter, having regard to all of the circumstances of this case.
While the substantive issues in these proceedings have not yet been heard, the complicated factual background provides further context for allowing some procedural latitude. The various loan agreements in this case are unusual. The interest rates for each of the loans are unusually high. There was no clear evidence explaining the commercial purpose of the loan. The third defendant gave evidence that he never received the borrowed funds. Indeed, the plaintiff accepts that funds were paid out under the loan agreement by depositing those funds into the trust account of the lender's (plaintiff's) solicitor, Hiways. The plaintiff is not, at this stage, in a position to contradict the third defendant's assertion that he never received any of the borrowed funds. A key (and somewhat mysterious) figure in the initial September Loan Agreement, is Mr Li, who was joined as a defendant, but then not served or pursued in any way. He has emerged in the evidence of the third defendant as a central character, linking the plaintiff's solicitor, the plaintiff and the third defendant. On the last day of the hearing, it was said that Mr Li might even fund the third defendant's legal expenses.
The novation of the September Loan Agreement, substituting the first defendant for Mr Li (and the third defendant) also lacks a commercial explanation. The effect of the November Loan Agreement was to saddle the first defendant with the repayment obligations under the September Loan Agreement, along with interest to be calculated under the new November Loan Agreement.
The third defendant says, in effect, that he did not take a step in the proceeding until he came to the realisation that those who he had understood were 'handling' the litigation had all settled, and it became clear to him that the plaintiff was continuing to pursue its claim against him. According to the third defendant, he was aware that the proceedings were the subject of a mediation process in late 2024. He was aware that settlement of some sort had taken place. He received no further communication from the plaintiff until he was served with an amended originating motion on 10 June 2025 which made clear that the plaintiff was now pursuing judgment in default of appearance against only the first and third defendants.
On 17 June 2025, only seven days after being served by the plaintiff with an amended originating motion and an amended statement of claim, the third defendant physically attended court, which is all that is required of a defendant in response to an originating motion served in Form 5C.
As at 17 June 2025, the form of relief sought against the third defendant was not precisely clear. The declarations and relief sought in the further amended originating motion dated 12 May 2025, the prayers for relief in the second further amended statement of claim dated May 2025 and the orders sought by way of final relief in the summons of 12 May 2025 were all slightly different. Although the refinements of the originating motion and statements of claim were intended to simplify matters, it was nonetheless necessary for the plaintiff to rely upon affidavit material which had not been filed with the originating motion, but which had been served upon the third defendant as recently as 10 June 2025. As the application progressed before me, the plaintiff sought leave to rely on further affidavit material in relation to the way the third defendant's liability should be calculated in light of the settlements which had been achieved.
The premise of the plaintiff's application for judgment where no appearance is that the third defendant had failed to appear in these proceedings for more than three years. While it is true that the third defendant failed to respond until 17 June 2025, the plaintiff of its own volition acknowledged that, while its case against the third defendant had not changed in substance since it was first commenced, the settlements which had been achieved in the proceeding made it desirable to alter: 1) the pleaded case; 2) the form of relief sought against the third defendant; and 3) the evidence necessary to quantify its claims.
The plaintiff says in substance that none of these changes would have been necessary if the third defendant had responded to the proceedings from the outset, pleaded his case, and participated in the mediations and interlocutory steps. The plaintiff says that it suffers prejudice by having settled the proceedings with all other parties, and that in those circumstances this Court should proceed to grant its application for judgment where no appearance, despite the fact that the third defendant appeared in court evincing its intention to defend the applications.
I am not prepared to do that for the following reasons. I accept that the third defendant may have mistakenly assumed that he did not need to take steps in the proceedings because others were 'handling' the matter. While the loan agreements are, on their face, simple documents, they are unusual in that the underlying commerciality of the arrangements is not clear. According to the third defendant, none of the borrowers ever received the benefit of any loan despite having put up security for the loans. All of this supports an inference that the third defendant may have been lulled, as he says, into an understanding that he need not take any step in the proceeding.
In attempting to explain the basis of his defence, the third defendant explained enough of the background to these loan agreements to satisfy me that he may have a basis to defend the claim. Because the allegations made by the third defendant are of a serious kind, and because they have not been tested, I refrain in these reasons from setting them out in detail. Suffice it to say that, in my view, despite the fact that the third defendant has been extremely late in responding to the plaintiff's claims he should have one last opportunity to properly defend them.
There is a further reason why the third defendant ought to be permitted to participate. As Lord Justice Clauson, delivering judgment for the Court (Scott and Clauson LLJ, Luxmore J), remarked in Redditch Benefit Building Society v Roberts ('Redditch'):[11]

[83]

[T]he Court does not ordinarily enter a default judgment where it is pointless do so because a defendant is seeking genuinely on a tenable basis to defend the proceeding. In other words, whatever the technical failure of the defendant may be, a default judgment serves no purpose and the failure can properly be taken into account only on other questions of discretion, such as the question of costs. It is this well-known kind of consideration which formed the basis for the judge's (and the master's) approach, though not expressly stated.

It is so well known a principle of practice in this area (that is in the area of default judgments), that it would serve no purpose to examine all the authorities which have expressed it. They are usefully set out in the practice books and, in particular, to the annotation to Orders 22.01 and 22.02 of the Rules in Williams Supreme Court Practice. They include cases such as the decision of the Court of Appeal in Redditch Building Society v. Roberts, where it is said that a default judgment should never be ordered 'where the defendant is before the Court ... and is anxious to put himself in a position to defend' the proceedings, whatever the technical position might be. That authority related to judgments in default of appearance, but, not only is it consistent with other authorities relating to rules such as Order 22.01, but what was there said is likewise the principle behind the similar approach to judgments in default of defence... Of course, it must be seen that the defendant has a genuine answer to the plaintiff's claim and how that is shown will depend on all the circumstances. Where, as here, objection is made to the form and substance of the statement of claim, then that ordinarily will be sufficient, if it can be seen that the objection is reasonably arguable. I should explain further, if it be necessary, that one reason for the Court's approach is that it would be a waste of time and money to allow a default judgment and then to require it to be set aside, where the nature of the defence or objection to the claim is obvious. Ordinarily, it is not difficult to show sufficient facts or legal argument, if there is a genuine defence, to have a default judgment set aside. Not only would the process result in further expenditure of money and time, but it would allow a judgment on the records of the Court which should not be maintained, a matter which may reflect on the reputation or solvency of a particular defendant.

[87]

The result on these applications gives the third defendant an opportunity to defend the plaintiff's claim, and with it a significant indulgence noting the fact that he has not taken an active part in the litigation for more than three years.
It is apparent that a significant part of the third defendant's defence may involve allegations against third parties, some of whom may have been previously involved in the proceeding.
For those reasons it is essential that the third defendant pleads a properly particularised defence to the plaintiff's further revised statement of claim dated 8 August 2025, and bring any related claim against third parties.
Any defence of the plaintiff's claim mounted by the third defendant will likely involve a high degree of complexity. It is not the kind of case that can be advanced without careful legal assistance. At various times I have encouraged the third defendant to seek legal assistance.
Noting both the indulgence and the complexity, it is important to ensure that the third defendant's defence is properly conducted in a timely manner in accordance with the orders of the Court to avoid any further protracted delay to the matter.
I will make orders that entitle the plaintiff to enter judgment pursuant to r 21.02 of the Rules if the third defendant fails to file a timely defence_._ Rule 21.02 is not confined by its own language to proceedings commenced by writ (as is r 21.01). Rule 21.02 is intended to apply where an order for pleadings has been made under r 4.07(1)(a) and a defendant has not complied with the order.
As to the amount of time provided to the third defendant to prepare a defence, I am conscious that the third defendant has known of the existence of these proceedings since their commencement, but had not been actively involved in the proceedings until recently. From about June 2025 he has acknowledged the need to take steps to defend his position. He has been regularly and strongly encouraged to seek legal representation, and to furnish material in support of his position - which he has either failed to do, or not undertaken in a sufficiently clear way. In the lead up to, and at the hearing before me on 27 November 2025, he openly acknowledged the need for assistance and made clear that he intended to engage lawyers to prepare his defence. In all the circumstances, and given the history of the matter, the orders that I make give the third defendant an adequate window within which to prepare his defence.

Plaintiff v Third Defendant

At a glance

Court

Decision date

Before

Source

Judgment (102 paragraphs)

Parties

Legislation Cited (6)

Cases Cited (2)