FEDERAL COURT OF AUSTRALIA
Sovereign Point Pty Ltd v Gu (No 2) [2020] FCA 1377
File number: VID 359 of 2018 Judgment of: DAVIES J Date of judgment: 28 September 2020 Catchwords: PRACTICE AND PROCEDURE – application to set aside default judgment – whether discretion under r 39.05 of the Federal Court Rules 2011 (Cth) should be exercised – where no adequate explanation for default – where no adequate explanation for significant delay in bringing application to set aside default judgment – where applicant settled proceedings with another respondent following default judgment – serious prejudice to applicant that would not be adequately compensated by award of costs or security would arise if default judgment set aside – application dismissed Legislation: Federal Court Rules 2011 (Cth) rr 5.23(2)(c), 39.05 Cases cited: 3D Funtimes Ltd v Intellec Development Group Pty Ltd (No 2) [2011] FCA 407
Delta Metallics Pty Ltd v King [2012] FCA 1119
Evans v Bartlam [1937] AC 473
Sovereign Point Pty Ltd v Gu [2019] FCA 1753
Violi v Commonwealth Bank of Australia [2015] NSWCA 152
Division: General Division Registry: Victoria National Practice Area: Commercial and Corporations Sub-area: Commercial Contracts, Banking, Finance and Insurance Number of paragraphs: 27 Date of hearing: 18 September 2020 Counsel for the Applicant: Ms V Bell Solicitor for the Applicant: SBA Law Counsel for the First Respondent: Mr M J Galvin QC Solicitor for the First Respondent: Eakin McCaffery Cox Lawyers Counsel for the Second Respondent: No appearance ORDERS
VID 359 of 2018 BETWEEN: SOVEREIGN POINT PTY LTD
Applicant
AND: MING FENG (RICHARD) GU
First Respondent
AXF GROUP PTY LTD (IN LIQUIDATION)
Second Respondent
ORDER MADE BY:
DAVIES J
DATE OF ORDER:
28 SEPTEMBER 2020
THE COURT ORDERS THAT:
1.The first respondent’s application to set aside the default judgment entered against him on 25 October 2019 be dismissed.
2.The first respondent pay the applicant’s costs of the application.
Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.
REASONS FOR JUDGMENT
DAVIES J:
INTRODUCTION
On 25 October 2019, judgment in default was entered against the first and second respondents pursuant to r 5.23(2)(c) of the Federal Court Rules 2011 (Cth) (Federal Court Rules) for failing to attend case management hearings conducted in the proceeding and for failing to file and serve a defence to the amended statement of claim by 27 September 2019, pursuant to orders made on 16 August 2019: Sovereign Point Pty Ltd v Gu [2019] FCA 1753. The first respondent (Mr Gu), by application filed on 26 August 2020, has applied to have the judgment set aside pursuant to r 39.05 of the Federal Court Rules.
BACKGROUND TO THE PROCEEDING
The proceeding relates to a joint venture entered into between the applicant (Sovereign Point) and the second respondent (AXF Group) for the development and sale of an apartment complex. The development was undertaken by AXF Development (Sovereign Point) Pty Ltd (in liquidation) (development company
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- AGLC
- Sovereign Point Pty Ltd v Gu (No 2) [2020] FCA 1377
- Case
- [2020] FCA 1377
- Decision Date
CaseChat Overview and Summary
In considering whether to set aside the default judgment, the court examined the reasons provided by Mr Gu for his failure to participate in the proceeding and the significant delay in bringing his application to set aside the judgment. Mr Gu provided limited explanations for his defaults, attributing them to his inability to pay his former lawyers and the presence of other legal matters. The court found these excuses inadequate, particularly in light of Mr Gu's failure to attend case management hearings personally. Furthermore, Mr Gu failed to provide a satisfactory explanation for the ten-month delay in filing his application to set aside the judgment. The court concluded that Mr Gu's evidence was silent on whether negotiations with Sovereign Point continued into 2020 and what steps, if any, were taken to resolve the matter or to apply to set aside the judgment promptly. The court was not persuaded that the delay was justified or adequately explained.
The court concluded that the prejudice to Sovereign Point if the default judgment was set aside could not be adequately compensated by an award of costs or the giving of security. The court dismissed Mr Gu's application to set aside the default judgment and ordered him to pay the costs of the application. The dismissal of the application meant that the default judgment against Mr Gu remained in place, and he was liable for the relief ordered by the court in that judgment.
Orders
Orders of the court
1. The first respondent’s application to set aside the default judgment entered against him on 25 October 2019 be dismissed.
2. The first respondent pay the applicant’s costs of the application.
Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.
Background
Background to the litigation
Full text does not contain this section.
Evidence
Evidence Before The Court
Full text does not contain this section.
Decision
Reasons for decision
Ratio Decidendi
Legal Principle Established
The application was opposed by Sovereign Point, which relied on two affidavits affirmed by Mr Chan. CONSIDERATIONWhether Mr Gu has provided explanations for his defaults and delay in bringing his application In his first affidavit dated 25 August 2020, Mr Gu deposed that his lawyers filed a notice of intention to cease to act on 22 May 2019 because he owed fees which he was unable to pay. After his lawyers ceased to act, Mr Gu also ceased to participate in the proceeding. Specifically, he failed to appear at case management hearings conducted on 7 June, 19 July and 16 August 2019. When orders were made requiring him to file and serve a defence to the amended statement of claim by 27 September 2019, he also failed to comply. Mr Gu offered no explanation for his defaults other than that in May or June 2019 his lawyers in Sydney, Australian Business Lawyers & Advisors (ABLA) liaised with his former lawyers in relation to the transfer of the files relevant to the proceeding but he could not instruct new lawyers because the former lawyers asserted a lien over the documents until their outstanding fees had been paid. Mr Gu deposed that he “had other legal matters in 2019, including defending a winding-up application against AXF Group Pty Ltd” and “[d]ue to the limited funding available to [him] at the time, [he] could not afford to pay [his former lawyers]”. The assertion that he could not afford to pay his former lawyers does not explain his failure to participate in the case management hearings in person, at the least. Nor does the fact that he had other legal matters on foot in 2019 excuse his non-involvement or justify a delay in participating in, or progressing his defence in, this proceeding. I do not accept that the excuses proffered by Mr Gu provide an explanation, let alone an acceptable explanation, for his defaults. Mr Gu has also failed to provide an acceptable explanation for the delay in making the application to set aside the judgment, which, on any view, is inordinate. The order for default judgment was made on 25 October 2019. Yet the application to set aside the judgment was not filed until 26 August 2020. The delay cannot be put down to a lack of legal representation as ABLA filed a notice of appearance on his behalf in the proceeding on 11 November 2019. Mr Gu’s explanation for the delay was that he believed he would be able to resolve the proceedings with Mr Chan and endeavoured to do so. The explanation proffered does not withstand scrutiny. Even if Mr Gu had aspirations for resolving the proceeding, such aspirations were neither a sufficient nor an acceptable explanation for the delay until August 2020 for filing an application to set aside the default judgment. His evidence left wholly unexplained why he did not apply to set aside the default judgment until August 2020. In particular, whilst he deposed to attempts to settle with Mr Chan in December 2019, his evidence was wholly silent as to whether negotiations continued in the new year or when they stopped. There was no evidence as to what steps were taken in 2020, if any, to attempt to resolve the matter, nor as to what steps Mr Gu took, if any, to make application to set aside judgment at the earliest available time. The delay of 10 months from the entry of default judgment against him called for an explanation, which he did not provide. The delay was inordinate in circumstances where Mr Gu received advice from solicitors in November 2019 regarding setting aside the judgment, and there is nothing in the evidence to show that Mr Gu acted at the earliest opportunity to apply to set aside judgment once it must have become apparent to him that his attempts at resolution were not successful. Accordingly, I do not accept that the length of the delay has been explained, let alone satisfactorily.