De Castro v Burtenshaw Super Pty Ltd - [2023] QCA 218

SUPREME COURT OF QUEENSLAND

CITATION:

De Castro v Burtenshaw Super Pty Ltd [2023] QCA 218

PARTIES:

GUI JORGE DA COSTA NAPOLEAO DE CASTRO
(appellant)
v
BURTENSHAW SUPER PTY LTD ACN 635 959 572 AS TRUSTEE FOR THE BURTENSHAW SUPERANNUATION FUND
(respondent)

FILE NO/S:

Appeal No 4776 of 2023
SC No 348 of 2022

DIVISION:

Court of Appeal

PROCEEDING:

General Civil Appeal

ORIGINATING COURT:

Supreme Court at Cairns – [2023] QSC 60 (Henry J)

DELIVERED ON:

10 November 2023

DELIVERED AT:

Brisbane

HEARING DATE:

23 August 2023

JUDGES:

Bond and Dalton JJA and Cooper J

ORDER:

Appeal dismissed with costs.

CATCHWORDS:

PROCEDURE – CIVIL PROCEEDINGS IN STATE AND TERRITORY COURTS – JUDGMENTS AND ORDERS – AMENDING, VARYING AND SETTING ASIDE JUDGMENTS AND ORDERS – ACTIONS TO REVIEW OR SET ASIDE JUDGMENT OR ORDER – where the appellant failed to defend within time and the respondent obtained default judgment against the appellant – where the appellant applied to set aside the default judgment – where the appellant contended that he had a defence on the merits based on the proposition that the lender had been guilty of unconscionable conduct – where the primary judge dismissed that application – where the appellant appealed on a single ground – whether the primary judge miscarried in finding that the appellant had not demonstrated a prima facie defence on the merits

Uniform Civil Procedure Rules 1999 (Qld), r 290

Day v RAC Motoring Services Ltd [1999] 1 WLR 2150, considered
Deputy Commissioner of Taxation v Johnston (2006) 230 ALR 575; [2006] QSC 61, considered
Embrey v Smart[2014] QCA 75, considered
Evans v Bartlam [1937] AC 473, considered
House v The King (1936) 55 CLR 499; [1936] HCA 40, considered
Kumar v Ernst [2021] QCA 260, considered

COUNSEL:

M T Tolcon for the appellant (sol)
J C Treviño KC for the respondent

SOLICITORS:

Forbes Kirby Lawyers for the appellant
MacDonnells Law for the respondent

BOND JA: The appellant guaranteed the debt of a corporation which borrowed money from the respondent. It is convenient to refer to these three persons as, respectively, the guarantor, the borrower, and the lender.
The borrower defaulted in repayment of the loan and was later wound up. The lender sued the guarantor under his guarantee for the amount outstanding under the loan. The guarantor failed to defend within time and the lender obtained default judgment against the guarantor.
The guarantor applied to set aside the default judgment which had been entered against him. He contended that he had a defence on the merits, based on the proposition that the lender had been guilty of unconscionable conduct.
The primary judge dismissed that application. His Honour found that the guarantor had not demonstrated a prima facie defence on the merits, essentially because the evidence showed no basis for attribution to the lender of knowledge of the alleged unconscionable conduct.
The guarantor’s sole ground of appeal was that the primary judge erred in law by…

Grounds of appeal

[14] The appellant contends that the primary judge erred in finding that the respondent had discharged the onus of establishing the matters required under the relevant provision.

[15] It was submitted that his Honour failed to give adequate weight to the evidence of the second witness, and that the findings of fact were not reasonably open on the material before the Court.

[16] The respondent, for its part, submits that no error is disclosed, and that the conclusions reached were well within the range of outcomes available to the primary judge.

Consideration

[17] It is convenient to deal first with the question of construction, as the resolution of that issue informs the remaining grounds advanced by the appellant.

[18] For the reasons that follow, we are of the view that the appeal should be allowed in part and the matter remitted for further determination.

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Details

Case: [2023] QCA 218
Decision Date: 10 November 2023

CaseChat Overview and Summary

The case of De Castro v Burtenshaw Super Pty Ltd was heard in the Supreme Court of Queensland. The dispute arose from a default judgment obtained by the lender against the guarantor in the amount of $479,483.85, together with costs. The guarantor, who had failed to defend within the requisite time, sought to set aside the default judgment, contending that the lender had acted unconscionably by taking advantage of his known vulnerability and disadvantage when offering the loan and having him provide the personal guarantee.

The primary legal issue before the court was whether the primary judge miscarried in finding that the guarantor had not demonstrated a prima facie defence on the merits. The guarantor needed to provide evidence that he had a plausible defence to avoid the operation of the deed of guarantee and indemnity. This requirement was firmly established in the case of Embrey v Smart, which emphasized that the applicant must produce to the Court evidence that they have a prima facie defence. The applicant must make more than a bare allegation; the allegation must be supported by some reference to evidence to suggest that the defence is plausible and not just raised for the purpose of having default judgment set aside.

The court found that the primary judge did not miscarry in their exercise of discretion. The evidence presented by the guarantor was insufficient to demonstrate a prima facie defence on the merits. The guarantor's allegations of unconscionability were not supported by any reference to evidence, and the application was not made in good faith. The appeal was dismissed with costs.

In summary, the court held that the primary judge correctly found that the guarantor had not demonstrated a prima facie defence on the merits and properly exercised their discretion to deny the application to set aside the default judgment. The appeal was dismissed, and the guarantor was ordered to pay costs.

Orders

Orders of the court

Appeal dismissed with costs.

Background

Background to the litigation

Finally, it must be observed that any challenge on appeal to the exercise of discretion pursuant to r 290 must demonstrate that the discretion miscarried on one or other of the familiar bases referred to in House v The King.[8][8]House v The King (1936) 55 CLR 499.Undisputed background facts At all material times the guarantor was a financial adviser who provided advice to clients through a company, of which he was a director, called PMM Group Pty Ltd (PMM Group). He was also the sole director of the borrower, which was a company called My Two Boys (Aust) Pty Ltd. The borrower was the trustee of a family trust connected with the guarantor. On about 1 June 2021, the lender entered into a loan agreement (the Advance Agreement) with the borrower pursuant to which it lent the borrower $450,000.00. The Advance Agreement was for a very short term. It obliged the borrower to repay the full amount borrowed plus interest prior to 26 August 2021. There was a commensurately high interest rate, namely 4% per month and 6% per month following an event of default. Under a written deed of guarantee and indemnity with the lender, the guarantor assumed joint and several liability with the borrower to the lender for the monies to be paid by the borrower to the lender under the Advance Agreement. The guarantor was liable to pay the lender all monies owing immediately upon there being any default in payment by the borrower, and without the need for any demand to be made. The borrower defaulted in making payment to the lender under the Advance Agreement. On 27 September 2021, the lender both issued a notice of default to the borrower and notified the guarantor of the default and of the then total outstanding amount owing of $482,826.18, inclusive of principal, interest and costs. On 23 May 2022, the borrower was wound up by Order of Master Sanderson of the Western Australian Supreme Court. On 14 June 2022, the lender commenced proceedings in the Supreme Court of Queensland against the guarantor which sought recovery of the outstanding amount due under the deed of guarantee and indemnity, including interest and costs. After allowing for $240,000 in payments which had been made in January and February 2022, the amount which the lender sought to recover (inclusive of interest) was $479,483.85, together with costs on a solicitor and own client basis. As mentioned, the guarantor did not defend within time; the lender regularly obtained default judgment for the amount claimed; and the guarantor applied to the primary judge for an order setting set aside the default judgment so that he could then defend the proceeding.The defence which the guarantor sought to set up The guarantor sought to set up a defence which avoided the operation of the deed of guarantee and indemnity. He contended that the lender had acted unconscionably by taking advantage of the guarantor’s known vulnerability and disadvantage when offering the loan and having the guarantor provide the personal guarantee.

Evidence

Evidence Before The Court

In Embrey v Smart, Applegarth J (with whom Muir and Morrison JJA agreed) observed (emphasis added):[4]“The third matter has been described in different ways. Lord Atkin in Evans v Bartlam referred to rules that guide the discretion and one of them was “an affidavit of merits, meaning that the applicant must produce to the Court evidence that he has a prima facie defence”. It has been said that the affidavit “must set out all the defences on which the defendant intends to rely and briefly set out the facts by which the defendant seeks to establish such defences”. The defendant must make more than a bare allegation: the allegation must be supported by “some reference to evidence to suggest that the defence is plausible and not just raised for the purpose of having default judgment set aside”. It is insufficient for an applicant:“to allege that he has a defence upon the merits and swear to such a defence generally. He must go further and disclose what such merits are, and show to the court that his application is bona fide.”[4]Embrey v Smart [2014] QCA 75 at [68], footnotes omitted. Nothing turns on the differences in language between “prima facie defence on the merits” and “substantial ground of defence”. Such differences should be viewed as the emphasis in a particular case to the particular facts of that particular case.[5] Neither formulation should be treated as though it was some statutory statement of a condition precedent to the exercise of the discretion. In any particular case, the extent of evidence necessary to persuade a judge to exercise the discretion in favour of a defendant cannot be specified by any a priori “rule” or “rules”. As Lord Wright explained in Evans v Bartlam (emphasis added):[6]“It is, however, often convenient in practice to lay down, not rules of law, but some general indications, to help the Court in exercising the discretion, though in matters of discretion no one case can be an authority for another. As Kay L.J. said in Jenkins v. Bushby ..., "the Court cannot be bound by a previous decision, to exercise its discretion in a particular way, because that would be in effect putting an end to the discretion." A discretion necessarily involves a latitude of individual choice according to the particular circumstances, and differs from a case where the decision follows ex debito justitiae once the facts are ascertained. In a case like the present there is a judgment, which, though by default, is a regular judgment, and the applicant must show grounds why the discretion to set it aside should be exercised in his favour. The primary consideration is whether he has merits to which the Court should pay heed; if merits are shown the Court will not prima facie desire to let a judgment pass on which there has been no proper adjudication.”[5]Cf the suggestion made by Ward LJ in Day v RAC Motoring Services Ltd [1999] 1 WLR 2150 at 2157 in analogous circumstances.[6]Evans v Bartlam [1937] AC 473 at 488 to 489.

Decision

Reasons for decision

Full text does not contain this section.

Ratio Decidendi

Legal Principle Established

Full text does not contain this section.

CITATION:	De Castro v Burtenshaw Super Pty Ltd [2023] QCA 218
PARTIES:	GUI JORGE DA COSTA NAPOLEAO DE CASTRO (appellant) v BURTENSHAW SUPER PTY LTD ACN 635 959 572 AS TRUSTEE FOR THE BURTENSHAW SUPERANNUATION FUND (respondent)
FILE NO/S:	Appeal No 4776 of 2023 SC No 348 of 2022
DIVISION:	Court of Appeal
PROCEEDING:	General Civil Appeal
ORIGINATING COURT:	Supreme Court at Cairns – [2023] QSC 60 (Henry J)
DELIVERED ON:	10 November 2023
DELIVERED AT:	Brisbane
HEARING DATE:	23 August 2023
JUDGES:	Bond and Dalton JJA and Cooper J
ORDER:	Appeal dismissed with costs.
CATCHWORDS:	PROCEDURE – CIVIL PROCEEDINGS IN STATE AND TERRITORY COURTS – JUDGMENTS AND ORDERS – AMENDING, VARYING AND SETTING ASIDE JUDGMENTS AND ORDERS – ACTIONS TO REVIEW OR SET ASIDE JUDGMENT OR ORDER – where the appellant failed to defend within time and the respondent obtained default judgment against the appellant – where the appellant applied to set aside the default judgment – where the appellant contended that he had a defence on the merits based on the proposition that the lender had been guilty of unconscionable conduct – where the primary judge dismissed that application – where the appellant appealed on a single ground – whether the primary judge miscarried in finding that the appellant had not demonstrated a prima facie defence on the merits Uniform Civil Procedure Rules 1999 (Qld), r 290 Day v RAC Motoring Services Ltd [1999] 1 WLR 2150, considered Deputy Commissioner of Taxation v Johnston (2006) 230 ALR 575; [2006] QSC 61, considered Embrey v Smart[2014] QCA 75, considered Evans v Bartlam [1937] AC 473, considered House v The King (1936) 55 CLR 499; [1936] HCA 40, considered Kumar v Ernst [2021] QCA 260, considered
COUNSEL:	M T Tolcon for the appellant (sol) J C Treviño KC for the respondent
SOLICITORS:	Forbes Kirby Lawyers for the appellant MacDonnells Law for the respondent