Timberland Property Holdings Pty Ltd v Schindler Lifts Australia Pty Ltd; Oaklands Property Holdings Pty Ltd v Schindler Lifts Australia Pty Ltd

Judgment 1In each of these separate proceedings (which were heard together), the plaintiff makes application under s 459G of the Corporations Act 2001 (Cth) for an order setting aside a statutory demand served on it by the defendant. 2It will be convenient to refer to the respective plaintiffs as "Timberland" and "Oaklands" and to the single defendant as "Schindler". 3The debt upon which each statutory demand is based is a judgment debt. The judgment of the District Court on 27 October 2010 was in these terms: "Default judgment given for the Plaintiff against the Defendants in the sum of $271,618.09." 4In the District Court, the present defendant, Schindler, was the plaintiff, Timberland was the first defendant and Oaklands was the second defendant. The reference in the judgment to "the Defendants" is thus a reference to both Timberland and Oaklands. 5Each statutory demand - by which I mean the statutory demand served by Schindler on Timberland and the statutory demand served by Schindler on Oaklands - demands payment of the $271,618.09 judgment sum. 6In seeking to have the statutory demand affecting it set aside, each of Timberland and Oaklands relies on the s 459H(1)(a) ground and the s 459J(1)(b) ground. 7As to s 459H(1)(a), the proposition advanced by each plaintiff is that, even though the debt is a judgment debt, there is a "genuine dispute" as to its existence. 8Each plaintiff relies on the fact that the judgment was ordered by default, that is, because of failure by the defendant parties in the District Court to take a procedural step and without any hearing on the merits. Those parties (Timberland and Oaklands) later applied for an order setting aside the default judgment. After a hearing in the District Court, that application was dismissed. Timberland and Oaklands later filed in the Court of Appeal a summons seeking leave to appeal from the whole of the decision of the District Court on the application in which it was sought to have the default judgment set aside. The application in the Court of Appeal is pending. 9Counsel for Timberland and Oaklands submitted that, because a default judgment does not create a res judicata or issue estoppel, that there can be a genuine dispute as to the existence of the judgment debt. 10I do not accept that submission. A default judgment, unless and until set aside, confers the same rights as a judgment entered after a trial. The fact that it may be liable to be set aside if the party who suffered it satisfactorily explains the default and shows an arguable case on the merits means only that it shares the characteristic of susceptibility to be set aside with a judgment rendered after a hearing on the merits which may be liable to be set aside as a result of a successful appeal. 11It is well established, in the s 459H(1)(a) context, that such susceptibility on the part of a judgment rendered after a hearing on the merits does not mean that is a "genuine dispute" as to the existence of the judgment debt: see for example Eumina Investments Pty Ltd v Westpac Banking Corporation (1998) 84 FCR 454; Barclays Australia (Finance) Ltd v Mike Gaffikin Marine Pty Ltd (1996) 21 ACSR 235; Midas Management Pty Ltd v Equator Communications Pty Ltd [2007] NSWSC 759 ; (2007) 25 ACLC 1038. The like susceptibility, but for a different reason, of a default judgment attracts the same conclusion for the same reason. Unless and until the judgment is set aside, it is the source of a payment obligation that cannot be called into question. 12The case based on s 459H(1)(a) therefore fails. 13I next turn to the proposition that, in terms of s 459J(1)(b), "some other reason" why statutory demand should be set aside - that is, some reason other than those contemplated by s 459H and s 459J(1)(a). 14Assessment of this proposition is not assisted by the fact that the reasons for the District Court's refusal to set aside the default judgment are not before me. Mr Thomson of counsel, who appeared for Timberland and Oaklands, did, however, take me in some detail to the documentary and other evidence relevant to Schindler's District Court claim. I need not refer to that evidence in any detail. It is sufficient to note the following allegations, bearing in mind that the claim is a contract-based claim related to the installation (or proposed installation) of lifts in a building: