Statewide Secured Investments Pty Ltd v Pearsall,; Statewide Secured Investments Pty Ltd v Frog Swamp Pty Ltd

[2015] NSWSC 680

Supreme Court

New South Wales

• Summary available

Medium Neutral Citation:	Statewide Secured Investments Pty Ltd v Pearsall,; Statewide Secured Investments Pty Ltd v Frog Swamp Pty Ltd [2015] NSWSC 680
Hearing dates:	18 September 2014
Date of orders:	12 June 2015
Decision date:	12 June 2015
Jurisdiction:	Common Law
Before:	Garling J
Decision:	(1)Further Amended Notice of Motion dated 15 September 2014 in each proceeding be dismissed. (2)Defendants to pay the costs of the plaintiff of each Notice of Motion
Catchwords:	PROCEDURE – civil – judgments and orders – application to set aside default judgments – defendant made deliberate decision not to defend claim – no satisfactory explanation to justify failure to file defence – setting aside judgments would not further overriding purpose of the Civil Procedure Act – proposed cross-claim – ordinary time to file cross-claim passed – whether extension of time should be granted to file cross-claim – no satisfactory explanation for delay – defendants entitled to commence cross-claim as new proceedings – not in interests of justice to extend time to file cross-claim
Legislation Cited:	Civil Procedure Act 2005 Corporations Act 2001 (Cth) Uniform Civil Procedure Rules 2005
Cases Cited:	Adams v Kennick Trading (Int) Ltd (1986) 4 NSWLR 503 Allianz Australia Insurance Ltd v Bluescope Steel Ltd [2012] NSWCA 240 Aon Risk Services Australia Ltd v Australian National University [2009] HCA 27; (2009) 293 CLR 175 Baulderstone Hornibrook Engineering Pty Ltd v Gordian Runoff Ltd [2008] NSWCA 243 Bi v Mourad [2010] NSWCA 17 Commonwealth Bank of Australia v Goater [2014] NSWSC 652 Dai v Zhu [2013] NSWCA 412 Dunwoodie v Teachers Mutual Bank Ltd [2014] NSWCA 24 Halpin v Lumley General Insurance Ltd [2009] NSWCA 372; (2010) 78 NSWLR 265 Hans Pet Constructions Pty Ltd v Cassar [2009] NSWCA 230 J P Morgan Trust Australia Ltd v Bridge [2013] NSWSC 668 Perpetual Ltd v Kelso [2008] NSWSC 906 Reinehr Industrial Lease and Finance Pty Ltd v Jordan (Court of Appeal, unrep, 4 June 1974) Richards v Cornford (No.3) [2010] NSWCA 134 Seltsam Pty Ltd v Energy Australia; Re Banham [1999] NSWCA 89 Worldwide Corporation Ltd v GPT Ltd [1998] EWCA Civ 1894
Texts Cited:	Not Applicable
Category:	Principal judgment
Parties:	Statewide Secured Investments Pty Ltd (P) Brent Robert Pearsall (D1) Frog Swamp Pty Ltd (D2)
Representation:	Counsel: R A Jedrzejczyk (P) J E Richards (D) (both matters) Solicitors: Ashurst (P) S Poyser (D) (both matters)
File Number(s):	2012/214000,2012/214016
Publication restriction:	Not Applicable

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Judgment

1. On 10 July 2012, Statewide Secured Investments Pty Ltd (“Statewide”), commenced proceedings against Brent Robert Pearsall (“Mr Pearsall”) as first defendant and against Frog Swamp Pty Ltd (“Frog Swamp”) as second defendant in proceedings number 2012/214000.

2. On the same day, Statewide commenced proceedings numbered 2012/214016 against Frog Swamp as first defendant and Mr Pearsall as second defendant.

3. In each case, the defendants were sued in its and his capacity as a mortgagor of identified real property, and as a guarantor of the obligations of the mortgagor.

4. It will be convenient where necessary to distinguish each matter to refer to the proceedings by the name of the first defendant. Hence, proceedings 2012/214000 will be referred to as the “Pearsall proceedings” and proceedings 2012/214016 as the “Frog Swamp proceedings”.

5. In each matter, Statewide sought judgment for possession of the mortgaged real property and a monetary judgment against each of the respective defendants.

6. Since the time when each proceeding was filed, the matters have travelled together and the steps which have been taken have been identical between each matter.

7. This judgment deals with two Further Amended Notices of Motion, each filed on 15 September 2014. One Notice of Motion was filed in each proceeding. The terms of the relief sought in each of those Notices of Motion is substantially identical.

8. For the reasons which follow, the Further Amended Notices of Motion should each be dismissed. The applicant on each Motion should pay the costs of the respondent to the Motion.

Procedural History

9. It is convenient to commence with the procedural history in the Pearsall proceedings.

10. The Statement of Claim was filed on 10 July 2012. No defence was filed by either of the defendants.

11. On 28 September 2012, Statewide filed a Notice of Motion seeking default judgment. It sought possession of one property from Mr Pearsall, the first defendant, and possession of a second property from Frog Swamp, the second defendant. In addition, it sought a monetary judgment against both defendants in the sum of $214,788.80.

12. On 3 October 2012, the Court entered judgment in these proceedings in accordance with the orders sought in the Notice of Motion.

13. The terms of that judgment are:

“Brent Robert Pearsall, First Defendant is to give possession to Statewide Secured Investments Pty Ltd, First Plaintiff of the following land: Possession of the whole of the land as described in folio identifier 53/241238 being the land situated at and known as 407 Dale Crescent Lavington NSW 2641.

Frog Swamp Pty Ltd ACN 098030650, Second Defendant is to give possession to the plaintiff of the whole of the land as described in folio identifier 2/870831 being the land situated at and known as 602 Oliver Street Lavington NSW 2641.

The defendants are to pay to the plaintiff the sum of $214788.80 inclusive of costs.”

14. In the Frog Swamp proceedings, the Statement of Claim was filed on 10 July 2012. No defence was filed by either defendant in that proceeding.

15. On 21 January 2013, Statewide filed a Notice of Motion seeking a monetary default judgment and possession of a number of properties.

16. On 30 January 2013, the Court entered default judgment in favour of Statewide. It ordered Frog Swamp, the first defendant, to give possession to Statewide of three properties noted in the Notice of Motion which sought default judgment. The Court also entered a monetary judgment against both defendants in the sum of $1,306,510.60.

17. So far as the Court was concerned, for all practical purposes the proceedings were at an end at that stage.

18. On 26 May 2014, each defendant filed a Notice of Appearance. They jointly filed a Notice of Motion in each proceeding seeking to have the default judgments set aside.

19. The Court fixed the hearing of the Notices of Motion on 14 August 2014. On that day, Harrison AsJ, when it became apparent that the matter was not ready to proceed, adjourned the hearing of the matter and made a series of procedural orders.

20. On 15 September 2014, in the Frog Swamp proceedings, Frog Swamp filed a Further Amended Notice of Motion which sought the following orders:

“1.   The judgment for $1,306,510.60 entered by default, in favour of the plaintiff, Statewide Secured Investments Pty Ltd, on 30 January 2013 be set aside.

2.   That the Court grant a stay of enforcement in this matter until the application to set aside judgment is decided.

3.   That the application for a stay of enforcement be dealt with on an urgent ex parte basis in chambers.

4.   That the plaintiff pay the costs of the defendant’s application to set aside the default judgment if it is successful.

5.   Alternatively, that the order and judgment of 26 February 2013, that the defendants are to pay the plaintiff the sum of $1,306,510.60 be stayed pending the determination of the defendant’s cross-claim.

6.   Such further or other alternative relief as the Court considers appropriate.”

21. Ultimately, a Motion seeking similar relief was filed in the Pearsall proceedings, with the exception that the monetary sum and the date of judgment were different. In those proceedings the monetary sum was $214,788.80. As well, the date of the judgment was 3 October 2012, rather than 30 January 2013.

Relevant Factual Background

22. Mr Pearsall is the sole director and shareholder of Frog Swamp.

23. On 7 July 2004, Statewide agreed to lend Frog Swamp the amount of $110,000. That loan was secured by a registered mortgage over properties in Urana Road, Lavington, and a guarantee from Mr Pearsall.

24. On 20 April 2005, Statewide agreed to lend Mr Pearsall the sum of $224,000. That loan was secured by registered mortgage over a property at Dale Crescent, Lavington and another property at Oliver Street in Lavington. As well, Frog Swamp gave a guarantee for that loan.

25. On 2 February 2006, Statewide agreed to lend Frog Swamp a further sum of $215,000 which was secured by the existing registered mortgage over the property at Urana Road, a registered mortgage over a second property in Urana Road and a registered mortgage over another property in Oliver Street. As well Mr Pearsall gave a guarantee for that loan.

26. On 26 July 2007, Statewide agreed to lend Frog Swamp a further sum, namely $1.2M. It was secured by registered mortgages over two properties in Urana Road and three properties in Oliver Street. As well, a registered second mortgage was given to Statewide over the property in Dale Crescent and Mr Pearsall gave a guarantee.

27. Over time, the total of the monies lent by Statewide was $1,732,500 to Frog Swamp, and $224,000 to Mr Pearsall. In total, the indebtedness was $1,956,500.

28. From time to time during 2008, 2009 and 2010, either Mr Pearsall or Frog Swamp repaid monies to Statewide. However, from about January 2011, the loans fell into arrears when Mr Pearsall and Frog Swamp failed to make the monthly payments which were due.

29. In January 2012, default notices were sent to both Frog Swamp and Mr Pearsall by Statewide. The defaults were not made good.

30. Shortly after both of the proceedings were commenced, on 14 July 2012, Mr Pearsall transferred the sum of $30,000 to Statewide. That sum was applied by Statewide to the outstanding amounts on the third Frog Swamp loan. Two days later, the Statements of Claim were personally served on Mr Pearsall.

31. On 17 July 2012, Mr Neale, an executive of Statewide, informed Mr Pearsall that no action would be taken until 17 August 2012, to enable Mr Pearsall to try and sell some of the properties and use the monies to discharge his indebtedness to Statewide.

32. On 30 July 2012, in a further conversation, Mr Neale informed Mr Pearsall that if the outstanding amounts were not paid by 15 August 2012, Statewide would proceed with its legal action.

33. There was no sale of properties. As indicated earlier, no defences were filed in the proceedings, and Statewide moved the Court for judgment.

34. Having obtained orders for, and actual possession of, the properties, Statewide sold all of the properties with the exception of one of the Oliver Street properties. With respect to that property, and at Frog Swamp’s request in order to enable it to be named as the vendor on the contract for sale, Statewide set aside possession of the property. On 7 June 2013, Frog Swamp sold the Oliver Street property and the net proceeds of sale were subsequently transferred to Statewide and applied in reduction of the loan balances owing.

35. As a result of the sales of all of the properties which were completed by November 2013, Statewide recovered a total of $1,284,000.

36. On 8 January 2014, Statewide sent a demand to Mr Pearsall and Frog Swamp seeking the then outstanding sum of $471,400.47. No substantive response was received to that letter.

37. On 5 May 2014, Statewide served a Creditors Statutory Demand on Frog Swamp seeking payment of $307,769.93.

38. In May 2014, the defendants, namely Mr Pearsall and Frog Swamp, moved this Court to have the default judgment set aside, and filed fresh proceedings in the Supreme Court of Victoria seeking to have the statutory demand set aside.

Evidence of Mr Pearsall

39. The applicants relied on the evidence of Mr Pearsall in support of the motions. Mr Pearsall swore two affidavits – the first on 23 June 2014 and the second on 12 September 2014.

40. In his first affidavit, Mr Pearsall gave a lengthy and detailed account of the application for loans and the receipt of the loan funds. He also gave an account of payments made to Statewide.

41. He draws attention to a letter of 1 May 2009, which was sent in identical terms from Statewide to each of Frog Swamp and himself. That letter contained these paragraphs:

“We are pleased to advise that the Board of Directors for Statewide Secured Investments Ltd and Banksia Financial Group have reached an agreement to amalgamate their two Kyabram based businesses.

...

The amalgamated entity becomes a substantial non-bank financial institution offering commercial funding opportunities to borrowers. Part of the amalgamation process will see your loan being managed by the new amalgamated entity. In particular, Banksia Mortgages Ltd. It is important to note that you will continue to deal with your usual loan representative and that the current terms and conditions of your loan facility will remain unchanged.” (sic)

42. A further letter was sent by Banksia Mortgages Ltd to Mr Pearsall on 10 December 2009, which related to the loan, for which he was the principal borrower. The letter was headed “Transfer of your Statewide Loan to Banksia Financial Group”.

43. That letter included this paragraph:

“We refer to previous correspondence dated 1 May 2009, which outlined the amalgamation of the Banksia Financial Group and Statewide. We wish to confirm that your above-named loan facility has been transferred to the Banksia Financial Group. Your loan will continue to run on your existing terms and conditions, however it will be managed by Banksia Mortgages Ltd.”

44. Frog Swamp received letters containing identical paragraphs with respect to each of its three loans.

45. At paragraphs 40 and 41 of his affidavit, Mr Pearsall gives an explanation as to why he did not file a defence in either of the matters. He says:

“40.   As a consequence of the $30,000 payment to Statewide, I was unable to defend the proceedings as I had used my last available funds that I had at the time (the $30,000) to make the payment to Banksia as they told me they would not continue with the proceedings.

41.   As I was not able to afford representation, I considered the best way to minimise my loss was to try and assist in the sale of the properties to extinguish the money that Statewide claimed that I owed as I knew that the value of the properties far exceeded the amount of the loan.”

46. In the balance of his first affidavit, Mr Pearsall does not provide any other explanation for his conduct since August 2012, when the defences were first due.

47. In his second affidavit, Mr Pearsall gives some details about his dealings with Statewide, but does not provide any explanation at all for the inactivity, or failure to take any steps in either of the proceedings prior to the filing of the original forms of the Motions which are now before the Court.

Evidence of Statewide

48. Statewide relied upon the evidence of Alison Staines, a credit manager employed by Banksia Securities Ltd (Receivers and Managers Appointed).

49. In her affidavit of 23 June 2014, which was not the subject of cross-examination, Ms Staines deposed to these facts with respect to the Banksia Financial Group of Companies:

1. Securities Holdco Ltd is the parent company, and ultimate holding company for the Group;

2. Banksia Securities Ltd, Banksia Mortgages Ltd and Statewide are all members of the Group, and are all wholly owned by Securities Holdco;

3. On 31 January 2013, Statewide appointed the Receivers and Managers of Banksia Securities Ltd as its attorneys, pursuant to a power of attorney, to manage, amongst other loans, the loans by Statewide to the applicants.

50. The affidavit of Ms Staines also deposes to the fact of default on the loans giving rise to the commencement of each of these proceedings. Default was said to have occurred on or about 15 January 2011.

51. The affidavit of Ms Staines annexes to it all of the relevant loan and security documents, and also the statement for each of the loan amounts, which record the balance of each account from time to time, having regard to monies paid to reduce the outstanding balance, and also sums for interest debited to each loan account.

52. None of this material was challenged in cross-examination. It reflects the business records of, and maintenance by, the relevant companies. There is no reason to think that there is any inaccuracy in this material. Accordingly, I accept it.

53. This evidence establishes that as at 18 June 2014, the applicants were indebted to Statewide in the total sum of $380,020.56.

Proposed Pleadings

54. The proposed Defence in each proceeding is in substantially identical form. The Defence admits that the loans were made, and that the security, including the mortgages and guarantees were given. The Defence denies any default on the loans.

55. In addition, the Defence pleads defences based upon a representation said to have been made in June 2008, by an officer of Statewide to Mr Pearsall. The effect of the representation was that if Mr Pearsall was to deposit any funds, they could be used to off-set interest accumulating on the loan accounts. It is also alleged that it was represented that those deposited funds could be redrawn at a future date.

56. It is alleged that the representation was false, or misleading, or deceptive, that it was acted upon by Mr Pearsall and Frog Swamp and as a consequence, they have suffered a loss. Various specific legal causes of action relating to the representation are pleaded.

57. Mr Pearsall and Frog Swamp claim by way of a defence, an entitlement to a set-off with respect to their losses from the investment made as a consequence of the representation. They plead that their losses exceed any outstanding amounts claimed by Statewide.

58. A further defence is pleaded as giving rise to an additional set-off, namely that there was a negligent failure to market and sell the properties at a reasonable price.

59. The proposed cross-claim which Mr Pearsall and Frog Swamp would file if allowed, first pleads the representation to which reference has been made with respect to the Defence. That representation is said to have constituted either an amendment to the agreement of the parties or, alternatively, remained as a representation. It is pleaded that the representation was acted upon and as consequence Frog Swamp deposited a total sum of $500,000 in various amounts into each of the relevant loan accounts. It is said that the deposit occurred on 4 June 2008.

60. The cross-claim goes on to plead that pursuant to the various terms of the facilities (including the amendment), and in reliance on the representation, Frog Swamp drew down monies from time to time as required to develop land. It is then alleged that in June 2010 a request was made to draw down a sum of $100,000 which, in breach of the terms of the facilities and contrary to the representation, Statewide refused to allow. According to the pleading, Statewide would only allow a drawdown of $23,000.

61. Frog Swamp and Mr Pearsall allege that the refusal to permit the drawdown of $100,000 had the consequence that it was unable to progress the subdivision of land to which that money was related, which ultimately meant that it could not register individual lots of land, take any further steps to develop them and to sell them.

62. The cross-claim pleads that Statewide wrongly treated, at different times, Frog Swamp as being in default of its facilities, and imposed higher rates of interest.

63. The cross-claim also pleads that at the time proceedings were commenced, Statewide had no right to possession of the land or to any judgments for the sums due because there had been no default.

64. A curious pleading follows in paragraph 31 and 32, where Frog Swamp and Mr Pearsall assert that after possession of the land was taken by Statewide, and the land was sold “purportedly pursuant to the mortgages which [Frog Swamp] had earlier granted …”. The cross-claim alleges that Statewide was not entitled to sell the land

“… as the land was not secured for any indebtedness then due to [Statewide], the only indebtedness then due to [Statewide] being the judgment in the sum of $1,306,510, which sum was unsecured.”

65. Finally, the cross-claim pleads that Statewide had failed to take all reasonable care to sell the land for not less than its market value or, alternatively, the best price that was reasonably obtainable.

66. The proposed cross-claim claims damages.

Submissions of Frog Swamp and Mr Pearsall

67. The applicants submit that the Court ought not allow either of the judgments to stand, even in circumstances where a significant period of time has passed, because Statewide had no entitlement to the relief which it obtained. It is submitted that the consequence of this is that each judgment has been entered into “… against good faith”: r 36.15(1) Uniform Civil Procedure Rules 2005 (“UCPR”).

68. The basis of this submission is that, as a matter of fact, Statewide was not owed money, as each of the loans had been transferred to Banksia Mortgages Ltd (“Banksia”), and accordingly the plaintiff had no justification for entering judgment for a money sum, in circumstances where it must have known that it was not a creditor, and must have known of the absence of any basis to enforce the mortgages.

69. In oral submission, counsel for the applicants fastened on the statements made in the correspondence to which reference has been made at [41] and [43] above. Counsel submitted that at no time did Statewide have the legal right to recover the money from the applicants. Counsel further submitted that the use of the term “transfer” meant, and should be understood to mean, a conveyance, i.e. an assignment of the legal rights of Statewide to Banksia.

70. Counsel relied upon paragraph 21 of the affidavit of Alison Joyce Staines sworn 23 June 2014, as the basis for that submission, in addition to the correspondence to which attention has been drawn.

71. That paragraph is in the following form:

“On or about 30 November 2009, following the acquisition of Statewide by SHL, the Frog Swamp loans were transferred to Banksia. Upon transfer, the Frog Swamp loans retained the same terms and conditions, but were managed by BML and given the new Banksia loan account reference numbers: …”

72. In this paragraph of the affidavit, Banksia is the term used by Ms Staines to refer to the Banksia Financial Group of companies. SHL is a reference to Securities Holdco Ltd, the parent company of the Banksia Financial Group of companies (including Statewide). BML is a reference to Banksia Mortgages Ltd, a company within the Banksia Financial Group of companies.

73. The applicants submitted that the proposed defence was an arguable one.

74. The applicants further submitted that the delay in seeking to set aside judgment was adequately explained because, the defendants, having paid Statewide the sum of $30,000 in July 2012, did not have any further funds to defend the proceedings, including resisting judgment in each matter, and in the face of judgment having been entered in each matter, that impecuniosity ought be taken to extend to the making an application to set each of the judgments aside.

75. With respect to the second part of the relief sought, namely a stay on the judgments pending the hearing and determination of the cross-claims, the applicants submitted that the proposed cross-claims disclose a properly pleaded cause of action which if ultimately proved, would entitle the defendants to relief by way of damages. They submitted that the balance of convenience favoured, and the interests of justice, meant that they ought not have to pay the judgment sums until the determination of the cross-claims, when the net position between the parties would be known.

Submissions of Statewide

76. Insofar as the applicants applied to set aside the judgments for possession, Statewide submitted that it was too late to do so because the Writs of Possession had been executed: see Perpetual Ltd v Kelso [2008] NSWSC 906 at [15]; J P Morgan Trust Australia Ltd v Bridge [2013] NSWSC 668 at [20].

77. Statewide also submitted that no satisfactory explanation has been provided for the delay in commencing proceedings to set aside the judgments of the Court. Statewide invited the Court to infer that these Notices of Motion were taken out only for the purpose of responding to the Creditor’s Statutory Demand served on Frog Swamp in May 2014.

78. Statewide points to the fact that, on the evidence, Mr Pearsall made a deliberate decision to refrain from defending the proceedings in 2012, and that having made that decision, and Statewide having acted upon that decision to take possession of the properties, and to sell them, it is not in the interests of justice that Mr Pearsall should now be allowed to have the judgments set aside, and to defend the proceedings.

79. Finally, Statewide argued that Frog Swamp and Mr Pearsall did not have an arguable defence.

80. Statewide submitted that with respect to one of the two properties in the proposed cross-claim which it is alleged was sold at an under-value, the evidence demonstrates that the sale was not conducted by Statewide, but it was the fact that the property was sold by Frog Swamp itself. In those circumstances, it submitted that an allegation of sale at a gross undervalue cannot be sustained.

81. With respect to the second property, Statewide submitted that it was held by Mr Pearsall in his own name. In those circumstances, s 420A of the Corporations Act 2001 (Cth) has no application because it refers only to the exercise of a power of sale of the property of a corporation. In addition, counsel for Statewide submitted that, having regard to the evidence, there are no reasonable prospects of success in the prosecution of the cross-claims.

82. Finally, counsel for Statewide submitted that no explanation, let alone any adequate explanation, has been provided in the evidence for the delay in filing of the cross-claims.

Legal Principles

83. It is first necessary to consider the legal principles applicable to the question of whether or not the judgments ought be set aside. Any application to set aside a judgment must address three discrete issues. The first is that a satisfactory explanation is provided for the failure to file the Defence at the appropriate time. The second is that the applicant has a good arguable defence on the merits, as that appears from a proposed pleading, and the evidence. The third component is that it is in the interests of justice to allow the proposed defence to be instigated. See: Reinehr Industrial Lease and Finance Pty Ltd v Jordan (Court of Appeal, unrep, 4 June 1974); Adams v Kennick Trading (Int) Ltd (1986) 4 NSWLR 503 at [506]-[507]; Dai v Zhu [2013] NSWCA 412 at [83]; Dunwoodie v Teachers Mutual Bank Ltd [2014] NSWCA 24 at [43]-[46] per McColl JA.

84. The Court’s power to set aside a judgment is contained in r 36.16(2) of the UCPR. That power is subject to the statutory framework set out in ss 56-60 of the Civil Procedure Act 2005. See: Baulderstone Hornibrook Engineering Pty Ltd v Gordian Runoff Ltd [2008] NSWCA 243 at [160]-[161]; Hans Pet Constructions Pty Ltd v Cassar [2009] NSWCA 230; Bi v Mourad [2010] NSWCA 17.

85. The overriding purpose to which the Court must seek to give effect is to facilitate the just, quick and cheap resolution of the real issues in the proceedings: s 56(1) Civil Procedure Act. It is relevant to note here that Mr Pearsall and Frog Swamp, as parties to the proceedings, were under a duty to assist the Court to further the overriding purpose, including a duty to participate in the processes of the Court: s 56(3) Civil Procedure Act.

86. As the Court of Appeal has made clear, timely disposition of litigation is central to the provision of justice in an individual case. In examining the provision of justice, the Court balances what is just for both parties: Aon Risk Services Australia Ltd v Australian National University [2009] HCA 27; (2009) 293 CLR 175 at [94] per Gummow, Hayne, Crennan, Kiefel and Bell JJ. The majority in Aon at [94] also recognised that, in circumstances analogous to those which exist here, if a party has had an adequate opportunity, or a sufficient opportunity, to plead its case, here by filing a defence in a timely manner, a refusal to permit it to file a defence may lead to a feeling of personal injustice, but that may simply be nothing more than the consequence of the Court doing justice to the opposing party, and having regard to the interests of justice of other litigants in the Court. See: Worldwide Corporation Ltd v GPT Ltd [1998] EWCA Civ 1894; Richards v Cornford (No.3) [2010] NSWCA 134 at [119] per Allsop P.

87. Although there is tension in any given set of circumstances between the just, quick and cheap resolution of the real issues, the Court is obliged to balance each of those requirements as best it can in the individual case: Halpin v Lumley General Insurance Ltd [2009] NSWCA 372; (2010) 78 NSWLR 265 at [29] per Basten JA, at [93] per Sackville AJA.

Discernment

88. As the facts make plain, Mr Pearsall and Frog Swamp decided, for reasons which appeared appropriate at the time, that they would not defend the claim made against them by Statewide. Intentionally, they chose not to file a defence. Judgments were entered and Writs of Execution of the judgments were issued. Possession was taken of each of the properties, and the Power of Sale for those properties was engaged.

89. In respect of one property, possession was returned to Mr Pearsall and Frog Swamp to enable them to be the vendors on the contract. However, this consensual arrangement, which took place after judgment was entered and the Writs of Execution were issued, and after possession was originally taken, does not detract from the underlying principle to which attention will shortly be turned, that it is inappropriate to set aside judgments once they have been entered and action taken to execute those judgments.

90. The first matter to be considered is whether the Court ought set the judgments aside, and grant leave to the applicants to file their proposed defence.

91. In support of this grant of relief, the applicants’ first submission that must be addressed, is whether the judgments were entered “against good faith” because there was no indebtedness to Statewide at that time. As outlined above at [67]-[69], this submission depends upon the factual proposition that Statewide transferred, by assignment, all of its legal rights in the agreements with Mr Pearsall and Frog Swamp to Banksia. If that is proved to be what happened, then it would follow, according to the applicants, that Statewide could not thereafter be a creditor.

92. I am not persuaded, as a matter of fact, that a transfer of the rights occurred to the extent alleged. There are a number of reasons for this. First, there was no evidence of any transactional documentation which established any conveyance or assignment of all legal rights with respect to the relevant loans. Secondly, the terms of correspondence set out at [41] and [43] above do not permit an inference to be drawn to the effect that the amalgamation of Statewide and the Banksia Financial Group had occurred by a transfer of the legal rights of Statewide with respect to the relevant loans to Mr Pearsall and Frog Swamp. The terms of the correspondence makes these facts clear:

1. there was to be an amalgamation of Statewide and the Banksia Financial Group;

2. the relevant loans were to be managed on behalf of the amalgamated entity by Banksia Mortgages Ltd;

3. the current terms and conditions of each of the loan facilities “… will remain unchanged"; and

4. the loan facility had been transferred to the Banksia Financial Group.

None of these facts support the submissions that Statewide, as a legal entity, had conveyed or assigned all of its legal and beneficial interest in the relevant loans to the Banksia Financial Group, which is not a legal entity.

93. Thirdly, the affidavit of Ms Staines, who was not asked any questions about this issue orally in evidence, does not support the factual conclusion sought by the applicants but tells against it. The corporate records attached to the affidavit of Ms Staines, show that Statewide became a wholly owned subsidiary of Securities Holdco, which was the parent company of the Banksia Financial Group. Thus, Statewide did not cease to exist, nor was there any reason why it needed to assign its interest to any other legal entity in the Banksia Financial Group. Statewide and its operations, including its loan portfolio, were absorbed into the Banksia Group. The fact that its loans were being managed by Banksia Mortgage Ltd did not require any transfer of its interests. It is simply an internal arrangement within the Group.

94. Fourthly, the affidavit evidence filed in support of the Motions for default judgment supported, but was not conclusive of, the existence of the debt owing to Statewide.

95. For those reasons, in short, there is no evidence that an assignment of Statewide’s rights and interests actually happened, and evidence which tells against such a conclusion, I am not satisfied that the necessary factual conclusion has been proved so as to arrive at the conclusion urged upon the Court that the judgments were entered against good faith. There is thus no basis for setting the judgments aside ex debito justitiae.

96. It is now necessary to consider the other submissions advanced in support of the setting aside of the judgments.

97. The issuing of the Writs of Execution, the taking of possession of property and the exercise of the power of sale, are all steps which give practical effect to the judgment of the Court. None of these steps were opposed by Mr Pearsall or Frog Swamp. On the contrary, they were apparently supported by Mr Pearsall.

98. The power of sale was exercised for the purpose of the recovery of money due and owing to Statewide in accordance with the Court’s judgment. That the sale of all of the properties did not discharge the entirety of the monetary judgment is not to detract from the proposition that what was happening was the exercise of a number of steps in the enforcement of the judgment.

99. As Harrison J said in analogous circumstances in J P Morgan Trust at [20], the principle of finality of judgment is engaged and the validity of the judgment which saw the Writ of Possession executed, and the Power of Sale exercised, cannot now be contested: see J P Morgan at [20]-[21].

100. In Commonwealth Bank of Australia v Goater [2014] NSWSC 652 at [22], Davies J said this:

“Once the judgment has been executed, the matter is at an end and it is not possible for the defendants against whom the judgment has been given and executed to contest the basis of the judgment, whether it was given by default or otherwise. Such a view is entirely supported by the principle of finality which governs judgments of the Court.”

101. I am not satisfied, having regard to these principles, that it is appropriate to now set aside the judgments upon which execution has been enforced. In my view it is not open to the Court to do so by means of a notice of motion in reliance upon the Court’s discretion under the UCPR which is what the applicants seek to do.

102. But there are other reasons why I am not persuaded that I should set the judgments aside. The applicants do not provide any satisfactory explanation which could excuse or justify their failure to file any defence, and then to propound their defences. As is apparent, the decision of the applicants not to defend the proceedings was a deliberate and intentional one, taken on the basis that it was in their best interests to follow that course.

103. Since that time, having made that decision, they have taken no steps to set aside either of the judgments. They have simply proffered no reason for their change of attitude which could justify reopening the proceedings by allowing them to defend the proceedings at this very late stage. Particularly is this so as they knew throughout this period of time, that Statewide was taking steps to enforce the judgment.

104. Even if I were persuaded that it was open to the Court to set aside the judgments, and even if I were persuaded, a matter upon which there is no need for me to express a view, that the applicants had an arguable defence, I would not be prepared to exercise my discretion to allow the judgments to be reopened because of the very lengthy delay, which is wholly unexplained in any, let alone any satisfactory, way between when the judgments were entered and this application being made.

105. I am unconvinced that an order setting aside the judgment and extending the time for the filing of defences, as the applicants seek, would further the overriding purpose of the Civil Procedure Act. Whilst such orders may give the applicants a sense of justice, that sense would be far outweighed by the injustice to which Statewide would be subjected.

106. As well, the granting of the applications would do nothing to further timeliness in the conduct of litigation by the parties, and it would be to reward a lack of attention to the statutory duty falling on the applicants. There is no sense of a purpose of punishment of the applicant in this conclusion. To the contrary, the adverse outcome for the applicants is the consequence of the Court reflecting the statutory obligation to further the overriding purpose. That is in the interests of justice of the parties, and for other litigants.

107. Accordingly, I decline to set aside the judgments of the Court.

108. The ordinary time has long passed for the filing of a cross-claim. Rule 9.1(1) of the UCPR, requires that a cross-claim be filed within the time limited for filing a defence i.e. 28 days after service of the Statement of Claim: r 14.3(1) of the UCPR. The Court has the power to extend time, both for filing a defence and for the filing of a cross-claim.

109. In light of the conclusion just reached, it is convenient to now consider the question of whether the applicants ought to be granted an extension of time within which to file their proposed cross-claim.

110. Even though a judgment has been entered on the principal claim in respect of which the proceedings were originally commenced, it is still possible that a cross-claim may be proceeded with: r 9.10(1)(a) of the UCPR. Whether this rule extends to proceedings on a cross-claim, where the cross-claim has not been filed at the date of judgment, is not directly the subject of any rule in the UCPR.

111. However, I am prepared to accept that the Court may grant leave for the filing of a cross-claim even though judgment has been entered. A cross-claim may include a claim between the same parties, or some of the same parties to the original litigation. Commonly, it will relate directly to the original litigation. In particular, where a plaintiff chooses to sue only one tortfeasor, that party may join on a cross-claim another unrelated person or entity on the basis that they are a joint or concurrent tortfeasor.

112. Alternatively, there seems no reason in principle, why one existing party cannot sue another existing party on a cross-claim in circumstances where the commonality consists of the named parties to the original proceedings rather than any commonality of subject matter. In such a circumstance, if appropriate, the Court can order that the hearing of the original proceedings, and the proceedings on the cross-claim, proceed separately at a different time: r 9.9 of the UCPR. Section 22 of the Civil Procedure Act supports this view.

113. Cross-claims must be brought in a timely fashion. The Court has the power to extend the time for the bringing of a cross-claim: r 1.12 of the UCPR; r 9.1(1)(a) of the UCPR. Both of these powers are discretionary and must be exercised judicially. The Court is entitled to extend the time even after the relevant time has expired: r 1.12(2) of the UCPR. The appropriate view of these powers is, once a proceeding is commenced, and a statement of claim is served, that the right of a defendant to institute a cross-claim is unfettered and unconditional for a period of 28 days, and that the right thereafter continues without limitation as to time, subject to a contingency, namely the proviso that the Court grants leave: see Allianz Australia Insurance Ltd v Bluescope Steel Ltd [2012] NSWCA 240; Seltsam Pty Ltd v Energy Australia; Re Banham [1999] NSWCA 89.

101. The first matter which falls for consideration is whether the Court ought extend time for the filing of the cross-claims in circumstances where the cross-claims were almost two years out of time when the Motions were first filed. In considering this matter, I will apply the three component approach described above at [83].

102. There has to be a satisfactory explanation for the delay in seeking to file the cross-claim. Here the applicants provide no evidentiary explanation at all for the delay in bringing the cross-claims. Counsel for the defendants pointed to the fact that the sum of money, which is the subject of the damages claim in the cross-claim, could not be precisely quantified until the completion of the sale of the properties pursuant to the power of sale. In one sense that is so. But the cross-claims mount claims for damages which are broader than a mere sale of the properties at an under-value.

103. As indicated earlier, the cross-claims are based upon three separate causes of actions. Each of those causes of action existed prior to the sale of the properties, with the exception of the allegation of sale at a gross undervalue.

104. Accordingly, it was open to the applicants to commence the cross-claim well before the completion of the period during which the properties were sold. Certainly, the causes of action of breach of contract existed in 2012 when the defendants were obliged to file their defence.

105. In the absence of any specific evidence addressing the failure to file the cross-claims, I would infer that the applicants simply considered any claim which they had at that stage against Statewide should be dealt with in the same way in which they dealt with the question of defending the proceedings, namely, that the better course, and the one which most suited their economic interests, was to work to ensure that the properties were sold at the best available value.

106. In those circumstances, and for the same reasons which I expressed with respect to setting aside the judgments and granting an extension of time for defences to be filed, I cannot see any basis for an extension of time to be granted to the defendants to commence their proceedings by way of cross-claim.

107. In short, the defendants are seeking an extension of time of some years to commence those cross-claims. If the defendants have a good cause of action, they are entitled to commence new proceedings. Counsel for Statewide conceded that this was so. Such proceedings, of course, would be subject to any limitation issue which may properly be pleaded by way of a defence. It is not possible for me to, and I do not, make any determination with respect to the existence or otherwise of any limitation issue. The same limitation issue would arise upon the filing of the cross-claims, if leave was granted so to do.

108. In light of the applicants’ entitlement to commence their cross-claims as fresh proceedings, if they wish, there is little, if any, prejudice to the applicants which may arise from the refusal to extend time for the filing of cross-claims in circumstances where the principal proceedings have concluded. In the balancing exercise required to determine where the interests of justice lie, I am affirmatively satisfied that it is not in the interests of justice to extend the time for filing cross-claims in these proceedings.

109. In the absence of setting aside the judgments, and in the absence of allowing the cross-claims to be filed and prosecuted in these proceedings, there is no basis for the Court to stay the further execution of the judgment in either of the proceedings.

Conclusion

123. The Notices of Motion brought by Frog Swamp and Mr Pearsall do not succeed, and should be dismissed with costs.

Orders

124. I make the following orders:

1. Further Amended Notice of Motion dated 15 September 2014 in each proceeding be dismissed.

2. Defendants to pay the costs of the plaintiff of each Notice of Motion.

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Decision last updated: 12 June 2015