Pavlovic v Punt Road Hostel Pty Ltd
[2021] VCC 750
•10 June 2021
| IN THE COUNTY COURT OF VICTORIA AT MELBOURNE COMMERCIAL DIVISION | Revised Not Restricted Suitable for Publication |
BUILDING CASES LIST
Case No. CI-19-05231
| Robert Pavlovic t/as Robert Pavlovic & Associates | Plaintiff |
| v | |
| Punt Road Hostel Pty Ltd | First defendant |
| and | |
| Brittany McGuire | Second defendant |
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JUDGE: | Judge Woodward | |
WHERE HELD: | Melbourne | |
DATE OF HEARING: | 12 May 2021 | |
DATE OF JUDGMENT: | 10 June 2021 | |
CASE MAY BE CITED AS: | Pavlovic v Punt Road Hostel Pty Ltd & Anor | |
MEDIUM NEUTRAL CITATION: | [2021] VCC 750 | |
REASONS FOR RULING
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APPEARANCES: | Counsel | Solicitors |
| For the plaintiff | K Weston-Scheuber | Logie-Smith Lanyon |
| For the Defendant | B Mason | GBX Law |
HIS HONOUR:
Background and outcome
1By summons filed on 28 April 2021, the defendants seek to set aside order 1 and 4 of my orders made 19 March 2021. By those orders, judgment was entered in against the defendants in default of defence, in the sum of $805,989.99, and the defendants were ordered to pay the plaintiff’s costs of and incidental to the proceeding, to be taxed on the standard basis in default of agreement. The plaintiff opposes the application and wishes to proceed with a winding up application and bankruptcy notice issued (respectively) against the first and second defendant.
2The application is supported by three affidavits of Danielle McGuire (“Danielle”) on 27 April, 10 and 11 May 2021, two affidavits of Brittany McGuire (“Brittany”) on 10 and 11 May 2021 and two affidavits of Mr Chen (the defendants’ solicitor) sworn 28 April and 10 May 2021. Brittany is the second defendant and the sole director of the first defendant. Danielle is Brittany’s mother. The evidence establishes that Danielle has been primarily responsible for the conduct of the proceeding on behalf of the defendants. The plaintiff’s solicitor Ms Yuan has made an affidavit dated 10 May 2021 in opposition to the application. An affidavit has also been made by the defendants’ former solicitor Mr Lennon in the circumstances described below.
3For the reasons below, I will order that the judgment in default of defence be set aside, on terms that the defendants pay forthwith to the plaintiff a sum representing its costs on an indemnity basis of and incidental to entering the judgment in default of defence, taking steps in the enforcement of that judgment and responding to this application. I will also order that the proceeding be re-fixed for trial on the earliest available date which, as explained below (and contrary to my statement to the parties in the course of the hearing of the application), could be as early as 13 July 2021.
4I will fix the proceeding for further directions on a date next week that is convenient to the parties and to the court, for the purposes of making the orders foreshadowed above and re-timetabling the remaining steps to trial. I direct that the plaintiff prepare and send by email to the court and to the defendants as soon as practicable, a statement of the defendant’s actual legal costs and disbursements in respect of the matters referred to above, including a reasonably detailed breakdown of those costs. For the avoidance of doubt, that statement need not be in the form of a bill of costs in taxable form. Rather, it should set out the items of costs and disbursements actually charged or to be charged to the plaintiffs.
Principles to be applied
5These were not materially in dispute, and are conveniently set out in the defendants’ written submissions as follows:
“The Court’s power to set aside a default judgment requires that it weighthe extent to which the defendants will be prejudiced by allowing the judgment to stand against any prejudice to the plaintiff in setting it aside [citing Kostokanellis v Allen [1974] VR 596]. This raises the following considerations for the Court’s attention:
(a) an explanation for the defendants’ failure to comply with order 5 of the orders made on 9 February 2021, which resulted in their defences been dismissed pursuant to order seven of the orders made on 5 March 2021;
(b) that the defendants can identify a prima facie defence to the plaintiff’s claim;
(c) that the application has been made promptly upon the defendants becoming aware that default judgment had been entered against them; and
(d) any prejudice to the plaintiff.”
6The defendants submit that when these factors are considered individually or cumulatively, “together with the irregular manner in which the default judgment was entered”, the interests of justice require that the default judgment be set aside such that the defendants may have an opportunity to defend the plaintiffs’ claims. They then turn to deal with each of the four considerations identified and finally the allegation that the judgment was entered irregularly. I will do likewise, but will first briefly summarise the interlocutory stages of the proceeding leading up to the making of the self-executing order and the judgment in default of defence.
Interlocutory stages leading to self-executing order
7The particular failure that triggered the self-executing order and ultimately led to judgment in default of defence being ordered, was a failure by the defendants to provide the plaintiff with any additions to the court book index by 4pm on 12 March 2021. On its face, this may seem a relatively minor transgression. However, it is a transgression that must be seen in context. Most notably, the plaintiff had lost a trial date already in the circumstances described below, and the failure by the defendants to comply with any of the precursor steps to the delayed trial date, could reasonably be taken as a clear sign that this date was also seriously at risk.
8The interlocutory steps leading up to the self-executing order were as follows:
(a) the proceeding (a claim by the plaintiff for unpaid invoices totalling $612,769.72 for building work at a backpackers hostel at 14 Punt Road, St Kilda) was commenced by writ and statement of claim filed on 4 November 2019;
(b) on 17 December 2019 the plaintiff entered judgment in default against the defendants, despite the fact that the defendants’ solicitors had been actively corresponding with the plaintiff’s solicitors for more time to file and serve their defence;
(c) the defendants later applied for an order setting aside the default judgment, supported by a lengthy affidavit by the second defendant sworn on 20 December 2019 setting out the background to the plaintiff’s claim and the nature of the defence (including a set off) that the defendants proposed to advance;
(d) on 28 January 2020, I made orders by consent setting aside the default judgment, providing a timetable for pleadings and fixing a date for a directions hearing;
(e) by orders made by consent on 26 March 2020, the proceeding was set down for trial on 8 February 2021, with detailed timetabling orders made leading up to that trial date, including an order that the defendants respond with requested additions to the court book index by 18 January 2021 and file and serve witness outlines by 29 January 2021 (the plaintiff) and 3 February 2021 (the defendants);
(f) the interlocutory stages of the proceeding progressed reasonably smoothly until late 2020, and included the filing and service by the defendants of a detailed expert witness statement dated 22 April 2020, particularising their set-off claim;
(g) on 18 and 23 December 2020, the defendants and the plaintiff (respectively) made interlocutory applications; the former for further discovery and the latter for leave to file and serve an amended statement of claim;
(h) the above applications were the subject of orders made 22 January 2021, which orders also confirmed that the trial date of 8 February 2021 and listed the proceeding for a further directions hearing on 28 January 2021;
(i) the day before that directions hearing, by an affidavit sworn by the defendants’ solicitor Mr Ward, the defendants foreshadowed an application to vacate the trial date, relying on the circumstances of the involvement of Danielle and Brittany as victims in an imminent criminal proceeding;
(j) at the directions hearing on 28 January 2021, I fixed the directions hearing for further hearing on 2 February 2021, made orders providing for the filing of further evidence in support of the application to vacate the trial date and made adjustments to the 26 March 2020 timetable orders, primarily by providing for the filing and service of witness statements rather than witness outlines;
(k) at the directions hearing on 2 February 2021, I heard further argument on the defendants’ application to vacate the trial date and ultimately acceded to that application, although the making of orders was delayed until 9 February 2021 so the court could identify a new trial date and reset the timetable in consultation with the parties;
(l) the orders of 9 February 2021 set the proceeding down for trial on 3 May 2021 and fixed a new timetable to trial, including an order that by 26 February 2021, the defendants were to provide to the plaintiff any requested additions to the court book index, together with electronic copies of those documents;
(m) I also ordered at that time that the defendants pay the plaintiff’s costs thrown away by reason of the adjournment, to be taxed on the standard basis or agreed, with an amount of $10,000 to be paid towards those costs by 16 February 2021 - this was later paid; and
(n) on 5 March 2021, the defendants’ solicitors Ward & Co made application to cease to act, discussed below.
Have the defendants provided a sufficient explanation for their failures?
9This and the question of prejudice to the plaintiff are the most troublesome issues on this application. Against the background of the interlocutory steps summarised above, the facts comprising the context and content of the defendants’ explanation can be summarised as follows:
(a) Ward & Co’s application for leave to cease to act was supported by an affidavit of Ms Veska made on 26 February 2021 – the affidavit (which I had regard to for the purposes of the application to cease to act) was initially subject to the usual confidentiality orders but was later referred to in the application to set aside judgment with the consent of all affected parties;
(b) in broad terms, Ms Veska’s affidavit stated that Ward & Co had experienced difficulty in securing instructions from the defendants in relation to the pre-trial steps and the engagement of counsel;
(c) notably, the affidavit referred to several WhatsApp messages exchanged between Ward & Co and Danielle, during which Danielle confirmed that the defendants were in receipt of the emails from Ward & Co and understood that instructions were being sought from the defendants;
(d) the affidavit also exhibited numerous emails from Ward & Co to Danielle emphasising the importance of (among other things) confirming the engagement of counsel and providing funds on trust to cover counsel’s fees;
(e) the orders made on 5 March 2021 noted in “other matters” that there had been contact between the court and Brittany in the days before the hearing, explaining that it would be advisable for the second defendant to participate;
(f) based on the defendants’ affidavits, it seems likely (and I accept) that the contact was in fact with Danielle and I note that Danielle disputes that she was told it would be advisable for her to attend the hearing;
(g) the orders of 5 March 2021 gave leave to Ward & Co to cease to act, directed that Ward & Co take all reasonable steps to ensure the defendants were made aware of the content and effect of the orders and ordered that:
“6.By 12 March 2021 at 4.00pm, the defendants must comply with order 5 of the orders dated 9 February 2021, requiring the defendants to provide to the plaintiff any requested additions to the court book index, together with electronic copies of those documents.
7.Failure to comply with order 6 of these orders will result in the defendants’ defences being thereupon dismissed forthwith and without further notice, and the plaintiff being entitled thereafter to enter judgment in default of defence, also without further notice to the defendants.”
(h) both Danielle and Brittany gave evidence (supported – indirectly – by Mr Chen’s evidence) to the effect that they were unaware of the detail of the order requiring the defendants to provide requested additions to the court book index and believed that Ward & Co had all the documents they required;
(i) Danielle and Brittany also gave evidence that they were unaware of the 5 March 2021 orders, despite a copy of the orders being sent by email to Danielle both by Ward & Co and by the court on the day the orders were made, and a further copy being hand-delivered to the defendants at the Punt Road Hostel on 10 March 2021;
(j) late on 5 March 2021, Danielle spoke by telephone with Mr Lennon, asking him to act for the defendants in the proceeding and arranging to meet at Mr Lennon’s home the following day;
(k) at that meeting on 6 March 2021, Danielle gave to Mr Lennon folder of documents and USB stick comprising Ward & Co’s file on the proceeding that she had collected from Ward & Co two days earlier, and Mr Lennon said he would contact Danielle and would handle the matter for her;
(l) Danielle followed up with Mr Lennon on 10 March 2021 and later arranged a meeting with Mr Lennon on Saturday, 21 March 2021;
(m) on the same day that meeting was arranged, Danielle received an email from the court noting that there would be a hearing in the proceeding at 9:30am the following day, 19 March 2021 which Danielle forwarded to Mr Lennon;
(n) at 8.19am on the morning of the hearing on 19 March 2021, Danielle sent a text to Mr Lennon asking if he needed anything from her for the hearing and he said that it was fine and he would contact her if required;
(o) in the orders I made on 19 March 2021 giving judgment for the plaintiff in default of defence with a stay for 10 days until 30 March 2021 at 4.00pm, I noted in “other matters” as follows:
“Mr Lennon joined the Zoom hearing at 9.31am confirming that he had been retained by the defendants some 7 days ago. Mr Lennon had not filed a notice confirming that he acted for the defendants, but nevertheless sought an indulgence on their behalf in the form of a seven day adjournment of the hearing this morning. Given the difficult history of the matter including the circumstances of the recent adjournment of the trial date, his Honour refused that application and informed Mr Lennon that he would proceed to give judgment for the plaintiff against the defendants in default of defence. He explained to Mr Lennon what would be required if the defendants made application to set aside the judgment.”
(p) although not referred to in other matters, the order for the stay was made at the request of Mr Lennon so that (according to his affidavit) “time would be available for the Defendants to take whatever action was necessary”;
(q) Mr Lennon did not contact Danielle that day concerning the outcome of the hearing because (according to Mr Lennon) “he was juggling a number of things that morning”;
(r) Mr Lennon eventually met with Danielle in the afternoon of Monday, 22 March 2021;
(s) Danielle deposed in her affidavit dated 27 April 2021 that Mr Lennon did not say at any time in the meeting that default judgment had been entered against the defendants and that she first heard about the default judgment on 24 March 2021 when a friend of Brittany’s said that there was an article about it in the newspaper, and Danielle later read the article;
(t) because of this evidence (and other matters deposed to buy Danielle reflecting poorly on Mr Lennon’s conduct of the matter on behalf of the defendants) I made arrangements for Mr Lennon to be provided with a copy of Danielle’s 27 April 2021 affidavit and invited Mr Lennon to make such response as he considered appropriate, by affidavit or in submissions at the hearing of the application (or both);
(u) Mr Lennon did appear at the hearing and also (after an adjournment of the hearing to give Mr Lennon time to finalise his affidavit) filed an affidavit responding to Danielle’s evidence;
(v) relevantly for present purposes, in that affidavit (and in his submissions) Mr Lennon deposed that at the meeting with Danielle on 22 March 2021 he “provided unequivocal advice with respect to the Orders [of 19 March 2021] and what I believed ought to be done” and that Danielle “was well aware of the Orders that had been made as well as my position”;
(w) there is also some divergence between Danielle and Mr Lennon’s evidence about what transpired after Danielle said she became aware of the judgment from the article dated 24 March 2021, but what in fact occurred is sufficiently explained by the text messages passing between Danielle and Mr Lennon (which generally tend to support Danielle’s version of events);
(x) a text message from Danielle to Mr Lennon on 24 March 2021 is somewhat equivocal, but I accept is broadly consistent with Danielle not appreciating the full effect of the orders made on 19 March 2021 until reading the newspaper article about the orders that day;
(y) importantly the text messages make clear that Danielle was thereafter frequently, and in increasingly urgent terms, following up with Mr Lennon about what action he was taking and (consistently with the stay expiring on 30 March 2021) the need for things to be ready for court by 30 March 2021;
(z) on Sunday, 28 March 2021 Mr Lennon sent a text to Danielle saying that she was ”stressing” him and that he was working on it “as we speak” and that he will text or call later that night (which he failed to do);
(aa) Danielle was again repeatedly texting Mr Lennon on 29 and 30 March asking that he call her until, on 31 March 2021, Mr Lennon sent a text as follows: “hi - don’t stress - I had a few massive matters I had to sort - I will be getting ur stuff finalise (sic) tomorrow - it was a 14 day stay - we didn’t have to lodge material within that time - I’ll explain when I’m looking at u”;
(bb) Danielle responded: “Hi okay well I just seen in the paper it was the 30th so yeah I was stressing Okay well can you please call me when you have a minute”;
(cc) the next and final text is dated 8 April 2021, in which Danielle states that she still hadn’t heard from Mr Lennon and asks him to call her;
(dd) Danielle deposes that she attended Mr Lennon’s office on 12 April 2021 when he was not available to meet her, but that she did meet with him on 14 and 15 April 2021, when she decided she no longer wanted Mr Lennon to act for the defendants and asked him to return the folder of documents and USB stick, which he did; and
(ee) the next day Danielle retained the defendants’ current solicitor Mr Chen of GBX Law; the plaintiff makes no criticism of the manner in which the defendants and their current solicitors have progressed matters since that date.
10Mr Mason, counsel for the defendants, has submitted that the defendants can readily identify a “sufficient reason” which warrants the default judgment being set aside. In relation to the particular failure that triggered the self-executing order, Mr Mason refers to the evidence that shows that neither Danielle nor Brittany were aware of the need to ensure that requested additions to the court book were provided. As noted above, I accept this evidence. I am satisfied that the defendants did not apprehend the detail of the steps they were required to take to satisfy the order. Rather, they understood Ward & Co’s requests as being directed to the need to engage counsel and provide funds on trust to cover counsel’s fees.
11Mr Mason next submits that neither Danielle nor Brittany were aware of the court’s orders made on 5 March 2021. This is the most problematic aspect of the defendants’ application, and was the primary focus of the submissions by counsel for the plaintiff, Dr Weston-Scheuber. The defendants’ evidence on this issue was essentially that:
(a) Brittany did not have access to the email address for service of documents on the defendants, once Ward & Co had ceased to act;
(b) Danielle, who did have access to the email address, did not open either of the emails from Ward & Co or from the court sent on 5 March 2021 attaching the orders; and
(c) neither Danielle nor Brittany received or were otherwise aware of the copy of the orders delivered to the hostel premises on 10 March 2021.
12Dr Weston-Scheuber pointed to a number of emails and texts in the evidence that showed that Danielle had opened other emails from both Ward & Co and the court sent to this email address at around this time. She submitted that it beggars belief that Danielle would not also open these emails of 5 March 2021, particularly as she knew from her conversation with the court the day before that there was an important hearing that morning. Dr Weston-Scheuber made similar submissions concerning Danielle’s failure to open the email from the court attaching the orders of 19 March 2021.
13I accept, for the reasons stated by Dr Weston-Scheuber, that there is good reason to be sceptical about Danielle’s evidence in relation to the emails of 5 March 2021. It is surprising (to say the least) that she apparently failed to appreciate the importance of emails from both the defendants’ former solicitors Ward & Co, and from the court, sent on the day she knew the defendants’ solicitors had applied to cease to act, with a trial date only two months away. Even accepting her evidence at face value, it points to a troubling lack of care and attention on Danielle’s part in protecting the defendants’ interests, including by ensuring that communications from the court were treated with the necessary gravity.
14However, I accept that Danielle did not wholly shirk the responsibilities she had assumed in managing the proceeding on behalf of the defendants. In particular, it is not in dispute that she took steps that day to engage Mr Lennon to replace Ward & Co as solicitors on the record for the defendants. This is important for two reasons. First, it might explain (at least in part) why she took less interest in correspondence from Ward & Co and the court than might otherwise have been the case. Second, had she opened the emails and appreciated their importance, it is likely that she would have passed them on to Mr Lennon for him to deal with, along with all the other material she supplied to him on 6 March 2021.
15I can only speculate as to what might have occurred had the emails of 5 March 2021 been forwarded or otherwise passed on to Mr Lennon. It is possible that he may have acted with more alacrity, had he known as early as 5 or 6 March 2021 that the time on a self-executing order was running. However, I have no confidence about this. Based on the way he dealt with the matter over the ensuing weeks as discussed below, I am satisfied that it is equally possible events would have transpired no differently than what in fact occurred. Mr Mason made a submission to similar effect about what might have occurred had the defendants received the court’s orders delivered to the hostel. I accept this submission.
16I also agree with Mr Mason that the steps the defendants took (through Danielle) to engage Mr Lennon as a replacement solicitor were reasonable and the assistance they then received was evidently deficient. I would add that the steps that Danielle took on behalf of the defendants (primarily through her text messages) in following up Mr Lennon during the latter part of March 2021 and into early April, were also reasonable. In particular, it is clear that by 24 March 2021 at the latest, that she understood the urgency and importance of the 30 March 2021 deadline, and it was reasonable for her to take Mr Lennon’s plainly wrong advice about this at face value.
17That advice is troubling on a number of levels. First, it was factually incorrect. The stay was not for 14 days, and had in fact expired (as Danielle had been insisting) on 30 March 2021. Second, the statement that “we didn’t have to lodge material within that time” is at least highly misleading, and also conveys a general sense of lack of urgency about taking steps to respond to court deadlines. It does not sit well with Mr Lennon’s insistence that he informed Danielle of the effect of the orders of 19 March 2021.
18These concerns about Mr Lennon’s conduct in acting for the defendant are reinforced by his complete failure to follow-up on the text exchange, until he was once again pressed by Danielle to do so. Even then, it was not until 14 April 2021 that he next met with Danielle, a meeting again arranged by her. This was well after the expiration of the stay on the judgment in default of defence even on Mr Lennon’s faulty recollection of the length of that stay.
19In my view, for the reasons discussed above, Danielle’s actions in engaging Mr Lennon on and from 5 March 2021 and her regular and persistent attempts to push him to action over the ensuing weeks, are key factors in assessing the sufficiency of the defendants reasons for their failures leading up to the entry of judgment in default of defence. They effectively supersede any concerns that might otherwise persist concerning the reliability of Danielle’s evidence about failing to open the 5 and 19 March emails discussed above. And they show that responsibility for failing to act with sufficient urgency and purpose in the period after 5 March 2021 rests largely with Mr Lennon.
20In forming the conclusions above, it is not necessary for me to reach a concluded view about what Mr Lennon in fact conveyed to Danielle about the 19 March 2021 orders at their meeting on 22 March 2021. I accept Danielle’s evidence (supported by her contemporaneous text messages) that throughout this period she was concerned to ensure that the defendants actively defended the proceeding. Whatever Mr Lennon said to Danielle at the meeting on 22 March 2021, it was clearly not sufficient to convey to Danielle that any further failure by the defendants to act urgently to seek to set aside the orders made that day, would have potentially catastrophic financial implications for the defendants.
21I interpolate here that the views I have expressed about Mr Lennon’s conduct of the matter on behalf of the defendants are sufficient to support my findings on the present application. However, in my judgment, they fall short of supporting any formal adverse finding against Mr Lennon (including in relation to the costs of the application). Among other things, such a finding could only fairly be made after Mr Lennon had the opportunity to be heard further, including on the detail of any legal advice that he gave to Danielle over the period. If the defendants wish to pursue any claim against Mr Lennon in that regard, they will need to do so in a separate application or proceeding, that does not in any way impede the progress of the existing proceeding to trial.
22Mr Mason has submitted (in effect) that the court should be particularly amenable to exercising its discretion to set aside the default judgment, where that judgment arises from the deficient assistance the defendants received from their replacement solicitor after 5 March 2021. He further submitted that the courts have accepted that a solicitor’s conduct should not result in a party being penalised by being shut out from defending its claim, citing Kostokanellis v Allen [1974] VR 596 at 607. In that case Full Court endorsed the principle that, in general, “where default is due to the carelessness of a party’s solicitor, the party is not penalised to the extent of being shut out from litigating his claim or defence”.
23I agree. Although the defendants are not entirely blameless in the failures that occurred during the period, it is clear that Danielle sought to progress matters by engaging an experienced solicitor who because of (it seems) pressures of other work did not give the matter the urgent attention it required.
24Mr Mason further submitted (and I also agree) that there have not been other significant or continuous non-compliances by the defendants with the court’s orders made in this proceeding. Indeed, as I have observed, the interlocutory stages of the proceeding have otherwise progressed smoothly. In this context, I do not regard the entry of judgment in default by the plaintiff in December 2019 as relevant. This came about not because of any lack of attention or engagement by the defendants or their solicitors at the time. Rather, it resulted from the plaintiff’s unwillingness to accede to request for more time which, in my view, were not unreasonable given the time of year.
25In the circumstances, I am satisfied that the defendants have given a sufficient explanation for their failures leading to the entry of judgment in default of defence.
Can the defendants identify a prima facie defence to the plaintiff’s claim?
26This question was not materially in issue on the application. In any event I am satisfied based on my review of the defendants’ defence and the expert report of Mr Trevor Jeffrey dated 22 April 2020, that the defendants have identified a prima facie defence to the whole of the plaintiff’s claim, at least sufficient to support their application to set aside the judgment in default of defence.
Have the defendants acted promptly on becoming aware of the default judgment?
27This question too was not materially in issue. As I have explained above, I accept that the defendants did not fully appreciate the implications of the orders of 19 March 2021 (or the precursor orders of 5 March 2021), largely as a result of the lack of attention and urgency on the part of Mr Lennon. I am satisfied that the defendants, having lost confidence in Mr Lennon, acted promptly to engage their current solicitors, who in turn acted reasonably promptly to bring this application on for hearing. This relevantly included, within a relatively short time frame, searches of Court Connect, the review of a voluminous and complex file, the preparation of comprehensive supporting affidavits and responding promptly to requests from the court for further material.
Is there prejudice to the plaintiff?
28There can be no doubt that the plaintiff will suffer significant prejudice if, having already lost two trial dates, it is again put to the trouble and expense of preparing for trial. More importantly, as Dr Weston-Scheuber has submitted, the plaintiff is a small construction business that (on its case) has since mid to late 2018, been kept out of in excess of $600,000 in payments that are due and payable to it. She further submitted (and I accept) that this is a significant prejudice for a small business to suffer. That prejudice is exacerbated in circumstances where, as I indicated during the course of the hearing of the application, a new trial date would not available until the first half of 2022.
29Against that background, Dr Weston-Scheuber submitted that, if (contrary to her primary submissions) the court were to accede to the application, it should be on terms, referring me to the commentary on this issue in Civil Procedure Victoria at [I 21.07.55]. She argued that, in this case, the appropriate condition was that the defendants be ordered to pay into Court the amount of the default judgment of $805,989.99.
30In my view, this is not a case where it is appropriate to impose terms for an order setting aside the judgment. First, I’m satisfied that this is not a case where, until the events giving rise to the default judgment, the defendants could reasonably be accused of dragging their heels. Indeed, the fact that the proceeding appeared to be almost ready for trial on the first allocated trial date, is probably the exception rather than the rule for cases in the commercial division of this court. If it were not for the difficulties faced by the court in allocating an earlier trial date, there is a realistic prospect that, even with the delays to date, the proceeding could still go to trial about 18 months after commencement. I accept that this is far from ideal, but is nevertheless not an unreasonable period to expect a case of this kind to take.
31Second, I am satisfied that this is not the type of case discussed by the NSW Court of Appeal in Baptiste v Gilmour-Latham [2001] NSWCA 392 at [16] involving doubt about the bona fides of the proffered defence. In my view (albeit based on limited material and without the benefit of detailed argument), the defendants appear to have a good arguable defence.
32Third, following enquiries of the court registry and some judicious arm-twisting, it appears that I may now be in a position to offer the parties a much earlier trial date than I had feared at the time of the application. Indeed, subject to the convenience of at least the plaintiff and its legal advisers, I may be in a position to fix the proceeding for trial as early as 13 July 2021. This will go a substantial way to ameliorating the clear prejudice to the plaintiff resulting from a further lengthy delay.
33Having said this, clearly the plaintiff should not suffer prejudice from the costs it has incurred in entering judgment in default of defence, taking steps in the enforcement of that judgment and responding to this application. On no view can the plaintiff be held in any way responsible for the circumstances of the default judgment. I therefore propose to make orders that the defendants forthwith pay an appropriate sum to the plaintiff in respect of these costs as a term of my order setting aside the default judgment.
34Mr Mason argued any costs ordered against the defendants should not extend to the plaintiff’s costs of its separate winding up application and bankruptcy notice, and these should be dealt with in the winding up and bankruptcy proceedings (respectively). I disagree. There may well be other considerations affecting the costs orders made in those proceedings and this court, of course, has no control over how those issues might be dealt with. However I do have power as a term of setting aside the default judgment to ensure that the plaintiff is fully compensated for its costs of enforcement.
Was the judgment entered regularly?
35Although in view of my findings above is not necessary for me to decide this question, I am satisfied that the judgment was entered regularly. In particular, the terms of order 6 and 7 of the orders of 5 March 2021 set out in full above, could hardly have been clearer. In particular, they provided in effect that the failure by the defendants to provide the plaintiff with requested additions to the court book index would “result in the defendants’ defences being thereupon dismissed forthwith and without further notice, and the plaintiff being entitled thereafter to enter judgment in default of defence, also without further notice to the defendants” (emphasis added).
36In my view, contrary to Mr Mason’s submissions, the order expressly dispensed with the requirement for a summons (the whole purpose of a summons being to give notice). I also do not agree with Mr Mason that the plaintiff was required to file an affidavit proving the default. This is not a case where the default judgment was entered administratively. Rather, it was an order made by the court at the directions hearing on 19 March 2021 that had been fixed by the 5 March 2021 orders. Further, that hearing was attended by Mr Lennon who, while not formally on the record for the defendants, informed the court that he had been retained by them.
37In the circumstances, I am satisfied that there was more than sufficient material before the court at the time the judgment in default was made, to conclude that the defendant had failed to comply with the 5 March 2021 orders, and thus triggered the self-executing effect of those orders. There has been no suggestion to the contrary, either at the hearing on 19 March 2021 or since.
Certificate
I certify that these 19 pages are a true copy of the ruling of his Honour Judge Woodward delivered on 10 June 2021.
Dated: 10 June 2021
Sean Bricknell
Associate to His Honour Judge Woodward
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