Rahmani v Heng - [2010] SADC 81

DISTRICT COURT OF SOUTH AUSTRALIA
(Civil: Appeal Against a Master's Decision)
RAHMANI v HENG
[2010] SADC 81
Reasons for Decision of His Honour Judge Beazley
25 June 2010
PROCEDURE
PRACTICE AND RULES OF COURT - DEFAULT OF PLEADINGS
Appeal and cross-appeal against order of a Master imposing terms of payment into Court as a pre-condition to setting aside a default judgment obtained by respondent – whether default judgment regularly obtained – presumptive service of Proceedings – onus on appellant to show a bona fide intention of defending the action on the merits – discussion as to the nature of an appeal under DCR 292 of the 2006 Rules of Court – discussion as to the scope of a court's scrutiny of the merits of a proposed defence - Respondent cross appeals for order that the appellant’s application to set aside the default judgment be dismissed – whether the Master should have dismissed the appellant’s application instead of conditionally setting the default judgment aside – whether the Master erred in imposing a condition for payment in by the appellant of the sum of $100,000.
Held: The right of appeal is circumscribed by 6 DCR 292. The Court may only exercise its discretion in the event that error by the Master was demonstrated. The default judgment was regularly obtained by the respondent. The conclusion of the Master that the appellant had not satisfied her as to an arguable defence would generally point to the exercise of the discretion to dismiss the application to set aside the default judgment. Although in principle an order imposing a condition of payment in ought rarely be made, this was such a case, and it cannot be said, save for the quantum of the payment in, that there was any error in the Master’s exercise of her discretion in the subject matter.
Appeal otherwise dismissed.
Cross appeal dismissed.
District Court Act 1991 (SA) s 43; District Court Rules 2006 R 229, 230 and 292, referred to.
McLean v DID Piling Pty Ltd [2010] SASC 33; Battiste v Mulvaney (unreported decision Doyle CJ, 7/11/1997); Edwards v Wallace (1986) 42 SASR 308; Lau v Citic Australia Commodity Trading Pty Ltd [1999] VSCA 34; Gao v Zhu [2001] VSC 500; Banicic v DFR Beach [2008] VSCA 35; Gajic v Poyser [2007] VSCA 175; Cook v DA Manufacturing Co Pty Ltd [2004] QCA 52; Murray Villa Pty Ltd v Nitschke Earthmovers Pty Ltd (1989) 153 LSJS 451; Saunders v Esanda (unreported decision, Lander J 31/5/1996); House v The King (1936) 55 CLR 499; Way's (Aust) Pty Ltd v Partnership Systems Pty Ltd [No 2] [2004] VSC 330; Mulpara Pty Ltd v Thunder Enterprises Ltd [2008] SASC 94; Daly v Silley [1960] VR 353; Chow v Yang [2010] SASC 96, considered.

RAHMANI v HENG
[2010] SADC 81
Introduction

This is an appeal instituted by the defendant Sasan Rahmani (“the appellant”) from certain orders made by a Master of this Court on 23 October 2008. The Master had on that day determined an application brought by the appellant to set aside a default judgment obtained by the plaintiff James Kia Song Heng (“the respondent”).
That default judgment in the sum of $637,375.00, together with the costs of action had been obtained administratively by the respondent on 24 April 2008, pursuant to District Court Rule 6R 229, in consequence of the appellant’s failure to file a defence.
The Master ultimately concluded that the default judgment would be set aside, but only on condition that the appellant pay into court, the sum of $100,000.
The Master did not publish detailed reasons for the orders pronounced on 23 October 2008.
The Background
The Appeal raises matters of some importance. Those matters include, firstly, the question of whether it is ever appropriate to impose a term for payment in, as a pre-condition for setting aside a default judgment; and secondly the line of demarcation, on the one hand, of the Court scrutinizing the merits of any alleged defence while on the other avoiding an assessment of the credibility of the appellant.[1]
[1] Lau v Citic Australia Commodity Trading Pty Ltd [1999] VSCA 34 at [6]-[8].
c.f. Gajic v Poyser (2007) VSCA 175.
The background and the course of the proceedings needs to be explained in detail before the bases of the Master’s orders can be properly understood.
The Nature of the Respondent’s Claim
The genesis of the respondent’s claim is a payment of $500,000 made by the respondent and his wife to the appellant in October 2000. There is no dispute that such a payment was in fact made. In dispute are both the nature of the payment, and the identity of the recipient.
The respondent issued the within proceedings on 19 June 2007, claiming from the appellant the liquidated sum of $637,375 together with interest and costs. There was thus an interval of almost seven years from the date of the payment before the recovery proceedings were instituted.
The respondent asserts that on 9 October 2000, he and his wife jointly loaned the sum of $500,000 to the appellant upon terms as to interest and principal repayments, as set out in a written agreement duly executed by the appellant. The respondent further asserts that in consequence of only partial repayment of principal by the appellant, namely the sum of $100,000 on 15 July 2001, the appellant and the respondent agreed to vary the terms of the written agreement on 8 July 2001, thereby providing for repayment of principal and interest on 9 October 2001.
The respondent asserts that on two subsequent occasions the appellant executed written acknowledgements of his indebtness to the respondent and his wife. On 8 June 2002 the first acknowledgment was in the sum of $440,000 together with interest at the rate of 10% per annum; while in 2005 the final written acknowledgment was in the sum of $532,000.
The respondent pleads that on 16 May 2006, at the request of the appellant, he offered to further extend the time for repayment upon condition that the appellant would execute a further written loan agreement on varied terms for the repayment of the debt then standing at $580,767. The respondent asserts that the appellant neglected or refused to execute the said loan agreement as varied.
The respondent pleads that in November 2005 his wife assigned her joint interest in the appellant’s debt to him, and the respondent consequently has brought the within action in his sole name.[2]
[2] Thomas v National Australia Bank Ltd (2000) 2 Qd. R. 448.
Presumptive Service of the within proceedings
On 29 February 2008, upon being satisfied of the respondent’s unsuccessful attempts to serve the appellant, the Master ordered that presumptive service be effected by the forwarding of a copy of the proceedings by prepaid post to the occupants of two premises at Benowa in the State of Queensland, and by publication of an approved notice in the Adelaide Advertiser Newspaper.
In accordance with the orders for presumptive service the respondent’s solicitors, on 3 March 2008, forwarded letters enclosing copies of the proceedings to the two addresses at Benowa, Queensland and caused the Public Notice to be placed in the Advertiser Newspaper on 5 March 2008. On 24 April 2008 the Deputy Registrar of the Court entered a default judgment in favour of the respondent pursuant to Rule 229 of the 2006 Rules of the District Court.
Application to set aside judgment
On 13 June 2008 the appellant filed an application to set aside the default judgment, accompanied by an affidavit sworn by the appellant on 10 June 2008. Subsequently, answering affidavits sworn by the respondent’s solicitor Mr Redden on 19 August 2008; the respondent on 21August 2008, and another solicitor, Andrew Caruso, on 23 October 2008 were filed on behalf of the respondent.
In his affidavit the appellant conceded that he had been made aware of the nature of the proceedings by the occupant of one of the Benowa properties and that he had received a copy of them on or about 20 March 2008, that is, slightly in excess of one month prior to the entry of the default judgment.
He asserted that following telephone calls with the respondent he agreed to a proposal from the respondent to settle the proceedings for the sum of $100,000. The respondent denied that any such agreement had been reached. The appellant exhibited some emails, some of which had not been delivered, in which he stated that he was “prepared to offer” the sum of $100,000 in two instalments of $50,000 each. He asserted that he did not file a defence because he thought that the action had been settled, and because the respondent had not informed him of his intention to seek a default judgment.
The appellant acknowledged that he had received the sum of $500,000 from the respondent, but asserted that he had a good defence to the respondent’s claim as follows:
·that the “loan” was made to the appellant’s company “Adelaide Computer Superstore” and not to himself personally. He exhibited an unsigned document purporting to constitute the “true” agreement between the parties, and dated 7 October 2000.
·That document, which referred to the superstore “guaranteeing” the repayment is dated only two days prior to the written loan agreement which was in fact executed by the parties, and exhibited to the affidavit of the respondent.
·that the “loan” was in truth not a loan but an investment by the respondent in the speculative online trading in shares, in “partnership” with the appellant.
·that “the partnership” in the online trading in shares had suffered losses and nothing was owing to the respondent.
·that he only signed the acknowledgments of debt because the respondent had asked him to do so; in order to hide its true nature from his wife.
·that the sum of $100,000 paid on 15 July 2001 was not the repayment of principal but a release of funds to meet the respondent’s then financial needs.
The respondent, in his affidavit, denied each of the appellant’s assertions. He did however acknowledge that he entered into online trading, however deposed to doing so direct with a United States firm and with monies separate from the subject $500,000. He exhibited the executed loan agreement, and the respective acknowledgements of debt.
The terms of the agreement were as follows:
9^th October 2000.
I SASAN RAHMANI of Adelaide Computer Superstore, agree to borrow $500,000 from Dr and Mrs JKS Heng as from today, 9^th October 2000.
I will repay Dr and Mrs Heng a sum of $200,000 on 9^th July 2001 and a further $300,000 on 9^th October 2001.
I will reimburse Dr and Mrs Heng in full all costs they incur in their borrowing of the $500,000 from the bank.
Sgn
Sasan Rahmani
Adelaide Computer Superstore
The respective undertakings were as follows:
I SASAN RAHMANI of 269 Pulteney St. Adelaide owe JIM + SALLY HENG the sum of $440,000 with interest at 10% P.A. paid quarterly as at 30 June 2002
SASAN RAHMANI
Sgn
8/6/2002
I SASAN RAHMANI owe JIM HENG $532,000 as of July 2005. I will continue to pay him 10% compounding interest.
Signed SASAN RAHMANI
Sgn.
The respondent deposed that the appellant had told him that he would either go bankrupt or alternatively commit suicide, and that accordingly the respondent would recover nothing.
The Master’s decision
The Master was not satisfied that the appellant had deposed to an arguable defence to the respondent’s claim however, in the exercise of the discretion, concluded that it was appropriate to set aside the default judgment and grant leave to the appellant to defend the respondent’s claim conditional upon the appellant paying the sum of $100,000 into court within 28 days.
The Master did not publish detailed reasons however the notes which formed part of the orders, point to the bases of the orders made on that day. The Master employed the neutral expression of not being satisfied as to an arguable defence.
The Master’s orders
The Master made the following orders:
1.     The defendant was served pursuant to a presumptive service order made on 29 February 2008.
2.     On the defendant’s own affidavit evidence, he attempted to negotiate a resolution of the plaintiff’s claim following receipt of the Summons and Statement of Claim evidenced by the email dated 10 April 2008, Exhibit “A” to his affidavit sworn 10 June 2008. The plaintiff obtained default judgment without warning the defendant of his intention to do so. However, I am not satisfied that the defendant has deposed to an arguable defence to the plaintiff’s claim.
3.     In the circumstances, I am of the view that it is appropriate to set aside the judgment and give leave to defend the plaintiff’s claim, conditional upon the defendant paying the sum of one hundred thousand dollars into Court within 28 days.
4.     In the event the sum is paid into Court, the judgment will be set aside and the defendant will have leave to file and serve within 21 days of the payment into Court.
5.     The plaintiff to have his costs of and incidental to the application (FDN 17) and the costs of entering judgment.
It was, with respect, entirely proper for the Master to refrain from commenting upon the credibility of the appellant or in detail upon the merits of the appellant’s proposed defence.[3]
[3] See Lau v Citic Australia Commodity Trading Pty Ltd, supra.
However the respective parties have submitted that this Court ought draw different inferences from the neutral expression employed by the Master. The appellant submits that the Master must have erred by considering issues of credibility, because a defence on the merits was clearly apparent on the affidavit filed by him.
The respondent submits that if indeed the Master had concluded that there was no arguable defence, then the application to set aside the default judgment ought have been dismissed. An alternative inference is that the Master set aside the default judgment because it was not regularly obtained. In my opinion, as appears hereafter none of those inferences ought be drawn from that neutral expression.
Notice of Appeal
In his Notice of Appeal, the appellant sought orders that the judgment be set aside and that he be permitted to file a Defence and Counterclaim (my emphasis) within 21 days. Although the Notice of Appeal is partly directed to an appeal against the findings made by the Master, the essence of the appeal is that the Master erred in ordering the appellant to pay the sum of $100,000 or any sum into court as a pre-condition to the grant of an order to set aside the default judgment.
The grounds of Appeal
The appellant asserts in his grounds of appeal:
1.Having found that the plaintiff obtained default judgment without warning the defendant of his intention to do and by implication of finding that the default judgment was there by obtained in breach of good faith and irregularly the Learned Master erred in law in that:
(a)She failed to set aside the default judgment unconditionally.
(b)     She proceeded to consider the merits of the defendant’s proposed defence.
(c)She awarded costs against the defendant.
2.The Learned Master erred in law in construing the email message from the defendant to the plaintiff as:
(a)     An admission of liability by the defendant to the extent of the $100,000.
(b)     An offer of immediate payment of $100,000.
3.The Learned Master erred in failing to find the defendant had deposed to facts showing his proposed defence was fairly arguable in fact and in law that it should be adjudicated upon at a trial.
Notice of Cross Appeal and Notice of Contention
The respondent has cross appealed against the orders made by the Master. That cross appeal contained three grounds however in essence the respondent claims that the Learned Master erred in the exercise of her discretion to allow the default judgment to be set aside at all. The respondent asserts that in light of the alleged inadequacies of the proposed defence and the explanation of the appellant for the failure to file a defence the Learned Master ought not to have set aside judgment at all.
In the alternative pursuant to a Notice of Contention the respondent asserts that the finding and orders of the Master ought be upheld both for the reasons expressed by the Master, and on the basis on the inadequacies in the proposed defence and the inadequacy of the explanation provided by the appellant for the failure to file a defence.
Nature of the Appeal
The Appeal is brought pursuant to s 43 of the District Court Act 1991, and District Court Rule, 6 DCR 292.
The scope of 6 DCR 292 has been the subject of some differing views of Judges of this Court, and in particular as to whether this Court, on appeal, may interfere with the exercise of a discretion in the absence of any demonstrable error in the reasons of the Master.
In McLean v DID Piling Pty Ltd[4], Layton J referred to various recent decisions of the Full Court of the Supreme Court, that affirmed the requirement for a Court to find error before exercising the discretion afresh.
[4] [2010] SASC 33 at [19]-[23].
Her Honour concluded that in respect of the equivalent of 6 DCR 292 a Court on an appeal from the Master ought apply the principles set out by the High Court in House v The King[5]
The manner in which an appeal against an exercise of discretion should be determined is governed by established principles. It is not enough that the Judges comprising the appellate court consider that, if they had been in the position of the primary Judge, they would have taken a different course. It must appear that some error has been made in exercising the discretion. If the Judge acts upon a wrong principle, if he allow extraneous or irrelevant matters to guide or affect him, if he mistakes the facts, if he does not take into account some material consideration, then his determination should be reviewed and the appellate court may exercise its own discretion in substitution for his if it has the materials for doing so. It may not appear how the primary Judges has reached the result embodied in his order, but, if upon the facts it is unreasonable or plainly unjust, the appellate court may infer that in some way there has been a failure properly to exercise the discretion which the law reposes in the court of first instance. In such a case although the nature of the error may not be discoverable, the exercise of the discretion is to be reviewed on the ground that a substantial wrong has in fact occurred.
[5] (1936) 55 CLR 499 at 505.
I respectfully adopt, and apply her Honour’s reasons.
The Principles of Law
The principles upon which a Court should act in respect of an application to set aside a default judgment are governed by Rule 6R 230, and are not in doubt.
The discretion to set aside is expressed in the widest possible terms. Generally however, in the case of a default judgment which has been regularly obtained, an applicant ought explain the failure to file a defence, and satisfy the Court that he has a bona fide intention of defending the action on a basis that is fairly arguable in law and in fact.
Where however the proposed defence is entirely without merit, the Court ought not set aside the default judgment. In Weng Ge Lou v Christianos[6] the Full Court of the Supreme Court refused to set aside a default judgment in a case where the applicant’s “proposed defences” were entirely without merit because the applicant had previously acknowledged his indebtedness, and in context the proposed defences could only properly be construed as an attempt to delay and frustrate the plaintiff.
[6] Unreported decision of Full Court of the Supreme Court (10/4/90 BC 9000410)
Where a judgment has been obtained irregularly whether in breach of good faith or without proper compliance with the Rules, it will be set aside without the need for an applicant to explain the default, nor to show an arguable defence.[7]
[7] See Philp v DM Aston (2010) SASC 114, Daly v Silley (1960) VR 353, Mulpara Pty Ltd v Thunder Enterprises (2008) SASC 94 and Way's (Aust) Pty Ltd v Partnership Systems Pty Ltd (No 2) (2004) VSC 330.

In paragraph 2 of the orders made on 23 October 2008, the Master noted that the “plaintiff had obtained default judgment without warning the defendant”. I do not take the Master to have found that the default judgment had been obtained irregularly.
In Lau v Citic Australia Commodity Trading Pty Ltd, supra, the Court of Appeal of Victoria defined the scope of the court’s scrutiny of the merits of a proposed defence as follows:
Whilst I can understand the argument …his Honour was bound, in forming his conclusions, to scrutinise material put to him, it was, in my view, no part of his Honour’s function, in determining whether he had an arguable defence, to assess the weight of that material by reference to factors which were suggested to go to the credibility of the defendant …It may well be that there is a fine line between a finding that there is no material at all before the court to support a critical finding of fact, and a finding that the material will not support that fact because, in the judge’s view, it lacks sufficient weight or credibility. In the vast majority of cases that line, in my view, will have been impermissibly crossed where the judge has come to the latter view because of an assessment that he has made of the credibility of the testimony of the person alleging that he has an arguable defence.
Subsequently in Gajic v Poyser[8] the Court of Appeal in Victoria affirmed that it was not the function of the Court on an application to set aside a default judgment to determine for itself the merits of the claimed defence or to resolve any factual disputes on the affidavits. It was however entitled to consider the proposed defence “not uncritically” to determine whether the defence was without merit.
[8] (2007) VSCA 175
It is obvious that the evidence presented on an application to set aside judgment is necessary limited, and it is not appropriate to resolve disputed questions of fact on affidavit evidence.
Conditional payment in
In Edwards v Wallace[9], the Full Court of the Supreme Court adopted the principles expressed in Grimwade v Beresford as follows:
(a)That if the facts placed before the Court disclose a state of affairs which might reasonably constitute a defence to the action, the defendant should be unconditionally allowed to defend.
(b)That if the Court takes the view that the circumstances are so suspicious that although it could not be said that they could not constitute a defence, the Court thinks, nonetheless that it is unlikely that they would do so, or thinks that the contemplated defence is only a sham, the Court may order a payment in to be made as a condition of defending.
(c)The Court should decide what view it takes of the facts placed before it, and if it subscribes to the view set out in paragraph (a) above, then it has a duty to allow the defendant to defend, and it is not within the Court’s discretion in that event to order payment to be made as a condition of defending
[9] (1986) 42 SASR 308 at 315
In Lau v Citic Australia Commodity Trading Pty Ltd, supra, in dealing with a case in which there was “no palpable sham” the court concluded that there was no reason why a condition should be placed upon a defendant as to payment in circumstances where he has an arguable defence on the merits.
In Gao v Zhu[10] Eames J, having reached a level of suspicion about the merits of the assertions of the defendant and concluded that it was appropriate that the judgment be set aside, and that leave be given to the defendant to defend the action but only upon terms as to payment into Court of a sum of $35,000.
[10] (2001) VSC 500
In Graywinter Properties Pty Ltd v Rodway[11]Warren J in dealing with an application for summary judgment, the test being much stricter than in the case of a default judgment, concluded that where a proposed defence is regarded by the Court as dubious or shadowy the defendant will bear the onus of satisfying the Court that a financial condition ought not be imposed as a condition for leave to defend. Further, in the absence of any material to establish that a defendant could not bear the financial burden of a payment in then the Court ought not conclude that the condition of payment in will render the defence impossible.[12]
[11] (1998) VSC 117
[12] See Battiste v Mulvaney (unrep. decision Doyle C.J., 7/11/1997))
In Saunders v Esanda Finance Corporation[13] Lander J considered an appeal in respect of a differently phrased Rule of the Magistrates Court. His Honour affirmed that it is not possible, on an application to set aside a default judgment, to resolve disputed questions of fact particularly when those answers will depend upon the credibility of the parties. His Honour concluded that the Learned Magistrate had erred in attempting to test, upon affidavit evidence, the respective strengths of the parties’ cases and that it was not possible to do so without the risk of injustice to one of the parties. As to the question of payment in, His Honour concluded that while the Court has jurisdiction to so require payment such an order should only be made sparingly:-
That is because the circumstances in which such an order comes to be made only arise in circumstances where the Court has first determined that the party seeking to set aside the judgment has an arguable defence. If the Court has determined that a party not only has an arguable case on the merits and that the party has a reasonable excuse for not having complied with that party’s obligations, as the Court must have before considering the terms of the order, it would only be, in my opinion, in special circumstances that an order for payment in would be made.
[13] Unreported decision of Lander J (31/5/96) BS 9602273
Appellant’s submissions
Counsel for the appellant, Mr Ower, directed his submissions to the notes made by the Master and which form part of the formal orders made on 23 October 2008. He did not criticise the absence of detailed reasons. He submitted that the appellant had disclosed a bona fide intention to defend the action. He further submitted that the appellant had a reasonable explanation for the failure to file a defence, namely the very reasons going to the order for presumptive service in the first place coupled with the ongoing negotiations between the appellant and the respondent and the failure of the respondent to inform the appellant of his intention to seek a default judgment.
Although he conceded that it was necessary to avoid resolving issues as to credit, he submitted that it was incredible that the respondent would wait some 7 years before commencing proceedings to recover an alleged liquidated claim. This, he submitted, coupled with the respondent’s acknowledged involvement in online trading added force to the appellant’s defence that the payment of $500,000 was not by way of a loan.
Mr Ower submitted that contrary to the Master’s finding, the appellant had demonstrated an arguable defence, which could only be resolved at trial. It involved issues of credibility which could not be determined upon affidavits filed in an interlocutory application. He submitted that the Master must have impermissibly considered questions of credibility in reaching a conclusion that no arguable defence had been established.
Mr Ower then referred to the emails exhibited to the respective affidavits. He noted that the respondent knew, at least on 12 April 2008, of the appellant’s email address. He did not expressly submit that the respondent had failed to make full disclosure prior to obtaining an order for presumptive service. I am satisfied that there was no non disclosure. It is patently obvious that the respondent had used his best endeavours to effect service upon the appellant, and would have made use of the email address rather than incur the cost of a newspaper advertisement had it then been known to him. In any event the appellant physically received a copy of the proceedings on 20 March 2008.
Mr Ower did however submit that the respondent ought to have communicated with the appellant after receiving the email containing the “offer to settle”, and before obtaining judgment by default. In so far as Mr Ower submitted that the default judgment was irregular because of a lack of good faith in obtaining it without notice, I reject such a submission. There is of course no doubt that the default judgment was obtained without express notice to the appellant. The appellant had however been on notice since 1 June 2006 that the respondent intended to pursue legal action against him. He had been fully aware of the nature of the proceedings on 20 March 2008. On any view of the emails by 14 April 2008, the respondent had not conveyed any acceptance of the “offer” to the appellant. Some 10 days had elapsed before the default judgment was obtained. In my opinion the default judgment was regularly obtained.
He identified what he described as an arguable defence on various bases, but principally that the monies were not a loan but payments to “the company”. The appellant had suggested somewhat interchangeably that the monies were received by the company in its capacity as agent for the respondent for the purpose of online investments, on the one hand; and as some partnership arrangement, on the other. Mr Ower submitted that the precise capacity of “the company” was not significant. He submitted that the appellant would, if leave were given, file a counterclaim for the recovery of his alleged losses in consequence of their partnership arrangements.
As to the merits of any proposed defence Mr Ower submitted that the Court ought not embark upon any detailed analysis of the merits of such a defence which might be appropriate in the case of an application for summary judgment[14]. He submitted that the various defences set out in the affidavit filed by the appellant ought be permitted to proceed for determination at trial. As to the imposition of a condition for payment in, Mr Ower referred to the dicta of the Full Court in Edwards v Wallace[15] to the effect that orders for payment in of very large sums are in the nature of a penalty against being able to defend an action and ought rarely be made.
[14] See Battiste v Mulvaney (unreported decision Doyle CJ, 7/11/1997)
[15] (1986) 42 SASR 308
He submitted that the order for payment in the sum of $100,000 was no more than a penalty which prevented the appellant from having his defence tested at trial and that in the circumstances any prejudice to the respondent could be overcome by an order for an early trial of the action and costs. The only evidence as to the appellant’s financial position was that provided by the respondent in detailing alleged conversations with the appellant. On the appellant’s account he had been in a position to pay the respondent $100,000 in two instalments in full and final settlement.
Finally Mr Ower submitted that it appeared implicit in the Master’s orders that the sum of $100,000 had been selected in error, on a mistaken belief that it represented some admission of liability; rather than an attempted compromise of the claim with a denial of liability. He submitted that in light of the affidavit of the respondent no such agreement had been reached and accordingly the Master had erred in fact and in law in approaching the quantum of payment in on that basis.
Respondent’s submissions
Counsel for the respondent, Mr Dal Cin, submitted that the Master had erred in making any order for the setting aside of the default judgment. He submitted that once the Master had concluded that the applicant had failed to satisfy her as to an arguable defence, the discretion ought inevitably had led to the dismissal of the application. Save for that matter and, in the alternative, Mr Dal Cin submitted that the Master had not erred in the manner suggested by the appellant and that indeed that no error appeared on the face of the Master’s reasons. Accordingly, he submitted that this Court on appeal ought not exercise the discretion afresh.
He submitted that there was in fact no merit in the proposed defence or counterclaim of the appellant.
Mr Dal Cin concentrated his submissions upon the affidavit of the appellant. He submitted that the proposed defence and counterclaim was entirely inconsistent with the loan agreement and the two acknowledgements of debt executed by the appellant himself. He submitted that the appellant had put before the Master and in this Court sham defences which were mutually inconsistent. These included that of a loan to his company rather than himself as one basis; the suggestion of a partnership involving speculative investments as a second alternative and then finally the suggestion of being an agent for the respondent as another basis for defending. He criticised the appellant’s description of the arrangement as an agency while purporting to file a counterclaim based upon losses incurred in a partnership. He submitted that this added to the suspicion obviously held by the Master as to the merits of any defence. This suspicion was increased by the production by the appellant of an unsigned “agreement”, in which the “superstore” is described as “guaranteeing” repayment of the loan.
Mr Dal Cin submitted that there was no proper basis for the criticism that the Master had misconstrued the sum of $100,000 as some form of admission. It was however evidence of the appellant’s capacity to pay into Court and thus could not be seen to be a penalty against defending. He accordingly submitted that this Court ought conclude that the appellant had no arguable defence and that therefore the default judgment ought not be set aside. In the alternative, he submitted that no error could be found in the Master’s reasons and that accordingly the appeal ought be dismissed.
Discussion and findings
The first question to be resolved is what the Master meant to convey when referring to her lack of satisfaction as to an arguable defence in paragraph 2 of the orders made on 23 October 2008.
In my opinion it is clear that the Master had simply expressed in a neutral manner, consistent with paragraph (b) of the dicta in Grimwade v Beresford, supra, that in light of all the circumstances, and without attempting to resolve any issues on the affidavit evidence alone, the appellant’s purported defences were so suspicious, that while it could not be said that they could not constitute a defence that it is unlikely that they would do so. It is also clear that the Master did not conclude that the default judgment was irregularly obtained. Those conclusions are consistent with the decision to set aside the default judgment subject to a condition for payment in. I reject the submission of the respondent that the Master ought to have dismissed the application to set aside. As I say I do not accept that she concluded that there was no possible merit in the proposed defences.
I also reject the submission of the appellant that the Master had erred by impermissibly determining issues of credibility. She clearly did not assess issues of credibility at all.
The objective and undisputed evidence before the Master was that the sum of $500,000 had been paid and received on 9 October 2000. A document purporting to be a loan agreement had been executed by the appellant on that day. A payment of $100,000 had been paid by the appellant to the respondent in July 2001. Thereafter in 2002 and 2005 the appellant had executed acknowledgements of debt to the respondent. In 2006 a further loan agreement was presented to the appellant.
In light of those documents, and without testing the credibility of the appellant’s version, the Master was in my opinion, entirely justified in reaching her conclusions that on the evidence at this interlocutory stage the appellant’s purported defences were so suspicious as to fall within the category (b) identified in Grimwade v Beresford.
It follows that the Master was entitled to impose an order for payment in as a condition to setting aside the default judgment.
I do not accept the submission that the Master had treated the offer to settle for $100,000 as an admission of liability.
If I were wrong in my construction of the basis of the Master’s orders, it would be necessary for me to exercise the discretion afresh.
I have already expressed my finding that the default judgment was regularly obtained. I accept that there is a proper explanation for the appellant’s delay in filing a defence to the proceedings. I accept that he acted expeditiously in seeking to set aside the default judgment.
As is apparent from these reasons I would reach the same conclusion as that detailed in my construction of the basis of the Master’s orders.
I reach that conclusion consistent with the principles expressed in Lau’s case, and the dicta of Lander J. in Saunders’ case, supra, that no attempt ought be made to resolve credibility issues on the affidavit evidence.
In my opinion the appellant has asserted defences which may, if established, constitute a defence to the respondent’s claim. However the nature of those defences will depend upon the acceptance of the appellant that a series of documents executed by him over a number of years are themselves a sham and do not mean what they plainly say.
It does not involve any assessment as to credit for this court to conclude that the purported defences are so suspicious that they fall within paragraph (b) of the dicta in Grimwade v Beresford, supra. While I readily accept that orders for payment into Court of a sum of money, ought rarely be made, in my opinion, this is such a case. It is appropriate that I should also couch my opinion in neutral terms as the matter may still go to trial, with more extensive evidence produced. I do however make it clear that my level of suspicion is of the highest order.
In the exercise of my discretion I would also have imposed an order for the payment in of monies as a pre-condition for setting aside the default judgment.
I am conscious that any such order for payment in should not be in such a large sum so as to financially hamstring the appellant or otherwise prevent him from being able to defend the action.
Consistent with the principles in House v King, supra, I ought not exercise my discretion as to the quantum of the sum to be paid into Court, unless there is some demonstrable error in the Master’s reasons in that respect. I have already concluded that the Master did not err in treating the $100,000 as some admission of liability by the appellant. As I have noted there is little or no evidence from the appellant as to his financial circumstances. The respondent has however deposed to conversations with the appellant suggestive of his limited means. The proposal to pay the sum of $100,000 was predicated by him on the basis of a full settlement, and by two instalments of $50,000 each.
While the sum of $100,000 represents a mere fraction of the respondent’s claim and there was limited evidence as to the appellant’s financial position, in my opinion the sum of $100,000 was too large a sum in the circumstances. It effectively may well have prevented the appellant from otherwise defending the action. In my opinion there could not be any such question in respect of the sum of $50,000, which the appellant had been able to pay pursuant to his offer to settle.
I accordingly would affirm the orders of the Master save for substituting the sum of $50,000 for the sum of $100,000, and the time for payment in, of 21 days for the time provided in paragraph 3 thereof.
In the event that the appellant pays the said sum of $50,000 into Court with 21 days of today the default judgment will be set aside and the appellant will have leave to defend the respondent’s claim.
He must then file such a defence and counterclaim as he is advised within 7 days of the receipt of the payment into Court. In the event that payment in has not been made the respondents’ default judgment will stand.

This is clearly a case where an order for an urgent trial ought be made notwithstanding the delays in the delivering of these reasons. I note that the matter is listed in the Masters list for 10 August 2010 at 9.50 am.
Conclusion
Save for the variation of paragraph 3 of the orders of the Master to substitute the sum of $50,000 for the sum of $100,000 and as to the time for payment in as referred to herein the appeal is dismissed. I also dismiss the cross appeal of the respondent.
The formal orders of the Court are:
1.That paragraph 3 of the orders of the Master be varied to substitute the sum of $50,000 for the sum of $100,000 appearing therein, and to require payment into court of that varied sum within 21 days from today.
2. That otherwise the appeal be dismissed.
3. That the cross appeal be dismissed.
I will hear the parties as to the costs of the appeal and any other orders to expedite the trial of the action.