Oakland York Pty Ltd v SG Precision Coatings Pty Ltd

[2017] VCC 865

IN THE COUNTY COURT OF VICTORIA

AT MELBOURNE

COMMERCIAL DIVISION

Revised
Not Restricted
Suitable for Publication

GENERAL LIST

Case No. CI-17-00374

Oakland York Pty Ltd	Plaintiff
v
SG Precision Coatings Pty Ltd & Anor	Defendant

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JUDGE:	His Honour Judge Woodward
WHERE HELD:	Melbourne
DATE OF HEARING:	19, 28 June 2017
DATE OF RULING:	28 June 2017
CASE MAY BE CITED AS:	Oakland York Pty Ltd v SG Precision Coatings Pty Ltd & Anor
MEDIUM NEUTRAL CITATION:	[2017] VCC 865

REASONS FOR RULING
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Subject:PRACTICE AND PROCEDURE – Application to set aside default judgment

Legislation Cited:     County Court Civil Procedure Rules 2008 (Vic), Australian Consumer Law

Cases Cited:Lubura v Nezirevic (2013) 42 VR 43, O’Toole v Kent [2015] VSC 470, Lau v Citic Australia Commodity Trading Pty Ltd [1999] VSCA 34

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APPEARANCES:	Counsel	Solicitors
For the Plaintiff	Mr T J Mullen	Summer Lawyers
For the Defendant	Mr G Burns	Lou Castellano Lawyers

HIS HONOUR:

1       On 11 April 2017, the plaintiff (“Oakland”) entered judgment against the first defendant in default of appearance and against the second defendant (“Mr Valentine”) in default of a defence (“default judgment”).  The default judgment was for possession of the Mr Valentine’s property at 8/78 Wirraway Drive, Port Melbourne (“Port Melbourne property”).

2       This matter first came before me on 19 June 2017 on an application by the defendants for a stay of the default judgment. At that time, the hearing of the defendants’ application by summons filed 7 June 2017 and returnable today, was still pending and the evidence was that the sheriff required the second defendant Mr Valentine to vacate the Port Melbourne property on 21 June 2017, failing which he would be evicted. I made orders on 19 June 2017 granting the stay of the default judgment and restraining the sheriff from executing the warrant for possession, until 4pm today.

3       The application returnable today is an application by the defendants that the default judgment be set aside. There are three affidavits in support of that application, namely, affidavits sworn by Mr Valentine on 7 June 2017 on 16 June 2017 and on 23 June 2017. Those affidavits together comprise a comprehensive explanation of the circumstances which the defendants allege led to their failure to file (respectively) an appearance and a defence, in the time required by the County Court Civil Procedure Rules 2008 (“Rules”) and of the facts said to support the defendants’ proposed defence in the proceeding. I have also been assisted by written outline of submissions by counsel on behalf of the defendants dated 25 June 2017 and a draft of a proposed defence and counterclaim (being a revised and updated version to that provided for the hearing on 19 June 2017).

4       The application is opposed by Oakland.  To that end, Oakland relies on an affidavit sworn on 28 June 2017 by Oakland’s solicitor Mr Gradidge of Summer Lawyers, and detailed written submissions from counsel for the plaintiff. I have been greatly assisted by the written submissions by counsel for each party.

5 The test for exercising the discretion under rule 21.07 of the Rules is well-established; the Court should assess:

-    whether there is a defence on the merits;

-    the reasons for the default;

-    whether the application to set aside the judgment was made promptly after the judgment came to the knowledge of the defendants;

-    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.[1]

[1]Lubura v Nezirevic (2013) 42 VR 43 (“Lubura”), per Warren CJ at [3]

6       Dealing with each of those matters in reverse order, I am satisfied that, if the judgment is set aside, a suitable award of costs would be adequate to cover the prejudice to the plaintiff in having the judgment set aside.  The orders I propose in respect of those costs and the reasons therefor (including on the question of security) are dealt with later in this ruling.  I am also satisfied on the material that the application to set aside the default judgment was made sufficiently promptly after the default judgment came to the notice of the defendants.  The plaintiff made no submission to the contrary.

7       Turning next to the reasons for the default, while I accept (as has been submitted on behalf of the plaintiff) that there are aspects of the defendants’ explanation that are incongruous, it is nevertheless plausible. In particular, in relation to the failure to file an appearance on behalf of the second defendant, it makes no sense that Mr Valentine would go to the trouble of attending court in person to file an appearance for himself and send a copy of that to the plaintiff’s solicitors, and not do the same for the second defendant at the same time.  I also accept that a notice of administrative mention sent to the Port Melbourne property could have gone astray.

8       In those circumstances, and having regard to the fact that Mr Valentine is unfamiliar with the procedures of this Court, his inaction pending further anticipated communication from the court is understandable. I am therefore satisfied with the defendants’ explanation for the failure to file a notice of appearance on behalf of the second defendant and a defence on his own behalf.

9       Dealing finally with whether the defendants have a defence on the merits, I have considered carefully the detailed submissions by both parties on this question in the light of the various authorities cited by them. Without discounting the difficulties that the defendants will face in pursuing at least two the foreshadowed defences, I am satisfied that the defendants have a defence on the merits to which the court should pay heed or, in other words, sufficient to overcome the threshold variously articulated[2] in the authorities.

[2] See the summary of the language used in O’Toole v Kent [2015] VSC 470 (“O’Toole”), per Mukhtar AsJ at [11]

10      In the course of his submissions, counsel for the plaintiff put much store in the decision of Mukhtar AsJ in O’Toole. That reliance is not surprising, given the superficial factual similarity between that case and the present and His Honour’s typically lucid and thorough analysis of the approach to be taken in these applications.

11      While not disagreeing with that analysis, I would urge some caution in the application of what, on one view, is a gloss on what His Honour describes as “the restriction that it is not the function of the court on such an application to decide whether the defence would succeed”.[3]  His Honour’s added observation that: “I do not think it is enough to say that a defence is arguable”, needs to be understood in the context in which it appears.

[3] O’Toole at [13]

12      I would also urge caution in applying too liberally the observation by Her Honour Chief Justice Warren in Lubura[4] that the test in these applications is “not all that different from the test in summary judgment applications”. Her Honour does not go so far as to say the test is the same.  Further, while the test may have similar features, it does not follow that the evidence in support of an application to set aside a default judgment should be as extensive and comprehensive as that normally expected on behalf of a party opposing an application for summary judgment.

[4]Lubara per Warren CJ at [3]

13      It is important to bear steadily in mind that the critical question in forming the court’s discretion is not whether the court is of the opinion that the defence will succeed but simply whether a defence on the merits has been adequately raised.[5] The approach urged on me by counsel for the plaintiff has echoes in the approach of the court at first instance that was the subject of express criticism by Tadgell JA in Lau v Citic Australia Commodity Trading Pty Ltd [1999] VSCA 34 at [20].

[5]Lubura per Osborne JA at [20]

14      Returning to O’Toole, it is plain that His Honour was there dealing with a case where there were no controversies in the admissible objective facts.  It is therefore not surprising that His Honour was willing to descend into the legal arguments and ultimately conclude that those arguments were bound to fail. In my view, it was arguments of this kind that His Honour was referring to in observing that “it is not enough to say that a defence is arguable”. Thus, His Honour held:

“Whether it is an application to set aside default judgment or an application for summary judgment, where facts are not in dispute or to be investigated, it sometimes requires extensive legal arguments and reasons to show the asserted defence is bound to fail. And that is what happened here.”[6]

[6] O’Toole at [14]

15      This is a different case. In my view, without a detailed factual inquiry into the relationship between Heath McFadyn of Private Finance Hub and the plaintiff, it is not possible to comfortably conclude that McFadyn was not, even in a limited way, acting as agent for the plaintiff or making representations on behalf of the plaintiff that he was expressly or impliedly authorised by the plaintiff to make.  Thus I am satisfied that the defendants have a defence on the merits at least in respect of the foreshadowed misleading and deceptive conduct claims.  I also note that the contrary evidence on this issue on behalf of the plaintiff (as far as it goes) is given on information and belief by the plaintiff’s solicitor.  Ordinarily, it would be expected that evidence of this kind on such a critical issue, would be given by a person with actual knowledge of the facts.

16      Further, the allegations concerning the amounts claimed by the plaintiff from time to time as recoverable by it under the terms of the facility provided to the first defendant, and most notably the claim for interest at the rate of 120% per annum, are both troubling and not without foundation.  As a minimum, these would appear to create real doubt about the amount claimed by the plaintiff in the proceeding. For example, the chain of emails in early May 2016 evidencing Mr Valentine’s attempts to be provided with an accurate payout figure and, in particular, the schedule attached to the email from the plaintiff dated 3 May 2016,[7] appear to demonstrate a discrepancy in the principal sum claimed ($384,458.50 versus $397,368.06) as well as the imposition of a higher interest rate (albeit not as high as 120% per annum) and numerous substantial default fees and enforcement costs, the basis for which is far from clear.

[7] Exhibit TAV-10 to the affidavit of Trent Valentine sworn 16 June 2017

17      In my view, these matters, together with the broader question of whether the conduct by or on behalf of the plaintiff in promoting the loan facility to the defendants and the terms of the facility itself (including the purported establishment and default charges, the 120% per annum interest rate and the plaintiff’s entitlement to charge compound interest) all warrant further investigation at trial, in order to ascertain if they found claims for misleading and deceptive conduct or unconscionability (or both).  I am satisfied that the defendants have a defence on the merits in relation to these matters.

18 The plaintiff’s undertaking to enter judgment at the lower 48% rate is an insufficient answer to these potential claims. Indeed, the offer of that undertaking in itself would suggest that the plaintiff sees real difficulty in maintaining a claim for recovery (as currently pleaded by it) based on an interest rate of 120% per annum. Among other things, the undertaking does not deal the other matters referred to above that cast doubt on the plaintiff’s claim as to the amount due under the facility. More significantly, it does not traverse the wide range of relief potentially available to the defendants under the provisions of Part 5.2 of the Australian Consumer Law[8] (or its equivalents) should they succeed on their alleged claims based on misleading and deceptive conduct or unconscionability.

[8] For example, an order pursuant to s 243 refusing to enforce all or any part of the credit agreement or guarantee

19      Finally, in relation to the conditions of setting aside judgment, I accept the submissions on behalf of the defendants that the plaintiff has sufficient security to cover any prejudice or damage the plaintiff may suffer on the judgment being set aside. And I propose to order that the defendant pay the plaintiff’s costs thrown away of and incidental to the entry of the default judgment on an indemnity basis, in default of agreement.

20      However, based on the necessarily limited elucidation of the facts to date, I am presently not satisfied that the plaintiff should have the benefit of the same order in respect of the costs of and incidental to the hearings on 19 June 2017 and today.  In particular, given the thorough affidavit material and submissions filed on behalf of the defendants in respect of both applications, it seems to me at least arguable that the plaintiff was not justified in mounting such an extensive case in opposition to the defendants’ application.

21      I am therefore not yet persuaded that the plaintiff should have the costs of those applications on an indemnity basis. On the other hand, I do not wish to close out possibility that, once the facts are fully revealed, it becomes clear that such an order is warranted.  I therefore propose to order that the defendant pay the plaintiff’s costs of and incidental to the applications 19 June 2017 and today on the standard basis in default of agreement, but reserve liberty to the plaintiff to apply for an order that those costs be paid on an indemnity basis following the trial or other determination of the proceeding.

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Certificate

I certify that these 7 pages are a true copy of the reasons for decision of His Honour Judge Woodward delivered on 26 June 2017.

Dated:      28 June 2017

Simon Bobko

Associate to His Honour Judge Woodward