Yuhui Lei (also known as Juliya Lei) v Jian Jun Zhang (also known as John Zhang)
[2020] VSCA 123
•14 May 2020
SUPREME COURT OF VICTORIA
COURT OF APPEAL
S APCI 2019 0088
| YUHUI LEI (also known as JULIYA LEI) | Applicant |
| v | |
| JIAN JUN ZHANG (also known as JOHN ZHANG) | Respondent |
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| JUDGES: | KAYE and McLEISH JJA |
| WHERE HELD: | MELBOURNE |
| DATE OF HEARING: | 11 May 2020 |
| DATE OF JUDGMENT: | 14 May 2020 |
| MEDIUM NEUTRAL CITATION: | [2020] VSCA 123 |
| JUDGMENT APPEALED FROM: | [2020] VCC 450 (Judge Cosgrave) |
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PRACTICE AND PROCEDURE – Application for leave to appeal decision refusing to set aside default judgment – Indemnity in respect of costs in separate proceeding in which parties unsuccessful and special leave refused – Whether error in exercise of judge’s discretion – House v The King (1936) 55 CLR 499, applied – Proposed grounds of appeal relate to separate proceeding or otherwise misconceived – No error shown – Application for leave to appeal dismissed.
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APPEARANCES: | Counsel | Solicitors |
| For the Applicant | In person | |
| For the Respondent | In person |
KAYE JA
McLEISH JA:
This application for leave to appeal concerns a decision by a judge in the County Court refusing to set aside judgment in default of appearance.[1] The County Court proceeding concerned an alleged agreement on the part of the applicant to indemnify the respondent for costs incurred in the largely unsuccessful defence of a proceeding in the Supreme Court, in particular the respondent’s liability to pay the costs of the plaintiffs.
[1]Zhang v Lei [2020] VCC 450 (‘Reasons’).
It is convenient to begin by briefly describing the Supreme Court proceeding.[2] For present purposes, the identity of the plaintiffs is not relevant. The defendants to the proceeding included the applicant and the respondent, as well as a company called MMC Pacific International Pty Ltd (‘MMC’). The proceeding also involved a counterclaim brought by the applicant and MMC against six defendants by counterclaim including the respondent.
[2]Lei v Lei [2016] VSC 336 (Riordan J).
As described by the trial judge, there was a ‘myriad of claims and alternative claims’ brought by the plaintiffs and the plaintiffs by counterclaim against each other based on transactions that took place over approximately 25 years.[3] For present purposes, the claims related principally to the beneficial ownership of the shares in MMC and three properties.
[3]Ibid [2].
At the risk of oversimplifying the facts, the Supreme Court proceeding broadly involved four main claims. The first concerned a property at 1/11 Kintore Crescent, Box Hill which had been the subject of a redevelopment. For reasons that need not be explained, the plaintiffs alleged that the applicant, the respondent and MMC held legal title to this property on trust for one of the plaintiffs.
Secondly, the plaintiffs alleged that the applicant had caused sham documents to be prepared having the effect of giving her a substantial allotment of shares in MMC, and declarations were sought in respect of that matter.
By the third claim, the plaintiffs alleged that MMC held land at 104 Balwyn Road, Balwyn on trust for the plaintiffs.
Finally, the case concerned a property known as Unit 2, 23 Yerrin Street, Balwyn. It was alleged that the applicant had been permitted to reside in that unit by two of the plaintiffs and that she wrongly remained in possession of it after being given notices to vacate.
The judge delivered judgment on 17 June 2016. He found that the applicant held no shares in MMC and that the shares in MMC were beneficially owned by two of the plaintiffs. The judge also found that the Kintore Crescent property was held on trust for MMC, that two of the plaintiffs were beneficially entitled to the Yerrin Street unit, and that MMC was beneficially entitled to the property at 104 Balwyn Road.[4]
[4]Ibid [40], [46], [59], [66], [75]–[76].
On 16 September 2016, the judge made orders, among other things, that the applicant and the respondent transfer their interests in the Kintore Crescent property to MMC and that the applicant pay two of the plaintiffs damages for wrongful possession of the Yerrin Street apartment. The applicant and the respondent were ordered to pay the plaintiffs’ costs of the proceeding.
The applicant filed notices of appeal from the decision of the trial judge, out of time. The registrar refused an extension of time and the applicant filed an application to have that decision reviewed. On 30 August 2018, Whelan JA dismissed that application. The applicant filed an application for special leave to the High Court which was refused on 14 November 2018.[5]
[5]This appears to be the third application for special leave made by the applicant to the High Court in respect of the Supreme Court proceeding. Earlier applications were refused on 14 December 2016 and 30 March 2017, the latter on the basis that it was an abuse of process: see Lei v Lei [2016] HCASL 342, and Lei v Lei [2017] HCASL 65.
On 19 October 2018, an order was made in the Costs Court that the first and second plaintiffs’ costs in the Supreme Court proceeding be taxed and allowed in the sum of $465,000.
With that short background, it is convenient to turn to the substance of the County Court proceeding. The writ was dated 13 June 2019. By his statement of claim of the same date, the respondent alleged that, in or around early January 2012, the applicant asked the respondent to defend the Supreme Court proceeding and agreed to indemnify him for all loss and damage by reason of him doing so. The indemnity agreement was alleged to be partly oral, partly written and partly implied. The oral component was said to have been a conversation between the applicant and the respondent in Kew in early January 2012. The agreement was said to be ‘evidenced by a note dated 21 January 2019’ signed by the applicant. The agreement was also said to be implied by unspecified conduct of the parties, presumably including the respondent’s defence of the Supreme Court proceeding, which is pleaded elsewhere.
The statement of claim then pleads the making of the costs orders and the taxation of those costs and alleges the applicant’s refusal to indemnify the respondent as agreed. Adding interest and other expenses to the taxed sum of $465,000, the total amount claimed to the date of the writ is $523,617.37.
An affidavit of service, which was not disputed by the applicant, established that the writ and statement of claim were served upon her on 23 June 2019. The applicant not having filed an appearance, the respondent obtained a default judgment on 4 July 2019 in the sum of $529,714.16.
On 26 July 2019, the applicant filed an application to have the judgment set aside. The primary judge referred to two affidavits filed by the applicant in the support of that application. By the first, she asserted that the Supreme Court proceeding was still on foot. The judge correctly described this assertion as ‘puzzling’, given that the High Court had refused special leave in that proceeding in November 2018.[6] The applicant repeated this claim before us, and submitted that the High Court had reversed the decision in the Supreme Court proceeding. That is not so. By its decision, the High Court refused to entertain any challenge to the correctness of the orders in the Supreme Court proceeding.
[6]Reasons [14].
The applicant also claimed in the County Court that she had not filed a defence because she was awaiting a summons in form 46A.
The judge noted that the applicant had confirmed that she had paid the respondent’s legal fees to a solicitor and barrister from 2011 to 2014 in respect of the Supreme Court proceeding, that she said that the respondent drafted a document and asked her to sign it, and that she agreed to pay the legal costs according to orders made by the High Court. The judge observed that these matters seemed significantly more consistent with the respondent’s case than that of the applicant.[7]
[7]Ibid [17].
The second affidavit of the applicant contested the claim that it was her signature on the 21 January 2019 document. The judge described this document as relevant but ‘certainly not decisive’, given that the agreement relied on was alleged to have been made in 2012 and the applicant had not denied that agreement.[8]
[8]Ibid [20].
The judge held that the material did not raise any defence sufficiently arguable to be regarded as having real rather than fanciful prospects of success. There was also no explanation for the applicant’s failure to appear. The judge therefore dismissed the application, reserving liberty to the applicant to make a further application on material evidencing a defence.[9] She did not take that course.
[9]Ibid [26].
Before turning to the applicant’s proposed grounds of appeal, it is convenient to mention the legal principles governing the application.
First, a court dealing with an application to set aside a default judgment has a broad discretion to be exercised according to the circumstances of the particular case. There are no universal rules governing the exercise of that discretion, but ordinarily it will be important to consider whether there is a reasonably arguable defence on the merits of the case, what reasons explain the applicant’s default, how promptly the application to set side was made after the default judgment came to the notice of the applicant, and whether a suitable award of costs or security would suffice to avoid prejudice to the party having the benefit of the judgment, if it were to be set aside.[10]
[10]Kostakanellis v Allen [1974] VR 596, 605–6 (Gowans, Crockett and Harris JJ); Lubura v Nezirevic (2013) 42 VR 43, 44 [3] (Warren CJ).
Secondly, because the decision is one in which the court has a discretion, the test for appellate intervention is that in House v The King.[11] It is not sufficient for the appellate court simply to take a different view as to how the discretion should have been exercised. Rather, there must be shown to have been an error made in the exercise of the discretion. That must involve the judge having acted upon a wrong principle, relied on extraneous or irrelevant matters, mistaken the facts, or failed to take some material consideration into account. Alternatively, if none of these things can be shown, but the decision is unreasonable or plainly unjust, the appellate court may infer that in some unidentified way there has been a failure to exercise the discretion properly. In that event, the exercise of the discretion is set aside on the ground that a substantial wrong must have occurred.
[11](1936) 55 CLR 499, 504–5 (Dixon, Evatt and McTiernan JJ).
At the hearing of the present application, it was explained to the applicant that she should concentrate her submissions on the two issues which principally motivated the primary judge, namely the absence of a defence on the merits and the reasons for the applicant’s failure to enter an appearance.
The applicant advanced five proposed grounds of appeal. The first two grounds concerned what she characterised as ‘background’ matters to the Supreme Court proceeding. The submissions made in support of these grounds addressed the applicant’s prior involvement with MMC and certain transactions involving MMC and other entities. These matters had no bearing on the issues before the primary judge and were not addressed in his reasons. They are incapable of undermining his decision.
To the extent that these submissions were directed at challenging the outcome of the Supreme Court proceeding, they were (as we have already said) misconceived. The appellate processes that were engaged after the decision in that proceeding have been exhausted and it is not possible for this Court now to revisit its correctness.
The third proposed ground contends that the applicant had not been provided with the document of 21 January 2019 or a summons. This ground is also misconceived. There was no requirement for the document, or any summons, to be served on the applicant before she filed an appearance or a defence. The writ makes it clear on its first page that the defendant has 10 days after service in which to file an appearance, and that failure to do so entitles the plaintiff to obtain judgment without further notice. This was the applicant’s only attempted explanation for her failure to file an appearance.
As part of her submissions, the applicant repeated an assertion made before the primary judge that her signature had been forged on the 21 January 2019 document, and relied on an affidavit she had sworn to that effect in the County Court. However, as the primary judge pointed out, the indemnity agreement upon which the respondent was suing was made in 2012, and the document in question was only said to evidence that agreement. The applicant did not give evidence denying the making of the agreement in 2012.[12]
[12]Reasons [20]–[21].
The applicant did say from the Bar table that the respondent was ‘confused’ about her past assurances as to costs, which she said were about an earlier special leave application in the High Court.[13] Even if this had been the subject of evidence, however, it would not amount to an arguable defence because no High Court application was in prospect until after judgment following the Supreme Court trial in June 2016. The suggested confusion on the part of the respondent could not amount to a refutation of an alleged conversation in 2012.
[13]See n 5 above.
The fourth proposed ground asserts that the respondent is not the creditor in respect of costs of the Supreme Court proceeding, because they were paid by others. It was said that the costs were paid by two of the plaintiffs. However, that is not the payment for which the applicant is alleged to have agreed to give an indemnity. The indemnity was for loss and damage suffered by the respondent ‘by reason of him defending’ the Supreme Court proceeding. The principal component of that loss and damage is the obligation of the respondent (jointly with the applicant) to pay the taxed costs of the plaintiffs in the sum of $465,000. It is irrelevant which of the plaintiffs is entitled to enforce that order against the respondent.
Finally, the applicant contended that the judge had erred by placing reliance on a document dated 1 September 2016 and signed by the applicant and the respondent in which the applicant stated that she would pay ‘all cost in relation to the case’. The applicant submitted that this was about an application for special leave that was made the following day. It appears that this was an attempt to appeal to the High Court before seeking to appeal to this Court. This first special leave application was dismissed on 14 December 2016.[14]
[14]Ibid.
The judge treated this as one of a number of matters tending to support the respondent’s case. He construed the document as the applicant submits it was to be understood, namely as being concerned with costs orders that might be made in the High Court.[15] There was no error in this approach. Again, the right of indemnity was alleged to have originated in a conversation in 2012 regarding the costs of the Supreme Court proceeding. The 1 September 2016 document is of no particular significance in this context. Accepting that its scope was confined to costs in the High Court does not amount to any defence to the principal claim.
[15]Reasons [16].
The result is that none of the grounds relied on by the applicant has any merit. No arguable defence has been advanced to the allegation that the indemnity agreement was made in January 2012. Indeed, as the primary judge observed, that agreement has not been denied. Nor did the applicant provide any satisfactory explanation for not having filed an appearance.
The application for leave to appeal must therefore be dismissed.
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