Poyser v Gajic

[2006] VSC 380

IN THE SUPREME COURT OF VICTORIA Not Restricted

AT MELBOURNE

COMMERCIAL AND EQUITY DIVISION

No. 5016 of 2006

MAXWELL ANDREW POYSER	Plaintiff
v
MALOJKO GAJIC	First Defendant
and
MILEVA GAJIC	Second Defendant

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JUDGE:	Morris J
WHERE HELD:	Melbourne
DATE OF HEARING:	6 October 2006
DATE OF JUDGMENT:	20 October 2006
CASE MAY BE CITED AS:	Poyser v Gajic
MEDIUM NEUTRAL CITATION:	[2006] VSC 380

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Application to set aside judgment in default – Judicial discretion in setting aside default judgment – Default on loan repayment – Plaintiff failed to file defence – Plaintiff alleged agreement existed to extend loan - Warrant of possession – Whether defence had merit

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APPEARANCES:	Counsel	Solicitors
For the Plaintiff	Mr D Farrands	Wainwrights Pty Ltd
For the Defendants	Mr J M Selimi	Radebe and Associates

HIS HONOUR:

1. On 7 March 2006 the plaintiff issued a writ in which it sought possession of land at 36 Curlew Point Drive, Patterson Lakes as a consequence of the defendants’ failing to repay money owed pursuant to a loan.  Although the defendants filed an appearance in the matter, they did not serve a defence.  Consequently on 11 May 2006 default judgment was entered in favour of the plaintiff and it was ordered that the plaintiff be entitled to recover possession of the land, together with the sum of $2,290.

1. The defendants then applied to a Master of this Court to set aside the default judgment.  This was supported by an affidavit of the first defendant, sworn 15 June 2006, in which he stated that he did not file a defence because he was involved in negotiations with the plaintiff to settle the debt and that he was made to understand that the plaintiff was not going to take further action in relation to the proceeding.

1. On 7 July 2006 Gillard J ordered that the execution of the warrant in respect of the land be stayed until further order.

1. On 9 August 2006 Senior Master Mahoney heard and dismissed the defendants’ application to set aside the default judgment.  In taking this course Senior Master Mahoney noted:

“The Court regarded as compelling the failure of the first defendant to protest the plaintiff’s requirement of repayment of the loan on the due date by referring to the alleged agreement made at the time of the loan to “roll it over”; for an additional year and the faxes of the defendants’ solicitors dated 27 October 2005 and 23 November 2005 which not only did not refer to the alleged agreement but were inconsistent with its existence:  see Eyota Pty Ltd v Hanove Pty Ltd 91994) 12 ACSR 785, at 787; 12 ACCC 669, at 671-2.”

1. The defendants have now appealed to a judge against the decision of the master made on 9 August 2006.  (The notice of appeal wrongly states that the plaintiff is the appellant; but this is clearly an error and should be overlooked.)

1. An appeal from a master is to be reheard de novo.

1. The defendants submitted that the default judgment was not regularly entered.  I do not accept this.  Although it is not fatal, I note that this claim does not appear to have been made before the Senior Master.  Having reviewed the circumstances in which the default judgment was entered, I cannot identify any shortcoming or deficiency which would mean that the judgment was irregularly entered.

1. In the case of judgments that are regularly obtained, there is a discretion as to whether or not the judgment should be set aside.  In the case of a default judgment, the relevant principles that ought be applied are those set out in Lau v Citic Australia Commodity Trading Pty Ltd [1999] VSCA 34. In that case Winneke P stated:

“The principles upon which the discretion of the primary judge fell to be exercised are not in doubt.  The applicant must demonstrate to the court grounds upon which the discretion ought to be exercised in his favour.  The primary consideration for the judge is that there are merits in the defences to which the court should pay heed.  If there are merits in one or more of those defences the court will ordinarily exercise its discretion in favour of allowing the matter to pass to final adjudication, provided that the applicant shows that he has an adequate explanation for his failure to file a defence.”

I am prepared to conclude that the defendants have provided an adequate explanation for their failure to file a defence.  It is true that the explanation which has been proffered is hotly contested by the plaintiff.  It is also true that I would regard the plaintiff’s version as more probable.  But the determination of whether the explanation is adequate cannot be conclusively determined without cross-examination and a finding as to the credibility of the main actors.  Hence I should proceed as if the defendants have proffered an adequate explanation for their failure to file a defence within the time prescribed.

1. Thus the question becomes whether or not the defendants have demonstrated to the court grounds upon which the discretion ought to be exercised in their favour; and in particular whether they have demonstrated that there are merits in its defence.  In order to deal with this it is necessary to set out the facts in more detail.

1. In September 2004 the solicitors for the plaintiff, Wainwrights, were approached by the first defendant for a loan of $50,000 for a one year term as part of a larger refinancing.  After discussions, the plaintiff offered to lend $200,000 to the second defendant for one year on a second mortgage over the land, the registered proprietor of which was the second defendant.  Relevant documentation to support the loan was prepared and was signed by the second defendant on 21 October 2004.  The loan monies actually agreed to were $250,000, but as the interest component was payable upfront (together with costs) the sum advanced was closer to $200,000.

1. The loan was due to be repaid at the end of October 2005.  Shortly before that date the defendants sought a thirty day extension for repayment.  The following month the second defendant sought a three month extension for repayment.  The plaintiff rejected these requests for an extension; and subsequently initiated legal proceedings to recover the land which was secured by the loan.

1. The first defendant has sworn affidavits in which he states that the initial loan for one year was subject to an oral term whereby the loan could be “rolled over” for a further year.  This claim is strongly contested by the solicitor acting for the plaintiff in connection with the loan.

1. As was pointed out by the plaintiff, the fact that the court’s task is confined to determining whether there are merits in the defence – rather than determining the merits of the defence or seeking to resolve factual issues – does not mean that the court must accept uncritically as giving rise to a genuine dispute every statement in an affidavit, however equivocal, lacking in precision, inconsistent with undisputed contemporary documents, or other statements by the same person, or inherently probable:  see Eyoto Pty Ltd v Hanove Pty Ltd (1994) 12 ACSR 785 at 787.

1. Further, for the defendants to have raised a defence with merits, it is necessary for them to go beyond establishing that a statement was made at the time the loan documents were prepared to the effect that it was possible that the plaintiff might agree to extend the loan for a further period, whether of one year or some longer period.  Rather, for the defence to have merit it is necessary for the defendants to raise the issue that the parties agreed that the defendants would have a right to extend the loan period for a further year.  I am not persuaded that the defendants have demonstrated that they have a defence of this character which has merit.

1. It is significant that the claim by the defendants that they had a right to extend the loan was not first made until almost six months after the date upon which the initial loan became repayable.  Further, in the immediate aftermath of the initial loan becoming repayable the defendants’ response was to seek to extend the time for repayment by, first, a month and then, second, three months.  As the Senior Master noted, these facts make it inherently improbable that the parties have agreed that the defendants had a right to have the loan rolled over for a further year.

1. Second, it is inherently improbable that the parties agreed that the defendants had a right to have the loan rolled over for a further year without insisting that interest on the second year of the loan be paid in advance.  There is no evidence that the defendants tendered interest in respect of the second year of the loan.

1. Third, evidence has been put before the court on behalf of the plaintiff which flatly, emphatically and credibly disputes the defendants’ contentions.  Although it is inappropriate for the court to determine where the truth lies in an application of this character, the fact that the plaintiff has produced such evidence is nonetheless relevant in determining whether the defendants’ defence has sufficient merit to make it appropriate that the proceeding proceed to final adjudication.

1. Fourth, even if there were oral discussions at the time of the initial loan which might be characterised as an agreement giving the defendants a right to extend the loan for a further year, such an oral term could not stand if it was inconsistent with the main contract, being the loan agreement and mortgage:  see Hoyts Pty Ltd v Spencer (1919) 27 CLR 133 at 139 and 147-8. In this respect it is significant that the solicitor acting for the defendants in respect of the loan has signed a certificate to the effect that he explained the meaning of the loan and mortgage documents to the second defendant.

1. I decline to exercise the discretion to set aside the judgement.  The appeal from the Senior Master is to be dismissed.

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