Default judgement
Setting aside a default judgement is not as straightforward as many might think. It requires the defendant to persuade the court of many things.
The principles applicable for setting aside a default judgment were stated by Hislop J in Hamafam Pty Limited & Ors v Saadullah [2007] NSWSC 818 at [7] as follows:
“(a) Whether the defendant has shown a satisfactory explanation for the delay in filing a defence or moving to set aside the judgment.
(b) Whether the default judgment was obtained without notice to the defendant.
(c) Whether the proposed defence is asserted bona fide.
(d) Whether, if the judgment were set aside, prejudice would be occasioned to the plaintiffs.
(e) Whether the proposed defence presents an arguable or triable issue.
(f) Whether it would be futile to set aside the judgment.”
The question of the existence of a bona fide defence and a triable issue should be considered together; GKQ Mortgages Pty Ltd v Maureen Pedersen [2010] NSWSC 230.
Such applications are supported, or should be, by affidavit evidence addressing the above criteria. The affidavit must be made by the defendant. Not by a solicitor on instructions and not by an officer of some large corporation; but by the defendant personally; see Sharples v. Northern Territory of Australia (1988) 55 NTR 35 [1988] NTSC 20.
‘I do not accept that the fact that the defendant is a large corporation makes any difference to the general rule. If a plaintiff has regularly obtained judgment he is entitled to that judgment. He is entitled to be assured by somebody who is sufficiently personally concerned in that defence to make an affidavit concerning the details of that defence [and] the events that have occurred ‘
Further the affidavit has to be of substance. ‘It is not sufficient to discharge the onus to simply exhibit a copy of a defence said to be intended to be filed to an affidavit’; Middleton & Anor v. Laurel Springs Management P/L[2001] QDC 80 @ [14]. Thus unattributable hearsay is not acceptable.
In Monkton v Stephenson [2011] NSWSC 67 the court made it quite clear that the applicant must set out the nature of the evidence to be called.
Mr Monkton’s affidavit did not contain any indication as to the nature of any evidence proposed to be called to support the proposed defence. [37]
The affidavit did not provide any factual sub-stratum for the defence. The defence simply constituted denials of the elements constituting [the plaintiff’s] cause of action. [72].
Often insurers claim some sort of breakdown in communication as an excuse. It does not follow that an application will thus be successful. In Borowiak v Hobbs [2006] NSWSC 1089 the court upheld a default judgment where the amount was small [in that case $28,000] and the insurer was on notice and messed up.
Special rules apply to solicitors and in the absence of demonstrated significant prejudice a party will not have to bear the consequences of the neglect of his solicitor, Langanis v. Roberts [1993] SASC 4043. Of course the exercise of such discretion does not arise until the threshold tests have been considered, Langanis v. Roberts [1993] SASC 4043.
One aspect of prejudice is sending the plaintiff back to the starting gate. And the award of costs is not per se a remedy. Lord Denning MR, for example, in Allen v Sir Alfred McAlpine & Sons Ltd [1968] 2 QB 229 at 245 countered the applicant’s submission opposing the strike out of an action without trial for time default, with this retort:
“To this there is a short answer. The delay of justice is a denial of justice. Magna Carta will have none of it. ‘To no one will we deny or delay right or justice’ [Magna Carta, ch 40]. All through the years men have protested at the law’s delay and counted it as a grievous wrong, hard to bear. Shakespeare ranks it among the whips and scorns of time [Hamlet, Act III, sc 1]. Dickens tells how it exhausts finances, patience, courage, hope [Bleak House, Ch 1].
In Szczygiel v Peeku Holdings [2006] NSWSC 73 Campbell J in a more modern context spoke in similar vein.
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The application to set aside the judgment is made under Rule 36.16 of the Uniform Civil Procedure Rules 2005. The application of that Rule needs to be made in the context of other provisions of the Civil Procedure Act 2005. Section 56 provides that the overriding purpose of the Act and of the Rules of Court in their application to civil proceedings is to facilitate the just, quick and cheap resolution of the real issues in the proceedings. The Court is required to give effect to that overriding purpose in exercising any power given to it by the Act. Section 57 sets out multiple purposes which the Court is to have regard to in furthering the overriding purpose set out in section 56. Those multiple purposes include the efficient disposal of the business of the Court, the efficient use of available judicial and administrative resources, and the timely disposal of the proceedings, and all other proceedings in the Court, at a cost affordable by the respective parties. [6-9]
Defendants, and their insurers, often claim relief because the originating process was not received usually because the claim was posted. Sometimes this excuse is used if documents are sent from the insurer to their solicitors. A bland denial is never good enough and evidence is required to overcome the presumption of Sec 160 Evidence Act.
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160 Postal articles
(1) It is presumed (unless evidence sufficient to raise doubt about the presumption is adduced) that a postal article sent by prepaid post addressed to a person at a specified address in Australia or in an external Territory was received at that address on the fourth working day after having been posted.
No evidence was called by the defendants as to the existence of a system for handling or dealing with postage, and in that context, a blanket denial of receipt is insufficient to displace the presumption enabled by s 160 of the Evidence Act 1995. An onus lies on the defendants to call cogent evidence on such matters rather than simply contending that the document was not received: Tsoukatos v Mustafa [2007] NSWSC 614 at [40] per Hall J. Unexplained evidence of non-receipt does not in this case constitute necessary or sufficient doubt to displace the statutory presumption of delivery to the designated address: Randhawa v Serrato [2009] NSWSC 170 at [19] per Hammerschlag J. TQM Design & Construct Pty Ltd v Romeo [2011] NSWDC 143 (28 September 2011) @ [47].
Similarly in Leveraged Equities Limited v Goodridge [2011] FCAFC 3 (18 January 2011) the Federal Court considered the similar section of the commonwealth act
Importantly, his Honour accepted … evidence of a “detailed and generally reliable system” for the despatch of important documents <and> there was no evidence that any correspondence had been returned …. Second, his Honour found that Mr Goodridge’s files “were not always in proper order.” The presumption is to be made unless evidence sufficient to raise doubt about the presumption is adduced. Submissions that systems sometimes fail and that the system did not operate as expected is ‘not evidence that fell within to sec 160’.
So for defendants setting aside a judgement entered up by default is no walk in the park. Such applications require quite a few details and some supporting evidence.