Rahal v Abedin

Case •

[2022] NSWSC 232

•

08 March 2022

No judgment structure available for this case.

Supreme Court


New South Wales

Medium Neutral Citation: Rahal v Abedin [2022] NSWSC 232
Hearing dates: 28 October 2021
Date of orders: 8 March 2022
Decision date: 08 March 2022
Jurisdiction:Common Law
Before: Walton J
Decision:

(1) The motion filed by the defendants on 14 September 2021 is dismissed.

(2) The defendants shall pay the costs of the motion as agreed or, in default, as assessed.

Catchwords:

CIVIL PROCEDURE – default judgment – setting aside – UCPR 36.16 – bona fide defence on merits – explanation of delay – unsatisfactory evidence – no defence on merits or explanation of delay – application refused

CIVIL PROCEDURE – default judgment – setting aside – irregularity in statement of claim – UCPR 36.15 – s 63 Civil Procedure Act – types of irregularities that will necessitate setting aside – omission of material facts necessary to support the pleaded cause of action – no such errors found – application refused

Legislation Cited:

Civil Procedure Act 2005 (NSW)

Uniform Civil Procedure Rules 2005 (NSW)

Cases Cited:

Arnold v Forsythe [2012] NSWCA 18

Fenato v Chief Commissioner of State Revenue (2010) 78 NSWLR 20; [2010] NSWCA 80

Category:Principal judgment
Parties: Narinder Singh Rahal (First Plaintiff)
Sarojny Rahal (Second Plaintiff)
Mohammad Abedin (First Defendant)
Xiaoyan Tang (Second Defendant)
Representation:

Counsel:
H Durack (Plaintiff)
B Long (Defendant)

Solicitors:
Craig Milne & Company (Plaintiff)
Celtic Legal (Defendant)
File Number(s): 2021/148251
Publication restriction: Nil

Judgment

  1. These proceedings concern an action by the first defendant Mohammad Abedin and the second defendant Xiaoyan Tang, (together “the defendants”) by notice of motion filed on 14 September 2021 (“the defendants’ motion”) to set aside a default judgement entered against them in the sum of $954,065.60 on 2 August 2021 (“the default judgment”).

  2. The contested factual background underpinning the proceedings may be briefly restated as follows.

  3. The first plaintiff is Narinder Singh Rahal. The second plaintiff is Sarojny Rahal, (together “the plaintiffs”). The first and second plaintiffs are married, as are the first and second defendants. All four are friends and have been business associates from time to time. [1]

    1. T21.5-20

  4. On 16 February 2016, the defendants received a loan of $550,000.00 from the plaintiffs (“the first loan”) from the proceeds of sale of the property at X Wiggins Place, Concord (“the Wiggins Place Property”). [2]

    2. Loan Agreement page 2 at [B]

  5. On 20 July 2018, the defendants received a further loan of $203,000.00 from the plaintiffs (“the second loan”) to be used for a deposit for a proposed purchase of X Patricia Street, Mays Hill (“the Patricia Street Property”). [3]

    3. Loan Agreement page 2 at [B]

  6. On 15 July 2019, the defendants received a further cash loan of $200,000.00 from the plaintiffs (“the third loan”) to buy a property in Adelaide (“the Adelaide Property”). [4]

    4. Loan Agreement page 2 at [B]

  7. On 13 July 2020, the parties entered into a loan agreement under which the plaintiffs were described as the lenders and the defendants as the borrowers (“the Loan Agreement”). Under the Loan Agreement the defendants acknowledged they were indebted to the plaintiffs in the sum of $953,000.000 (“the Debt”). [5] The Loan Agreement records that the Debt arose from the three loans made by the plaintiffs to the defendants between 2016 and 2019. [6]

    5. Loan Agreement page 2 at [A]

    6. Loan Agreement page 2 at [B]

  8. Pursuant to the Loan Agreement, the defendants were to pay the plaintiffs $400,000.00 on or before 1 October 2020, $200,000.00 on or before 1 March 2021, $200,000.00 on or before 1 August 2021, and $153,000.00 on or before 1 December 2021. [7] The defendants were also to pay interest on the Debt in the amount of $8,290.00 per month each month until the Debt had been repaid. [8]

    7. Loan Agreement page 3 at [2.1]

    8. Loan Agreement page 3 at [4.1]

  9. The Loan Agreement is initialled on each page save the last, and is signed on the last page by all four parties. [9] It is witnessed on the last page by Ms Jaspreet Singh, the first plaintiff’s step-daughter and second plaintiff’s daughter. [10] The plaintiffs say that on 13 July 2020 the defendants attended their residence at The Boulevarde, Lilyfield and signed the Loan Agreement. [11] The defendants dispute that the Loan Agreement bears their initials and signatures and say that they never entered into the Loan Agreement. [12]

    9. Loan Agreement pages 1-6

    10. Loan Agreement page 6; Aff of Jaspreet Singh on 19 October 2021 at [6]

    11. Aff of Narinder Singh Rahal on 19 October 2021 at [19]

    12. Defendants’ submissions at [26] – [27]

  10. On 15 July 2020, the first plaintiff emailed the first defendant an executed copy of the Loan Agreement “for the defendants’ records”. [13]

    13. Aff of Narinder Singh Rahal on 19 October 2021 at [22]

  11. The first plaintiff deposes that between 13 July 2020 and 28 July 2020 he noticed that the spelling of the second defendant’s name was incorrectly recorded on the Loan Agreement and he contacted the defendants to remedy the defect. [14]

    14. Aff of Narinder Singh Rahal on 19 October 2021 at [24]

  12. On 27 July 2020, the plaintiffs met with the defendants and corrected the second defendant’s name on pages 1, 2 and 6 of the Loan Agreement. The defendants are said to have both initialled each correction. [15] On 28 July 2020, the first plaintiff emailed the first defendant attaching a copy of the corrected Loan Agreement. [16]

    15. Aff of Narinder Singh Rahal on 19 October 2021 at [31] – [34]

    16. Aff of Narinder Singh Rahal on 19 October 2021 at [35]

  13. On 6 August 2020, the first plaintiff sent an SMS to the first defendant requesting that a charging clause be added to the Loan Agreement. [17] On 12 August 2020, the parties met and the defendants’ both initialled the new clause 17 on page 5 of the Loan Agreement. [18] On 13 August 2020, the first plaintiff emailed the first defendant a copy of the final amended form of the Loan Agreement. [19]

    17. Aff of Narinder Singh Rahal on 19 October 2021 at [37]

    18. Aff of Narinder Singh Rahal on 19 October 2021 at [44] – [45]

    19. Aff of Narinder Singh Rahal on 19 October 2021 at [46]

  14. On 25 May 2021, the plaintiffs filed a statement of claim in this Court claiming the sum of $926,150.00 being monies owed to them by the defendants pursuant to the Loan Agreement as well as interest until 10 May 2021 (the “statement of claim”).

  15. On 1 July 2021, the plaintiffs served both the first and second defendants with the statement of claim by way of licenced process server Andrew Khee Tuan Ng Saad (“the process server”) at Inner West Estate Agency, the defendants’ business. [20]

    20. Affs of Service of Andrew Khee Tuan Ng Saad on 2 July 2021

  16. The first defendant says he did not receive the statement of claim until after he received a bankruptcy notice. [21] He does not recall the exact dates of when he received each document, [22] however he disputes being served with the statement of claim as early as 1 July 2021. [23] He says as soon as he received the bankruptcy notice on about 25 August 2021 he contacted his lawyer. [24]

    21. T20

    22. T20.9-16

    23. T20.48-50

    24. T20.33-46

  17. On 30 July 2021, the plaintiffs’ filed a notice of motion in this Court seeking default judgment for the sum of $954,065.60 being the amount owed under the Loan Agreement as well as interest, filing fees and legal fees (the “plaintiffs’ motion”).

  18. On 2 August 2021, default judgment was entered. The defendants say the amount is “plainly wrong”. [25]

    25. Defendants’ submissions at [14]

  19. On 14 September 2021, the defendants’ motion was filed.

  20. On 28 October 2021, the parties appeared before me in this Court.

Evidence before the Court

  1. The plaintiff relied on the following affidavits:

  1. Affidavit of Jaspreet Singh affirmed on 19 October 2021 (“Aff Singh 19/10/21”).

  2. Affidavit of Narinder Singh Rahal sworn on 19 October 2021 (“Aff Singh Rahal 19/10/21”).

  1. The defendants relied on the following affidavits:

  1. Affidavit of Mohammad Abedin, sworn on 13 September 2021 (“Aff Abedin 13/9/2021”).

  2. Affidavit of Brendan Thomas Long, solicitor for the Defendants, sworn on 27 October 2021 (together with exhibit BL-1).

The defendants’ motion

  1. This Court has the power to set aside the default judgment pursuant to r 36.16(2) of the Uniform Civil Procedure Rules 2005 (NSW) (“UCPR”). UCPR 36.16 relevantly reads:

“36.16 Further power to set aside or vary judgment or order

…

(2) The court may set aside or vary a judgment or order after it has been entered if—

(a) it is a default judgment (other than a default judgment given in open court), or

…”

  1. For a party to set aside a default judgment they must first show that they have a defence on the merits, and then provide explanation for their delay in filing a defence, and if applicable, explain any delay in making their application.

  2. Apart from the documentary evidence, a factor which significantly influenced my view that the defence lacks merit is the unsatisfactory evidence given by the first defendant which I will discuss below.

The first defendant’s evidence

  1. In examination in chief the first defendant was asked if there was anything in Aff Abedin 13/9/2021 (his own affidavit) that he wished to correct. [26] He stated that at [6] he deposed that he didn’t know and had never met Jessie (Jaspreet) Singh, however this was incorrect and he merely did not recognise Ms Singh’s name. [27]

    26. T5.16-18

    27. T5.20-35

  2. Cross examination of the first defendant proceeded primarily by way of an interrogation of Aff Singh Rahal 19/10/21. The responses given by the first defendant, in my opinion, reveal that the defendants do not have, or at least are unable to establish, a defence on the merits. I do not mean to assert that the defendants have been deliberately dishonest in giving their evidence, only that on the basis of the evidence that they have presented to this Court they have not provided an defence which is adequate to have the default judgment set aside. The first defendant’s evidence in cross examination contained various inconsistencies and at points was fanciful. After hearing his evidence, and given the exhibited documents and accompanying correspondence appeared quite clear on their face, my conclusion was that he could not be considered a reliable witness.

Defence on the Merits

  1. Counsel for the plaintiffs began cross examination of the first defendant by enquiring about the loans purportedly made by the plaintiffs to the defendants. The first defendant admitted that he and the second defendant received the first loan for the Wiggins Place Property. [28] The first defendant denied that the defendants had ever received the second loan, the purported purpose of that loan (to purchase the Patricia Street Property), and that the first plaintiff asked for the return of the money that was purportedly loaned. [29] The first defendant also denied that the defendants had received the third loan to purchase the Adelaide Property. [30]

    28. T6.1-5

    29. T6.6-T7.39

    30. T7.41-49

  2. Counsel for the plaintiffs then asked the first defendant to have regard to Annexure E, which comprised of a screenshot of a phone contact named “Mohammad Abedine Mobile” recording the number 04XX XXX XXX and email address mahin@XXXXX X.com.au. The first defendant confirmed these were his. [31]

    31. T8.1-6

  3. Counsel then took the first plaintiff to Annexure D which comprised of a screenshot of a text conversation between the first plaintiff and first defendant. The messages read:

“Hi Mohammed What time can we come to sign the loan agreement today?

Hello Sir can u [sic] we do After hrs and then can have dinner as Rajan is here as wlell [sic]” [32]

32. Aff of Narinder Singh Rahal sworn on 19 October 2021; Annexure D

  1. The first defendant said that this conversation related to “… my private loan agreement and I have that and I have share with him as well which is Bligh Finance” [33] suggesting that the loan agreement referred to in the above messages was entirely separate to the Loan Agreement that is the subject of these proceedings. After a number of questions from counsel the first defendant eventually accepted that the text message referred to a loan agreement. [34]

    33. T8.31-33

    34. T8.35-T9.47

  2. Counsel then took the first defendant to Aff Singh Rahal 19/10/21 at [7] where the first plaintiff deposed that on 12 July 2020 he had emailed the first defendant a copy of the Loan Agreement, and Annexure A which was purported to be a copy of that email and the Loan Agreement that was attached to it. The email reads:

“Hi Mohammad, Please find contract to be signed tomorrow. Narinder Rahal.” [35]

35. Aff of Narinder Singh Rahal sworn on 19 October 2021; Annexure A

  1. The first defendant admitted he received this email and the attached copy of the Loan Agreement. [36]

    36. T10.27-47

  2. Counsel then directed the first defendant to have regard to Aff Singh Rahal 19/10/21 at [22] where the first plaintiff deposed that on 15 July 2020 he emailed an executed copy of the Loan Agreement to the first defendant, and Annexure F which was purported to be a copy of that email. [37] The email reads:

“Hi Mohammad and Tina Please find copy of the signed Deed Loan Agreement. Regards, Narinder Rahal” [38]

37. T10.49-11.20

38. Aff of Narinder Singh Rahal sworn on 19 October 2021; Annexure F

  1. The first defendant admitted that the second defendant is also known as Tina, that the Loan Agreement had now been dated 13 July 2020, that on pages 2 to 5 there were markings, and on the final page signatures, [39] however he denied that the signatures were his or the second defendant’s. [40]

    39. T11.22-46

    40. T11.47-50

  2. Comparing the signature in Annexure F to that at the end of Aff Abedin 13/9/2021, the first defendant admitted that the signatures were similar, but nevertheless denied that the signature on Annexure F was his. [41] He also denied that the signature which appeared to read ‘Tina T’ is one that he had seen the second defendant use, stating that it looked ‘nothing like’ her signature. [42] Given the similarities between the signatures the first defendant’s evidence on this issue strains credulity.

    41. T12.3-40

    42. T12.42-47

  3. Counsel then directed the first defendant to Aff Singh Rahal 19/10/21 at [24]-[36] where the first plaintiff deposed that at some time between 13 July 2020 and 28 July 2020 he noticed the second defendant’s name was spelt incorrectly, raised this with the defendants, attended the first defendant’s office to correct it, and then on 28 July 2020 emailed the first defendant with an amended form of the Loan Agreement. [43] Annexure H was said to contain this email and its attachment. The email reads:

“Hi Mohammad, Please find loan deed agreement corrected name from Tan to Tang. Thank you; Narinder Rahal” [44]

43. T12.49-T14.14

44. Aff of Narinder Singh Rahal sworn on 19 October 2021; Annexure H

  1. Initially the first defendant denied that the first plaintiff ever raised the issue of the misspelt name with him, but soon thereafter conceded that he could not remember if he had spoken to him about it and that he may have. [45] The first defendant accepted that he received the email and its attachment in Annexure H, and that the change from Tan to Tang had been made and initialled ‘TT’ and ‘MA’ on pages 1, 2, and 6 of the Loan Agreement, however he denied having initialled it stating “…we don’t know who has done it”. [46] Again the first defendant’s evidence is difficult to believe.

    45. T12.49-T13.19

    46. T13.26-T14.14

  2. Counsel then took the first defendant to Annexure I [47] which comprised of a screenshot of a text sent from the first plaintiff to the first defendant on 6 August 2020 which relevantly reads:

“Hi Mohammed My solicitor as [sic] asked me to insert this clause to our existing contract and get it signed from you both

17. SECURITY

…” [48]

47. T14.16-31

48. Aff of Narinder Singh Rahal sworn on 19 October 2021; Annexure I

  1. The first defendant was then taken to Aff Singh Rahal 19/10/21 at [46] where the first plaintiff deposed that on 13 August 2020 he emailed the first defendant a final amended form of the Loan Agreement, and Annexure K which was purported to be a copy of that email and attachment. [49] After some cajoling the first defendant accepted that he had received the email, that it was sent 7 days after the text, and that both appeared to be directed to the subject of the insertion of a security clause. [50] He also accepted that the copy of the Loan Agreement contained within Annexure K had a new clause 17 inserted on page 5, which had next to it some initials, and below it some signatures. [51] However whilst the first defendant accepted that he would have opened the attachment, he stated he either did not see page 5, or did not look through the Loan Agreement at all after receipt. [52] The transcript reads at T16.8-16:

“Q: Mr Abedin, you would have opened the attachment to the email that we just looked at and seen this document, correct?

A: Correct

Q: And you would have gone through it and seen page 5, the security clause?

A: No, I never looked at it.

Q: You never looked at it?

A: No”

49. T14.33-16.16

50. T15.1-24

51. T15.31-42

52. T16.8-13

  1. Counsel continued cross examination by asking the first defendant if he received Aff Singh Rahal 19/10/21 before the date of the hearing, which he confirmed that he had. [53] Counsel then enquired as to why the first defendant had not put on any evidence in reply to the affidavit. The first defendant responded that he called and spoke to the first plaintiff on a near daily basis, that he had emailed asking ‘What’s this about?”, and had questioned what the first plaintiff was doing and why he had prepared the documents the first defendant had received by email. [54] At T17.14-27 the transcript reads:

    53. T16.18-26

    54. T16.35-17.19

“Q: But no text messages or emails from you to that effect, was there?

A: It was.

Q: So you sent text messages and emails disputing or querying these documents that he was sending you?

A: Yes.

Q: But those emails and text messages that you refer to, querying or questioning this document and that it wasn’t signed by you and why he was doing this, they are not in evidence, are they?

A: Yes.

Q: You didn’t put those into an affidavit, did you, sir?

A: No, I did not.”

  1. That the first defendant, being in possession of correspondence which would have supported his defence, would choose not to submit it as evidence, in my opinion, strains credulity.

  2. The first defendant’s answers in cross examination, in my opinion, lacked credit and revealed a number of internal inconsistencies. He was on the whole an unsatisfactory witness and I do not accept his evidence. In my opinion his answers demonstrate that, on the evidence on the motion, the defendants are unable to establish a defence on the merits which warrants a rejection of the application to set aside the default judgment.

Delay

  1. Although I am not bound to consider the defendants’ submissions on delay as I have already found they do not have a defence on the merits, I shall nevertheless address them briefly and in doing so reach the conclusion that if I were required to decide, in my opinion, the defendants have failed to provide any proper explanation for their delay.

  2. Counsel began cross examination of the first defendant as to delay by enquiring as to the first defendant’s occupation and English language skills. The first defendant confirmed that he and the second defendant were both real estate agents, that he had completed a number of qualifications in English, and that he had a good ability to read English. [55] The first defendant then confirmed that he was served with the statement of claim on 1 July 2021 [56] before saying he was confused and that he received the bankruptcy notice on around 25 August 2021 and this was before he received the statement of claim. [57] He stated that he had called the Registry when he received the statement of claim and having been told there was no hearing date, believed he had to wait until notified of a date. [58] He stated that as soon as he received the bankruptcy notice he contacted his lawyer. [59] The first defendant also confirmed that he read the entire statement of claim when he received it. [60]

    55. T17.29-18.45

    56. T18.47-49

    57. T19.45-20.50

    58. T19.34-37

    59. T20.33-37

    60. T19.1-32

  1. In closing argument counsel for the defendants’ attempted to disentangle the first defendant’s position as to delay. He stated:

“With respect to delay, Mr Abedin says that he contacted the registry who advised him that there is no hearing date for this Supreme Court matter yet. He says that he conducted this within two weeks of service of the statement of claim.

…

In cross-examination today [he stated] that he may have received the statement of claim after the bankruptcy notice. So the point I am getting at is that if, either on the plaintiff’s case that the statement of claim was served on 1 July, the time between 1 July and 14 September, so if it was served on 1 July the time for a defence to be filed was 28 days, 29 July.

The time between 29 July and 14 September we submit is not a significant delay, it is of 6 weeks, it may even be less depending on what has come out of cross-examination as to when Mr Abedin actually received the statement of claim, it was after a bankruptcy notice or before. The thrust of the submission remains that six weeks at most is not a significant delay.” [61]

61. T27.27-44

  1. There are some difficulties with this evidence. It does not seem logical that if the first defendant received the statement of claim after having already received a bankruptcy notice and having instructed a solicitor, he would call the Registry rather than his solicitor. Further, even if it is to be believed that the first defendant did not contact the Registry until after service of the statement of claim, which purportedly occurred after service of the bankruptcy notice on around 25 August 2021, conceivably he would not be told that there was ‘no hearing date’ but rather that default judgment had been entered against him on 2 August 2021 and that he should instruct a solicitor.

  2. Further, there is no proper basis for me to doubt the veracity of the two affidavits of service sworn on 2 July 2021 in which the process server deposes that he served each of the defendants with the statement of claim at their real estate agency on 1 July 2021. [62] Although I accept that the defendants are not especially familiar with court processes, given the first defendant has several qualifications attained in English I do not accept the suggestion that he did not understand that he was required to file a defence in order for the matter to progress to a hearing [63] given the very clear words on page 5 of the statement of claim which read:

“NOTICE TO DEFENDANTS

You will be in default if you do not file a defence within 28 days of being served with this statement of claim. The court may enter judgement against you without any further notice to you.

…

HOW TO RESPOND

Please read this statement of claim very carefully. If you have any trouble understanding it or require assistance on how to respond to the claim you should get legal advice as soon as possible.”

62. Aff of Andrew Khee Tuan Ng Saad sworn on 2 July 2021 (Mohammad Abedin); Aff of Andrew Khee Tuan Ng Saad sworn on 2 July 2021 (Xiaoyan Tang)

63. T19.34-37; Aff of Mohammad Abedin sworn on 13 September 2021 at [22]

  1. Whilst the delay of six weeks from 1 July 2021 to 14 September is not an especially long one, it is nevertheless a material delay for which there is no satisfactory explanation. Again the first defendant’s evidence strains credulity, and were I required to deal with the issue of delay I would be minded to refuse the application on the basis of the defendants providing no reasonable explanation.

Irregularities in the statement of claim

  1. The conclusions as to the merits of the defence and/or the issue of delay are sufficient to dispose of the defendants’ motion unfavourably to them, save for a further matter raised by the defendants in support of their application. The defendants submitted both in writing and orally that the default judgment is irregular and as a consequence it should be set aside. [64]

    64. T27.7-23; Defendants’ submissions at [9]-[20]

  2. In their written submissions the defendants suggested this should be done as the plaintiffs’ statement of claim does not plead a cause of action, and/or the particulars are incorrect, and these errors are irregularities for the purposes of s 63(2)(a) of the Civil Procedure Act 2005 (NSW) (“Civil Procedure Act”), and therefore this Court should strike out the statement of claim in accordance with UCPR 14.28, or set aside the default judgment pursuant to UCPR 36.15(1). [65] In oral submissions counsel for the defendant confirmed that he had not located an authority for the proposition that default judgment may be set aside on the basis of an irregularity in the statement of claim. [66]

    65. Defendants’ submissions at [13]-[20]

    66. T27.18-23

  3. Despite the absence of authority I am prepared to proceed on the basis that an application to set aside a default judgment may, depending on the circumstances of the case, be granted where a failure to plead material facts results in the opposing party being unable to be sufficiently identify the pleaded case. [67] It is also necessary, however, to have regard to s 63 of the Civil Procedure Act and UCPR rr 14.28 and 36.15.

    67. Arnold v Forsythe [2012] NSWCA 18 (“Arnold”) at [83]; Fenato v Chief Commissioner of State Revenue (2010) 78 NSWLR 20; [2010] NSWCA 80 (“Fenato”) at [75]

  4. Section 63 of the Civil Procedure Act reads:

“63 Directions with respect to procedural irregularities

(1) This section applies to proceedings in connection with which there is, by reason of anything done or omitted to be done, a failure to comply with any requirement of this Act or of rules of court, whether in respect of time, place, manner, form or content or in any other respect.

(2) Such a failure—

(a) is to be treated as an irregularity, and

(b) subject to subsection (3), does not invalidate the proceedings, any step taken in the proceedings or any document, judgment or order in the proceedings.

(3) The court may do either or both of the following in respect of proceedings the subject of a failure referred to in subsection (1)—

(a) it may, by order, set aside the proceedings, any step taken in the proceedings or any document, judgment or order in the proceedings, either wholly or in part,

(b) it may exercise its powers to allow amendments and to make orders dealing with the proceedings generally.

(4) The court may not take action of the kind referred to in subsection (3) (a) on the application of any party unless the application is made within a reasonable time and, in any case, before the party takes any fresh step in the proceedings after becoming aware of the failure.”

  1. UCPR rr 14.28 and 36.15 relevantly read:

“14.28 Circumstances in which court may strike out pleadings

(1) The court may at any stage of the proceedings order that the whole or any part of a pleading be struck out if the pleading—

(a) discloses no reasonable cause of action or defence or other case appropriate to the nature of the pleading, or

…

36.15 General power to set aside judgment or order

(1) A judgment or order of the court in any proceedings may, on sufficient cause being shown, be set aside by order of the court if the judgment was given or entered, or the order was made, irregularly, illegally or against good faith.

…”

  1. Pursuant to s 63 of the Civil Procedure Act, failure to comply with a requirement of that Act or with the rules of this Court is to be taken as an irregularity but does not necessarily invalidate the proceedings. A party is entitled to have the material facts which support a cause of action summarised in the pleadings so that it knows the case it has to answer, and a failure of this objective will constitute an irregularity within the ambit of UCPR 36.15. [68] Likewise a statement of claim which omits material facts that are necessary to support the pleaded cause of action is not in compliance with the rules and is thus irregular and within the ambit of UCPR 36.15. [69]

    68. Fenato at [84]

    69. Fenato at [75]; Arnold at [79]-[82]

  2. Therefore, consistently with the earlier stated principle, not every failure to plead a material fact will constitute an irregularity for the purpose of UCPR 36.15. In that regard, the comments of Sackville AJA in Arnold v Forsythe [2012] NSWCA 18 (“Arnold”) at [83]-[84] bear repeating:

“[83] I do not read the decision in Fenato v Chief Commissioner as establishing that a failure to plead any material fact in a statement of claim will necessarily constitute an irregularity for the purposes of r 36.15. The significance of such a failure may depend on the nature of the material facts omitted and whether the pleading, despite the omission, sufficiently identifies the case pleaded against the defendant. If it were otherwise, challenges to default judgments could be made in cases where the pleading defects were of little practical importance and created no prejudice to the defendant. If a pleading defect entitles a defendant as of right to set aside a default judgment based on the pleading (a matter left open in Fenato v Chief Commissioner), applications to set aside judgments are likely to turn on fine pleading points in a context divorced from that in which the relevant principles were developed.

[84] In the present case, however, the omissions in the statement of claim went to the very foundations of the respondents’ cause of action against the appellant. By reason of the omissions, the case the appellant was required to meet was not clear. On the authority of Fenato v Chief Commissioner, this would have been a sufficient reason to conclude that the default judgment had been given irregularly. In a case where the appellant has an arguable defence, the appropriate order would have been to set aside the default judgment.” (emphasis added)

  1. Consequently, the defendants’ submission that the default judgment is irregular and should be set aside will only be upheld if the material facts, despite the omission, do not sufficiently identify the plaintiffs’ pleaded case.

Incorrect particulars

  1. The defendants submit that the particulars in the statement of claim are incorrect as at [1] the plaintiffs claim interest due on 10 March 2020 and 10 April 2020, whilst the Loan Agreement was entered into on 13 July 2020.

  2. The error here appears to be an error as to the date rather than an error as to the as to the calculation of interest. The statement of claim relevantly reads at [1]:

Principal Sum

$953,000.00

Plus interest owing to 10 September, 2020

$24,870.00

$977,870.00

Less interest paid on 11 September, 2020

$28,300.00

$949,570.00

Less interest paid on 29 October, 2020

$40,000.00

$909,570.00

Plus interest due on 10 March, 2020 and 10 April, 2020 (2 months at $8,290.00 per month and continuing up until judgment)

$16,580.00

$926,150.00

  1. Given the layout of the paragraph it appears the drafter simply made an error in writing March and April 2020 instead of March and April 2021. It does not appear to be an error which undermines the veracity of the amount claimed which would render the enforcement of a default judgment for that sum unfair to the defendants. Further bolstering this reading is the fact that the plaintiffs’ motion seeking default judgment filed on 30 July 2021 (approximately 3 months after 10 April 2021) at [6] seeks $926,150 (the total amount claimed in the statement of claim) plus $24,870 interest, which is 3 months of interest if calculated at the rate of $8,290 per month as suggested in the statement of claim.

  2. The error that has been made here is an inconsequential one, a single numeral in two dates. Its existence does not preclude the defendants from understanding the case they have to answer and has not caused them any prejudice. Despite the error the pleaded case is able to be sufficiently identified. As such I am not minded to exercise my discretion to set aside the default judgment on the basis of this error.

No pleaded cause of action

  1. The statement of claim is said by the defendants to plead no cause of action as it “simply says in 3 paragraphs: a the plaintiffs claim monies owing under a Loan Agreement; b the plaintiffs demanded payment; and c the plaintiffs claim interest” [70] without pleading the terms of the agreement, the rights and entitlements of the plaintiffs and obligations of the defendants under the agreement, how the defendants owe monies, whether there was a breach, what it was, when it occurred and how it entitles the plaintiffs to demand monies and if not paid to commence proceedings.

    70. Defendants’ submissions at [10]

  2. Whilst I note the pleadings are by no means an exemplar of drafting, they are not so sparse as to support the contention that there is no cause of action pleaded. They identify with sufficient precision that an agreement existed between the parties, the amount claimed as owing under that agreement, that a demand to pay was made by the plaintiffs and that the defendants have not paid that amount. Whist I accept that the circumstances could have been explained in greater detail, and that such explanation would have been prudent, in my opinion the essential facts are pleaded. The pleading, despite the plaintiffs’ omission, sufficiently identifies the case pleaded against the defendants, and has not caused them any prejudice. Any deficiencies could readily be cured by particulars. In accordance with the decisions in Fenato and Arnold I am therefore not minded to exercise my discretion to set aside the default judgment on the basis of this error either.

  3. In my view, any failing in the pleadings in the present matter are insufficient to constitute an irregularity for the purposes of Fenato, Arnold and UCPR 36.15 and accordingly the defendants’ motion must be dismissed.

Orders

  1. The Court makes the following orders:

  1. The motion filed by the defendants on 14 September 2021 is dismissed

  2. The defendants shall pay the costs of the motion as agreed or in default as assessed

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Endnotes


Decision last updated: 08 March 2022

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Cases Citing This Decision

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Cases Cited

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Statutory Material Cited

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Arnold v Forsythe [2012] NSWCA 18
Fenato v Chief Commissioner of State Revenue [2010] NSWCA 80
Fenato v Chief Commissioner of State Revenue [2010] NSWCA 80