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Supreme Court 1 September 2021

Australian Lending and Finance Pty Ltd v D & D Properties Australia as trustee for the D & D Property Trust

[2021] NSWSC 1110

Other
CIVIL PROCEDURE DEFAULT JUDGMENT

Citation: Australian Lending and Finance Pty Ltd v D & D Properties Australia as trustee for the D & D Property Trust [2021] NSWSC 1110
Court: Supreme Court of New South Wales
Date: 1 September 2021
Judge(s): Ward CJ in Eq

Background

A mortgagee commenced proceedings against mortgagor defendants seeking a liquidated sum exceeding $10 million, possession of three mortgaged properties, and leave to issue writs of possession. The defendants filed a defence raising, among other things, an alleged full repayment of principal and a claim of unconscionable conduct by the mortgagee, including interest rates said to be 48% per annum.

The matter had a troubled procedural history. Following the plaintiff's own late service of evidence, the parties entered into two rounds of consent orders, each containing self-executing provisions: the first (the May Orders) struck out the defence when the defendants failed to serve evidence by 10 June 2021, and the second (the July Orders) provided that, if the defendants again failed to serve evidence by 2 August 2021, default judgment would be entered against them in favour of the plaintiff.

The defendants served their evidence on 3 August 2021, one day late. The plaintiff then moved to formalise default judgment, arguing the proceedings had already been concluded by operation of the self-executing July Orders. The defendants sought an extension of time to cure their one-day delay.

Legal Issues

  • Whether the court retains power under the UCPR to extend the time for compliance with a self-executing consent order after that order has been triggered by non-compliance, giving rise to default judgment.
  • Whether the distinction between an order dismissing proceedings and an order for default judgment affects the availability of that power.
  • Whether, if such a power exists, the court should exercise its discretion to extend time in the circumstances of this case.

Decision

Issue 1: Power to extend time after a self-executing order has been triggered

Ward CJ in Eq held that the court retains power under the UCPR to entertain an application to extend the time for compliance with a self-executing order, even where non-compliance has already given rise to default judgment (at [55]). Her Honour drew on the High Court's decision in FAI General Insurance Co Ltd v Southern Cross Exploration NL (1988) 165 CLR 268, which distinguished between the court's inherent jurisdiction (which does not permit interference with a perfected order) and the specific statutory power under the court rules to extend time fixed by an order (at [45]-[46]). The relevant provisions of the UCPR, particularly r 1.12, were found to be sufficiently analogous to the former Supreme Court Rules considered in FAI to attract the same conclusion (at [55]).

Her Honour rejected the plaintiff's reliance on Bailey v Marinoff (1971) 125 CLR 529 and Gamser v The Nominal Defendant (1977) 136 CLR 145 as determinative, noting that those cases concerned the court's inherent jurisdiction rather than any specific rules power (at [42], [45]-[46]).

Issue 2: Dismissal versus default judgment

The plaintiff argued that FAI was distinguishable because it concerned dismissal of proceedings, whereas the July Orders would produce a final judgment, leaving no avenue for fresh proceedings. Her Honour accepted there is a conceptual distinction between the two outcomes but was not persuaded it was relevant to the question of whether the rules power to extend time was available (at [56]). Her Honour also rejected the submission that a default judgment arising from self-executing orders would be immune from a setting-aside application under r 36.16(2)(a) of the UCPR (at [57]).

Issue 3: Exercise of discretion

Having found power to extend time, her Honour exercised the discretion in favour of the defendants, albeit with significant costs consequences. The one-day delay was described as "hardly gross default" (at [60]). While the defendants' conduct throughout the proceedings was criticised as unsatisfactory, and the absence of any explanation for the delay was found to be a significant deficiency (at [63]), her Honour concluded that depriving the defendants of an opportunity to defend their case on the merits where substantial property interests were at stake would be a severe consequence disproportionate to the minor delay (at [62]). The court also noted that, if default judgment were entered, an application to set it aside had been clearly foreshadowed, such that granting the extension would not ultimately prejudice the plaintiff's ability to have its claims determined on the merits (at [61]). The extension was granted on the condition that the defendants pay the plaintiff's costs of the application and costs thrown away, assessed on the ordinary basis and payable forthwith, and that the defendants file an affidavit explaining their non-compliance with both the May and July Orders (at [65], [67]-[69]).

Orders Made

  • Time for compliance with Order 1 of the July Orders extended to 3 August 2021.
  • Plaintiff's notice of motion filed 14 July 2021 dismissed.
  • Defence struck out pursuant to the May Orders reinstated.
  • Defendants ordered to file and serve, within 7 days, an affidavit explaining their default in compliance with the May and July Orders.
  • Defendants ordered to pay the plaintiff's costs of the application and of the notice of motion filed 14 July 2021, on the ordinary basis, payable forthwith.
  • Matter listed for directions before the Equity Registrar on 6 September 2021.

Key Takeaways

  • Under r 1.12 of the UCPR, a court retains power to extend the time for compliance with a self-executing order even after non-compliance has triggered the order and given rise to default judgment; this power derives from the rules rather than the court's inherent jurisdiction, and is not displaced by the principles in Bailey v Marinoff (at [55]).

  • The distinction between a self-executing order that dismisses proceedings and one that produces a default judgment does not, of itself, determine whether the rules power to extend time is available; the Supreme Court found no relevant distinction for that purpose in this case (at [56]).

  • A default judgment arising from non-compliance with self-executing consent orders remains susceptible to a setting-aside application under r 36.16(2)(a) of the UCPR; its origin in a self-executing order does not insulate it from that rule (at [57]).

  • Where the discretion to extend time is engaged, proportionality matters: a one-day delay causing loss of the right to defend substantial property claims on the merits may warrant relief, even following prior non-compliance, particularly where the plaintiff would face no prejudice beyond having to proceed to a hearing (at [60]-[62]).

  • Parties who seek and obtain an indulgence by way of a time extension, without complying and without explaining their default, can expect adverse costs orders, including costs payable forthwith, as a condition of any further relief (at [65], [67]-[68]).

Legislation and Cases Referenced

Legislation
- Australian Securities and Investment Commission Act, ss 12CA, 12CB, 12CC
- Civil Procedure Act 2005 (NSW), s 56
- Supreme Court Rules 1970 (NSW), P t 2, r 3; Pt 40, r 9 (rules now repealed)
- Uniform Civil Procedure Rules 2005 (NSW), r r 1.12, 12.7 , 36.16

Cases
- Alternative Engine Technologies Pty Limited v Kruger Ventures Pty Limited (No 2) [2010] SASC 60
- Aon Risk Services Australia Ltd v Australian National University (2009) 239 CLR 175; [2009] HCA 27
- Arthur Andersen Corporate Finance Pty Ltd v Buzzle Operations Pty Ltd (in liq) [2009] NSWCA 104
- Bailey v Marinoff (1971) 125 CLR 529; [1971] HCA 49
- FAI General Insurance Co Ltd v Southern Cross Exploration NL (1988) 165 CLR 268; [1988] HCA 13
- Gamser v The Nominal Defendant (1977) 136 CLR 145
- General Steel Industries Inc v Commissioner for Railways (NSW) (1964) 112 CLR 125; [1964] HCA 69
- Goodwin v Southern Tablelands Finance Co Pty Ltd (1968) 42 ALJR 309
- Mango Boulevard v Spencer [2010] QCA 207
- Manley Estates Ltd v Benedek [1941] 1 All ER 248,
- National Australia Bank Ltd v Viziteu [2017] NSWSC 1125
- Pearl Bay Corp Pty Ltd v Lodur Pty Ltd (2001) 19 ACLC 982; [2000] WASC 315