Martinez & Anor v Keeshan
[2024] VCC 318
•15 March 2024
| IN THE COUNTY COURT OF VICTORIA AT MELBOURNE COMMERCIAL DIVISION | Revised Not Restricted Suitable for Publication |
BANKING AND FINANCE LIST
Case No. CI-22-05413
| SONIA MARTINEZ | First Plaintiff |
| IVAN MARTINEZ | Second Plaintiff |
| v | |
| CLINTON WAYNE KEESHAN | Defendant |
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JUDGE: | HIS HONOUR JUDGE WISE | |
WHERE HELD: | Melbourne | |
DATE OF HEARING: | 15 March 2024 | |
DATE OF RULING: | 15 March 2024 | |
CASE MAY BE CITED AS: | Martinez & Anor v Keeshan | |
MEDIUM NEUTRAL CITATION: | [2024] VCC 318 | |
RULING
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Subject:CIVIL PROCEDURE
Catchwords: Defendant’s application to set aside judgment entered in default of defence – where plaintiffs made two loans to the defendant – plaintiffs allege that loans have not been repaid – defendant alleges that terms of loans extended such that not yet due – plaintiffs opposed the application – principles of Kostokanellis v Allen and Lubura v Nezirevic in considering an application to set aside default judgment – whether there is a defence on the merits – whether defence has real not fanciful prospects of success – Court satisfied that defence has real prospects of success and default judgment should be set aside – application allowed
Legislation Cited: Civil Procedure Act 2010 (Vic); County Court Civil Procedure Rules 2018 (Vic)
Cases Cited:Evans v Bartlam [1937] AC 473; Kostokanellis v Allen [1974] VR 596; Lubura v Nezirevic (2013) 42 VR 43
Ruling:For the defendant
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APPEARANCES: | Counsel | Solicitors |
| For the Plaintiffs | Ms A Storey | Mackay Chapman |
| For the Defendant | Mr S Ozturk (solicitor) | Pera Lawyers |
HIS HONOUR:
Background
1This is an application by the defendant, Clinton Keeshan, pursuant to summons filed 8 March 2024, seeking to set aside a judgment that was entered in default of defence in favour of the plaintiffs, Sonia Martinez and Ivan Martinez.
2The proceeding concerns two loans provided by Mrs Martinez and Mr Martinez to Mr Keeshan. The first loan was for an amount of $500,000 (the first loan agreement), and the second loan was for the sum of $145,000 (the second loan agreement). They are, relevantly, in all but identical terms. Mrs Martinez and Mr Martinez commenced proceedings against Mr Keeshan seeking to recover amounts outstanding pursuant to the two loan agreements. On 17 October 2023, Mrs Martinez and Mr Martinez entered judgment against Mr Keeshan in default of defence.
Evidence
3Mr Keeshan has filed two affidavits: one on 18 December 2023 and a supplementary affidavit filed on 8 March 2024. In opposition to those affidavits, Mrs Martinez and Mr Martinez have filed three affidavits: an affidavit of their solicitor, Mr Cheng sworn 17 October 2023; a second affidavit of Mr Cheng sworn 12 March 2024; and an affidavit of Mrs Martinez, sworn 12 March 2024.
Legal principles
4There appears to be no dispute as to the principles upon which this application is to be determined. It is an application pursuant to Order 21.07 of the County Court Civil Procedure Rules 2018 (Vic). It seems to be common ground that the defendant may apply to set aside a default judgment. Where the judgment is regular, the applicant must show grounds upon which the Court’s discretion should be exercised in the defendant’s favour: see Kostokanellis v Allen.[1]
[1][1974] VR 596 at 603-605.
5In Lubura v Nezirevic,[2] Warren CJ described the test for setting aside a default judgment as follows:
“The test for setting aside a default judgment is set out in Kostakanellis v Allen where the Full Court held that a court should assess:
•Whether there is a defence on the merits;
•The reasons for the default;
•Whether the application to set aside the judgement was made promptly after the judgment came to the knowledge of the first defendant; and
•Whether, if the judgment is set aside, a suitable award of costs and the giving of security would be adequate to cover the prejudice to the plaintiff in having the judgment set aside.”
[2](2013) 42 VR 43 at [3].
6The test is not all that different from the test for summary judgment under s63 of the Civil Procedure Act 2010 (Vic): whether there is a real prospect of success.
7Of these considerations, the primary one is whether the defendant 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: Lord Wright in Evans v Bartlam [1937] AC 473 at 489, applied in Kostokanellis v Allen [1974] VR 596 and Lubura v Nezirevic [2013] VSCA 215 at [4].
8In the event of judgment being set aside, the Court must consider awarding costs and providing for the giving of security which would adequately cover the prejudice to the respondent in having the judgment set aside: Lubura v Nezirevic.[3]
[3] [2013] VSCA 215 at [119].
9I note that this is Mr Keeshan’s application. The material filed with the Court must disclose the particulars of the relevant sections of the defence and the material facts that the defendant relies on in his defence. The defendant must meet the onus of proof that the applicant bears in such applications.
Analysis
10The parties agreed that the primary issue for me to determine is whether Mr Keeshan’s purported defence demonstrates reasonable prospects of success.
11The primary defence agitated by Mr Keeshan is that the terms of the first loan agreement and the second loan agreement were extended, partly by oral conversations and partly in writing, to a date in September 2024, from the earlier dates that each were due. Mr Keeshan relies principally upon two written notices purportedly posted to Mrs Martinez and Mr Martinez, extending the terms of both loan agreements to 1 September 2024 (the extension notices). Copies of the extension notices were contained in a letter from the defendant’s solicitor, Mr Ozturk of Pera Lawyers, to the plaintiffs’ solicitors, Mr Chapman of Mackay Chapman dated 8 March 2024 giving further particulars of Mr Keeshan’s proposed defence. In paragraph 3(c) of that letter, Mr Ozturk wrote:
“In or around August 2022 the parties agreed to vary the Second Loan Agreement so that its repayment date aligned with the First Loan Agreement of 01/09/2024 (“August 2022 Variation”). Our client sent a notice to confirm the August 2022 Variation on or about 1/08/2022. A copy of the notice is attached to this letter at Annexure 2. The August 2022 Variation took place over a telephone conversation between the parties to the effect alleged.”
12Annexed to that letter were two annexures. Annexure 1 was an extension notice purporting to be applicable to the first loan agreement. It is in identical terms to Annexure 2, which is an extension notice purporting to be in respect of the second loan agreement. Both of the extension notices purport to be given pursuant to clause 5.2 of the first loan agreement and the second loan agreement. Clause 5.2 of both loan agreements provides as follows:
“5.2 Extension of Repayment Date
The Borrower has the right to extend the Repayment Date, therefore extending the term as set out in the schedule twice by giving notice to the Lender. This option is available to the Borrower despite any or part of the Commitment and interest remains unpaid.”
13Mr Ozturk submitted that by giving the extension notices, Mr Keeshan has extended the terms of the first loan agreement and the second loan agreement to 1 September 2024.
14Ms Storey of counsel, who appeared for Mrs Martinez and Mr Martinez, submitted that her clients dispute the authenticity of these extension notices and indeed will dispute that the extension notices were given. Notwithstanding this position, I note that Mrs Martinez swore an affidavit on 12 March 2024, subsequent to having received the second affidavit of Mr Keeshan which contains these extension notices, yet she has not deposed to the fact that she now wishes to dispute having received these extension notices and their authenticity.
15Ms Storey, correctly in my view, submitted that the question of the authenticity of the extension notices will ultimately be a matter for trial.
16The production of these extension notices, being the heart of the defence that Mr Keeshan wishes to run, is sufficient to demonstrate that Mr Keeshan has a defence to the claim that has something other than merely fanciful prospects of success. This defence runs for the second loan agreement in the same way that it runs for the first loan agreement.
17Ms Storey submitted that regardless of whether the extension notices were adequately given or not, the defendant is really attempting to run an argument that the loan agreements have been repudiated, and under those circumstances it is incumbent on the defendant to plead that he is ready, willing, and able to perform the balance of the loan agreements. I do not accept that submission. This is the plaintiffs’ proceeding, by which they allege that the loan is due and payable today, or at least as at the date of commencement of the proceeding. The defendant wishes to agitate a defence that that is not the case by reason of the extension notices to the loan agreements. The plaintiffs will carry the onus, from first to last, to demonstrate that the loans were due and payable at the date of issue and at the date of judgment. As matters presently stand, if Mr Keeshan’s defence succeeds at trial, regardless of whether he had the ability to repay the loans as at the date of commencement of the proceeding, the time had not yet arrived for the performance of such obligations, and therefore the issue of his ability to repay did not arise.
18Ms Storey also submitted that the defence that the defendant wishes to run is weak, which therefore brings into play the other considerations: that is, the reasons for the default, and whether the application to set aside the judgment was made promptly. I do not accept the submission that the defence is weak. In my view the defence is arguable and has real, and not merely fanciful, prospects of success. As Ms Storey conceded, the question of the authenticity of the two notices does not arise at this stage, and it is not a matter upon which I could express a view. Under those circumstances, it does not appear to me that I could form the view that the defence is weak. It is true, as Ms Storey has submitted, that the question of the extension notices was only first raised by the defendant upon the giving of further particulars on 8 March 2024. However, in and of itself that does not deprive them of the probative value of what they appear to say on their face, subject to proper examination of the question of authenticity and the plaintiffs making discovery in relation to whether such extension notices were received.
19I do note again, that Mrs Martinez, despite being aware of the nature of the defence and the extension notices, did not depose either to not having received the extension notices or disputing their authenticity. Under those circumstances, I do not accept that I should conclude at this stage that the defence is weak.
20As to the question of whether the reasons for the default have been adequately explained, I note that Mr Keeshan was self-represented at the commencement of the proceeding. I note that he did seek further particulars of the statement of claim, and seems to have thought that he was not obliged to file his defence until these were provided. Notwithstanding the directions that were made on 1 September 2023 requiring him to file his defence by 7 September 2023, Mr Keeshan seems to have misunderstood that this was subject to him receiving further and better particulars of the statement of claim. Although this is not without doubt, and perhaps an unusual position to have adopted, as he was self-represented at the time, I do accept that an explanation for the default has been provided.
21Mr Keeshan has also produced a medical certificate indicating that he had severe stress and anxiety and thus was unfit to make any legal or financial decisions, albeit the medical certificate only certified Mr Keeshan’s condition for the period from 25 October 2023 to 3 November 2023. While this was only a short time after he was required to file his defence on 7 September 2023, I cannot conclude that this played a substantial role in his failure to have filed his defence on time.
22Another matter which I should take into account is the question of whether or not Mr Keeshan acted promptly to apply to set aside the judgment once he became aware of it. Judgment was entered on 17 October 2023. Mr Ozturk emailed the registry on 18 December 2023 seeking a return date for a summons to set aside the default judgment. Although that is some two months after the date that judgment was entered and the application was not formally filed until 8 March 2024, I do not think anything turns on that. I do not regard the delay as being unwarranted.
23The final matter I have to consider is whether, if the judgment is set aside, a suitable award of costs and the giving of security would be adequate to cover the prejudice to the plaintiffs in having the judgment set aside. It is my view that it would be sufficient to do so.
Conclusion
24Having regard to all of these matters, it is my view that the defendant has made a sufficient case to entitle him to have the judgment set aside, and I intend to make orders to do so.
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