Papagiorgos v Complete Credit Acquisitions Pty Ltd

[2019] SASC 44

SUPREME COURT OF SOUTH AUSTRALIA

(Magistrates Appeals: Civil)

PAPAGIORGOS v COMPLETE CREDIT ACQUISITIONS PTY LTD

[2019] SASC 44

Judgment of The Honourable Justice Doyle

28 March 2019

MAGISTRATES - APPEAL AND REVIEW - SOUTH AUSTRALIA - APPEAL TO SUPREME COURT

PROCEDURE - JUDGMENTS AND ORDERS - AMENDING, VARYING AND SETTING ASIDE

The defendant appeals from a decision of a Magistrate declining to set aside a default judgment entered in favour of the plaintiff.

The plaintiff was assigned the benefit of a credit card contract entered into between the defendant and the Commonwealth Bank of Australia Limited. On 8 March 2017, the plaintiff filed a claim alleging that the defendant was liable to pay an amount totalling $23,761. The defendant did not file a defence or counterclaim and default judgment was entered in favour of the plaintiff on 31 May 2017. Approximately nine months later, by application dated 26 February 2018, the defendant sought to set aside the default judgment entered against him. The Magistrate dismissed the application.

Held (per Doyle J):

1.      The Magistrate was correct to decline to set aside the default judgment obtained by the plaintiff. The defendant did not demonstrate either an arguable case on the merits, or a reasonable excuse for the failure to comply with the rules, as required by r 87(2) of the Magistrates Court (Civil) Rules 2013 (SA).

2.      The appeal is dismissed.

National Consumer Credit Protection Act 2009 (Cth) s 178; Consumer Credit (South Australia) Act 1995 (SA); Magistrates Court (Civil) Rules 2013 (SA) r 87, referred to.
Sandery v Kowalski [2016] SASC 175; Cubelic v T & D Lock Pty Ltd [2009] SASC 397; Watson v Anderson (1976) 13 SASR 329; Marmanidis v Germein [2017] SASC 103; Aon Risk Services Australia Ltd v Australian National University (2009) 239 CLR 175; SA Repairs and Painting Pty Ltd v Tranxa Pty Ltd (1993) 171 LSJS 300, considered.

PAPAGIORGOS v COMPLETE CREDIT ACQUISITIONS PTY LTD
[2019] SASC 44

Magistrates Appeal:            Civil

1. DOYLE J:    The defendant appeals from a decision of a Magistrate declining to exercise his discretion to set aside a default judgment entered in favour of the plaintiff.

   Background

2. The plaintiff’s claim was filed on 8 March 2017. It alleged that the defendant entered into a credit card contract with the Commonwealth Bank of Australia Limited (CBA), pursuant to which CBA extended credit to the defendant.  It alleged that CBA did so on the terms contained in the application for credit, including as to the interest and monthly amounts payable by the defendant.  The plaintiff alleged that the defendant became liable to pay, but failed to pay despite demand, an amount of $17,265 plus interest, giving a total of $23,761.

3. The claim further alleged that on 28 April 2015, CBA assigned the contract and debt to Pioneer Credit Solutions Pty Ltd (Pioneer Credit), and that on 22 December 2016 Pioneer Credit further assigned the contract and debt to the plaintiff (Complete Credit).  The plaintiff pleaded that it gave the defendant written notice of the assignments, and demanded payment of the debt, on 2 February 2017.  The demanded sum was not paid, and the claim sought an amount of $23,761.

4. An affidavit of service indicated that the claim was served on the defendant on 18 March 2017. 

5. The claim was endorsed with a warning that a defence or counterclaim must be filed within 21 days, and if the defendant did not do so then the plaintiff “may get judgment against you”. 

6. The defendant did not file any defence or counterclaim, and on 31 May 2017 default judgment was entered in favour of the plaintiff for the amount claimed, plus interest and costs, giving a total of $25,236.

   The defendant’s affidavit

7. Approximately nine months later, by application dated 26 February 2018, the defendant sought to set aside the default judgment entered against him.  The application was supported by an affidavit of the same date sworn by the defendant.

8. The defendant did not deny receiving the claim, or indeed owing money to CBA under a credit card account set up in 2009.  However, the affidavit contained some detail intended to address both the defendant’s failure to file a defence, and the content of the defendant’s proposed defence and counterclaim.

9. As to the failure to file a defence, the defendant said that on 26 April 2017,[1] his wife had contacted a representative of the plaintiff, Mr Dean Nichols.  He said that they discussed the defendant’s request to amend the hardship arrangement that had previously been made with CBA.  Apparently based upon a file note made by his wife, the defendant said that Mr Nichols said during this conversation that by reason of the defendant having made contact and a hardship application under the National Consumer Credit Protection Act 2009 (Cth), the plaintiff was obliged to respond to that application; and that Mr Nichols added that “so we are not in the position where we can further court proceedings or go and seek a judgment or whatever the case may be until we come to the conclusion in and around the hardship application.”

   [1]    The defendant’s affidavit says 26 April 2016, but it seems clear this is a mistaken reference to 26 April 2017.

10. The defendant said that he was thus led to believe that the plaintiff would not take any further steps to enforce the credit contract, and that the plaintiff did not advise him that it intended to proceed with obtaining a default judgment.

11. The defendant’s affidavit did not address, or explain, the defendant’s failure to file a defence during the period of over four weeks between service of the claim and the conversation with Mr Nichols on 26 April 2017.  Nor did it address the letter of 11 May 2017 from the plaintiff (see below), in which the plaintiff informed the defendant that it had not agreed a hardship variation to his contract, and that it was “very likely we will take further steps to recover the outstanding account balance”.  Nor did it address, or explain, the defendant’s delay in seeking to set aside the default judgment during the period of approximately nine months between the plaintiff obtaining that default judgment and the defendant bringing the application to set it aside on 26 February 2018.

12. As for the nature of the proposed defence, the defendant’s affidavit contained various general denials and allegations, albeit mostly without much, if anything, by way of explanation or factual support. The defendant acknowledged that CBA had extended credit to him through a credit card facility, but denied that the plaintiff was entitled to rely upon the asserted terms and conditions.  He alleged that he had not been given notice of the assignment, and hence did not know when, or on what terms, CBA had assigned the credit contract, albeit that he then went on to acknowledge that “notices of assignment were provided later” through his wife, but only at a time when “costs had already been sustained regardless of the hardship agreement” made with CBA.  The defendant also said that any such assignment was subject to the hardship arrangements that he claimed had been agreed with CBA.

13. The defendant also alleged that “a valid notice of default has not been issued nor can it be relied”, and that the negotiations with his wife had involved deceitful and misleading conduct by the plaintiff.  The defendant concluded by denying that the plaintiff was entitled to the sum claimed in the default notice. 

14. The defendant’s affidavit then set out what he described as particulars of his proposed counterclaim.  The proposed counterclaim alleged that the plaintiff had neglected (i) to advise the defendant of the precise amount due by reason of the default; (ii) to advise that the hardship arrangements were no longer applicable; (iii) to comply with the provisions of the National Credit Code; (iv) to have in place procedures to ensure the defendant was not disadvantaged by any conflict of interest; and (v) to take steps to ensure that its representatives were satisfactorily trained and competent when engaging in money lending and credit collection activities. 

15. The defendant then alleged that the plaintiff had contravened, or not taken into account, various legislative provisions, before then proceeding to list (without explanation) a number of sections or groups of sections from the National Consumer Credit Protection Act.  The defendant concluded by stating that he sought orders compelling an assessment of the quantum of the penalties, compensation or damages payable by way of set off against any debt payable by the defendant.

    The plaintiff’s affidavit

16. The plaintiff filed a responding affidavit from its legal support manager, Mr Nichols, dated 18 April 2018.  In that affidavit, Mr Nichols set out a relatively detailed chronology of the communications and dealings between the parties subsequent to the filing of the plaintiff’s claim. 

17. Mr Nichols identified several communications between the parties in March and April 2017 in relation to a hardship application on behalf of the defendant.  There was no suggestion by the defendant in these communications that the amount claimed by the plaintiff was not owing, or that there was otherwise any deficiency in the notice or information that had been provided to the defendant.  To the contrary, the defendant’s communications were largely directed to an attempt to agree some kind of plan for repayment of the amount claimed to be owing (with the defendant offering to pay $25 per week). 

18. These communications culminated in the 26 April 2017 telephone conversation that Mr Nichols had with the defendant’s wife. Mr Nichols acknowledged in his affidavit that during that conversation he advised her that “we would not proceed to enforce the debt until the hardship application was determined”.

19. However, Mr Nichols also annexed a subsequent letter sent to the defendant on 11 May 2017, advising that the plaintiff had declined the hardship application.  The letter relevantly added:

    As we have not agreed to provide a hardship variation to your contract, it is very likely we will take further steps to recover the outstanding account balance.

20. On 15 May 2017, the defendant sent an email to a representative of the plaintiff stating merely “you have stated that you are not refusing my $25 per week.  I will start payments on 22 April 2017.”  It is difficult to make sense of this communication given the chronology of communications that proceeded it. 

21. In any event, other than this email, there was no communication between the parties following the 11 May 2017 letter, and Mr Nichols said that on 31 May 2017 he caused his solicitors to apply for default judgment.

22. By email dated 14 June 2017, the defendant sought the plaintiff’s B-pay details because he said he could afford to pay $25 per week.  By responding email the following day, the plaintiff reiterated that the defendant’s hardship application, and request to pay $25 per week had been declined, and advised that default judgment had been entered in the plaintiff’s favour. 

23. By email the next day, the defendant complained that he had been told that if they kept in touch the matter would not go to court, suggesting that it had been sneaky of the plaintiff to do so without informing him or his wife.  The plaintiff responded by referring to its letter of 11 May 2017, and by reference to the chronology of delay in the matter more generally. 

24. Between mid June and September 2017, there were further communications between the parties in which the defendant continued to seek to agree a payment arrangement.  Agreement was not reached. 

25. In November 2017, the plaintiff filed and served a bankruptcy notice, and in January 2018 served the defendant with a creditor’s petition that had been filed back in December 2017.

26. There does not appear to have been any communication from the defendant (or on his behalf) from September 2017 until the filing of the application to set aside the default judgment in late February 2018.

    The Magistrates Court’s discretion to set aside a default judgment

27. The defendant’s application was under r 87 of the Magistrates Court (Civil) Rules 2013 (SA).  That rule relevantly provides:

    (1)     The Court may set aside or vary a judgment (not being a final judgment).

    (2)The Court must not set aside such a judgment unless the party seeking to set it aside establishes that he or she –

    (a)     has an arguable case on the merits; and

    (b)     has a reasonable excuse for not having complied with these Rules, or an order of the Court, or any time limit fixed by these Rules or order of the Court, in respect of the action or proceeding.

28. Rule 87(1) vests a discretionary power in the Magistrates Court to set aside a default judgment.  However, the exercise of that discretion is conditioned upon satisfaction of the two threshold requirements in r 87(2), namely an arguable case on the merits and a reasonable excuse for non-compliance with the rules or an order of the Court.  As the terms of the rule, and the authorities that have applied it, make plain, these are cumulative requirements.  Both must be established before the discretion is enlivened. 

29. In relation to the first of these requirements, more is required to establish that the defendant has an arguable case on the merits than a bare and unsupported claim by the defendant.  There must be an affidavit as to the merits of sufficient particularity to at least enable the Court to make an assessment of the genuineness of the defence and whether it is arguable on the merits.[2]

    [2]    Sandery v Kowalski [2016] SASC 175 at [26], applying Cubelic v T & D Lock Pty Ltd [2009] SASC 397 at [20] and Watson v Anderson (1976) 13 SASR 329 at 334-335. See also Marmanidis v Germein [2017] SASC 103 at [80].

30. In relation to the second of these conditions, Hinton J said the following in Marmanidis v Germein:[3]

    As to rule 87(2)(b), a reasonable excuse is one which in all the circumstances the ordinary person would consider warrants forgiveness for non-compliance.  Here it is necessarily the case that the ordinary person will appreciate the high premium that the community places upon compliance with rules of courts and orders of courts in order that justice be administered effectively and efficiently.  That appreciation reflects an understanding of the importance to the functioning of the community of the effective and efficient exercise of judicial power to quell controversies arising in the community. With this understanding, the community, no less than the courts, expects litigants to discharge the obligations placed upon them by the law and the courts.

    [3]    Marmanidis v Germein [2017] SASC 103 at [83].

31. In Sandery v Kowalski, I summarised the relatively rigorous approach taken to both limbs of r 87(2) by Duggan J in Cubelic v T & D Lock Pty Ltd.  I explained why such an approach was not only consistent with authority, but also required by the demands of justice:[4]

    Cubelic v T & D Lock Pty Ltd represents a relatively rigorous approach to the setting aside of judgments.  However, that approach is required by r 87(2), particularly when interpreted in light of the overarching requirements of r 3(1)(a).  In the case of commercial litigation, there is an imperative to ensure that the rules are interpreted and enforced in a manner conducive to the expeditious determination of proceedings.  While this should not occur at the expense of doing justice to the parties and more generally, which remains the paramount concern of the courts, this does not mean that parties will be given unlimited opportunity to pursue or contest a claim.  If they have not taken an earlier opportunity reasonably available to them to identify and pursue a proper basis for contesting a claim, then even achieving justice between the parties may not require that they be afforded a further opportunity.  But certainly once regard is had to the interest in the just and expeditious administration of civil justice more generally, and in particular the need to ensure that the public’s confidence in the courts’ ability to efficiently determine matters is not undermined, it can readily be seen that there must be limits to the parties’ entitlement to contest claims where they have fallen into default in their conduct of the litigation.

    [4]    Sandery v Kowalski [2016] SASC 175 at [29].

32. I also noted the relevance in this context of the observations of the High Court in Aon Risk Services Australia Ltd v Australian National University.[5]

    [5]    Aon Risk Services Australia Ltd v Australian National University (2009) 239 CLR 175; Sandery v Kowalski [2016] SASC 175 at [30].

    The Magistrate’s reasons

33. The Magistrate commenced by noting the two threshold requirements of r 87(2), and by referring to the authorities mentioned above. 

34. The Magistrate then addressed the first requirement, noting that as submissions were developed before him, the defendant alleged three claims or types of claims said to give rise to a equitable right of set off: namely a claim or claims founded upon contravention of the National Credit Code (the NCC) (which had statutory force by reason of the National Consumer Credit Protection Act 2009 (Cth) (the NCCPA)) or its predecessor (the Uniform Credit Code (SA) (the UCC), (which had statutory force by reason of the Consumer Credit (South Australia) Act 1995 (SA) (the CCA)); a claim for misleading or deceptive conduct contrary to the Australian Consumer Law; or a claim of unconscionable conduct contrary to the Australian Consumer Law.

35. The Magistrate accepted that if one of these claims could be established, then it might provide a basis for an equitable set off.  However, the Magistrate was not satisfied that the evidence revealed a proper basis for any of the three claims alleged.

36. As to the first, the Magistrate accepted that the credit extended to the defendant was governed by the provisions of the UCC and CCA in respect of conduct prior to 30 June 2010, and the provisions of the NCC and NCCPA in respect of conduct after that date.  While the defendant had made reference to the UCC and CCA, there was nothing in his submissions that identified any claim in terms that enabled a genuine assessment of whether it contained arguable merit.  As for the NCC and NCCPA, the Magistrate noted that the defendant had mentioned a number of provisions said to give rise to a claim, but did little more than list those provisions.  Having identified the nature of the various provisions relied upon by the defendant, the Magistrate noted that the defendant had focussed his reliance upon various criminal offence provisions under the NCC, but that by reason of s 178(1) of the NCCPA compensation orders were not available in respect of such offences.

37. As to the claim for misleading or deceptive conduct, the Magistrate observed that this was based upon the communications between the parties after the claim had been issued, and in particular the statements made by Mr Nichols to the defendant’s wife in their conversation of 26 April 2017.  The Magistrate reasoned that, having read the affidavit material, and in particular the email communications between the parties, there was no merit in the allegation that the plaintiff had misled the defendant.  He accepted that the substance of the 26 April 2017 communication by the plaintiff was that it would not take further court action until the defendant’s hardship application was finalised, but that in light of the letter of 11 May 2017 it could not be said that the plaintiff’s conduct in entering default judgment was misleading.

38. As to the claim for unconscionable conduct, the Magistrate referred to the key authorities in relation to unconscionability, before concluding that there was no merit in the defendant’s allegation.  His Honour reasoned:

    I do not accept that the plaintiff has engaged in unconscionable conduct pursuant to s 20 of the ACL.  Whilst I accept that the defendant is suffering from considerable health issues and acknowledge the evident inequality of bargaining power between the parties, I do not consider that the defendant was labouring under a special disability…  I note that both the defendant’s wife and daughter have been able to deal with the plaintiff on the defendant’s behalf, and in the course of negotiations the defendant was able to aptly accordingly respond to the plaintiff’s correspondence.

    To address the plaintiff’s conduct, I do not find that they engaged with a ‘predatory state of mind’ to exploit the defendant’s weakness. If anything, the plaintiff’s willingness to properly finalise the matter and due consideration of the defendant’s interest is exemplified by their offer to settle the debt for $13,000 made on 2 August 2017 which is $12,557.85 short of the amount owing. In addition, I find that the debt was properly assigned to the plaintiff, with the defendant being properly notified of any relevant assignments pursuant to s 15 of the Law of Property Act 1936.

1. Having thus concluded that the defendant had not satisfied the first requirement of s 87(2), the Magistrate nevertheless went on to hold that the defendant had also failed to satisfy the second requirement.  The Magistrate reasoned:

   For completeness, I also consider the second of the threshold tests contained within sub-r 87(1) of the MCCR, and regard that the defendant does not have a reasonable excuse for not having complied with the MCCR, that is, for failing to file a defence within 21 days of being served the originating claim.  Indeed, the defendant’s submission are of little assistance on this issue, being silent with respect to this latter threshold test.

   The defendant was served with the originating claim in accordance with r 47(1)(d) of the MCCR on 22 March 2017, and implicitly acknowledged such service through his extensive correspondence with the plaintiff.  I note that the originating claim included instructions of the action required of the defendant to contest the claim.  Moreover, I highlight that the defendant was aware that default judgment had been entered from at least 15 June 2017, when an email stating the same was sent to the defendant to the plaintiff but did not file the interlocutory application until over eight months later, on 26 February 2018.

2. The Magistrate concluded that, for the reasons summarised above, the appellant had failed to satisfy either of the requirements of r 87(2)(a) and (b), and thus dismissed the application to set aside the default judgment entered in the plaintiff’s favour.

   The appeal

3. The defendant’s notice of appeal contains three grounds, each of which is expressed in a somewhat discursive manner, making it difficult to understand the points being made, let alone identify the errors said to have been made by the Magistrate.

4. The first ground appears to challenge the Magistrate’s rejection of an arguable case in respect of the defendant’s foreshadowed claim under the NCC and NCCPA.  The second ground challenges the Magistrate’s conclusions in relation to the 26 April 2017 conversation between Mr Nichols and the defendant’s wife.  The third ground challenges the Magistrate’s rejection of an arguable case for unconscionable conduct.

5. In addition to these grounds, the defendant raised some additional matters in the course of his submissions on the appeal.  I address these matters below.

6. Most of the defendant’s grounds of appeal, and submissions, were said to be relevant to the first requirement under r 87(2)(a) (an arguable case on the merits), with only the second ground of appeal being relevant to the second requirement under r 87(2)(b) (a reasonable excuse for non-compliance).

   No arguable case on the merits

7. In relation to the defendant’s first ground of appeal, he commenced by challenging the Magistrate’s conclusion that s 178(1) of the NCCPA did not permit compensation orders to be made for breaches of the offence provisions of the NCC.  I do not think there is any merit in this challenge.  While s 178(1) provides for the making of compensation orders, it is expressed as applying in respect of a civil penalty provision or commission of an offence against this Act “(other than the National Credit Code)”.  Indeed, as I read the defendant’s written submissions, they ultimately concede the correctness of the Magistrate’s qualification to the reach of s 178(1).[6]

   [6]    Notice of appeal, paragraph 3.2(xii)(d).

8. But more importantly, and even assuming any penalties or compensation payable by the plaintiff might be set off against the plaintiff’s claim, it is still not clear to me precisely how it is said that the plaintiff breached either the NCCPA or the NCC.  While the defendant has again in his submissions listed various sections of the NCCPA and NCC, he does not identify with any precision the alleged breach(es) complained of.  At one point in his submissions he repeated the allegations which I outlined as (i) to (v) in my summary of the defendant’s proposed counterclaim earlier in these reasons.  However, these allegations are expressed in too general terms to make out an arguable case on the merits for the purposes of r 87(2)(a).  They are in the nature of bare and unsupported claims, and without the support of affidavit material of sufficient particularity to enable the Court to make an assessment of their genuineness and arguability.  On the authorities I have summarised earlier, this is not enough.

9. Turning to the second ground of appeal, the primary relevance of this is in relation to the defendant’s contention that he had a reasonable excuse for non-compliance with the requirement that he file a defence (as to which, see below).  To the extent it was advanced in support of an arguable claim for misleading or deceptive conduct, I agree with the Magistrate’s reasons for rejecting the arguability of this claim.  Even though Mr Nichols said during the 26 April 2017 conversation that no further steps would be taken pending determination of the hardship application, there was nothing misleading about the plaintiff then taking further steps after its 11 May 2017 notification that the hardship application had been declined. 

10. Further, and in any event, even if made out, it is not clear to me what loss is said to have flowed from this conduct, let alone how it could give rise to a claim that could be set off against the defendant’s indebtedness to the plaintiff under the credit contract.  While any misleading conduct of the type alleged might have contributed to the obtaining of a default judgment, it did not contribute to the existence of the underlying indebtedness to which the plaintiff’s claim relates.

11. The third ground of appeal challenges the passage from the Magistrate’s reasons (extracted above) in which he rejected the allegation of unconscionable conduct on the part of the plaintiff.  To the extent I have been able to discern the basis for the defendant’s contention of unconscionability on the part of the plaintiff, it appears to relate to a combination of the plaintiff’s conduct in (allegedly) misleading the defendant in the 26 April 2017 conversation, and thereafter engaging in a course of negotiations about payment terms in circumstances where the defendant was suffering from various physical and mental health issues and experiencing economic duress.  Once again, the defendant’s claims are not supported by any evidence of the type required by the authorities.  He adduced no evidence as to the nature and seriousness of his physical and mental health issues.  He did not identify the particular aspects of the plaintiff’s conduct said to involve unconscionable conduct on its part.  I have earlier rejected the suggestion that anything said by Mr Nichols on 26 April 2017 was misleading.  While the evidence includes a number of subsequent written communications (largely emails) between the parties in an attempt to agree payment terms, there is nothing about those communications that suggests any unconscionability on the part of the plaintiff.  I agree with the Magistrate’s reasons for rejecting the arguability of this claim. 

12. I also point out that even if the claim of unconscionability was arguable, the same issue would arise as to the nature of the loss, and potential availability of a set off in respect of this claim, given that the unconscionability relates to negotiations after the issue of proceedings and does not go to the existence of the underlying indebtedness to which the plaintiff’s claim relates.

13. Finally, there are the matters not forming grounds of appeal, and which were raised for the first time in the defendant’s submissions on appeal.  The first of these was reliance upon a contention that the defendant did not receive notice of the assignment of his debt to the plaintiff, or of his default, prior to service of the proceedings upon him.  While he had previously denied notice of these matters, in the course of submissions he sought to support this assertion by reference to the January and February 2017 copies of these notices attached to the affidavit of Mr Nichols.  As the defendant pointed out, these notices were addressed to the defendant at a Croydon Park address, whereas the other documentation had been sent to him at a Prospect address.  The defendant denied having lived at the Croydon Park address.

14. In my view, this is a classic case of too little too late.  The plaintiff was taken by surprise by this factual matter being raised for the first time on 22 October 2018.  This was only one clear day ahead of the appeal, and over six months after Mr Nichol’s affidavit (to which the documents were attached) had been filed.  The letters themselves had been written over 18 months earlier.  The defendant’s contentions remain unsupported by any affidavit evidence.  The issue arose merely in the course of submissions on behalf of the defendant.  The plaintiff was not in a position to address this apparent anomaly in the documentation on the hearing of the appeal.  While counsel for the plaintiff offered some speculation as to why the Croydon Park address might have been used, he said that his client was not in a position to give a reliable explanation without having an opportunity to go back over its files in relation this matter – which it had not been able to do in the time available.

15. The second matter raised in submissions was the suggestion that the plaintiff had either overlooked, or not taken proper notice of, the hardship arrangements that the defendant contended it had put in place with CBA prior to the debt being assigned.  There is reference to the defendant asserting the existence of such arrangements in some of the earlier communications and documents before the Court.  However those references were in the nature of bare assertions.  There was no reference, let alone affidavit evidence, as to the substance or detail of the arrangements said to have been reached with CBA.  And there was correspondence on behalf of the plaintiff to the effect that it had made enquiries of CBA which had not revealed the existence of any such arrangements.  That is where the matter rested until the defendant’s submissions of 22 October 2018.  In those submissions, the defendant sought for the first time to rely upon certain CBA bank statements attached to Mr Nichols’ affidavit as a basis for inferring the existence of some form of arrangement.  While the submissions in this respect were difficult to follow, the effect of them was that close consideration of the repayment amounts on those statements was suggestive of the existence of some arrangement.

16. In my view, there are a number of difficulties with the defendant’s submissions in relation to this matter.  Again, it is not a matter raised in the grounds of appeal.  It was raised for the first time only one clear day prior to the appeal, and in circumstances that left the plaintiff unable to respond to the factual detail inherent in the submissions.  Even if one were to put these timing and procedural difficulties to one side, I do not think the submissions establish an arguable defence or counterclaim capable of answering the plaintiff’s claim.  The submissions were speculative in nature.  If the defendant wished to rely upon the existence of some arrangement reached with CBA, then he ought to have put on affidavit evidence as to the existence and nature of these arrangements, rather than rely upon last minute submissions based upon inferences that it is said might be drawn from repayment amounts appearing on some isolated bank statements.

17. For the reasons set out, I do not consider that the defendant has made out any arguable defence or counterclaim.  The defendant has not established that any of the defences or counterclaims in his grounds of appeal are arguable, and I am not satisfied that the other matters raised in the defendant’s submissions provide a proper basis for concluding that the defendant has an arguable defence or counterclaim.

    No reasonable excuse for non-compliance

18. Even if an arguable case on the merits had been established, the Magistrate dismissed the application to set aside the plaintiff’s default judgment on the alternative basis that the requirement of a reasonable excuse (under r 87(2)(b)) for the defendant’s failure to file a defence had not been established.

19. The defendant’s only challenge to this finding on appeal was in his second ground of appeal. The defendant relied upon the 26 April 2017 conversation between Mr Nichols and the defendant’s wife.  He contended that he relied upon this communication, and the absence of any statement by the plaintiff that it was planning to seek summary judgment prior to it doing so; and that it was incumbent upon the plaintiff to give such an indication.  The plaintiff contended that he had at all times continued to attempt to negotiate payment terms in good faith, and to seek the understanding and cooperation of the plaintiff.  Finally, the defendant also contended (without evidence) that he did not have the resources nor the capacity to seek professional help, and that it was only after receiving the bankruptcy proceedings in January 2018 and advice from a friend, that he appreciated that he should have filed a defence regardless.

20. In my view, the above falls well short of providing a reasonable excuse of the kind contemplated by s 87(2)(b).  

21. The starting point in the present case is that the claim served upon the defendant on 18 March 2017 contained a clear endorsement of the need to file a defence within 21 days, and the potential consequences of not doing so.  The defendant does not say that he did not see this endorsement, or that he was unaware of the need to file a defence or the consequences of not doing so.

22. The defendant has not proffered any excuse, let alone reasonable excuse, for not taking any steps to file a defence prior to 26 April 2017, which was over five weeks from the date of service.  While the evidence reveals some communications in this period in which the defendant indicated that he was intending to make a hardship application, this was not an excuse for not advancing the preparation of, and then ultimately filing, a defence.  Parties cannot assume from the mere fact that discussions or negotiations are on foot that the litigation clock is not ticking.  If a party wishes to proceed on that basis, then it should seek a clear assurance from the opposing party to that effect.  Here the defendant did not seek, and the plaintiff did not provide, any such assurance prior to 26 April 2017.

23. I accept that the conversation of the 26 April 2017 engendered a reasonable expectation on the part of the defendant that from that date, and for so long as the hardship application was pending, the plaintiff would not seek to enter default judgment.  However, in the circumstances of this case, that expectation cannot have reasonably extended past 11 May 2017.  I have earlier summarised the terms of the communication from the plaintiff to the defendant on that day.  It set out in plain terms that the hardship application had been unsuccessful, and provided an express warning to the defendant that the plaintiff was “likely to take further steps” to recover the amount owed by the defendant. 

24. I do not think the plaintiff was required to do any more than it did prior to entering default judgment on 31 May 2017.  As the Magistrate concluded, there was nothing misleading, let alone inappropriate, about the plaintiff’s conduct in this respect.  The defendant has not adduced any evidence to suggest that he took any steps at all prior to default judgment being entered to prepare or file a defence.  The natural inference from the fact that the terms of the proposed defence were first articulated in late February 2018 was that no such steps had been taken prior to entry of the default judgment.

25. In my view, the defendant failed to establish a reasonable excuse for its failure to file a defence, and has failed to establish error in the Magistrate’s conclusion to this effect.

26. Finally, even if the defendant had established a reasonable excuse for his delay and failure to file a defence prior to the date of entry of the default judgment, there remains the essentially unexplained delay of approximately nine months between default judgment being entered and the defendant bringing the application to set aside the default judgment.  The communications between the parties (summarised earlier in these reasons) establish that the defendant was aware that default judgment had been entered against it from at least 15 June 2017, and so over eight months prior to bringing the application to set it aside.

27. The defendant has not proffered any explanation for this period of delay.  It is apparent from the communications between the parties that the defendant was unwell during some of this period, albeit that he continued to communicate intermittently (often through his wife) with a view to attempting to reach some payment arrangement.  But the evidence in this respect falls a long way short of providing a reasonable excuse for the defendant’s delay in this period.  Having regard to the considerations I have earlier mentioned in relation to the efficient conduct of litigation – as reinforced by reason the High Court in Aon Risk Services Ltd v Australian National University[7] – this is an intolerable period of delay.  While this period of delay is perhaps not, strictly speaking, non-compliance with any rule or order of the Court for the purposes of s 87(2)(b), I consider that it was nevertheless a sufficient basis for exercising the Court’s residual discretion[8] under r 87 to decline to set aside the plaintiff’s default judgment even if the requirements of r 87(2)(a) and (b) were otherwise satisfied.

    [7]    Aon Risk ServicesLtd v Australian National University (2009) 239 CLR 175.

    [8]    SA Repairs and Painting Pty Ltd v Tranxa Pty Ltd (1993) 171 LSJS 300 at 302.

28. I am reinforced in that conclusion by the fact that the plaintiff would suffer material prejudice were the default judgment now set aside given that it incurred costs associated with the bankruptcy notice and creditor’s petition in the period prior to the defendant eventually bringing his application to set aside the plaintiff’s default judgment.

    Conclusion

29. I am satisfied that the Magistrate was correct to decline to set aside the default judgment obtained by the plaintiff.  In particular, I am satisfied that he was correct to do so on the two independent bases that he did; namely that neither the requirement of an arguable case on the merits (r 87(2)(a)) nor the requirement of a reasonable excuse for the failure to comply with the rules (r 87(2)(b)) had been satisfied. No error in the Magistrate’s reasoning or conclusion has been established.

30. In the circumstances, it is appropriate that the appeal be dismissed.