La Trobe Financial Asset Management Limited v Wallabie Constructions Pty Limited - [2024] WASC 482

JURISDICTION     :   SUPREME COURT OF WESTERN AUSTRALIA
CITATION:   LA TROBE FINANCIAL ASSET MANAGEMENT LIMITED -v- WALLABIE CONSTRUCTIONS PTY LIMITED [2024] WASC 482
CORAM:   HOWARD J
HEARD:   5 DECEMBER 2024
DELIVERED          :   18 DECEMBER 2024
PUBLISHED           :   18 DECEMBER 2024
FILE NO/S:   CIV 1583 of 2016
BETWEEN:   LA TROBE FINANCIAL ASSET MANAGEMENT LIMITED
Plaintiff
AND
WALLABIE CONSTRUCTIONS PTY LIMITED
First Defendant
VALENTINO KOVACIC
Second Defendant

FILE NO/S: CIV 2330 of 2017
BETWEEN: LA TROBE FINANCIAL ASSET MANAGEMENT LIMITED
Plaintiff
AND
WALLABIE CONSTRUCTIONS PTY LIMITED
First Defendant
VALENTINO KOVACIC
Second Defendant

Catchwords:

Practice and procedure - Applications to set aside default judgments by one defendant - Where significant time has passed since default judgments entered - Whether second defendant was regularly served - Whether second defendant has arguable defences - Applications dismissed

Legislation:

Rules of the Supreme Court 1971 (WA)
Service and Execution of Process Act 1992 (Cth)
Service and Execution of Process Regulations 1993 (Cth)

Result:

Applications dismissed

Category: B

Representation:

CIV 1583 of 2016

Counsel:

Plaintiff	:	Ms R A Collins
First Defendant	:	No Appearance
Second Defendant	:	In Person

Solicitors:

Plaintiff	:	HWL EBSWORTH LAWYERS (PERTH)
First Defendant	:	No Appearance
Second Defendant	:	In Person

CIV 2330 of 2017

Counsel:

Plaintiff	:	Ms R A Collins
First Defendant	:	No Appearance
Second Defendant	:	In Person

Solicitors:

Plaintiff	:	HWL EBSWORTH LAWYERS (PERTH)
First Defendant	:	No Appearance
Second Defendant	:	In Person

Case(s) referred to in decision(s):

Argyle Diamonds Ltd v Fluor Australia Pty Ltd [2018] WASC 356
Paciocco v ANZ (2016) 258 CLR 525
Starrs v Retravision (WA) Ltd [2012] WASCA 67
Timbercorp Finance Pty Ltd (In Liq) v Allan [2016] VSC 481

HOWARD J:

These reasons deal with applications in two related matters (CIV 1583 of 2016 and CIV 2330 of 2017) in which the second defendant in both seeks to set aside default judgments which were entered on 19 October 2017 and 23 October 2017 respectively. The applications to set aside those judgments were both made on 25 January 2024.

CIV 1583 of 2016 (CIV 1583)

This action was commenced by a writ of summons on 12 April 2016 (1583 writ).
A statement of claim was filed on 12 April 2016 (1583 SOC) and an amended statement of claim was filed on 9 August 2017 (1583 ASOC).
The claim made against the first defendant, broadly, was for amounts owing pursuant to a loan agreement and mortgage. The principal amount lent was pleaded to be $1,087,500.[1] The mortgage granted by the first defendant was over property in Dawesville in this State (Unit 55 or 1583 secured property).
[1] 1583 SOC [4], 1583 ASOC [4].
As against the second defendant, Mr Kovacic, the claim was made pursuant to a deed of guarantee and indemnity.[2]
[2] 1583 SOC [7], [8]; 1583 ASOC [8], [9], [11(a)].
On 15 August 2017, the plaintiff issued a chamber summons, pursuant to O 62A, seeking judgment against the first and second defendants. (It is to be noted that by the time that (the later) CIV 2330 had been commenced, O 62A had been replaced with O 4AA).
On 19 October 2017, a registrar gave the plaintiff leave and entered judgment against the defendants in default of an appearance being entered by either of the defendants (1583 judgment).
By 19 October 2017, the plaintiff had filed the following documents:
1.an affidavit of Simon Purcell made on 20 April and filed on 21 April 2016;
2.an affidavit of Paul Eistis made on 20 April and filed on 21 April 2016;
3.an affidavit of Nicole Burns made on 13 April and filed on 14 April 2016;
4.an affidavit of Gavin Bellamy made on 9 May 2016 and filed on 18 July 2017 (1583 Bellamy affidavit);
5.an affidavit of Helen Troughton made on 9 October and filed on 10 October 2017;
6.an affidavit of Melissa Benson made on 4 August and filed on 15 August 2017;
7.an affidavit of Wendy Shackleton made and filed on 12 September 2017 (first 1583 Shackleton affidavit);
8.an affidavit of Wendy Shackleton made and filed on 16 October 2017;
9.a memorandum of conferral dated and filed on 15 August 2017; and
10.a certificate of amount due under mortgage dated 19 October 2017.
Not all of these affidavits relate to the matters now in issue; for example, some of them deposed to service on the first defendant.
By the 1583 Bellamy affidavit, Mr Bellamy deposed that:
1.he was a process server;[3]
2.on Friday 22 April 2016, he personally served a copy of the 1583 writ which annexed a Form 1 under SEPA; and the 1583 SOC on Mr Kovacic;[4] and
3.Mr Kovacic accepted the service 'as the second defendant';[5] from which I infer that Mr Kovacic identified himself.
[3] [1].
[4] [2].
[5] [3].
The 1583 Bellamy affidavit did not include a copy of what was deposed to have been served.
By the first 1583 Shackleton affidavit, Ms Shackleton deposed, amongst other things:
1.to being a paralegal of the plaintiff's solicitors;[6]
2.that on 6 September 2017, to sending by express post a copy of the plaintiff's chamber summons dated 15 August 2017, and other documents including the 1583 ASOC, to Mr Kovacic at two addresses: one being the address where he had previously been served and another at Forrester's Beach in New South Wales;[7]
3.to sending a copy of the 6 September 2017 letter with its attachments to an email address of Mr Kovacic;[8] and
4.that one of the documents sent as above on 6 September 2017 was the 1583 ASOC.[9]
[6] [1].
[7] [2], [3].
[8] [3].
[9] [3].

The application in CIV 1583

By a document filed 25 January 2024, Mr Kovacic sought to set aside the 1583 judgment (1583 application).
It is important to note that no such application has been filed by the first defendant, Wallabie Constructions Pty Ltd, in this action; and it has not participated in the 1583 application.
Mr Kovacic filed in support an:
1.affidavit made and filed on 25 January 2024 (first 1583 Kovacic affidavit);
2.affidavit made on 30 April 2024 which was filed on 1 May 2024 (second 1583 Kovacic affidavit): I note that this affidavit was also said to be made to support the application in CIV 2330; and
3.an affidavit made on 25 July 2024 and filed on 26 July 2024 (third 1583 Kovacic affidavit).
Further, Mr Kovacic filed on:
1.29 May 2024, an outline of submissions in this application and in CIV 2330 of 2017; and
2.27 July 2024, an amended outline of submissions in the two actions.
In opposition to the application to set aside the default judgment, the plaintiff filed an:
1.affidavit of Pino Monaco made and filed on 22 May 2024 (1583 Monaco affidavit); and
2.affidavit of Helen Troughton made and filed on 24 June 2024 in both actions (second 1583 Troughton affidavit).

CIV 2330 of 2017 (CIV 2330)

The action was commenced by a writ filed on 10 August 2017 (2330 writ). The parties were the same in this action as they were in CIV 1583.
The statement of claim was also filed on 10 August 2017 (2330 SOC).
The claim against the first defendant was in respect of a loan agreement dated 30 September 2017, by which it was pleaded that the principal sum of $770,000 had been advanced.[10] It was pleaded that the mortgage granted by the first defendant was over a property at Dawesville in this State (Unit 35 or 2330 secured property).
[10] 2330 SOC [4].
As against Mr Kovacic, the claim was made in respect of a deed of guarantee and indemnity dated 16 September 2015.[11]
[11] 2330 SOC [8], [10], [11].
As noted above, O 4AA applied to CIV 2330. Order 4AA r 3(2) required that: 'a notice in Form 4 must be attached to the front of writ when the writ is served' (WASC Form 4).
By a Form 36B dated 23 October 2017, the plaintiff sought to enter default judgment against both defendants.
On 23 October 2017, a registrar of this Court gave leave to the plaintiff to enter judgment against each of the defendants, and, entered judgment (2330 judgment).
By the time of its application of 23 October 2017, the plaintiff had filed an:
1.affidavit of Gavin Bellamy made on 15 September and filed on 27 September 2017 (first 2330 Bellamy affidavit);
2.affidavit of Wendy Shackleton made and filed on 4 October 2017;
3.affidavit of Wendy Shackleton made and filed on 16 October 2017 (second 2330 Shackleton affidavit); and
4.affidavit of Helen Troughton made on 18 October and filed on 23 October 2017.
By the first 2330 Bellamy affidavit, Mr Bellamy deposed:
1.to being a process server;[12]
2.that at 11.15 am on Monday 11 September 2017 he had effected personal service of the 2330 writ which annexed a Form 1 Notice under SEPA and a Form 4 Notice; and the 2330 SOC on Mr Kovacic at a café in Gosford, New South Wales;[13] and
3.that he had endorsed the plaintiff's original sealed 2330 writ in compliance with O 9 r 1(4).[14]
[12] [1].
[13] [2].
[14] [3].
The first 2330 Bellamy affidavit did not attach or include a copy of what was deposed to have been served.
By the second 2330 Shackleton affidavit, Ms Shackleton deposed to:
1.being a paralegal employed by the plaintiff's solicitors;[15] and
2.causing to be sent by a priority pre-paid post on 4 October 2017, a Form 36A notice with the 2330 writ annexing a Form 1 under SEPA and annexing a Form 4 to two physical addresses of Mr Kovacic and to his email address.[16]
[15] [1].
[16] [2], [3].
I infer that Mr Bellamy (in the first 2330 Bellamy affidavit) and Ms Shackleton (in the second 2330 Shackleton affidavit) were referring to the WASC Form 4 when they deposed to the 'Form 4'.

The application in CIV 2330

On 25 January 2024, Mr Kovacic filed a document by which he sought to set aside the 2330 judgment (2330 application).
As with the other action, the first defendant has made no such application in this action and has not participated in the 2330 application
In support, Mr Kovacic filed an:
1.affidavit on 25 January 2024, made the same day (first 2330 Kovacic affidavit), which mirrored substantially the affidavit Mr Kovacic made in CIV 1583 of 2016; and
2.affidavit on 26 July 2024 made on 25 July 2024 (second 2330 Kovacic affidavit).
As noted above, the second 1583 Kovacic affidavit was also made, on its face, in support of the application in CIV 2330.
The plaintiff filed affidavits in opposition to Mr Kovacic's application being the:
1.affidavit of Pino Monaco made and filed on 22 May 2024 (2330 Monaco affidavit);
2.second 1583 Troughton affidavit; and
3.affidavit of Gavin Bellamy made and filed on 24 June 2024 (second 2330 Bellamy affidavit).

Applicable principles

The parties were agreed that:
1.Order 13 r 14 was the applicable provision; and
2.the principles were as stated by the Court of Appeal in Starrs v Retravision (WA) Ltd [2012] WASCA 67 [36] (Starrs v Retravision).
Order 13 r 14 provides as follows:
14.Setting aside or varying default judgment
The Court may, on whatever terms it thinks just, set aside or vary any default judgment entered under this Order.
The Court of Appeal in Starrs v Retravision[17] stated:
Whether judgment was regularly or irregularly entered may be significant. Under O 13 r 10 of the Rules of the Supreme Court 1971 (WA)[18] the court may set aside or vary a judgment entered in default of appearance, on such terms as it thinks just. That discretion is not qualified. But as a general rule, a judgment regularly entered will not be set aside unless the court is satisfied that there is a defence on the merits. That rule may be departed from in "rare but appropriate cases". A judgment irregularly entered, however, "ought not be on the records of the court and therefore if a judgment in default of appearance or pleading has been entered irregularly, it will be set aside ex debito justitiae". Not every irregularity in the means by which a judgment in default is obtained will necessarily entitle the defendants to have the judgment set aside as of right. In an appropriate case, the court may amend an irregularly entered judgment rather than set it aside. (citations omitted)
[17] Starrs v Retravision (WA) Ltd [2012] WASCA 67 [36] (Allanson J, with whom Pullin & Murphy JJA agreed).
[18] This was the equivalent provision to the current O 13 r 14.

Issues to be decided

Applying that law, from the parties' contentions, the following issues arise:
1.Whether, in both actions, Mr Kovacic was regularly served;
2.if he was regularly served, is it just to set aside the default judgments by reference to the next three matters;
3.is the delay between the entry of the default judgments and the applications made to set them aside adequately explained;
4.does Mr Kovacic have a defence or defences which it would be just to allow him to agitate; and
5.what prejudice would the plaintiff suffer from the setting aside of the default judgments.

Was Mr Kovacic regularly served

It is common ground that at the material times - namely 22 April 2016 and 11 September 2017 - Mr Kovacic was in New South Wales. Therefore, service needed to be effected in accordance with the Service and Execution of Process Act 1992 (Cth) (SEPA).
The plaintiff's position is that Mr Kovacic was regularly served in both proceedings.
I understood the plaintiff to accept that if Mr Kovacic was not regularly served then this would not be an appropriate case for the Court to consider not setting aside the default judgments. With respect, I consider that is the correct approach for the plaintiff to adopt and, although I do not need to decide it, I consider it is in line with judgments such as Timbercorp Finance Pty Ltd (In Liq) v Allan[19] referred to with approval by Quinlan CJ in Argyle Diamonds Ltd v Fluor Australia Pty Ltd.[20]

CIV 1583: service

[19] Timbercorp Finance Pty Ltd (In Liq) v Allan [2016] VSC 481.

[20] Argyle Diamonds Ltd v Fluor Australia Pty Ltd [2018] WASC 356 [21].

Mr Kovacic's position is that he now accepts he was served with the 1583 writ and 1583 SOC[21] but says that he was not served with a Form 1 Notice as required by s 16 of SEPA. That position was put consistently by him in his three 1583 affidavits. In saying that, I do note that Mr Kovacic put the proposition more broadly, or less carefully, by deposing to not having been served with the 1583 SOC in the first 1583 Kovacic affidavit.[22]
[21] ts 51.
[22] First 1583 Kovacic affidavit [7].
The plaintiff accepts that s 16 of SEPA (as it was in 2016) required that the 1583 writ be served with a Form 1 Notice.[23]
[23] ts 69.
Sections 15, 16 and 51 of SEPA provided in April 2016 (as they did in September 2017, and do now) that:
15 Initiating process may be served in any part of Australia
(1) An initiating process issued in a State may be served in another State.
(2) Service on an individual must be effected in the same way as service of such an initiating process in the place of issue.
…
16 Information to be provided
Service is effective only if copies of such notices as are prescribed are attached to the process, or the copy of the process, served.
51 Information to be provided
Service is effective only if copies of such notices as are prescribed are attached to the process, or the copy of the process, served.
Relevantly, SEPA, at all relevant times, provided that 'initiating process' means a process 'by which a proceeding is commenced': s 3 SEPA.
At 22 April 2016, the relevant regulations were the Service and Execution of Process Regulations 1993 (Cth) which continued to apply until 19 July 2018 (1993 SEPA Regulations); that is, they also applied to the asserted service in CIV 2330.
Regulation 4(1)(a) prescribed that a Form 1 was the prescribed notice for s 16 of SEPA.
The plaintiff relied on the evidence in the 1583 Bellamy affidavit; which I have relevantly quoted from in paragraph [10] above.
I note again that it did not annexe the 1583 writ, nor any Form 1 Notice.
The 1583 writ and the Form 1 Notice were annexed as 'PAM-03' to the 1583 Monaco affidavit. At paragraphs [9] ‑ [12] of that affidavit, Mr Monaco deposed to the provenance of the 1583 writ and the Form 1 Notice.
Without setting out Form 1 to the 1993 SEPA Regulations, my comparison of the Notice at 'PAM-03' to the 1583 Monaco affidavit with the 1993 SEPA Regulations shows that, if served, the Form 1 at 'PAM‑03' was in accordance with the 1993 SEPA Regulations.
Section 11(1) of SEPA provides, and has done at all relevant times, that service of a process under SEPA is taken to have been proved only if five matters (set out in paragraphs (1)(a) ‑ (e)) are proved.
That provision is 'relevantly here' subject to s 11(8).
The evidence which the plaintiff has put forward in CIV 1583 does not completely comply with s 11(1)(b) in that it does not depose to the time at which the process was served.
However, in circumstances where Mr Kovacic does not dispute being served with the 1583 writ and the 1583 SOC, I consider that it is appropriate for me to 'dispense with' that requirement.
Having done so, I consider that service of the 1583 writ with the Form 1 Notice attached would be proved if the evidence set out above was accepted.
Consistently with the practice in Western Australia, neither party sought to cross-examine any deponent on their affidavit evidence.
Nonetheless, the Court has Mr Kovacic's denial that he was served with the Form 1 Notice.
I consider that the evidence led by the plaintiff on this aspect should be accepted. Significantly to that is my acceptance of:
1.Mr Bellamy's 1583 affidavit which was made a few weeks after the personal service he deposes to;
2.Mr Bellamy's contemporaneous endorsement on the Court's writ which appears at 'PAM-03' of the 1583 Monaco affidavit; and
3.Mr Monaco's evidence as to the retrieval of the original documents from his firm's archives in his 1583 Monaco affidavit.
I am fortified in accepting that more contemporaneous evidence by a consideration of Mr Kovacic's evidence in his three 1583 affidavits. I say that because he does not depose to having retained any original documents with which he was served in April 2016. Rather, he asserts that he was not served with the Form 1 Notice by reference to things that he says he 'discovered' in the course of researching files in the bankruptcy proceedings against him which were commenced in Sydney in the middle of 2023.[24]
[24] See, for example, first 1583 Kovacic affidavit [6].
Mr Kovacic does not depose to having an actual recollection of what, if any, papers he was served with in April 2016.
That is, Mr Kovacic does not put forward the documents he says he was served with in April 2016. At the very least, then, there is a question as to what documents Mr Kovacic, if any, is relying on in making the assertion that in CIV 1583 he was not served with the Form 1 Notice. Mr Kovacic did not depose to what he saw that led to the deposed-to 'discovery'.
In all of those circumstances, I do not consider that there is, as a matter of substance, a real conflict in the evidence. If, however, it is thought that there is such a conflict, then I prefer the plaintiff's evidence on this point.
That is, I find that Mr Kovacic was regularly served with the 1583 writ on 22 April 2016. There are two further matters which Mr Kovacic raises in relation to the service in CIV 1583; being:
1.the 1583 SOC was not served with a Form 1 Notice;[25] and
2.the 1583 ASOC was not served in accordance with O 21 r 11.[26]
[25] Second defendant's submissions filed 27 July 2024 [14(h)].
[26] Second defendant's submissions filed 27 July 2024 [14(aa)].

The 1583 SOC (or ASOC for that matter) was not an 'initiating process' within the meaning of s 15(1) of SEPA and did not require to be served under SEPA with a Form 1 Notice.
Further, as noted above, Ms Shackleton in the first 1583 Shackleton affidavit deposed to having sent the 1583 ASOC to Mr Kovacic on 6 September 2017 to two physical addresses and to his email address.
So, while it may be accepted, for present purposes, that the plaintiff had not complied with O 21 r 11 in that there was a delay in serving the 1583 ASOC on Mr Kovacic, that delay does not go to his being served irregularly and, at most, may be a matter which would go to the exercise of discretion to set aside the 1583 judgment.
In all of the circumstances, however, I do not think it is a matter which has any weight in the exercise of that discretion.

CIV 2330: service

Mr Kovacic's position is different in respect to CIV 2330. At the hearing, he asserted that he was not served at all with the 2330 writ, the SEPA Form 1 Notice, or the WASC Form 4.[27]
[27] ts 49 - 50.
This represents something of a change of position on his part.
The first 2330 Kovacic affidavit did not depose to there being no service of the 2330 writ but, rather, asserted he was not served with the 2330 SOC[28] (nor any document) as required by SEPA.[29]
[28] First 2330 Kovacic affidavit [7].
[29] First 2330 Kovacic affidavit [8], [12], [13], [14].
In the second 1583 Kovacic affidavit, (also made in support of the 2330 application)[30] he again did not depose to not having been served with the 2330 writ. Rather, he deposed to the service on him as having not complied with SEPA.[31]
[30] Second 1583 Kovacic affidavit [5].
[31] See, for example: Second 1583 Kovacic affidavit [9], [13c, f, g, i], [23], [27], [28].
Further, the second 1583 Kovacic affidavit made no mention of the WASC Form 4 and whether or not it was included in the documents served.
In the second 2330 Kovacic affidavit, Mr Kovacic did not depose to what was or was not served upon him: see paragraphs [61] and [62] above which are equally applicable here.
In response, the plaintiff relied on the evidence in the first 2330 Bellamy affidavit which I quoted from in paragraph [26] above. As noted, that affidavit did not annexe the 2330 writ, nor the Form 1 Notice, nor the WASC Form 4 Notice that it deposed were served.
The 2330 writ and the Form 1 Notice were annexed as 'PAM-03' to the 2330 Monaco affidavit; and, again, Mr Monaco deposed to how those documents were retrieved from his firm's archives.
Neither the first 2330 Bellamy affidavit, nor the 2330 Monaco affidavit, however, adduced the WASC Form 4 into evidence.
There was a further matter pointed to by Mr Kovacic. The first and second 2330 Bellamy affidavits deposed to Mr Bellamy having served Mr Kovacic on 11 September 2017 at a café in Gosford. However, Mr Bellamy's endorsement on the court sealed original 2330 writ[32] stated that the writ was served at a Matcham address in New South Wales. It was not disputed at the hearing that the Matcham address in the endorsement to the 2330 writ is materially different from any address in Gosford in New South Wales.
[32] 'PAM-03' to the 2330 Monaco affidavit.
I note that the second 2330 Bellamy affidavit did not explain the discrepancy, but did depose, again, to the service having occurred at the café in Gosford.
I do not repeat here the discussion above to proving service under SEPA by s 11(1) of SEPA; other than to say that in CIV 2330 no dispensation was required under s 11(8).
In short, if the plaintiff's evidence were to be accepted, then I would hold that the service of the 2330 writ with the SEPA Form 1 Notice and the WASC Form 4 Notice was served on Mr Kovacic.
I repeat, here, again the observations I made about the lack of any application for cross-examination.
Mr Kovacic's position at the hearing, to the effect that he was not served with any documents at all in CIV 2330, is not consistent with the evidence in his three affidavits (being the first and second 2330 Kovacic affidavits and the second 1583 Kovacic affidavit).
Rather, those three affidavits deposed to the service not having been effected in compliance with the requirements of SEPA (and the relevant regulations).
Again, the observations I made above about whether there was, in substance, a true conflict on the evidence are also applicable here and I have not repeated them.
By parity of reasoning, I accept the plaintiff's evidence. If it is thought that there is a conflict on the evidence, then I would prefer the plaintiff's evidence to the position put by Mr Kovacic as to the service of the 2330 writ and the Form 1 Notice.
That leaves two issues to be considered; namely:
1.whether I am satisfied that the WASC Form 4 was annexed as required by O 4AA; and
2.the significance of the discrepancy between the first and second 2330 Bellamy affidavits on the one hand, and his endorsement on the 2330 writ at 'PAM-03' of the 2330 Monaco affidavit.
It may be accepted that:
1.the evidence that the WASC Form 4 was served is provided by the two 2330 Bellamy affidavits as 'corroborated' by Mr Bellamy's endorsement on the original Court sealed 2330 writ which appears as part of 'PAM-03' to the 2330 Monaco affidavit; but
2.a copy of the WASC Form 4 does not appear in the plaintiff's evidence.
Notwithstanding that deficiency in the plaintiff's evidence, I accept that Mr Bellamy did serve the 2330 writ with a WASC Form 4 as he twice deposed to.
If I did not accept that evidence, then there would have been a real issue as to whether the plaintiff would have complied with s 15(2) of SEPA when one has regard to the requirements in O 4AA r 3(2), requiring the WASC Form 4 to be attached to the front of the writ when the writ is served.
It is not clear to me that, having regard to the combined operation of s 15(2) of SEPA and O 4AA r 3(2), I necessarily would have had the power to correct that as an irregularity under O 2 r 1, as SEPA does not contain an equivalent provision.
It may be accepted that the discrepancy as to the place of service is not explained by Mr Bellamy, or by any other evidence (as identified in [87.2] above) by the plaintiff.
However, before making the second 2330 Bellamy affidavit, it is plain that the endorsement he had made on the 2330 writ had been brought to his attention.[33]
[33] Second 2330 Bellamy affidavit [7].
Notwithstanding that, he deposed, again, to having served Mr Kovacic at the specified café in Gosford.
While it might be thought to have been more satisfying if the discrepancy had been explained, I nonetheless consider that I am able to, and do, accept the two 2330 Bellamy affidavits and find that the service was personally effected on Mr Kovacic at the café at Gosford. I find, accordingly, that Mr Kovacic was regularly served with the 2330 writ on 11 September 2017.
In making this finding, I note that the first 2330 Kovacic affidavit made no mention of where Mr Kovacic said he had been served.
Further, the second 1583 Kovacic Affidavit (made to support both applications) again said nothing as to where Mr Kovacic was served.
The discrepancy was first deposed to in Mr Kovacic's second 2330 affidavit, which was the third he had made in support of the 2330 application. In the second 2330 Kovacic affidavit, he deposes to not being present at the café premises at the time he is said to have been served.[34] I prefer the evidence in Mr Bellamy's two 2330 affidavits (including the first made a few days after the service) to the somewhat lately introduced evidence in the second 2330 Kovacic affidavit.
[34] Second 2330 Kovacic affidavit [9].

The delay between the entry of the default judgments and the application to set them aside

As found above, default judgment in CIV 1583 was entered on 19 October 2017.
In my view, that date of the default judgment needs to be considered with the evidence led by the plaintiff in CIV 1583 going to:
1.personal service on Mr Kovacic: see paragraphs [10], [48] - [51] above; and
2.the sending, on 6 September 2017, of the plaintiff's chamber summons dated 15 August 2017 pursuant to O 62A to Mr Kovacic: see paragraph [12] above.
Further, Mr Kovacic, as he confirmed at the hearing:
1.was in April 2016, a director of Wallabie Constructions;[35] and
2.knew that the plaintiff had appointed a controller over Wallabie Constructions and, effectively, the 1583 secured property in about April or May 2016.[36]
[35] ts 51.
[36] ts 51.
In the first 1583 Kovacic affidavit, Mr Kovacic deposes, effectively, to his making a decision to apply to set aside the 1583 judgment some time later in 2023. I say that by reference to the Bankruptcy Notice to Mr Kovacic being filed on 18 July 2023 and his application to set that aside on 9 November 2023.[37] Although it is not entirely plain, the 'research' which motivated Mr Kovacic to make the 1583 application (and the 2330 application for that matter) may even have occurred after November 2023.[38]
[37] First 1583 Kovacic affidavit [5].
[38] See, for example, first 1583 Kovacic affidavit [6], [7].
In the first 1583 Kovacic affidavit, he deposed that:
I did not make any earlier claims to set aside the default judgment in this matter because I was not aware that the Plaintiff did not comply with the proper form of service of the statements of claim in this matter.[39]
[39] First 1583 Kovacic affidavit [13].
The second 1583 Kovacic affidavit did not depose to any additional relevant matters from those deposed to in the first 1583 Kovacic affidavit, save that he deposed to:
1.the complaint he made to the Credit and Investments Ombudsman (CIO) and the Australian Financial Complaints Authority as he:
… thought the only process that I could successfully undertake to reverse the actions of the plaintiff was by lodging a complaint with regulatory bodies being AFCA and CIO;[40]
2.'during this period' (by which I took to be the period covered by the making and considering of his complaints to the regulators) he was suffering from 'extreme pressure and stress' and:
It was very difficult at the time to understand what was required of me to defend my position and it all became overwhelming.[41]
[40] Second 1583 Kovacic affidavit [17].
[41] Second 1583 Kovacic affidavit [21].
By the third 1583 Kovacic affidavit, Mr Kovacic effectively and relevantly deposed that:
1.his complaint to the CIO was made or received on 12 May 2016;[42]
2.the controller was appointed to Wallabie Constructions on about 5 April 2016;[43] and
3.the plaintiff, and I infer to Mr Kovacic's knowledge, obtained possession of the secured properties on 31 March 2016.[44]
[42] Third 1583 Kovacic affidavit [6].
[43] Third 1583 Kovacic affidavit [7].
[44] Third 1583 Kovacic affidavit [24].
(Although not directly deposed to by Mr Kovacic), the second 1583 Troughton affidavit deposed to:
1.on about 31 March 2016, the plaintiff took possession of the 1583 secured property;[45]
2.on about 31 March 2016, the plaintiff informed Mr Kovacic of the same;[46]
3.the CIO closed the complaint made by Mr Kovacic on 21 June 2017;[47]
4.on about 8 September 2017, the plaintiff began advertising the sale of the 1583 secured property;[48] and
5.on 30 October 2017, the plaintiff entered into a contract of sale of the 1583 secured property.[49]
[45] Ms Troughton's second 1583 affidavit [8(a)].
[46] Ms Troughton's second 1583 affidavit [8(b)], [9].
[47] Ms Troughton's second 1583 affidavit [10(d)], [11].
[48] Ms Troughton's second 1583 affidavit [12], [13].
[49] Ms Troughton's second 1583 affidavit [14].
Paragraphs [106.2] and [106.3] equally apply to the CIV 2330 matter.
Further, relevantly, the second 1583 Troughton affidavit deposed to:
1.the plaintiff taking possession of the 2330 secured property on 25 July 2017;[50]
2.the plaintiff notifying Mr Kovacic of the same on about 27 July 2017;[51]
3.on about 8 September 2017, the plaintiff began advertising the sale of the 2330 secured property;[52] and
4.on 19 November 2017, the plaintiff entered into a contract of sale of the 2330 secured property.[53]
[50] Ms Troughton's second 1583 affidavit [15(a)].
[51] Ms Troughton's second 1583 affidavit [15(b)], [16].
[52] Ms Troughton's second 1583 affidavit [17], [18].
[53] Ms Troughton's second 1583 affidavit [19].
In all of the circumstances, then, I conclude from the evidence that in CIV 1583:
1.from no later than the date of service (22 April 2016) Mr Kovacic was aware that (the CIV 1583) proceedings were being taken against him and Wallabie Constructions;
2.from about April 2016, Mr Kovacic was aware that a controller had been appointed to Wallabie Constructions;
3.by no later than the end of June 2017, Mr Kovacic was aware that his complaint to the CIO had been 'closed';
4.by no later than the end of October 2017, Mr Kovacic was aware that the plaintiff was seeking default judgment; and
5.by no later than the middle of November 2017, Mr Kovacic was aware of the sale of the 1583 secured property.
I conclude from the evidence that in CIV 2330:
1.from no later than the date of service (11 September 2017) Mr Kovacic was aware that (the CIV 2330) proceedings were being taken against him and Wallabie Constructions;
2.on, or shortly after, 4 October 2017, Mr Kovacic was aware that the plaintiff was seeking default judgment; and
3.by no later than the end of November 2017, Mr Kovacic was aware of the sale of the 2330 secured property.
Even accepting that Mr Kovacic learnt of some matters in the second half of 2023 from his 'research' in the bankruptcy proceedings commenced against him, there is simply no explanation in the evidence of Mr Kovacic making any enquiry or taking any step from being notified that default judgment was being sought against him in both matters by no later than in October 2017 until, at best, about November 2023.
Mr Kovacic did assert to having suffered from a 'distressed mental condition' and deteriorating health from March 2016 due to the plaintiff's enforcement actions.[54] Even treating those assertions as the plaintiff's evidence, it can be immediately observed that the assertions are at a very high level of generality, as to each of: the asserted medical condition; its particular impact on Mr Kovacic; and its duration and persistence.
[54] Second defendant's submissions 27 July 2024 [15(l) - (o)].
In those circumstances, I have not attached any significant weight to those matters. In particular, I do not consider them to contribute to Mr Kovacic's 'explanation' for the delay in any real way.
In all of those circumstances, I do not consider that there is any relevant or adequate explanation on Mr Kovacic's part for the delay.

Is there a defence or defences

As noted above, the Court of Appeal in Starrs v Retravision stated that as a general rule a judgment regularly entered would not be set aside unless the court was satisfied that there was a defence on the merits.
As I understand it, that level of satisfaction is not that there is a defence which would succeed. Rather, the test is that there is an arguable defence disclosed which, in all of the circumstances, weighs in favour of the court setting aside a regularly entered judgment.
The most full statement of most of the defence or defences which Mr Kovacic wishes to run is found in his second 1583 Kovacic affidavit. There, Mr Kovacic deposes to having, or wishing to agitate, the following 'defences' if given leave to defend.
In setting them out as follows, I have sought to summarise the multiple ways Mr Kovacic expresses the same ideas:
1.the plaintiff failed to act in good faith when exercising the power of sale over the secured properties - principally this was by delaying the timing of the sale processes;
2.the plaintiff acted unconscionably by continuing to charge interest and costs (both of which became part of the default judgments), while being slow in the sale process and charging interest while the CIO process was underway;[55] and
3.the costs and interest charged were in the nature of a penalty.

The plaintiff's delay with the secured properties

[55] This latter aspect was articulated at the hearing: ts 52 - 54, 56 - 57.

As a matter of substance, it does not appear to me that Mr Kovacic's complaints about the 'delay' of the plaintiff could be sustained. The delay which Mr Kovacic complains of falls in two periods of time being:
1.between 31 March 2016 when the controller was appointed to the first defendant and 12 May 2016 when Mr Kovacic made the CIO application; and
2.between 21 June 2017 when the CIO closed his case until 8 September 2017 when the marketing of the secured properties began.
There are references in some of Mr Kovacic's material which seek to articulate the plaintiff's delay as being much longer and encompassing the whole of the period from when the controller was appointed at the end of March 2016, until early September 2017 when the marketing began. If Mr Kovacic intends to assert that longer period, that would fail to recognise the period in which the CIO process was underway and in which it would (on its face) have been inappropriate for the plaintiff to have sought to sell the secured properties.
Going back to the two periods identified above, I do not consider either of them to be significant in the scheme of a mortgagee's sale and, in any event, I do not consider that those periods are likely to lead a court to uphold Mr Kovacic's claims of a lack of good faith on the part of the plaintiff and his analogous claims.
In any event, I do not consider that these matters raised provide, on their face, an arguable defence as they are all events occurring after the defaults under the loans and guarantees and indemnities. That is, I do not consider that they would provide, realistically, Mr Kovacic with a defence to the cases pleaded against him.

The plaintiff's unconscionable conduct

While Mr Kovacic's second category of defences are expressed as the plaintiff having acted unconscionably, the difficulties with the first category also beset this category.
That is because, factually, this second category also raises and relies on delay by the plaintiff in the sale process.
There was a second aspect to this second category of defences. Mr Kovacic relied on the Rules of the CIO which he annexed as 'Annexure B' to his third 1583 affidavit.[56]
[56] ts 61, 62.
The plaintiff, in argument, noted that it was apparent from the face of Annexure B that the Rules adduced only applied on and from 15 August 2016. However, for the purposes of argument, the plaintiff was prepared to proceed on the basis that the CIO Rules were equivalently in force at the relevant time.[57] I have also proceeded on that basis.
[57] ts 79.
Mr Kovacic placed particular reliance on Rules 17 and 18 to submit that the plaintiff was not entitled to charge default interest and fees and enforcement costs because the matters fell within, in particular, Rule 18.5.
With great respect, it appears that Mr Kovacic may have misread that Rule. That Rule appears, on its face, to apply where the complainant was able to reasonably demonstrate that his 'financial hardship application' should have been approved by the plaintiff from the time when it was lodged. However, as I read it, Rule 18.5 plainly only applies where an applicant was able to reasonably demonstrate that the plaintiff should have approved his 'financial hardship application'. That did not occur here as the CIO closed Mr Kovacic's case without further action.
In those circumstances, I do not consider that the CIO Rules relied upon by Mr Kovacic assist him with asserting an arguable defence.
Because of the view I have taken (as to the arguability of these two categories of defences), I have not considered here the plaintiff's arguments to the effect that the matters complained of by Mr Kovacic would (if accepted) provide defences to Wallabie Constructions and not for Mr Kovacic. I do not express any concluded view on those matters but note that they did seem to pose another barrier to these two categories of defences succeeding.

Penalties

By his amended outline of submissions,[58] Mr Kovacic submits that the plaintiff, by charging 'late payment fees', charged a penalty for failing to observe a contractual stipulation.
[58] Amended submissions dated 25 July 2024 and filed 27 July 2024.
He then submitted that ' … if the Plaintiff did not charge the Late Penalty Fees in breach of the CIO Rules and in breach of the Penalty Doctrine supporting law, the Default Judgement would be incorrect …'.[59]
[59] Amended submissions dated 25 July 2024 and filed 27 July 2024 at page 16(v).
In response, the plaintiff referred to Paciocco v ANZ,[60] and in particular the judgment of Kiefel J (as she then was) at [68] - [69] to the effect that the mere imposition of a late payment fee by a financier did not make its imposition a penalty within the relevant doctrine.[61]
[60] Paciocco v ANZ (2016) 258 CLR 525.
[61] With whom French CJ agreed at [2]. See also Gageler J at [176] - [177]; Keane J at [216] -[217], [220], [274], [278], [283] - [284].
At the level of enquiry that I think needs to be made here, I consider that the High Court in Paciocco made plain that the mere designation of a charge as a 'late payment fee' by a financier does not have the result that the charge fails as a penalty.
Here, Mr Kovacic points to nothing else.

Prejudice suffered by the plaintiff if Court sets aside the default judgments

The plaintiff submits that it will suffer prejudice if the default judgments are set aside due to the:
1.considerable costs incurred by the plaintiff in the bankruptcy proceedings, which were commenced in reliance on the default judgments;[62] and
2.significant period of time that has passed since the default judgment was entered.[63]
[62] Plaintiff's written submissions dated 4 June 2024 [75].
[63] Plaintiff's written submissions dated 4 June 2024 [76].
The plaintiff has not put on any evidence as to the costs and time incurred in the bankruptcy proceedings.
Notwithstanding that, it may be accepted that there would be some costs and time incurred by the plaintiff in the bankruptcy proceedings and that these may be unrecoverable.
The plaintiff further submits that the significant period of time that has passed since the default judgments were entered would cause difficulties for the plaintiff in locating witnesses for the Supreme Court proceedings. The plaintiff submits that even if witnesses could be located, their memories would likely have deteriorated due to the considerable lapse of time since the events.[64] Again, there is no evidence sought to be led to support these assertions.
[64] Plaintiff's written submissions dated 4 June 2024 [76].
I accept that if the judgments are set aside, then the plaintiff would incur further costs as the Supreme Court proceedings would be re‑enlivened.
So, I accept there may be some general prejudice and some unquantified specific costs prejudice. I do not consider any of that would significantly weigh against setting aside the default judgments if the other factors all favoured Mr Kovacic. However, that is not the case as set out above.

Disposition

As set out above, I consider that Mr Kovacic was regularly served in both proceedings.
I do not consider that he has provided any real explanation as to the delay between being informed that the plaintiff was seeking default judgment and his making application to this Court to set aside in January of this year.
Further, I do not consider that any of the matters raised by Mr Kovacic provide him with arguable defences.
I consider that the plaintiff would have some prejudice if the default judgments were to be set aside. However, that prejudice would not outweigh an adequate explanation of the delay and properly arguable defence/s.
In all of the circumstances, I dismiss the two applications to set aside the default judgments.
I will hear the parties, if needs be, on final orders and costs.

I certify that the preceding paragraph(s) comprise the reasons for decision of the Supreme Court of Western Australia.
JC
Associate to the Honourable Justice Howard
18 DECEMBER 2024