Scottish Pacific Business Finance Pty Ltd v Qaqour, in the matter of Penny World Pty Ltd

A. Introduction 1 By an interlocutory process filed on 11 May 2023, the plaintiff seeks default judgment against the second defendant (Wizly), the third defendant (Mr Maximos), and the fourth defendant (Mr Eddine) pursuant to r 5.23(2) of the Federal Court Rules 2011 (Cth) (Rules). 2 The plaintiff relies on the following evidence in support of its application for default judgment: (a) an affidavit of Justin Doczy, the NSW/ACT General Manager of the plaintiff, sworn on 11 May 2023 (Doczy Affidavit), together with Exhibit JND-2 to that affidavit; (b) an affidavit of service of Kellie Van Munster, an employed solicitor of Swaab, the solicitors for the plaintiff, sworn on 1 May 2023; (c) an affidavit of service of Erika Thomas, a legal secretary employed by Swaab, affirmed on 17 May 2023; and (d) affidavits of William Clement, an employed solicitor of Swaab, affirmed on 18 May 2023, 22 May 2023 and 27 June 2023 (Clement Third Affidavit). 3 The plaintiff submits that each of Wizly, Mr Maximos and Mr Eddine (together, the respondents) are in default by failing to file a defence, attend case management hearings, and otherwise defend the proceeding with due diligence. 4 I am satisfied that in all of the circumstances, it is appropriate to make orders for default judgment against each of the respondents in the amounts sought in the interlocutory process.

B. Legal principles 5 Rule 5.22 of the Rules provides that a party is in default if the party fails to: (a) do an act required to be done, or to do an act in the time required, by these Rules; or (b) comply with an order of the Court; or (c) attend a hearing in the proceeding; or (d) prosecute or defend the proceeding with due diligence. 6 Rule 5.23(2) of the Rules relevantly provides: (2) If a respondent is in default, an applicant may apply to the Court for: (a) an order that a step in the proceeding be taken within a specified time; or (b) if the claim against the respondent is for a debt or liquidated damages - an order giving judgment against the respondent for: (i) the debt or liquidated damages; and (ii) if appropriate, interest and costs in a sum fixed by the Court or to be taxed; or (c) if the proceeding was started by an originating application supported by a statement of claim or an alternative accompanying document referred to in rule 8.05, or if the Court has ordered that the proceeding continue on pleadings - an order giving judgment against the respondent for the relief claimed in the statement of claim to which the Court is satisfied that the applicant is entitled; or (d) an order giving judgment against the respondent for damages to be assessed, or any other order; or (e) an order mentioned in paragraph (b), (c) or (d) to take effect if the respondent does not take a step ordered by the Court in the proceeding in the time specified in the order. Note 1: The Court may make any order that the Court considers appropriate in the interests of justice - see rule 1.32. Note 2: An order or judgment under this Division may be set aside or varied. 7 The power to give judgment against a defaulting party is discretionary. The discretion must be exercised cautiously. Where the defaulting party is a respondent to a pleaded claim, the giving of judgment for final relief on the application will deliver complete success to the applicant without investigation of the merits of the pleaded claim: Chamberlain Group, Inc v Giant Alarm System Co, Ltd (No 2) [2019] FCA 1606 at [13] (Yates J); ACOHS Pty Ltd v Ucorp Pty Ltd [2009] FCA 577 at [27] (Jessup J). 8 Rule 5.23(2)(c) of the Rules provides that the Court must be satisfied that the applicant for default judgment is entitled to the relief sought in the statement of claim. The Court must be satisfied that "on the face of the statement of claim" the applicant is entitled to the relief that has been claimed. An applicant is not required to prove its claim by way of evidence. The facts alleged in the statement of claim are taken to have been admitted: Chamberlain at [14] (Yates J) citing Australian Competition and Consumer Commission v Dataline.Net.Au Pty Ltd [2007] FCAFC 146; 161 FCR 513 at [42] (Moore, Dowsett and Greenwood JJ). 9 It is relevant, but not necessary, for the exercise of discretion to establish (a) inordinate or inexcusable delay, (b) that the act or acts of default were intentional or amount to contumelious conduct, or (c) the defaulting party is manifesting an inability or unwillingness to cooperate with the Court and the other party or parties to the proceeding.: Chamberlain at [13] (Yates J). 10 The Court may, and often does, permit additional evidence which might support the existence of the claims or the exercise of the Court's discretion whether to accede to the application for judgment, but not evidence that would alter the pleaded case: Project Noah Holdings Pty Ltd (in liq) v Jacka [2022] FCA 778 at [17] (Derrington J); Australian Competition and Consumer Commission v Dataline.Net.Au Pty Ltd [2006] FCA 1427 at [45], [48]-[50] (Kiefel J, as her Honour then was).

C. Background 11 On 14 June 2022, the plaintiff commenced these proceedings by filing an originating process. 12 On 16 June 2022, Ms Nicola Craven of Cockburn & Co Lawyers filed a notice of acting confirming that she acted for each of the first defendant (Mr Qaqour), Wizly and the fifth defendant (Penny World). 13 On 17 June 2022, Mr Sule Arnautovic of Hall Chadwick was appointed as the provisional liquidator of Penny World pursuant to s 472(2) of the Corporations Act 2001 (Cth) (Corporations Act). 14 On 24 June 2022, Mr Steven Pateman of Pateman Legal filed a notice of acting confirming he acted for Mr Maximos. 15 On 4 July 2022, Mr Eiden Havas of First Choice Legal filed a notice of acting confirming he acted for Mr Eddine. 16 On 29 June 2022, orders were made by Justice Goodman for the plaintiff to file and serve a statement of claim. 17 On 6 July 2022, Mr Pateman filed a notice of ceasing to act for Mr Maximos. No other legal representative has subsequently been appointed by Mr Maximos. 18 On 10 August 2022, a notice of change of lawyer was filed by Mr Steve Kasseem of Future Legal in respect of Mr Qaqour. At that time, Mr Qaqour was the sole director of Wizly. The notice stated that (as written): Shadi Qaqour, the Respondent has appointed Steve Kassem, FutureLegal to represent the Respondent in the proceeding in the place of Cockburn & Co Lawyers. 19 It is not clear whether it was intended that Ms Craven of Cockburn & Co Lawyers remain on the record for Wizly or whether Mr Kasseem had replaced Mr Craven in respect of Wizly. The Commonwealth Courts Portal records the 'End Date' for Cockburn & Co's representation to be 10 August 2022. 20 On 5 September 2022, Penny World was wound up in insolvency and Mr Arnautovic was appointed as liquidator pursuant to orders of this Court. 21 On 21 September 2022, the plaintiff filed a statement of claim. It was served on each of the respondents by email on the same date: (a) in respect of Wizly, to both Ms Craven and Mr Kaseem (noting that Mr Qaqour was its director); (b) in respect of Mr Eddine, to Eidan Havas of First Choice Legal (the solicitor on the record); (c) in respect of Mr Maximos, to the email address mega_au@hotmail.com. That was the email address that Mr Maximos had been using to correspond with the plaintiff's solicitors and the Court. 22 On 5 October 2022, Mr Clement received an email directly from Mr Eddine advising that he was no longer represented by Mr Havas and that he would represent himself going forward. 23 On 6 October 2022, Mr Clement received an email from Mr Havas confirming, in response to a request earlier that day from Mr Clement, that he was no longer acting for Mr Eddine. It does not appear that any notice of ceasing to act has ever been filed by Mr Havas. 24 On 7 October 2022, I made orders for, inter alia, Mr Qaqour and each of the respondents to file and serve defences on or before 31 October 2022. 25 On 4 November 2022, I made orders extending the time for Mr Qaqour to file his defence to 18 November 2022. No extension was sought by, or granted to, any of the respondents. 26 On 21 November 2022, Mr Qaqour filed a debtor's petition and was declared bankrupt. By reason of s 206B(3) of the Corporations Act, Mr Qaqour was thereby automatically disqualified from acting as the director of Wizly. From that date, Wizly has had no appointed director and has taken no active role in the proceeding. 27 On 17 February 2023, the proceeding was listed for a case management hearing. None of the respondents had filed a defence by that date and none appeared at the hearing. I made orders at that case management hearing and included a notation that the plaintiff had expressed its intention to file default judgment against each of the respondents (17 February 2023 orders). 28 On 14 April 2023, the proceeding was again listed for a case management hearing. Again, none of the respondents had filed a defence by that date and none appeared at that hearing. 29 On 26 April 2023, the plaintiff's solicitors sent (by email) a letter to each of the respondents (April Notification) providing a copy of the 17 February 2023 orders and placing each respondent on notice that (a) the respondent had not filed and served a defence, (b) the plaintiff was intending to file an application for default judgment, and (c) if the respondent intended to file a defence, they should do so as a matter of urgency. In respect of Wizly, that letter was sent to Mr Kasseem of Future Legal as well as to the email address qaqoursh2@gmail.com (which is the email address to which the Court has been sending correspondence). 30 On 27 April 2023, Mr Eddine called Mr Clement in response to the April Notification. Mr Eddine claimed that he did not remember receiving a copy of the statement of claim. Later that day, Mr Clement emailed a further copy of the statement of claim to Mr Eddine. I note, as stated above at [21(b)], that the statement of claim had initially been served on Mr Eddine's, then solicitor, Mr Havas, on 21 September 2022. 31 On 2 May 2023, Mr Maximos called Mr Clement and informed them that he did not have money to engage lawyers. 32 On 11 May 2023, the plaintiff filed the interlocutory application seeking default judgment against each of the respondents (default judgment application) and the accompanying Doczy Affidavit. 33 On 12 May 2023, the proceeding was listed for a case management hearing. Again, none of the respondents had filed a defence by that date. None of the respondents appeared at the case management hearing. At the request of the plaintiff, I made orders setting down a timetable for the hearing of the default judgment application on 27 June 2023. 34 Later on 12 May 2023, Mr Eddine, together with his sister Miriam, called Mr Clement. Mr Clement gives the following evidence of the conversation that he had with Mr Eddine and Miriam: Eddine said: "I was in court today. Can you explain what happened?" I said: "I did not attend today's hearing. The Court will likely circulate formal Orders shortly. My understanding is that our application for default judgment is set down for hearing at 10.15 am on 27 June 2023". Eddine said: "Can you speak to my sister. She speaks better English than me". Miriam said: "Omar cannot afford a lawyer and is on medication due to financial and personal stress. He has tried to get legal aid but was told he cannot". I said: "I act for the plaintiff in these proceedings and Omar is a defendant. I cannot give him legal advice. LawAccess NSW is a free Government telephone service that provides legal assistance. They may help Omar. Miriam said: "But they will not act for him until the end of the proceedings. Please show him some sympathy. Can I ask, do you act for Shadi Qaqour?" I said: "No, we act for ScotPac, the plaintiff. Shadi is another defendant in these proceedings". Miriam said: "I will hand you back to Omar". I said: "Before you do, can I please have your name". Miriam said: "Miriam". Omar Said: "Can you please keep me up to date with the proceedings?" I said: "Yes". 35 On 15 and 16 May 2023, the default judgment application, accompanying affidavit and Exhibit JND-2 were served on each of the respondents. In respect of Wizly, the documents were emailed to qaqoursh2@gmail.com and posted to Wizly's registered office. The documents were similarly emailed and posted to Mr Maximos and Mr Eddine. Later on 15 May 2023, Mr Eddine acknowledged receipt of that email.

D. Consideration 36 I am satisfied that each of the respondents is in default and it is appropriate to exercise the discretion of the Court to enter default judgment against each of them. 37 I am also satisfied that on the face of the statement of claim, the plaintiff is entitled to the relief that it seeks against each of the respondents in the amounts that the plaintiff seeks in the default judgment application. 38 Each of the respondents has failed to file a defence in the almost eight months that have elapsed since 31 October 2022, the date on which they had been ordered to file a defence to the statement of claim. Each of the respondents has also failed to appear at the case management hearings on 17 February 2023, 14 April 2023 and 12 May 2023. These failures constitute defaults for the purposes of r 5.22(a)-(d) of the Rules. 39 None of the respondents has taken an active role in the proceeding since the filing of the statement of claim. 40 The defaults by the respondents have been continuous and serious. None of the respondents has demonstrated a genuine desire to defend the proceeding with due diligence. Impecuniosity is not an excuse or justification for failing to comply with orders of the Court to file a defence, to attend case management hearings or to defend the proceeding with due diligence. 41 Each defendant has been notified of the plaintiff's intention to bring an application for default judgment and has been served with a copy of the default judgment application. None of the respondents have appeared today or sought to remedy their default in failing to file a defence in response to the statement of claim. 42 If the Court does not make orders for default judgment, then the plaintiff will incur the unnecessary time and expense of proving its claim. This would not serve the overarching purpose in s 37M of the Federal Court of Australia Act 1976 (Cth), particularly in circumstances where, if the respondents' assertions of impecuniosity are accepted, the plaintiff may not, in any event, be able to recover the judgment sums. 43 The plaintiff pleads that it was a term of a debt financing agreement dated 11 December 2019 (Debt Financing Agreement) that Wizly agreed to guarantee the repayment of money owed by Penny World to the plaintiff under that agreement. It is further pleaded that, under the Debt Financing Agreement, Penny World is indebted to the plaintiff in the sum of $3,117,347.01, which it has not paid. 44 The plaintiff seeks default judgment against Wizly in the sum of $3,117,347.01 plus interest and costs. 45 The plaintiff alleges in the statement of claim that Mr Maximos and Mr Eddine were involved in a scheme which involved Penny World fraudulently receiving payments from the plaintiff under the Debt Financing Agreement for false business debts. 46 The plaintiff pleads that companies (of which Mr Maximos and Mr Eddine were directors) made payments to the plaintiff purporting to be repayment of Penny World's business debts to give the false impression those purported business debts were legitimate. These payments are described in the statement of claim as the "Deceptive Remittance Representations". The plaintiff pleads that Mr Maximos and Mr Eddine made the Deceptive Remittance Representations on behalf of each of the companies of which they were directors. 47 Further, the plaintiff pleads that Mr Eddine sent six emails to the plaintiff in the period between 16 November 2021 and 4 May 2022, confirming that CCS 136 Castlereagh Pty Ltd, a company of which he was a director, had received invoices from Penny World which it would pay. These emails are described in the Statement of Claim as the "CCS Invoice Confirmation Representations". 48 The plaintiff pleads that, had it not been for the Deceptive Remittance Representations and the CCS Invoice Confirmation Representations, it would have discovered that the purported business debts were not legitimate and therefore, would not have made further payments to Penny World under the Debt Financing Agreement which it has not since been able to recover. 49 The conduct of Mr Maximos in making Deceptive Remittance Representations and the conduct of Mr Eddine in making Deceptive Remittance Representations and the CCS Invoice Confirmation Representations is alleged to constitute misleading or deceptive conduct in contravention of s 12DA of the Australian Securities and Investments Commission Act 2001 (Cth) or alternatively, s 18 of the Australian Consumer Law, being Sch 2 to the Competition and Consumer Act 2010 (Cth). 50 The plaintiff seeks default judgment as against: (a) Mr Maximos, in the sum of $1,538,691.59 plus interest and costs; and (b) Mr Eddine, in the sum of $2,219,029.67 plus interest and costs. 51 The plaintiff claims, in the statement of claim, the full amount of the losses incurred under the Debt Financing Agreement of $3,117,347.01 against Mr Maximos and Mr Eddine. The amounts sought for default judgment, however, as explained in the Doczy Affidavit at [49]-[50] and [66]-[67] and in the Third Clement Affidavit at [3]-[7], reflect the moneys paid by the plaintiff to Penny World pursuant to the Debt Financing Agreement after the earliest of the pleaded contravening conduct of each of Mr Maximos (12 April 2021) and Mr Eddine (16 November 2020). 52 Finally, I note pursuant to his obligation of candour, Mr Oakes of counsel, who appeared for the plaintiff on the default judgment application, specifically brought to my attention that Mr Maximos and Mr Eddine had denied having any involvement in the fraudulent scheme alleged by the plaintiffs and each had given evidence that Mr Qaqour had login details for the bank accounts of their respective companies. Evidence to this effect was given in both (a) their examinations pursuant to s 596A, s 596F, and s 597 of the Corporations Act, and (b) in affidavits that they made in these proceedings on 8 August 2022, prior to service of the statement of claim. 53 Those denials might suggest that Mr Maximos and Mr Eddine might have had an answer to the allegations in the statement of claim. They do not, however, provide an answer to the defaults relied upon by the plaintiff to obtain default judgment against Mr Maximos and Mr Eddine. The position remains that each of the respondents has failed to file a defence and failed to attend case management hearings. No explanation or excuse has been proffered by any of the respondents for those defaults. A self-represented litigant is not excused from compliance with orders of the Court and obligations to pursue defences diligently by reason of impecuniosity, lack of legal representation or unfamiliarity with the law or the processes of the Court.

E. Disposition 54 Orders for default judgment in the amounts sought by the plaintiff, together with interest (as calculated by Mr Doczy in Exhibit JND-2) and costs, against each of the respondents will be made. I certify that the preceding fifty-four (54) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Justice Halley.