Kaji Australia Pty Ltd v Glover

[2016] NSWSC 679

Supreme Court

New South Wales

Medium Neutral Citation:

Kaji Australia Pty Ltd v Glover [2016] NSWSC 679

Hearing dates:

25 May 2016

Date of orders:

01 June 2016

Decision date:

01 June 2016

Jurisdiction:

Common Law

Before:

Harrison AsJ

Decision:

The Court orders that:

 

(1) The plaintiffs are to file and serve an amended statement of claim in the Supreme Court proceedings by 5.00 pm on 15 June 2016.

 

(2) Leave is granted to the defendant to file and serve a defence and cross claim by 5.00 pm on 29 June 2016.

 

(3) These proceedings are listed for directions at 9.00 am on 13 July 2016 before the Registrar.

 (4) Costs are reserved.

Catchwords:

PROCEDURE – civil – summary disposal – default judgment – setting aside default judgment – irregularity – statement of claim in Supreme Court proceedings based on default judgment in District Court proceedings – District Court default judgment set aside – orders to return pleadings to orthodoxy

Legislation Cited:

District Court Act 1973 (NSW)
Uniform Civil Procedure Rules 2005 (NSW)

Cases Cited:

Perpetual Trustees Australia Ltd v Heperu Pty Ltd (No 2) [2009] NSWCA 387; 78 NSWLR 190

Category:

Procedural and other rulings

Parties:

Kaji Australia Pty Ltd (First Plaintiff
William Bradley Webster ( Second Plaintiff)
Johann Benson Glover (Defendant)

Representation:

Counsel:
R Newell (Defendant)
P Folino-Gallo (Plaintiffs)

  Solicitors:
Shields Lawyers (Plaintiffs)
LC Muriniti & Associates (Defendant)

File Number(s):

2014/105767

Publication restriction:

Nil

Judgment

1. HER HONOUR: By amended notice of motion filed 1 February 2016, the defendant seeks an order that the default judgment for possession entered on 19 June 2014 by this Court be set aside.

2. The first plaintiff is Kaji Australia Pty Ltd (“Kaji Australia”). The second plaintiff is William Bradley Webster. The defendant is Johann Benson Glover. The plaintiff relied upon the affidavit of Rodney Shields affirmed 28 June 2015, the affidavit of Richard Nicholson affirmed 29 October 2015, the affidavit of Julian McVittie sworn 3 November 2015 and the affidavit of Richard Nicholson dated 29 October 2015. The defendant relied upon the his affidavits sworn 29 July 2015, 22 January 2016 and 14 March 2016, the affidavits of John Lippits affirmed 6 March 2015, 3 August 2015 and 22 January 2016, and the affidavit of Leonard Carlo Muriniti dated 5 March 2015, and the affidavit of Dr Paul Friend dated 10 July 2015.

3. On or about 21 February 2011, the defendant executed a short term loan agreement with the plaintiffs in the sum of $115,000. The loan was for a period of two months.

4. In addition to these proceedings in this Court, there were proceedings taken in the District Court between the same parties arising from the same loan agreement. I shall briefly set out the unorthodox procedure adopted by the plaintiff’s solicitor in relation to both proceedings.

The District Court proceedings

5. By statement of claim filed 3 November 2012 in the District Court, Kaji Australia and William Bradley Webster, as plaintiffs, sought that judgment in the sum of $115,000 be entered against Mr Glover, as defendant, together with default costs and interest.

6. The statement of claim relevantly pleaded:

“1   The defendant (hereinafter referred to as “Glover”) is the registered proprietor of land comprised in Certificate of Title - Folio Identifier XX/X/XXXX and situated at XXXX St, Mount Druitt NSW 2770 (hereinafter known as “the land”).

2   On or about 21 February 2011 the plaintiffs (hereinafter called “K & W”) as mortgagees and Glover as Mortgagor entered into a mortgage AGXXXXX (“the Mortgage”) in respect of the land.

3   K & W rely upon the terms of the Mortgage as is specifically pleaded herein.

4   The relevant terms and contents of the mortgage were-

(a)   The Mortgagees will lend the sum of $115,000.00 to the mortgagor (“the Principal Sum”).

(b)   The Mortgagor will repay the Principal Sum to the Mortgagees within two (2) months from the date of receipt of the Principal Sum from the Mortgagees.

(c)   The Mortgagee would repay interest on the outstanding Principal Sum at the rate of five per cent (5%) per month reducible to three per cent (3%) per month if paid within seven days of the due date being 21/04/11 or in the alternative the 21st day of each month.

(d)   Interest at the lower rate of three per cent (3%) will and would be payable on the balance outstanding until the date of repayment of the Principal Sum.”

7. Calculations were made as to the amount of the debt due and owing (S/C [5]) and it was pleaded that the defendant did not repay the principal sum of the loan when it fell due “to wit 2 months after the date the loan was made” (S/C [6]).

8. On 30 January 2013, the defendant filed and signed an acknowledgment of liquidated claim in which he stated, “I acknowledge the whole of the amount being claimed by the plaintiff”. He now says that he did not understand that by completing and signing this form he was consenting to a judgment being entered against him. He explains that he thought that the form was simply a preliminary step that had to be taken in order to initiate a process which would result in a hearing before a judge and a determination by that judge; not that by simply signing the form, he was going to be the subject of an automatic judgment by admission against himself. He says that this was not explained to him by the clerk and at the time he was extremely distressed and could not think straight and had not had any legal advice about the matter whatsoever. (Aff, 22/1/2016 [20]). It also appears that on the same day a default judgment was entered ordering the defendant pay the plaintiffs the sum of $186,045.

Supreme Court proceedings

9. On 8 April 2014, a statement of claim was filed in this Court with the same parties as plaintiffs and defendant. It relevantly pleads:

“1   The defendant is the owner of the property at XXXX Street, Mount Druitt NSW 2770 folio identifier XX/X/XXXX (“property”).

2   The defendant obtained a loan from Kaji Australia Pty Ltd and William Bradley Webster on 21 February 2011, the first and second plaintiffs (“Lender”).

3   The defendant mortgaged the property as security for this loan by a mortgage number AGXXXXX .

4.   This mortgage means that if there is a default under your loan, the Lender can:

(a)   take possession of the defendant’s property; and

(b)   obtain a judgment against the defendant for the amount owed by the defendant to the Lender.

5.   The defendant is in default of the loan pursuant to Notice of Orders made in the District Court case no: 2012/00372995 Kaji Australia Pty Ltd ACN 111 (first plaintiff) and Webster (second plaintiff) by a judgment made in the District Court on 30 January 2013 against the defendant for breach of defendant’s failure to pay money to the plaintiff, (particulars of the date on which the failure began, the amount of money currently unpaid and the method by which that amount has been calculated).”

10. The particular of default was given as the defendant’s failure to pay the amount due being $186,045 pursuant to a notice of orders made by judgment in the District Court on 30 January 2013 (S/C [6]).

11. On 27 May 2014, default judgment was entered entitling the plaintiffs to possession of the property.

12. On 19 June 2014, a writ of possession was issued by the Supreme Court. Pursuant to that writ of possession, the Sheriff of NSW served a number of notices to vacate on the defendant including one on or about 9 July 2014, the execution of which was postponed at the request of John Lippits on behalf of the defendant, and one on or about 1 September 2014.

13. On or about 9 October 2014, the Sheriff took possession of the property.

14. On or about 28 November 2014, a further notice to vacate was serve on the defendant giving him until 15 January 2015 to vacate the premises.

15. On 15 January 2015, LJ Hooker Rooty Hill commenced the process of marketing the property as a contract had already been prepared in anticipation of obtaining possession.

16. On 5 March 2015, the defendant filed a notice of motion seeking firstly, that execution on the judgment for possession issued on 19 June 2014 be stayed; secondly, that the plaintiffs be restrained from exercising its power of sale; thirdly, that the District Court proceedings be transferred to the Supreme Court; and fourthly, that the defendant be granted leave to file a summons.

17. On or about 5 March 2015, the defendant also obtained ex parte orders restraining the mortgagee from exercising its power of sale.

18. On 17 November 2015, this motion came before me. I was advised that there had been proceedings in the District Court (2012/372995) relating to the loan agreement that apparently had been settled by consent and judgment had been entered.

19. On 22 January 2016, Gibb DCJ in the District Court made the following orders:

“1.   Pursuant to Uniform Civil Procedure Rule 35.15(1), order that any Judgment entered on or about 30 January, 5 March or 25 March 2013 be set aside as made irregularly (not entered by a Judicial Officer).

2.   Pursuant to Uniform Civil Procedure Rule 35.15(1), order that the writ of levy issued on or about 7 June 2013 be set aside as made irregularly (absence of foundation judgment).

3.   Order that all the costs in these proceedings, including the costs of the Notice of Motion filed 6 November 2015 and the listing today, are to be determined as costs in the Supreme Court Proceedings 2014/105767.”

20. Currently there is no defence or cross claim filed in this Court.

21. The powers to set aside a judgment are contained in Uniform Civil Procedure Rules 2005 (NSW) (“UCPR”) 36.15 and 36.16. They relevantly read:

“36.15   General power to set aside judgment or order

(1)   A judgment or order of the court in any proceedings may, on sufficient cause being shown, be set aside by order of the court if the judgment was given or entered, or the order was made, irregularly, illegally or against good faith.

(2)   A judgment or order of the court in any proceedings may be set aside by order of the court if the parties to the proceedings consent.

36.16   Further power to set aside or vary judgment or order

(1)   The court may set aside or vary a judgment or order if notice of motion for the setting aside or variation is filed before entry of the judgment or order.

(2)   The court may set aside or vary a judgment or order after it has been entered if:

(a)   it is a default judgment (other than a default judgment given in open court), or

(b)   it has been given or made in the absence of a party, whether or not the absent party had notice of the relevant hearing or of the application for the judgment or order, or

(c)   in the case of proceedings for possession of land, it has been given or made in the absence of a person whom the court has ordered to be added as a defendant, whether or not the absent person had notice of the relevant hearing or of the application for the judgment or order.

…”

22. I shall deal with UCPR 36.15 and then s 36.16 if necessary.

The plaintiff’s submissions

23. Counsel for the plaintiffs submitted that the focus of UCPR 36.15(1) is upon whether the judgment or order that is sought to be set aside was given, entered or made irregularly, illegally or against good faith. The focus is on an irregularity in these steps and not on the merits of any decision or the irregularity of other steps in the proceedings: Perpetual Trustees Australia Ltd v Heperu Pty Ltd (No 2) [2009] NSWCA 387; 78 NSWLR 190 at [16] (“Heperu”). In Heperu, it was observed at [17] that UCPR 36.15(1) applies with particular force to default or consent judgments or orders and those given or made ex parte and that it can only have limited application to judgments and orders made or entered after a hearing on the merits at which all parties were represented and fully heard.

24. According to counsel for the plaintiffs, the judgment for possession was not entered irregularly. He says that judgments for possession need not be founded upon another judgment and it was sufficient to establish that there was a breach of the loan agreement and mortgage that entitled the plaintiffs to possession. Counsel’s argument is the fact that the District Court judgment was itself irregular is of no moment to the instant case. Furthermore, he says that it is not a corollary that irregularity will in and of itself warrant the setting aside of a judgment. The court must still consider whether to exercise its discretion which will turn upon the whole of the relevant circumstances. The defendant’s position is that the default judgment and writ of possession obtained in this Court should be set aside.

25. So far as relevant circumstances are concerned, counsel for the plaintiffs submitted firstly, that the lenders were not institutional; secondly, that these proceedings have proved costly for them as they have not only been out of funds for some time, but have incurred substantial legal costs in trying to recover the funds that were advanced which has resulted in significant hardship for the lenders.

26. The plaintiff’s alternate position is that the writ of possession should still remain in force (subject to a current order that its execution be stayed until this judgment is delivered) and, depending on the outcome of the defendant’s defence and cross claim, the writ of possession could then be set aside if necessary.

Conclusion

27. I consider that the large legal fees that have been expended are due to the incorrect and costly procedure being adopted by their solicitor in both the District Court and this Court. The proceedings seeking both judgment for a sum of money owed under the loan agreement and judgment for possession should have been taken in this Court, not the District Court. As I understand it, the District Court does not have jurisdiction to issue a writ of possession for land exceeding $20,000 in value: see District Court Act 1973 (NSW) s 133(1). These circumstances are not ones that, in the exercise of my discretion, warrant this Court to not set aside the default judgment and writ of possession.

28. So far as the plaintiff’s alternate position is concerned, the default judgment for possession and writ of possession issued in this Court are founded upon a default judgment issued in the District Court (S/C [5] and [6]). That judgment has now been set aside. There is no judgment against the defendant in existence that a sum of money is due and owing under the loan agreement. The plaintiffs have no entitlement to maintain default judgment for possession as it is based on an irregularity. It follows that there is no basis for a writ of possession to remain in force. The default judgment and the writ of possession should be set aside. The plaintiffs’ alternate submission fails. I make those orders. Hence, it is not necessary to deal with UCPR 36.16.

29. I note that the defendant’s legal representatives have not filed a defence. A draft amended cross claim has been prepared. It relevantly seeks:

“1.   An order setting aside the loan secured by the mortgage that is the subject of these proceedings.

2.   A declaration that given the circumstances of which it was entered into it is unconscionable for the Cross Defendants to enforce the mortgage.

3. A declaration that the loan and mortgage are unjust contracts within the meaning of s7 of the Contracts Review Act.

4.   An order that the loan be set aside.

5.   An order that the mortgage be set aside.

6. An order pursuant to the Contracts Review Act (NSW) declaring the loan and mortgage to be void or otherwise refusing to enforce the loan and mortgage.

…”

30. So as to avoid more confusion and to return the pleadings to orthodoxy, I make the following orders.

The Court orders that:

(1)   The plaintiffs are to file and serve an amended statement of claim in the Supreme Court proceedings by 5.00 pm on 15 June 2016.

(2)   Leave is granted to the defendant to file and serve a defence and cross claim by 5.00 pm on 29 June 2016.

(3)   These proceedings are listed for directions at 9.00 am on 13 July 2016 before the Registrar.

(4)   Costs are reserved.

**********

Decision last updated: 01 June 2016