Federal Court of Australia Amirbeaggi as trustee of the bankrupt estate of John Mamdouh Hanna v Kamel (No 3) [2020] FCA 1202 File number: NSD 1722 of 2019 Judgment of: YATES J Date of judgment: 20 August 2020 Catchwords: PRACTICE AND PROCEDURE – application to set aside default judgment under r 39.05 of the Federal Court Rules 2011 (Cth) – where judgment entered against a cross-respondent who was on notice that application for default judgment would be made – whether setting aside is in the interests of justice on the basis of an arguable defence Legislation: Federal Court Rules 2011 (Cth) rr 5.23(2)(c), 39.05(a) Federal Court of Australia Act 1976 (Cth) s 37M(3) Cases cited: Amirbeaggi as trustee of the bankrupt estate of John Mamdouh Hanna v Kamel [2019] FCA 1965 Amirbeaggi as trustee of the bankrupt estate of John Mamdouh Hanna v Kamel (No 2) [2020] FCA 50 Codelfa Construction Pty Ltd v State Rail Authority of NSW (1982) 149 CLR 337 Deputy Commissioner of Taxation v Hua Wang Bank Berhad (No 2) [2010] FCA 1296; 81 ATR 40 Dunwoodie v Teachers Mutual Bank Ltd [2014] NSWCA 24 Hans Pet Constructions Pty Limited v Cassar [2009] NSWCA 230 Taylor v Taylor (1979) 143 CLR 1 Vacuum Oil Pty Co. Ltd v Stockdale (1942) 42 SR(NSW) 239 Registry: New South Wales Division: General Division National Practice Area: Commercial and Corporations Sub-area: General and Personal Insolvency Number of paragraphs: 49 Date of hearing: 13 August 2020 Counsel for the Third Respondent/Cross-Claimant: Mr V Bedrossian Solicitor for the Third Respondent/Cross-Claimant: SKM Lawyers Solicitor for the Second Cross-Respondent: Mr A J Patterson of Edmund Khoury Solicitors ORDERS NSD 1722 of 2019 BETWEEN: SHABNAM AMIRBEAGGI AS TRUSTEE OF THE BANKRUPT ESTATE OF JOHN MAMDOUH HANNA Applicant AND: MINA ROUSAFLAH YOUSSEF KAMEL First Respondent REGISTRAR GENERAL OF NSW Second Respondent HEDRA FAYEZ NASHED ABDALLA ABDALLA Third Respondent AND BETWEEN: HEDRA FAYEZ NASHED ABDALLA ABDALLA Cross-Claimant AND: SHABNAM AMIRBEAGGI AS TRUSTEE OF THE BANKRUPT ESTATE OF JOHN MAMDOUH HANNA (and another named in the Schedule) First Cross-Respondent order made by: YATES J DATE OF ORDER: 20 AUGUST 2020 THE COURT ORDERS THAT: 1. Order 1 of the orders made on 21 November 2019 be set aside. 2. The second cross-respondent file a defence to the cross-claim within 21 days. 3. The cross-claim be listed for case management at 9.30 am on 14 September 2020. Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011. REASONS FOR JUDGMENT YATES J: Introduction 1 On 21 November 2019, judgment was given against the present applicant, Jarvis J Pty Ltd (Jarvis J), for the relief claimed in a cross-claim filed by the present respondent, Hedra Fayez Nashed Abdalla, in proceedings in which the Court's bankruptcy jurisdiction has been invoked: Amirbeaggi as trustee of the bankrupt estate of John Mamdouh Hanna v Kamel [2019] FCA 1965 (Amirbeaggi). Judgment was given pursuant to r 5.23(2)(c) of the Federal Court Rules 2011 (Cth) (FCR). 2 Mr Abdalla's cross-claim against Jarvis J concerned the transfer of real property contained in folio identifier 17/SP93648, being a townhouse at 7 Altair Place, Hinchinbrook in New South Wales (the Lot 17 property). Mr Abdalla and John Mamdouh Hanna were the registered proprietors of the Lot 17 property as tenants in common in equal shares. 3 On 11 July 2017, a sequestration order was made against Mr Hanna and the first cross-respondent, Shabnam Amirbeaggi, was appointed as Mr Hanna's trustee in bankruptcy. 4 In about January 2018, Jarvis J obtained title to the whole of the Lot 17 property pursuant to the registration of a real property transfer (dealing number AN40118X). The transfer designated the sum of $650,000 as the consideration paid in respect of Jarvis J's acquisition. 5 On 21 November 2019, the Court made the following orders: 1. Judgment be given for the cross-claimant against the second cross-respondent in the sum of $325,000.00, together with pre-judgment interest thereon (calculated from 17 January 2018 to 21 November 2019) in the sum of $32,591.27 pursuant to s 51A of the Federal Court of Australia Act 1976 (Cth). 2. By 5 December 2019, the cross-claimant file and serve any affidavits in support of any lump sum costs order he may seek. 3. By 18 December 2019, the second cross-respondent file and serve any affidavits in response. 4. By 24 December 2019, the cross-claimant file and serve any affidavits in reply. 5. The question of whether a lump sum costs order should be made and, if appropriate to be made, the amount of those costs, be determined on the papers. 6. By 28 November 2019, the cross-claimant serve a copy of these orders on the second cross-respondent. 6 On 4 February 2020, an order was made that Jarvis J pay Mr Abdalla's costs in the sum of $5,880.50: Amirbeaggi as trustee of the bankrupt estate of John Mamdouh Hanna v Kamel (No 2) [2020] FCA 50. 7 On 16 June 2020, Jarvis J filed an interim application seeking the following orders: 1. That the default judgment, interest and costs entered in proceedings NSD 1722 of 2019 against the Second Cross-Respondent Jarvis J Pty Ltd (ACN 620 436 571) be set aside on the ground of irregularity, against good faith and mistake, pursuant to Rule 36 UCPR and Federal Court Rules 2011. Rule 10.72. 2. That the default judgment, interest and costs orders be stayed on the filing of this application. 3. That the Cross-Claimant Hedra Fayez Nashed Abdealla pay the costs of this application on an indemnity basis. 4. That the proceedings against the Second Cross-Respondent be dismissed. 5. Such further or other order as the court seems fit. (Errors in original.) 8 It is not clear to me how it can be said that the judgment given on 21 November 2019 was irregular or against good faith, or as one given in mistake. Further, neither the Uniform Civil Procedure Rules (NSW) nor r 10.72 FCR have any relevant application. At the hearing, Jarvis J's solicitor, Mr Patterson, invoked, at the invitation of Mr Abdalla's counsel (Mr Bedrossian), r 39.05(a) FCR as the basis for setting aside the judgment that had been given: The Court may vary or set aside a judgment or order after it has been entered if: (a) it was made in the absence of a party; … 9 Quite apart from this rule, the Court has an inherent power to set aside an order made in the absence of a party: see Taylor v Taylor (1979) 143 CLR 1 at 8. 10 Whether the power to set aside an order given in the absence of a party should be exercised in a given case is a matter of judicial discretion. In the context of an application to set aside a default judgment, the exercise of that discretion normally involves consideration of two questions. The first question is whether the party seeking to set aside the default judgment has provided a satisfactory explanation for that party's absence given that, if a party has notice of proceedings and an opportunity to appear, but has not done so, that party should be bound by the decision that is given: Deputy Commissioner of Taxation v Hua Wang Bank Berhad (No 2) [2010] FCA 1296; 81 ATR 40 at [10]. 11 At the time the default judgment was given against Jarvis J, I was not only satisfied that it had been served with Mr Abdalla's interlocutory application seeking default judgment but also that, from 13 November 2019, it was on notice that Mr Abdalla would press for default judgment at the return date of that interlocutory application on 21 November 2019: Amirbeaggi at [8]. On the evidence now before me, I have no reason to change that view. I shall return to consider further facts and circumstances concerning service of the interlocutory application seeking default judgment. 12 The second question is whether the party seeking to set aside the default judgment has demonstrated an arguable defence to the claim in respect of which the judgment has been given. In this context, "arguable" means a defence of such merit that, in the interests of justice, the default judgment should not be allowed to stand: Dunwoodie v Teachers Mutual Bank Ltd [2014] NSWCA 24 at [43]. The obvious rationale for this inquiry is to ascertain whether any useful purpose would be served by setting aside the judgment that has been given: Vacuum Oil Pty Co. Ltd v Stockdale (1942) 42 SR (NSW) 239 at 243. This inquiry does not involve the Court embarking on a hearing of the full merits of the defence that is raised. However, the defence, as then advanced, must be supported by evidence that is appropriate to persuade the Court that it is sufficiently meritorious and is raised bona fide. 13 In exercising the discretion, the Court must be mindful of the requirements of s 37M(3) of the Federal Court of Australia Act 1976 (Cth), which provides that the civil practice and procedure provisions (which include the FCR) must be applied, and any power conferred by those provisions must be exercised, in a way that promotes the overarching purpose of facilitating the just resolution of disputes according to law as quickly, inexpensively and efficiently as possible. Provisions such as s 37M(3) have brought about "a new statutory balance among the various factors in litigation including court and party efficiency and the delivery of individual justice": Hans Pet Constructions Pty Limited v Cassar [2009] NSWCA 230 at [36]. The evidence 14 The following affidavits were read by Jarvis J: (a) Tina He, sworn 16 June 2020; (b) Eman Kamel Shonoda, sworn 16 June 2020; (c) Anthony John Hanna, sworn 16 June 2020; and (d) Eman Kamel Shonoda, sworn 16 July 2020 (in reply). 15 Ms Shonoda is Mr Hanna's wife. Anthony Hanna is Mr Hanna's son. 16 The following affidavits were read by Mr Abdalla: (a) Sherine Metry, sworn 9 July 2020; (b) Hedra Fayez Nashed Abdalla, sworn 9 July 2020; and (c) Douglas O'Connor, sworn 15 November 2019 (the affidavit of service on Jarvis J of the interlocutory application seeking default judgment). 17 A substantial number of objections were taken to the affidavits read by Jarvis J, principally in relation to statements that were either conclusory or mere assertions without the primary facts being given, or that were simply argumentative propositions. In the main, these objections were upheld and the relevant parts of the affidavits were rejected or not read. No objections were taken to the affidavits read by Mr Abdalla. The explanation for absence 18 Ms He is the sole director and secretary of Jarvis J. She has held those offices since 2 May 2019. Since that date, Jarvis J's registered address and principal place of business has been her residential address in Hurstville, New South Wales (the Hurstville premises). This is also Ms He's residential address. Ms He's evidence is that she lives at the Hurstville premises with her elderly parents, who are Chinese. They do not speak English. They usually leave mail delivered to the premises on a table. 19 Ms He said that she was not aware of the default judgment given against Jarvis J until 5 June 2020, when she was given "papers" in relation to proceedings commenced in the Supreme Court of New South Wales by Mr Abdalla against Jarvis J (2020/00024822). However, she acknowledges that throughout 2019 she received numerous letters from SKM Lawyers, who are Mr Abdalla's solicitors. She said that she thought these were to do with Mr Hanna's bankruptcy. (Ms He used the name John Mhanna, but there is no dispute about the fact that Mhanna is a surname used by Mr Hanna and that, in using the name John Mhanna, Ms He was referring to Mr Hanna). 20 Ms He said that each time she got a letter from SKM Lawyers addressed to Jarvis J she would ring Mr Hanna and ask him what it was about. Mr Hanna's reply was to tell Ms He not to worry about it and that "all will be fixed up in a few months". This evidence reveals that Ms He received a number of letters from SKM Lawyers in respect of Jarvis J in 2019. 21 Ms He also said that she had had dinner with Mr Hanna and Ms Shonoda in March 2019 at which time they assured her that "nothing happening was anything to do with Jarvis J Pty Ltd". 22 There is nothing in Ms He's affidavit as to how she came to be the director and secretary of Jarvis J. Indeed, her affidavit is conspicuously scant on what her actual involvement with Jarvis J was and is, beyond her holding the two offices of director and secretary. It is silent on what Jarvis J actually does. Curiously, the conversation Ms He said she had with Mr Hanna and Ms Shonoda in March 2019 was before her appointment as the director and secretary of the company. Taken with Ms He's other evidence, this suggests that she accepted the offices of director and secretary at Mr Hanna's and/or Ms Shonoda's bidding. 23 It is tolerably clear that Ms He deferred to Mr Hanna and, perhaps, Ms Shonoda on matters concerning the conduct of Jarvis J's affairs, and acted according to their instructions. This is evident from the following statement in Ms He's affidavit: Had I known about any of this, and not relied on Mhanna I would have instructed solicitor to file a Defence on behalf of Jarvis J Pty Ltd. 24 Ms He's reference to "any of this" is to Mr Abdalla's interlocutory application for default judgment against Jarvis J and the affidavits relied on in support of that application. Importantly, Ms He's statement that she would have instructed a solicitor to file a defence is expressed entirely conditionally. She makes clear that she would only have given those instructions had she not relied on Mr Hanna. The evidence before me leads me to conclude that, so far as the conduct of Jarvis J's affairs are concerned, Ms He always relied on Mr Hanna and, perhaps, Ms Shonoda. Conspicuously, Mr Hanna has not given evidence in support of the present application. 25 Mr O'Connor's affidavit of service is to the effect that, on 13 November 2019, he served a letter dated 12 November 2019 from SKM Lawyers, the interlocutory application seeking default judgment against Jarvis J, and the principal affidavit in support of that application (Ms Metry's affidavit sworn 11 November 2019), by handing those documents to a male occupant at the Hurstville premises. Mr O'Connor said that he asked the male occupant whether he was able to accept service of the documents on behalf of Jarvis J and that the male occupant replied that he was able to accept service. There has been no challenge to this evidence and I see no reason why I should not accept it. 26 The letter from SKM Lawyers served on 13 November 2019 is addressed to Jarvis J and refers to Mr Abdalla as the cross-claimant in these proceedings. The letter identifies the interlocutory application and Ms Metry's affidavit of 11 November 2019, and states: Please be advised that the matter is listed for Directions Hearing before Justice Yates at 9.30am on 21 November 2019. We intend to seek the orders in the interlocutory process on that day. Please do not hesitate to contact that (sic) the writer, should you have any queries. (Underlining in original.) 27 The interlocutory application served on 13 November 2019 shows that Mr Abdalla was seeking an order that Jarvis J pay him $320,000 plus interest. 28 Ms Metry's affidavit of 11 November 2019 refers to the service of the cross-claim on Jarvis J on 2 July 2019 and the fact that Jarvis J had not filed any defence to the cross-claim or engaged in any communication, written or otherwise, with SKM Lawyers. The affidavit also refers to the fact that, on 17 January 2018, the property was transferred to Jarvis J for consideration expressed to be $650,000 and that Mr Abdalla had not received any payment in respect of his interest in the property. 29 I am satisfied that even the most cursory inspection of the documents served on 13 November 2019 would have alerted the reader to the fact that Mr Abdalla had commenced proceedings against Jarvis J and that, on 21 November 2019, he would be seeking an order against Jarvis J that it pay him the sum of $320,000 plus interest. The reader would also know that the reason for seeking that order was that the property had been transferred to Jarvis J for $650,000 without any payment having been made to Mr Abdalla. 30 Before departing from Ms He's evidence, I should also record that, in her affidavit, she did produce a copy of a letter from SKM Lawyers to Jarvis J dated 2 July 2019. Although acknowledging that she received numerous letters from SKM Lawyers in that year (in context, this could only mean letters addressed to Jarvis J), she says that the letter dated 2 July 2019 is the only one she could find. What this implies is that, although Ms He received legal correspondence addressed to Jarvis J at the Hurstville premises, generally Ms He did not keep this correspondence as part of the company's records. Further, the letter dated 2 July 2019 was the correspondence under which Jarvis J was served with Mr Abdalla's cross-claim against it. 31 I am not satisfied that a satisfactory explanation has been given for Jarvis J's absence at the time that Mr Abdalla's interlocutory application for default judgment was heard and judgment given. I place little weight on Ms He's statement that she did not know about the application for default judgment. As I have said, she appears to have deferred to Mr Hanna and, perhaps, Ms Shonoda on matters concerning the conduct of Jarvis J's affairs. I have no confidence that, as the director and secretary of Jarvis J, she had any active intellectual engagement with any of the correspondence from SKM Lawyers delivered to the Hurstville premises beyond contacting Mr Hanna and acting on his assurances that she did not have to do anything in respect of that correspondence. On balance, I am persuaded that this is what happened in relation to the letter and enclosed documents served at the Hurstville premises on 13 November 2019. I am satisfied, therefore, that Jarvis J was afforded a clear opportunity to respond to the interlocutory application for default judgment but chose to do nothing about it. In the general run of case, this finding would stand as sufficient reason to refuse the application to set aside judgment. The merits of the defence 32 Before dealing with the defence that Jarvis J wishes to raise, it is appropriate that I say something further about how the Lot 17 property came to be transferred to it. 33 As I have noted, the property was transferred to Jarvis J pursuant to registered dealing AN40118X. The evidence now before me includes oral statements made by Mr Hanna whilst attending a hearing of proceedings in the Supreme Court of New South Wales. At that time, Mr Hanna said that he not only affixed his own signature to the form of transfer but also purported to affix Mr Abdalla's signature. This evidence is consistent with Mr Abdalla's pleaded cross-claim against Jarvis J on which the default judgment was given. Further, I observe that these acts were done by Mr Hanna in January 2018, after the commencement of his bankruptcy. Mr Hanna also said that he organised and directed the transfer of the property from Jarvis J to his son, Anthony Hanna, for no consideration. Jarvis J does not challenge the fact that Mr Hanna made these statements. 34 Bearing this in mind, I now turn to the only defence that Jarvis J seeks to raise in respect of the claim on which default judgment was given. In a nutshell, Jarvis J contends that, at the time of the transfer of the Lot 17 property to Jarvis J, Mr Hanna and Mr Abdalla had no interest in the property but that Ms Shonoda did and that Ms Shonoda directed the property to be transferred to Jarvis J for no consideration. As Jarvis J put the argument in submissions, at the time of the transfer of the property to it, Mr Abdalla had no interest to claim. Further, Jarvis J says that Ms Shonoda directed Jarvis J to transfer the property to Anthony Hanna, for no consideration. Jarvis J goes even further to say, somewhat curiously, that it never had any legal or equitable interest in the property. 35 Jarvis J's defence is based on recitals in an Equitable Mortgage executed as a deed on 4 April 2017 by Mr Hanna, Mr Abdalla and Ms Shonoda: A. Mhanna and Abdalla are the proprietors of the following properties which are held by them as tenants in common: i. The property located at 16/7 Altair Place, Hinchinbrook in the State of New South Wales, being Folio Identifier 17/SP93648 (hereinafter "17/SP93648") ii. The property located at 21/7 Altair Place, Hinchinbrook in the State of New South Wales being Folio Identifier 22/SP93648 (hereinafter "22/SP93648") iii. The property located at 328 Great Western Highway, Lawson in the State of New South Wales, being Folio Identifier 34/116686 (hereinafter "34/116686") (Collectively referred to hereinafter as "the Properties") B. Mhanna agrees to transfer his part interest in the properties to the First Mortgagor for nil consideration. C. Abdalla agrees to transfer his part interest in the properties to the First Mortgagor for a total consideration in the sum of $247,356.74 (hereinafter referred to as "the Advance"). · D. The First Mortgagor is therefore hereby indebted to Abdalla in the sum of the Advance which is due and payable pursuant to the 'Terms of Repayment' set out herein. E. For the purposes of this Agreement, Abdalla is also referred to as "the Mortgagee". F. The Terms of Repayment of the Advance, which will be payable by the First and Second Mortgagor are as follows: i. The first instalment in the sum of $112,356.74 is payable on the date six (6) weeks from the date of this agreement. ii. The second instalment in the sum of $135,000.00 is payable on the date twelve (12) weeks from the date of this agreement. G. For the purpose of securing the Advance, the First Mortgagor has agreed to execute this agreement and thereby consent to the form of security set out hereunder. H. The First Mortgagor hereby consents to the security in the nature of an unregistered mortgage and registered by Caveat in favour of the Mortgagee over the following properties to which the First Mortgagor and Guarantor is the sole registered proprietor thereof: i. The property located at 8 Stynes Avenue, Kellyville in the State of New South Wales, being Folio Identifier 31/1166499 ii. The property located at 17 Bresnihan Avenue, Kellyville in the State of New South Wales, being Folio Identifier 43/1166499 (Collectively referred to hereinafter as "the Security") I. The First Mortgagor and Guarantor hereby consents to the registering of Caveats over the Security by the Mortgagee. J. Upon the Mortgagee banking and receiving clear funds of the second instalment and any interest if any payable, he shall hand to the Mortgagor a duly executed Withdrawal of Caveat, in registrable form. 36 Jarvis J submits that recitals A, B and C in particular show that Ms Shonoda was the equitable owner of the property. The Lot 17 property is the property referred to in recital A(i). 37 In support of this defence, Jarvis J points to a letter from SKM Lawyers to Mr Hanna and Ms Shonoda dated 19 February 2018. This letter refers to the agreement by Mr Hanna and Mr Abdalla to transfer their interests in the Lot 17 property and the other properties to Ms Shonoda for $247,356.74, and complains of breaches of the deed, in particular the unauthorised transfer of the property to Jarvis J and to the fact that monies are outstanding under the deed. The letter states that $35,356.74 remained outstanding to Mr Abdalla under the deed, as well as an amount of $15,000 said to be for loan repayments in respect of a property at 328 Great Western Highway, Lawson in New South Wales (the Lawson property): as to this property, see recital A(iii) in the deed. The letter demands that the breaches be remedied. 38 The execution of the Equitable Mortgage must be seen against the background of the business relationship between Mr Hanna and Mr Abdalla. 39 The uncontradicted evidence is that Mr Hanna and Mr Abdalla entered into an arrangement (referred to by Mr Abdalla as a partnership) to develop eight townhouses at 7 Altair Place, Hinchinbrook (the Hinchinbrook development), which included the Lot 17 property. Mr Hanna and Mr Abdalla also acquired the Lawson property, which they intended to develop. There seems to be no contest that Mr Hanna and Mr Abdalla each contributed funds for the Hinchinbrook development, with Mr Abdalla contributing more than Mr Hanna, requiring Mr Hanna to reimburse Mr Abdalla for the funds he (Mr Abdalla) provided in excess of what should have been equal contributions by the two developers. Following completion of the Hinchinbrook development, four townhouses were sold to repay a bank loan that had been provided for the development. Four townhouses remained, which continued to be owned by Mr Hanna and Mr Abdalla as tenants in common in equal shares, including the Lot 17 property. 40 In 2017, Mr Hanna and Mr Abdalla agreed to separate as business partners. Mr Abdalla's evidence is that he and Mr Hanna came to an arrangement that Mr Abdalla would transfer his ownership in two of the townhouses to Mr Hanna and that Mr Hanna would transfer his interest in two of the townhouses to Mr Abdalla, so that the four townhouses would be shared between them. However, as Mr Abdalla explained in his affidavit, this arrangement did not come into effect. 41 I now return to the Equitable Mortgage. Although the recitals in the deed refer to an agreement having been reached for the transfer of Mr Hanna's and Mr Abdalla's interests in the properties to Ms Shonoda, no document creating any legally enforceable obligation in that regard appears to exist. To be clear, Jarvis J did not adduce any such document or even contend that such a document exists. The deed itself contains no operative provisions creating any legally enforceable obligation to make those transfers. All the deed purports to do is to create debt repayment obligations and security interests in certain other properties to secure the payments due to Mr Abdalla under the deed which, of course, included a payment of $247,356.74 for the transfer of his property interests. As events transpired, there was no transfer of these property interests but it is clear from the letter from SKM Lawyers dated 19 February 2018 that part payment of the sum of $247,356.74 was made to Mr Abdalla, leaving a balance of $35,356.74 owing. 42 Mr Abdalla submits that there is no documentary evidence of any binding agreement between himself, Mr Hanna and Ms Shonoda to the effect of recitals A, B and C in the deed. He submits that the recitals themselves have no binding effect; they simply refer to an intention that there be certain property transfers. 43 Mr Abdalla also calls in aid evidence given by Ms Metry in her affidavit of 9 July 2020 in which she says that she drafted the deed and that she never intended the recitals to operate as a comprehensive summary of the entire agreement between Mr Hanna and Mr Abdalla. Ms Metry also said that the payment of $247,356.74 referred to in the deed was "quite separate" to the transfer of properties between Mr Hanna and Mr Abdalla which, as I have already said at [40] above, never came into effect. Ms Metry said: To the extent that I recorded a reference, in the Recitals to the Equitable Mortgage, to the amount of 4274K, it was simply for the purpose of securing the debt, in the event that Mr Hanna Snr transferred properties to Ms Shonoda (his wife) and it was never in an identification of the full terms of the agreement in respect to the transfer of the properties. 44 Although no objection was taken to Ms Metry's affidavit, I place no weight on her subjective intention in drafting the deed. The terms of the deed are perfectly clear. It would be an error on my part to construe the deed by reference to the drafter's subjective intentions: Codelfa Construction Pty Ltd v State Rail Authority of NSW (1982) 149 CLR 337 at 352. 45 Whilst I see force in Mr Abdalla's submission that the recitals in the deed do not themselves create any binding agreement by Mr Abdalla to transfer his interests in the properties to Ms Shonoda, this is not a complete answer to the defence that Jarvis J seeks to raise. The recitals refer to an agreement to transfer Mr Abdalla's interest in the properties, which is confirmed by the letter from SKM Lawyers dated 19 February 2018. Consistently with the recitals, that letter also stands as evidence that Mr Abdalla agreed to accept the sum of $247,356.74 as consideration for the transfers and, further, that there were, arguably, acts of part performance of that agreement by payments made to Mr Abdalla pursuant to the deed. This, in turn, supports Jarvis J's claim that Ms Shonoda had acquired an equitable interest in the properties concerned, including the Lot 17 property. Whether or not such an interest had been acquired is, obviously, a question that can only be determined at a final hearing when all the relevant evidence is before the Court. 46 If Jarvis J's contention be correct, I do not think it is necessarily gainsaid by the fact that Mr Abdalla's interests (or, indeed, Mr Hanna's interests) were not transferred directly to Ms Shonoda. Nor do I think it is necessarily gainsaid by the circumstances in which the Lot 17 property came to be transferred to Jarvis J. The question is whether, at the time of the transfer to Jarvis J, Mr Abdalla had a proprietary interest in the Lot 17 property entitling him to claim $325,000 by reference to the consideration expressed in registered dealing AN40118X, together with pre-judgment interest thereon. 47 Mr Abdalla also submits that he would be prejudiced if the default judgment were to be set aside because he has subsequently commenced further proceedings in the Supreme Court of New South Wales in relation to the Lot 17 property and incurred costs in relation to those proceedings. That may be so. But, as I understand it, those proceedings have been taken as a step to obtaining payment of the amount of the default judgment. If it be otherwise appropriate to set aside the default judgment, I do not accept that Jarvis J should be denied the opportunity to advance an arguable defence to the cross-claim simply because those costs have been incurred to seek, in effect, a means of enforcing the default judgment. Conclusions and disposition 48 I am satisfied that Jarvis J has established an arguable defence to Mr Abdalla's cross-claim of sufficient merit that it would be in the interests of justice to set aside the default judgment given on 21 November 2019, even though I am not persuaded that Jarvis J has provided an adequate explanation for its absence at the hearing on that day or, indeed, an adequate explanation for the other defaults relied on when default judgment was sought. As I have said, in the normal run of case, the absence of an adequate explanation would be fatal to an application to set aside a default judgment. However, I am not persuaded that the interests of justice would be served in this case by denying Jarvis J the opportunity to have its defence adjudicated upon according to its merits, for that reason alone. 49 For these reasons, I will set aside Order 1 made on 21 November 2019. Given Jarvis J's conduct in this matter to date, I see no reason to set aside the order for costs made on 4 February 2020. Further, for the same reason, Jarvis J is to pay Mr Abdalla's costs of the present application, even though it has been successful in setting aside the default judgment. I will order that Jarvis J file a defence to the cross-claim within 21 days and list the cross-claim for case management at 9.30 am on 14 September 2020. I certify that the preceding forty-nine (49) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Justice Yates. Associate: Dated: 20 August 2020 SCHEDULE OF PARTIES NSD 1722 of 2019 Cross-Respondents Second Cross-Respondent JARVIS J PTY LTD