Supreme Court New South Wales Medium Neutral Citation: Bhundia v Sommers & Neylon (No.2) [2020] NSWSC 1668 Hearing dates: 28 October 2020; 16 November 2020 Date of orders: 24 November 2020 Decision date: 24 November 2020 Jurisdiction: Common Law Before: Bellew J Decision: (1) The notice of motion filed by the first defendant is dismissed. (2) The notice of motion filed by the second defendant is dismissed. (3) I reserve the question of costs in respect of each motion. (4) In the absence of agreement being reached between the parties, each party is to file written submissions as to costs within seven days, such submissions not exceeding two pages in length. (5) The proceedings as between the plaintiff and the first defendant are listed for directions before me on 7 December 2020 at 9:15am. Catchwords: PRACTICE AND PROCEDURE – Application for security for costs – Where applicant failed to file the necessary evidence detailing the costs that would be incurred – Where applicant asserted that he had "not yet engaged full legal representation" – Failure to explain the delay in bringing the application – Application dismissed PRACTICE AND PROCEDURE – Application to set aside default judgment – Failure to adequately explain the delay of eleven months in bringing the application – Failure to establish a bona fide defence – Adverse credit findings made against the applicant – Prejudice to the plaintiff – Application to set aside default judgement dismissed Legislation Cited: Civil Procedure Act 2005 (NSW) Contracts Review Act 1980 (NSW) Uniform Civil Procedure Rules 2005 (NSW) Cases Cited: Amalgamated Mining Services Pty Limited v Warman International Limited (1988) 88 ALR 63 Bank of New Zealand v Hoult (Supreme Court (Qld), 14 February 1991, unrep) Dai v Zhu [2013] NSWCA 412 Hoxton Park Residents Action Group Inc v Liverpool City Council [2012] NSWSC 1026 J & M McNamee Holdings Pty Limited v Mungerie Vale Pty Limited t/as Greenwood Group Realtors [2019] NSWCA 283 MHG Plastic Industries Pty Limited v Quality Assurance Services Pty Limited [2002] FCA 821 Willey v Synan (1935) 54 CLR 175; [1935] HCA 76 Category: Procedural and other rulings Parties: Sundip Bhundia – Plaintiff Timothy John Sommers – First Defendant Sean Patrick Neylon – Second Defendant Representation: Counsel: D Robertson – Plaintiff B Sewell (Solicitor) – First and Second Defendants Solicitors: Colin Biggers & Paisley Pty Limited – Plaintiff Sewell & Kettle Lawyers – First and Second Defendants File Number(s): 2019/227905 Publication restriction: Nil Judgment INTRODUCTION 1. Two notices of motion are before the Court for determination, namely: 1. a notice of motion filed on 28 October 2020 by Timothy John Sommers, the first defendant, which seeks orders in the following terms: 1. an order that the plaintiff provide security for the first defendant's costs in the amount of $200,000.00 by way of unconditional bank guarantee, payment into court, or otherwise to the satisfaction of the first defendant; 2. in the alternative to order 1 above, an order that the plaintiff provide security for the first defendant's costs in the amount the court considers appropriate, by way of unconditional bank guarantee, payment into court, or otherwise to the satisfaction of the first defendant; 3. an order that until the security in the preceding orders is provided, there will be a stay of the proceedings as against the first defendant; and 4. an order that costs of this application be reserved. 1. a notice of motion filed on 14 September 2020 by Sean Patrick Neylon, the second defendant, which seeks an order in the following terms: 1. Set aside the plaintiff's judgment. 1. At the commencement of the hearing an application was made by the solicitor for the first and second defendants for an adjournment of the hearing of both motions. That application was refused. [1] BACKGROUND TO THE PROCEEDINGS 1. The plaintiff's case against the first and second defendants may be summarised as follows. 2. In December 2018, each of the first and second defendants was a director of PropertyBay Holdings Pty Ltd (PropertyBay). They approached the plaintiff in that capacity with a view to obtaining a loan in the sum of approximately USD$500,000.00 to assist PropertyBay to fund the purchase of land located off the coast of North Queensland known as Dunk Island. 3. The amount of the loan was later increased, resulting in the plaintiff agreeing to lend USD$630,000.00 to PropertyBay which was required to be repaid on or before 31 January 2019, along with interest totalling USD$189,000.00. There were two written agreements between the plaintiff and PropertyBay which recorded the loan. It is the plaintiff's case that each of the first and second defendants personally guaranteed, in writing, the obligation of PropertyBay to repay the principal sum and interest. Two separate guarantees were signed by each of the first and second defendants. 4. The plaintiff's case is that PropertyBay refused to comply with a formal demand and failed to repay the principal sum and interest, and that both the first defendant and the second defendant failed to repay the principal sum and interest pursuant to the respective guarantees. PropertyBay was wound up on the plaintiff's application in July 2019. 5. The plaintiff commenced proceedings against the first and second defendants on 23 July 2019. The plaintiff's case against the first defendant is listed for hearing on 27 April 2021, with an estimate of two days. On 11 October 2019, default judgment was entered against the second defendant in the sum of $935,701.19. THE FIRST DEFENDANT'S NOTICE OF MOTION The evidence 1. The notice of motion brought by the first defendant seeking an order for security for costs was supported by his affidavit of 14 October 2020. In that affidavit, the first defendant said that the claim brought against him by the plaintiff is to be defended on the basis that the guarantees were "induced through fraud or misrepresentation". [2] The second defendant said that he had "not yet engaged full legal representation", [3] and that he had established that the plaintiff has no assets in Australia. [4] 2. The first defendant's affidavit also included the following: [5] I estimate the legal costs in this matter to be in excess of $190,000 up to and including the hearing. 1. Counsel for the plaintiff took objection to that paragraph of the affidavit, on the basis that the assertion was: 1. in the nature of an expression of expert opinion which the first defendant was not qualified to give; or 2. tantamount to a conclusion, absent any identification of the basis on which it was reached. 1. Whilst I did not regard what was stated in that paragraph as being in the nature of an expert opinion, I concluded that it amounted to nothing more than a bare assertion, absent any foundational basis. For that reason, that the paragraph was excluded. 2. The first defendant was not cross-examined on his affidavit and the plaintiff did not adduce any evidence. SUBMISSIONS OF THE PARTIES Submissions of the plaintiff 1. Counsel for the plaintiff advanced a number of submissions in support of the proposition that the order sought in the motion should not be made. 2. Firstly, counsel submitted that the application had been brought at an extremely late stage, in circumstances where the proceedings between the plaintiff and the first defendant had already been set down for hearing, and where no explanation had been provided for the delay. Counsel submitted that this was, of itself, a sufficient basis upon which to dismiss the motion. 3. Counsel further submitted that the application was entirely unsupported by any proper evidence as to the likely costs which the first defendant would incur in defending the proceedings between now and the final hearing. Counsel submitted that in these circumstances, and given the first defendant's reference to not having engaged "full representation", the Court was simply not in a position to fix security in any sum. 4. Finally, counsel submitted that the plaintiff was, in effect, in the position of a defendant, in the sense that he had been forced to commence proceedings to recover a substantial amount of money which was advanced to a company of which the first and second defendants were directors, the repayment of which they had each guaranteed. It was submitted that this was a further matter which militated against the order sought being made. Submissions of the first defendant 1. As I have previously noted, an application for an adjournment of hearing of the first defendant's motion was rejected. In the course of the hearing of that application, the first defendant's solicitor said: [6] Regarding the security for costs application, I don't think that the application as it is presently prepared has enough merit to move the Court. I don't think the affidavit is sufficient. CONSIDERATION 1. Rule 42.21(1) of the Uniform Civil Procedure Rules 2005 (NSW) (the Rules) is in the following terms: Security for costs (1) If, in any proceedings, it appears to the court on the application of a defendant-- (a) that a plaintiff is ordinarily resident outside Australia, or (b) that the address of a plaintiff is not stated or is mis-stated in his or her originating process, and there is reason to believe that the failure to state an address or the mis-statement of the address was made with intention to deceive, or (c) that, after the commencement of the proceedings, a plaintiff has changed his or her address, and there is reason to believe that the change was made by the plaintiff with a view to avoiding the consequences of the proceedings, or (d) that there is reason to believe that a plaintiff, being a corporation, will be unable to pay the costs of the defendant if ordered to do so, or (e) that a plaintiff is suing, not for his or her own benefit, but for the benefit of some other person and there is reason to believe that the plaintiff will be unable to pay the costs of the defendant if ordered to do so, or (f) that there is reason to believe that the plaintiff has divested assets with the intention of avoiding the consequences of the proceedings, the court may order the plaintiff to give such security as the court thinks fit, in such manner as the court directs, for the defendant's costs of the proceedings and that the proceedings be stayed until the security is given. 1. No submission was made as to the particular sub-paragraph(s) of r 42.21(1) upon which the first defendant relied. In circumstances where the plaintiff has filed an affidavit in the proceedings giving an address in the United Arab Emirates, I have proceeded on the basis that in bringing the application, the first defendant relied on sub-paragraph (1)(a) of r 42.21. 2. Rule 42.21(1A) sets out a non-exhaustive list of relevant considerations in the following terms: (1A) In determining whether it is appropriate to make an order that a plaintiff referred to in subrule (1) give security for costs, the court may have regard to the following matters and such other matters as it considers relevant-- (a) the prospects of success or merits of the proceedings, (b) the genuineness of the proceedings, (c) the impecuniosity of the plaintiff, (d) whether the plaintiff's impecuniosity is attributable to the defendant's conduct, (e) whether the plaintiff is effectively in the position of a defendant, (f) whether an order for security for costs would stifle the proceedings, (g) whether the proceedings involves a matter of public importance, (h) whether there has been an admission or payment in court, (i) whether delay by the plaintiff in commencing the proceedings has prejudiced the defendant, (j) the costs of the proceedings, (k) whether the security sought is proportionate to the importance and complexity of the subject matter in dispute, (l) the timing of the application for security for costs, (m) whether an order for costs made against the plaintiff would be enforceable within Australia, (n) the ease and convenience or otherwise of enforcing a New South Wales court judgment or order in the country of a non-resident plaintiff. 1. The discretion conferred on the Court to make an order for security for costs is necessarily a wide one which must obviously be exercised having regard to all of the relevant circumstances of the particular case. There is no fixed principle which warrants the making of an order simply because one or more of the grounds specified in r 42.21(1) has been established. All of the circumstances of the case must be considered. [7] 2. The first defendant, as the applicant for the order for security, bears the onus of adducing the necessary evidence to enable the Court to make the order sought. [8] It is generally accepted that in order to discharge that onus, an applicant will be required to adduce evidence from his or her solicitor setting out, in detail, a reasoned estimate of the costs, security for which is sought. 3. No such evidence has been adduced by the first defendant. The highest point that the evidence reached in this respect was paragraph 5 of the first defendant's affidavit which, for the reasons previously outlined, I excluded. Even if that evidence had been admitted, it fell substantially short of constituting the detailed estimate of costs which is required on an application of this nature. The significance of the absence of such evidence is highlighted by the fact that the first defendant stated that he "had not yet engaged full legal representation". Whatever that may actually mean, it presents an obvious difficulty in the Court making the order sought. 4. In my view, the failure of the first defendant to adduce such evidence is fatal to his application and has resulted in a failure to discharge the onus that he bears. Over and above that, there are two other factors which, in my view, support the conclusion that the first defendant's notice of motion should be dismissed. 5. The first factor is the delay in bringing the present application. As I have noted, the plaintiff commenced these proceedings in July 2019. The first defendant filed a defence in August 2019. On 17 September 2020 the proceedings between the plaintiff and the first defendant were allocated a date of 27 April 2021. The present notice of motion was not filed until 28 October 2020, some 14 months following the filing of a defence. The first defendant has adduced no evidence explaining that delay, in circumstances where timing is a relevant factor. [9] Whilst I would not necessarily accept the proposition advanced on behalf of the plaintiff that this is, of itself, a sufficient reason to dismiss the motion, it is certainly one which weighs heavily in favour of doing so. 6. The second factor is that the plaintiff's cause of action is really one in the nature of a defence arising from the conduct of the first and second defendants in not meeting their obligations under the respective guarantees. [10] That also militates against the order sought being made. [11] 7. For all of these reasons, the first defendant's motion should be dismissed. THE SECOND DEFENDANT'S NOTICE OF MOTION The affidavit evidence of the second defendant 1. The notice of motion brought by the second defendant is supported by his three affidavits dated 14 September 2020, 6 October 2020 and 27 October 2020 as well as an affidavit of his current solicitor, Mr Sewell, of 13 November 2020 (annexed to which was a defence in draft form, a further version of which was provided in the course of the hearing). [12] 2. In his affidavit of 14 September 2020 which was prepared and filed at a time when he was unrepresented, the second defendant said (inter alia) the following: 4. I recently became aware that there may be a judgement against me in this matter due to an email I received from a debt management company stating that I had bankruptcy proceedings in process. 5. I had been diagnosed with Stage 3 Cancer and have recently completed a course of Chemotherapy. 6. I believe that I have grounds for a defence in this matter and wish to fully contest the case. 1. In a subsequent affidavit of 6 October 2020, which was also prepared and filed at a time when he was unrepresented, the second defendant said: 4. I recently became aware that there may be a judgement against me personally in this matter due to an unsolicited electronic communication I received from a random personal debt management company stating that I had bankruptcy proceedings in process against me and that they could help me in defending such proceedings. This was the first time I was aware of such proceedings. 5. Sometime in the first half of 2019… I believe, I was served at the PropertyBay Limited (Company) Office Premises at Level 9, 100 William Street Darlinghurst Sydney 2011 on behalf of the Company. 6. I have never been served in these proceedings or made aware of any Bankruptcy proceedings against me. If I was served or made aware of any Bankruptcy proceedings or other such matters against me personally, I would have made my grounds for defence earlier and reacted accordingly. … 7. In 2019, I was diagnosed with Testicular – Stage 3 Cancer and had an operation to remove the Tumour – Cancer. Subsequently, the Cancer returned and in early to mid-2020. [sic] I went through an extensive Chemotherapy program with a Testicular Cancer Specialist at the Randwick Prince of Wales Cancer facility. This extensive cancer chemotherapy program causes many side effects – such as memory loss or fogginess of the Brain. 8. I am also a victim of Covid-19 where my income is significantly reduced in 2020. 1. The second defendant's third affidavit of 27 October 2020 was filed by his then solicitor, Mr Bastick, and included the following: 4. The Plaintiff has asserted that I was personally served with a Statement of Claim in respect of those proceedings on 25 July 2019 by a process server, Sal Roppolo, who is said to have attended my home address. 5. I have no recollection of having been served with the Statement of Claim in question. 6. The reason I say I have no recollection of having been served, or otherwise having received the documents is that [sic] June 2019 I was diagnosed with Testicular Cancer and told by treating doctors that I [sic] low expectation of survival. I believed I was likely to die, and as a consequence, over the weeks surrounding the diagnosis, I was unable to properly attend to my personal and business affairs. My focus was on attending to the needs, welfare and interest of my family, and devoting what remaining energy I had to fighting the diagnosis. 7. As part of my treatment I underwent several procedures, an orchidectomy on 2 July 2019, and spent four or five weeks confined to my home. I would have been recuperating at home on the date it is alleged that I was served with the Plaintiff's Statement of Claim. However over that time I was in considerable pain and not attending to business or personal affairs as I could not concentrate. … 8. Although I have no recollection of having been served personally, I was later aware the proceedings had been issued against PropertyBay Holdings Pty Ltd and that my former co-director, Timothy Sommers, was engaged in negotiations with the Plaintiff's representatives to deal with the matter and resolve the court action which been commenced. I understood the action had been filed against the company only. 9. I was entirely surprised to learn in July or August 2020 that the matter had not been resolved, and that a default judgment had been entered in respect to these proceedings, and in which I had been named as a defendant. I learnt this because I started receiving unsolicited calls from bankruptcy advisers and the like. 10. Further to my previous affidavit filed on 6 October 2020, I am anxious to have the default judgment entered against me set aside and to thereafter file a defence to the Plaintiff's claim which is listed for trial as against Mr Sommers as the First Defendant and my co-defendant, in April 2021. 11. If this application is granted, it would be my intention to fully defend the matter. I consider we have strong prospects of defeating the Plaintiff's claim on the grounds that the Plaintiff had engaged in fraudulent, unconscionable and otherwise wrongful conduct through his failure to disclose conflicts of interest, and illicit payments of commissions to 3rd parties which had not been disclosed to myself nor Mr Sommers, and other matters. 12. Further, as part of the negotiations surrounding the loan of monies by the Plaintiff, myself and Mr Sommers had been given a letter of guarantee by an investment broker, Gerard A. Farley, principal of Empire Securities Group, Pty Limited confirming that the Empire Security Group would underwrite the loan and guarantee repayment of the loan principal and interest to the Plaintiff. This undertaking by Mr Farley was a pre-requisite to the loan given by the Plaintiff. 13. Had it not been for the undertaking provided by Mr Farley referred to in Paragraph 12 above – and the comfort that provided, I would not have signed the personal guarantee agreement the subject of the Plaintiff [sic] claim. I felt pressured to do so and only did so at the inducement of Mr Farley and the Plaintiff's business advisor and consultant, Mr Timothy Ward. 14. Further, because it was over the Christmas period, and due to pressures to complete the deal, I did not have the opportunity to seek independent legal advice as to the risks involved, and otherwise entering into the guarantees. 15. If my application to have the default judgment set aside is granted, it is my intention to file a detailed defence of the plaintiff's claim in concert with my solicitors, and to take further action to join other parties, including filing cross-claims against Mr Farley, Empire Securities Group Pty Limited and other parties. The oral evidence of the second defendant 1. The second defendant was cross-examined by counsel for the plaintiff in relation to a number of issues, one of which was his recent ill health. He agreed that on 2 July 2019 he underwent surgery for testicular cancer. [13] He said that he did not undergo chemotherapy treatment in 2019, [14] and that the cancer had returned in 2020. [15] 2. He was asked about the assertion in his affidavit of 6 October 2020 [16] that "the extensive cancer chemotherapy program causes many side effects – such as memory loss or fogginess of the brain": [17] Q. So when you say in one of your affidavits that chemotherapy caused you, what you describe as "fogginess of brain", that is something you have only experienced more recently in 2020, is that correct? A. No, incorrect. The point is it was the cancer. So probably I may have made a mistake. I don't remember the terminology I used. 1. He was then asked: [18] Q. Do I take it in referring to those side effects of chemotherapy, that was not something you had experienced prior to your first round of chemotherapy some time in 2020? A. Can you repeat the question please? Q. To the extent that you refer to those side effects of chemotherapy which I have just taken you to, that was something that you only experienced in 2020 and not any time earlier than that? A. No, I experienced worse scenarios with the chemo, so yes or no; yes, it was immense but I was incapable of doing anything the day I received the news that I had testicular cancer. 1. A report of Dr Elizabeth Hovey [19] which was prepared following her review of the second defendant on 26 May 2020 confirmed that he had undergone a left orchidectomy (which I gather is surgery to remove a cancerous testicle) on 2 July 2019, and that the cancer had returned in March 2020, following which he commenced chemotherapy. A CT scan on 19 May 2020 showed improvement in his condition. The report of Dr Hovey recorded the following history provided by the second defendant at her review on 26 May 2020: He told us that he was fatigued the weekend prior to the appointment and was 'falling in and out of sleep during the day' and was actually too fatigued on the 25.5.20 to work. His energy had seemingly returned by the next day in clinic. He told us that his breathing felt subjectively 'fine' and '90-95% of normal' though his wife thought he was noticeably 'slightly puffed on exertion'. She also noted a slight cough 'which sounded as though he was clearing his throat', which occurred during the night as well is the daytime. He reported that he felt he 'hadn't done anything physical for 9 weeks as he hadn't been exercising during the chemotherapy course'. He remained painfree. He denied nausea, vomiting or problems with his bowels, but he did comment that he was experiencing taste disturbance as well is intermittent 'indigestion' and some increased belching (but no increase in flatulence). He reported 'feeling hungry' most of the time though the days of significant fatigue over the prior weekend he reported 'feeling too tired to eat'. He denied leg swelling or any each or rash. His mood improved at the same time as his energy had improved. He reported experiencing slight irritability and frustration when he was tired. He was very busy at work. 1. The second defendant was cross-examined about the contents of this report, and particularly about the recorded history: [20] Q. Mr Neylon, do you accept that you continued to work throughout your treatment for chemotherapy? A. I worked on a one or two or five per cent capacity. I kept myself busy because chemo, I stayed at home and I had to do something. So I made random phone calls, I spoke to the people that I communicate with and we did things but was I up to - I have been - even they are complaining about me right now because I wasn't-- HIS HONOUR Q. You were not asked that, Mr Neylon, please confine yourself to the question. We will get through this a lot quicker if you do? A. I did extreme minimal work to keep myself from going crazy staying at home due to the various issues that I had. ROBERTSON Q. Do you accept that you told your doctors and they recorded in this note that you had been "very busy at work"? A. Correct. Q. That was in fact the case, that you had been very busy at work throughout your chemotherapy? A. Totally not right, incorrect. Where she got that from I don't know. I asked many, many questions. I was just probably trying to keep the scenarios, like keep the doctor happy or whatever but I was not without a doubt working at any capacity but I was working to keep my own brain working. Q. Do you accept also that you did not tell your doctors that you had suffered any fogginess of brain or any memory problems as a result of your chemotherapy treatment? A. What did you say, I did not? Q. You did not tell your doctors that you had suffered fogginess of brain or any memory side effects as a result of your chemotherapy? A. I mentioned many a time or once I put diesel in my petrol car and I lost my keys and I did various things. I remember them saying that I didn't have any fogginess. I actually did. I think the report has even detailed that. 1. He was later asked: [21] Q. But it is the case that you have continued to work as a consultant throughout 2019 and 2020 subject to the time you were recuperating following surgery, is that correct? A. Well, yes. I mean what capacity is another question but anyway. Q. Well, your performance as a consultant has not suffered, is that correct? A. Oh dramatically it has, incredibly. I think the word 'consultant' is something that everyone uses lightly but they were just taking care of me, keeping me happy. I have got good friends, well, not good friends, they were actually taking care of my assets. Q. What I want to suggest to you is that you are greatly overstating any impact that your cancer treatment has had on your memory; do you accept that? A. No, I am not actually, no. It is not the memory part of it, it is actually the whole - am I allowed to answer this question? … A. Okay, the effect was just not on the memory, it was the whole thing. I was told I had cancer so therefore everything I did and everything I wanted to do I really just focused on my family and my kids and my getting healthy, that was priority number one to ten so did everything suffer, absolutely, absolutely, from memory to business to life to everything. 1. After further cross-examination counsel for the plaintiff returned to the contents of Dr Hovey's report: [22] Q. Mr Naylon [sic], these were some notes I was asking you some questions about before. Starting at about a third of the way down the page under the heading "Summary recurrent tumour seminoma", I understand a seminoma is a testicle tumour and that is what you were diagnosed with, is that correct? A. Correct. Q. So, at point 2, Mr Naylon [sic], that refers to a left orchiectomy on 2 July 2019, which I understand was surgery to remove the testicle with the tumour, is that correct? A. Correct. Q. That was the only treatment that you undertook in 2019 for your cancer at that time, is that correct? A. Correct. Q. I think you said that took your about 4-6 weeks to recover from? A. Probably longer, I would say - it to took till Christmas I would say - yeah, I was still recovering from that operation now - it says on the scans there - the answer to the question is: It was sensitive for about 4 to 6 to 8 weeks, which the - it's taken a fairly long time, fairly long time to feel better than that. I still get pain now - right now. Q. At point 4 it is stated, "There was evidence of recurrent advanced disease in March 2020", that is what you gave evidence about previously when further cancer was discovered, is that correct? A. Advanced disease - I believe so, yes, it would have been January, February, March, around that period. Q. Then at point 5, "30 March 2020 commenced BEP". I understand that is when you commenced chemotherapy, is that correct? A. Correct. Q. I take you halfway down the page, "Dr Hovey and I reviewed Sean when he returned to the clinic on 26 May 2020". I invite you to read the description, which appears on the remainder of the first page? … A. Yep, I've read the complete. Q. You have read that. You accept there that you had told the doctors, and they recorded, that you were very busy at work despite the chemotherapy that you are undertaking? A. Correct, yeah, to my capacity. Q. You accept that you did not tell the doctors that you were suffering any fogginess of mind or any other memory difficulties as a result of your chemotherapy? A. I thought I did - when I say that, I believe I did, because I needed - I blocked a few things on various subjects. Q. I suggest that you did not tell them that because that was not a symptom you were suffering? A. That's incorrect. Q. You told them that you remained pain free, is that that correct? A. In the terms - my definition of "pain free", I was not in a sustained amount of pain, wearing nappies, that sort of pain in that 4 to 6 to 8 weeks period. Then I've always had pain and even since then the scans even detailed that. I am not in the level of pain I was in within that 8-10 week period, which was phenomenal. HIS HONOUR Q. Did you tell the doctor that you remained pain free, yes or no? A. I would say no actually - I know she's written it - I don't know, I'll have to speak to her. Q. Just a moment, when you say "I would say no actually", what do you mean by that? A. I don't believe I did Judge. I honestly believe I did not because I was in pain; I honestly was. HIS HONOUR: Go on Mr Robertson. ROBERTSON Q. I take it that your condition has only improved since 26 May 2020? A. No that's not correct either, every day it's getting better, okay? Q. What is the wrong even in the proposition that your condition has continued to improve since 26 May 2020? A. Sorry, please rephrase that question, I don't understand it. Q. From the time that this report was made on 26 May 2020, do you agree that your condition has further improved since that date? A. Correct, every day I get a bit better and better. 1. The second defendant was also cross-examined about the cause of action brought by the plaintiff against him. He was asked: [23] Q. It is the case, isn't it, that on about 30 December 2018 you and Mr Sommers executed a written loan document on behalf of Property Bay Holdings; that's correct, isn't it? A. We executed a document, whether it was a loan agreement or not is a different thing. Q. Your signature was in fact witnessed by someone by the name of Susan Cooper in Chatswood, is that correct? A. Probably, yes. Q. Who is Susan Cooper? A. Susan Cooper is Tim Sommers' wife. Q. You also executed a document entitled "Loan Personal Guarantee" on about 30 September 2018; that's correct, isn't it? A. I am unsure of that one because I believe it was signed later, a week later. Q. Do you then recall that the initial loan was for $500,000 to Property Bay Holdings, US$500,000 and that on about 3 January 2019 that amount was increased to US$630,000? A. I believe those are the correct amounts. Q. It was the case that on 3 January 2019 you and Mr Sommers on behalf of Property Bay Holdings executed a new loan agreement for that increased amount; do you recall that? A. I recall doing that. I don't know if that is the correct date. Q. Do you also accept that you executed another document entitled "Loan Personal Guarantee" in respect of that increased amount of $630,000 on about 3 January 2019? A. Again, there was a document signed but I don't know if they are the correct dates. Q. You accept, don't you, that Property Bay Holdings was in fact advanced to the sum of US$630,000? A. I accept that. Q. You accept that Property Bay Holdings has never repaid that amount? A. The agreement that we believe is that once we received the funding from Empire Securities we will we [sic] pay that amount. HIS HONOUR Q. That wasn't what you were asked. You were asked whether or not you accept that it has not been repaid. Do you accept that? A. Correct, yes, I do accept that, sorry. 1. The second defendant was also cross-examined about the service of the statement of claim: [24] Q. In paragraph 5 you say, "Some time in the first half of 2019 I was served at the Property Bay office premises on behalf of the company". Do you recall that? A. Look, that is something I do recall. I can't remember it with one hundred percent validity but I recall that it was really early, like it was even late, I can't remember but I just remember seeing someone serve something in the office. So that's why I am thinking that could have been it. Q. What your evidence is today is that you didn't take any steps to find out what that document was or what relevance it had to you as a director of the company; is that your evidence? A. That's correct. I basically - I believe I did act on something but I have forgotten many things and it is not due to this situation, I just can't remember a lot of things. I would love to say I could remember that and there are some things I remember but there are some things I cannot. Q. You remember, don't you, that Mr Bhundia issued a default notice to you and Property Bay when the company failed to repay the loan amount. Do you recall getting those emails and letters? A. No. Q. You don't deny you may have repaid them, you just can't recall? A. Most likely he did but I can't remember that, okay, so I apologise to the Court but I can't remember. Q. Do you also accept that you were served with a statement of claim in this proceeding at your Kambala Road property on about 25 July 2019? A. No. That is an interesting one because I had my operation the second or third, I can't remember the exact date, but early July and I would have been in bed absolutely in pain for about four to six weeks. So the answer to that question is no, I don't remember that at all, full stop and that's what I question because I don't remember that. I would find it difficult for me to do that but that's okay, I could be wrong but I doubt it very much. Q. As I understand your evidence sitting here today you simply cannot recall one way or another, is that the case? A. No, I don't believe I was served on that date, as simple as that. I don't think I could have so the answer to your question is no, I don't recall being served or I don't believe I was served due to that was in the mid stream of the operation or the recovery period which was six to eight weeks. Q. Can I understand this; you accept that you were living at that property as at 25 July 2019, you were living at the Kambala Road property? A. Correct. Q. You accept that you were at home at the time convalescing from an operation you had three weeks earlier? A. Correct. Q. What I want to suggest to you is that on that date you were in fact served with a statement of claim in this proceeding by a licensed process server; do you accept that? A. No, I don't. I am saying it strongly because I don't remember it and I don't think I was. Q. So your evidence is you don't remember being served with it? A. I don't believe I was served with it. 1. He was later asked: [25] Q. Mr Naylon [sic], I suggest to you that at all times from the time you were served with the statement of claim in July 2019 you have been aware that these proceedings have been commenced? That is the case isn't it? A. No I wasn't - what was that date again - that day keeps changing by the sounds of it. Q. 25 July 2019, you were served with the statement of claim? A. I knew - there is no doubt I knew there was stuff going on and I was trying to not deal with it and whatever I was trying to deal with was erratic and was not normal, meaning I wasn't 100 per cent because I was dealing with what I had. That was my focus - regardless of whatever you say, that was my focus. HIS HONOUR: I do not think that answer was responsive. You had better put the question again Mr Robertson. WITNESS: I'm trying to answer. ROBERTSON Q. I will break that up. Mr Naylon [sic], I am putting to you that you were personally served with the statement of claim in this proceeding on 25 July 2019? A. That's incorrect. Q. I suggest at all times since that date you have deliberately decided to do nothing to defend these proceedings, do you accept that? A. That's incorrect and I strongly oppose your last two statements; strongly oppose them. 1. It was also put to the second defendant: [26] Q. I also want to suggest to you that the reason that you had not filed any defence in this proceedings is because you made a deliberate decision in February 2019 and following that you were going to simply ignore the plaintiff's demands for repayment of funds which you had guaranteed repayment, isn't that the case? A. No, that is incorrect, that is very incorrect. Q. I want to suggest to you that the reason you have not filed any defence into these proceedings is because you do not believe that you have any defence to Mr Bhundai's [sic] claim against you? A. That is incorrect, sir, very much so incorrect. I believe I have an enormous, a fantastic defence but I have been sick and I have been lack of funds. Q. Well, you have had several months and with the benefit of Mr Bastick's legal advice to prepare a defence before today, haven't you? A. Look, I only sort of got my act together about two to three weeks ago, whatever, a recent period. I don't think you could say months. Q. In that two to three week period you have not sought to finalise any defence to the plaintiff's claim, have you? A. We are in the process of doing such and last week or so we have gained large amounts of momentum and I believe that is something that will be-- HIS HONOUR Q. Mr Neylon, you just mentioned a moment ago something to the effect that you only got your act together, I think you said, in the last couple of weeks? A. I should say four. When I say I am feeling a bit more stronger to handle this emotionally. I know it sounds pathetic. Q. Am I correct in saying that the notice of motion which was filed by you on 14 September 2020 was a notice of motion that you prepared yourself? A. Yes-- Q. Just a moment. Did you also prepare the affidavit that was filed and dated 14 September by yourself? A. I believe so. I did two so whichever the two were. Q. Did you also prepare the affidavit of 6 October that you swore yourself? A. As I mentioned, I only did two and I think the one was 6 October and there was one later than that. So that was 6 October. The evidence of the plaintiff 1. The plaintiff read the following affidavits without objection: 1. Sal Roppolo of 26 July 2019; 2. the plaintiff of 16 March 2020; and 3. Peter John Harkin, solicitor, of 20 October 2020. 1. In his affidavit [27] Mr Roppolo said (inter alia) as follows: 4. On 25 July 2019 at 7:57pm, I served Sean Neylon with the following document(s): a. Letter from Colin Biggers & Paisley dated 24 July 2019 …; and b. Statement of Claim filed in the Supreme Court of New South Wales on 23 July 2019 between Sundip Bhundia and Timothy John Sommers & Sean Patrick Neylon, being case number 2019/227905. 5. I served the documents by personally delivering them to Sean Neylon at 76 Kampala Road, Bellevue Hill NSW 2023; 6. At the time of service I asked: "Are you Sean Neylon, the person referred to in these documents?" The male said "Yes, I am". I handed the documents to the mail. 1. The plaintiff said that on about 20 December 2018, his business associate, a Mr Tim Ward, informed him that the first and second defendants were "putting together a consortium" to purchase Dunk Island Resort in Queensland and sought to borrow approximately USD$500,000.00 as part of the funding. [28] The plaintiff told Mr Ward that he may be interested in making a short-term loan to the defendants, or to one of their companies. According to the plaintiff, Mr Ward was his only point of contact and it was Mr Ward who facilitated the negotiations between he and the defendants. At some stage during those negotiations Mr Ward told the plaintiff that the proposed borrower was PropertyBay. At that point, the plaintiff told Mr Ward that he would require a personal guarantee from each of the defendants in respect of any loan that he made to the company. 2. On 30 December 2018 the plaintiff entered into a loan agreement with PropertyBay pursuant to which he agreed to lend property by the sum of USD$500,000.00. That agreement was varied on 3 January 2019 to increase the amount of the loan to USD$630,000.00. On 31 December 2018, the second defendant signed a document headed "Loan personal guarantee". He signed a second similar document on 3 January 2019. The first of those guarantees included the following clause: In consideration of the Lender extending a loan of $500,000.00 US Dollars to Property Bay Holdings PTY Limited … The Guarantor personally agrees jointly and severally the prompt full and complete performance of any and all present and future duties, obligations and indebtedness due to the lender under the terms of the loan agreement agree to on December 30th 2018 … 1. Immediately under the second defendant's signature on each guarantee the following words appear: The Guarantor signs this agreement after having sought legal advice with regard to this guarantee and its consequences and has made the decision to proceed with the guarantee. 1. Pursuant to the loan agreement, PropertyBay was required to repay the plaintiff the principal sum plus interest on or before 31 January 2019. On the plaintiff's case, that obligation was guaranteed by the first and second defendants. [29] When the money was not repaid, the plaintiff issued a default notice to PropertyBay, and to each of the defendants. Neither PropertyBay, nor the defendants, complied with such notices. 2. The affidavit of Mr Harkin establishes that on 13 December 2019, the Official Receiver issued a Bankruptcy Notice to the second defendant. [30] An attempt was made to serve that Notice on the second defendant at premises in Kambala Road, Bellevue Hill on 18 December 2019. The process server was told the second defendant no longer resided there. [31] The plaintiff then obtained an order from the Federal Circuit Court for substituted service of the Notice, allowing for service to be effected by sending it to the email address provided by the second defendant in these proceedings. [32] On 12 May 2020, the notice was served on the second defendant by that method. [33] 3. On 30 July 2020, the plaintiff filed a Creditor's Petition against the second defendant, [34] following which the plaintiff made several unsuccessful attempts to effect personal service on the second defendant. This resulted in an order for substituted service being made by the Federal Circuit Court on 6 October 2020. The form of the proposed defence 1. The most recent version of the proposed defence is, in some respects, a confusing document, and one in which has not been drafted in accordance with the rules as to the appropriate form of pleadings. [35] For present purposes, the following observations in relation to it are relevant. 2. Firstly, paragraph 5B is in (inter alia) the following terms: … [T]he Second Defendant says that: (a) They [sic] were [sic] personally a party to the agreement, being the Loan Agreement, pursuant to a stated guarantee but deny any liability as a surety because the agreement had no express terms (being an offer of guarantee) to provide a guarantee of the loan liability; (b) The obligation to repay the loan is ambiguous because it is a condition of the agreement that the loan will be payable from monies obtained through a capital raising by Empire Securities. Any liability to repay the loan by the Second Defendant pursuant to a surety is therefore void for uncertainty and ambiguity. … 1. Secondly, central to the proposed defence is what is referred to as a "non-enforcement promise", which appears to amount to the assertion that "any personal guarantee would not be called upon by the Plaintiff if a letter of comfort for the benefit of the Plaintiff was obtained from Empire Securities". [36] Linked to this is an assertion by the second defendant that he "understood" that the loan monies would be payable from future investment monies obtained by Empire Securities, and that the loan was only repayable once such monies were raised and held by Empire Securities. [37] 2. Thirdly, in terms of the guarantee(s), the proposed defence asserts: 1. the agreement that the second defendant "was party to that is plead [sic] at paragraph 5 of the Statement of Claim is an entire agreement between the Company, Plaintiff and the Defendants". 2. the guarantee is unenforceable because there was no consideration, as any offer of guarantee by the second defendant was made for past or executed consideration; and 3. the guarantee is unjust and void within the meaning of s 7(1) of the Contracts Review Act 1980 (NSW) (the CRA). 1. Finally, in purported answer to the entire statement of claim, the following is pleaded: [38] 1. in reliance on the Non-enforcement Promise the Second Defendant was induced to assist the Plaintiff to obtain the letter of comfort from the Empire Securities [sic] and to execute the loan and personal guarantee documents plead [sic] in the Statement of Claim; 2. by making the Non-enforcement Promise the Plaintiff expressly represented that it was their [sic] intention to rely upon a letter of comfort obtained in lieu of personal guarantees; 3. by reason of the Non-enforcement Promise the personal guarantees executed by the Second Defendant are void and unenforceable and liable to be set aside and Bank of New Zealand v Hoult (Supreme Court (Qld), 14 February 1991, unrep) applies. SUBMISSIONS OF THE PARTIES Submissions of the plaintiff 1. Counsel for the plaintiff submitted that there were three matters for the Court to consider, namely: 1. whether the second defendant had an arguable or bona fide defence; 2. the length of the delay in bringing the application, and whether that delay was adequately explained; and 3. whether the plaintiff, as the respondent to the application, would be prejudiced if an order were made setting the judgment aside. 1. It was submitted that the ultimate question for the Court was whether it was in the interests of justice that the second defendant, as the party seeking to set aside the judgment, be permitted to defend the proceedings on its merits. 2. Counsel for the plaintiff submitted that the discretion to set aside a default judgment must be exercised in accordance with the provisions of ss 56 to 59 of the Civil Procedure Act 2005 (NSW) which requires the Court to: 1. give effect to the overriding purpose of the Act, namely the just quick and cheap resolution of the real issues in the proceedings; 2. manage the proceedings having regard to the objects of: 1. the just determination of the proceedings; 2. the efficient disposal of the business of the court; 3. the efficient use of available judicial and administrative resources; 4. the timely disposal of the proceedings, and all other proceedings in the Court, at a cost affordable by the respective parties; 1. act in accordance with the dictates of justice; 2. implement the practice and procedure of the Court with the object of eliminating any lapse of time between the commencement of the proceedings and their final determination, beyond that which is reasonably required in the preparation of the case for trial. 1. It was submitted that as a general proposition, a party who seeks to set aside a default judgment must demonstrate that he or she has a bona fide defence, which ordinarily requires that party to file an affidavit demonstrating a prima facie defence on the merits. It was submitted that the rationale for such a requirement is that the Court is required to consider: 1. whether any useful purpose would be served by setting aside the judgment; and 2. how it came about that the applicant for the order found himself or herself bound by a judgment which had been regularly obtained. 1. By reference to these matters, and in the context of the present case, counsel for the plaintiff submitted that the statement of claim had been personally served on the second defendant on 25 July 2019 and that the second defendant had failed to provide any proper explanation for his failure to file a defence in the proceedings, and for his delay in taking any step to have the default judgment set aside. 2. In terms of the proposed defence, counsel for the plaintiff raised a number of issues. To the extent that the proposed defence pleaded a challenge to the interest rate, counsel submitted that even if made out, this would provide a defence to a small part of the claim but not to the substantive issues. 3. To the extent that reliance was placed on the provisions of the CRA, counsel drew my attention to the provisions of s (6)(2) which are in the following terms: 6 Certain restrictions on grant of relief … (2) A person may not be granted relief under this Act in relation to a contract so far as the contract was entered into in the course of or for the purpose of a trade, business or profession carried on by the person or proposed to be carried on by the person, other than a farming undertaking (including, but not limited to, an agricultural, pastoral, horticultural, orcharding or viticultural undertaking) carried on by the person or proposed to be carried on by the person wholly or principally in New South Wales. 1. Counsel for the plaintiff stressed that there was no issue that the loan agreements had been signed, and that the guarantees had been signed. He also stressed that there was no issue that the second defendant knew, and accepted, that the principal loan had been advanced to PropertyBay and had not been repaid. In terms of the suggestion that any consideration for the guarantee was in the nature of past consideration, counsel for the plaintiff submitted that such a proposition was defeated by the terms of the guarantees themselves. 2. In terms of the proposed defence, counsel for the plaintiff submitted that much of it amounted to little more than a bare denial of liability. He pointed out that in terms of the "non-enforcement promise", no such assertion had been made by the second defendant in any of his affidavits. Counsel further submitted that the proposition that such a promise was made was wholly inconsistent with the terms of each guarantee. 3. Counsel further submitted that there would be prejudice to the plaintiff if the second defendant were allowed to set aside the default judgment. In this regard, he pointed to the fact that the proceedings had been commenced in July 2019 and that, as between the plaintiff and the first defendant, the pleadings had closed, both parties had filed all of their evidence, and the proceedings had been listed for hearing in April 2021. It was submitted that in the event that the second defendant was successful in setting aside the default judgment, the proceedings would, in effect, be required to "restart", with the likely result that the hearing date in April 2021 would be vacated, thus causing considerable further delay in the proceedings being heard and determined, and resulting in further cost to the plaintiff. 4. Counsel also relied on the fact that the plaintiff had taken various steps to have the judgment debt satisfied by the second defendant which included the issue of a bankruptcy notice and obtaining related orders in the Federal Circuit Court, all of which had been both costly and time consuming. 5. It was submitted that in all the circumstances the interests of justice weighed in favour of the Court dismissing the motion. Submissions of the second defendant 1. It was submitted on behalf of the second defendant that the form of defence which had been provided for the purposes of the application was a defence that the second defendant would "want to have settled by counsel before it [was] filed". The second defendant's solicitor said that what had been put before the Court was "not a refined defence" and had been "created over a very short period of time" but that, notwithstanding that, it contained "real issues" to be determined by the court. As to those matters, I should simply observe that the present application is to be determined having regard (inter alia) to the form of proposed defence which is in evidence, the majority of the contents of which have not been verified or confirmed by the sworn evidence of the second defendant. 2. As to the reliance placed on the CRA, it was submitted on behalf of the defendant that in circumstances where the land which was the subject of the proposed purchase by PropertyBay was in Queensland, it was arguable that the provisions of s 6(2) had no application. 3. It was further submitted that at the time of being served with the statement of claim the second defendant was unwell and unable to manage his affairs and that this explained the delay in bringing the present application. It was submitted that the second defendant had given evidence that he had no recollection of being served. At the same time, it was expressly stated that the second defendant did "not seek to call into doubt the affidavits relied upon by the plaintiffs [but that] personal sickness [was] the explanation for default on the part of the second defendant and there is no dispute about this fact by the plaintiff". 4. It was further submitted that in circumstances where the proceedings as between the plaintiff and the first defendant are listed for hearing in April 2021, the plaintiff would not be prejudiced by the second defendant joining the trial date "provided the second defendant is able to finalise his defence and serve evidence in chief". It was further submitted that any refusal to set aside the default judgment would result in the second defendant suffering injustice by virtue of the bankruptcy proceedings pending against him. 5. The solicitor for the second defendant emphasised that the proposed defence encapsulated a number of propositions including that: 1. the rate of interest claimed was unconscionable, unjust and or a penalty; 2. the guarantee was executed after the principal loan agreement was concluded, and relied on past consideration; 3. the execution of the guarantee had been procured by misrepresentation on the part of the plaintiff's agent, Mr Ward; and 4. in all the circumstances the purported personal guarantee was unjust and should be set aside pursuant to the CRA. 1. Finally, it was submitted that once the second defendant had become aware of the entry of default judgment against him, he had prepared and filed the present motion without delay. It was further submitted that the 11 month period between the entry of default judgment and the bringing of the present application was "not a long period given it is before the listing of the hearing date but it must be conceded that it is not a short period either given the pleadings closed and evidence in chief was served by the plaintiff". CONSIDERATION The relevant provisions of the rules 1. Rule 36.16 of the rules is in the following terms: 36.16 Further power to set aside or vary judgment or order (1) The court may set aside or vary a judgment or order if notice of motion for the setting aside or variation is filed before entry of the judgment or order. (2) The court may set aside or vary a judgment or order after it has been entered if— (a) it is a default judgment (other than a default judgment given in open court), or (b) it has been given or made in the absence of a party, whether or not the absent party had notice of the relevant hearing or of the application for the judgment or order, or (c) in the case of proceedings for possession of land, it has been given or made in the absence of a person whom the court has ordered to be added as a defendant, whether or not the absent person had notice of the relevant hearing or of the application for the judgment or order. (3) In addition to its powers under subrules (1) and (2), the court may set aside or vary any judgment or order except so far as it— (a) determines any claim for relief, or determines any question (whether of fact or law or both) arising on any claim for relief, or (b) dismisses proceedings, or dismisses proceedings so far as concerns the whole or any part of any claim for relief. (3A) If notice of motion for the setting aside or variation of a judgment or order is filed within 14 days after the judgment or order is entered, the court may determine the matter, and (if appropriate) set aside or vary the judgment or order under subrule (1), as if the judgment or order had not been entered. (3B) Within 14 days after a judgment or order is entered, the court may of its own motion set aside or vary the judgment or order as if the judgment or order had not been entered. (3C) Despite rule 1.12, the court may not extend the time limited by subrule (3A) or (3B). (4) Nothing in this rule affects any other power of the court to set aside or vary a judgment or order. The applicable principles 1. In Dai v Zhu [39] three factors were identified as being of particular relevance to the exercise of the discretion conferred by rule 36.16(2)(a) namely whether: 1. there is an bona fide defence; 2. an adequate explanation for the delay in filing a defence has been provided; and 3. the respondent would be prejudiced if the default judgement were set aside. 1. In J & M McNamee Holdings Pty Limited v Mungerie Vale Pty Limited t/as Greenwood Group Realtors [40] Gleeson JA made the following observations: [48] It is well established that the considerations relevant to an application to set aside a default judgment include whether the applicant has a bona fide ground of defence, an adequate explanation for the failure to defend and the length of any delay: Adams v Kennick Trading (Int) Ltd (1986) 4 NSWLR 503 at 506 (Hope JA; Glass JA agreeing). Whether the plaintiff will be prejudiced if the default judgment were set aside is also relevant. [49] Fundamentally, the question is whether it is in the interests of justice to allow the party seeking to set aside a default judgment to be permitted to defend the proceedings on the merits: Dai v Zhu [2013] NSWCA 412 at [83] (Sackville AJA; Barrett and Leeming JJA agreeing), citing, with approval, the remarks in Reinher Industrial Lease & Finance Pty Ltd v Jordan (Court of Appeal (NSW), 4 June 1974, unrep). [50] Two further matters referred to by Sackville AJA in Dai v Zhu should be mentioned. One is the observation by his Honour at [89] that the rationale for the requirement that the applicant for relief demonstrate a bona fide ground of defence is that, "In the exercise of its 'unfettered, though judicial, discretion' the Court will consider … (a) whether any useful purpose would be served by setting aside the default judgment, and (b) how it came about that the applicant found himself bound by a judgment regularly obtained". [51] The other matter, which is related to this, is his Honour's observation at [92] that, "In determining whether the defendant has a bona fide defence on the merits, the Court does not embark on a hearing of the full merits of the case … [A]ll that is necessary is for the defendant to show that the defence is asserted bona fide and that there is an arguable or triable issue. His Honour continued at [92]: The nature of the evidence required in a particular case may depend on the circumstances, including the cogency of the defendant's explanation for the delay or failure to comply with orders of the Court. [52] It is also to be accepted that the application of these principles must now be subject to the provisions of the Civil Procedure Act 2005 (NSW). In Dai v Zhu, Sackville AJA gave as an example at [93], that there may be circumstances where it would be contrary to "the just determination of the proceedings", referring to s 57(1)(a) of the Civil Procedure Act 2005 (NSW), to require a defendant to adduce affidavit evidence demonstrating a bona fide defence and in such cases the Court would be unlikely to reject the defendant's application to set aside a default judgment solely on the ground that no such affidavit had been filed whilst emphasising each case must of course depend on its own facts. 1. The discretion must be exercised having regard to the provisions of s 56-59 of the Civil Procedure Act 2005 (NSW). [41] The evidence of the second defendant General observations 1. Generally speaking, I found the second defendant to be a most unsatisfactory witness. The transcript will reflect that he often gave unnecessarily protracted answers to the simplest of questions, often in terms which were non-responsive. On those occasions he appeared intent upon giving answers which he considered suited his position, and which portrayed him in the most favourable light. There are a number of instances which reflect what I consider to be the second defendant's unreliability. One example stems from the fact that in his affidavit of 27 October 2020 the second defendant asserted that he did not have the opportunity to seek independent legal advice as to the guarantee. [42] There is no serious issue that he signed each guarantee. [43] Significantly, immediately below his signature on each was an express acknowledgement of the fact that he had sought legal advice. The second defendant's assertion that he was not given a proper opportunity to obtain such advice is completely at odds with the objective evidence, and I do not accept it. 2. Further, and more specific, instances of the second defendant's unreliability are to be found when analysing the evidence in respect of particular issues which are directly relevant to my determination of the present motion. The service of the statement of claim 1. When the hearing of the second defendant's motion commenced before me on 28 October 2020, Mr Bastick, who then appeared for the second defendant, belatedly notified those acting for the plaintiff that Mr Roppolo, who had sworn an affidavit of service of the statement of claim, would be required for cross-examination. When I asked Mr Bastick why it was that this notification had come at such a late stage, he responded: [44] My client's instructions were that he had no recollection of having been served and the basis for that lack of recollection is set out in his affidavit of 27 October. There seems to be some confusion on the part of Mr Neylon on the interplay between the two separate proceedings. 1. Having drawn Mr Bastick's attention to the content of some of the affidavit material filed by the second defendant, he said: [45] Your Honour, my client has provided varying instructions. One has been that he had not been served, however then instructing that he was, nevertheless, aware of proceedings against the company and some form of personal action against both himself and Mr Sommers. 1. The "varying instructions" with which Mr Bastick had apparently been provided regarding the service of the statement of claim are reflected in the differing assertions made by the second defendant in his various affidavits. In his affidavit of 6 October 2020, he asserted that he had "never been served in these proceedings". [46] In his affidavit of 27 October 2020 he asserted that he had "no recollection" of having been served. [47] When cross-examined, he denied, on several occasions, that he had been served. [48] On other occasions he variously asserted that he didn't remember being served, [49] that he "didn't think [he] was [served]", [50] and that he "didn't believe" he had been served. [51] 2. The unchallenged evidence before this Court, which I accept, is that Mr Roppolo personally served the second defendant with a copy of the statement of claim on 25 July 2019 and, when doing so, had a conversation with the second defendant for the purposes of confirming that he was in fact the person named in the statement of claim. I do not accept the second defendant's assertion that he was not served, nor do I accept his assertion that he has no recollection of being served. I am satisfied that he was served with the statement of claim on 25 July 2019 and did nothing at any time about filing a defence. The second defendant asserts that any delay in taking any step in the proceedings was due to his ill health. I have addressed that issue further below. The second defendant's awareness of the entry of judgment 1. Another important aspect of the second defendant's evidence concerns the circumstances in which he asserted that he first became aware of the fact that judgment had been entered against him. In his affidavit of 14 September 2020, he said that he had "recently" become aware that there "may" be a judgment against him in these proceedings. He attributed that awareness to an email he had received from a debt management company which informed him that he had "bankruptcy proceedings in process". [52] The email was not annexed to any of the second defendant's affidavits and was not otherwise tendered in evidence. 2. In his affidavit of 6 October 2020 the second defendant again asserted that he had "recently" become aware that there may be a judgment against him due to "an unsolicited electronic communication" received from a "random personal debt management company". [53] According to the second defendant this was the first time that he had become "aware of such proceedings" [54] (which I take to be a reference to the bankruptcy proceedings). Again, the "electronic communication" was not annexed to the affidavit and was not tendered in evidence. 3. The second defendant also asserted, in unequivocal terms, that he had never been served with the statement of claim filed in the current proceedings [55] and that had he been served, he "would have made [his] grounds for defence earlier and reacted accordingly". [56] He went on to assert in his affidavit of 27 October 2020 that he was "entirely surprised" to learn that default judgment had been entered against him, and that this had come to his knowledge "in July or August 2020" because he had "started receiving unsolicited calls from bankruptcy advisers and the like". [57] It is worthy of note that his earlier affidavits referred not to calls, but to written communications which, as I have noted, were not tendered in evidence. 4. It will be apparent that the second defendant's assertions as to precisely when he became aware of the judgment against him are largely, if not entirely, inconsistent. He appears to assert that he became aware of the judgment at some time between June and September although for the reasons I have pointed out, his evidence in this respect is inherently vague and imprecise. 5. I do not accept that the second defendant did not become aware of the fact that judgment had been entered against him until that time, nor do I accept that he became aware of it as a consequence of being contacted by external agencies offering to assist him. I am satisfied, bearing in mind the unchallenged evidence of Mr Harkin, that on 12 May 2020 a Bankruptcy Notice was served on the second defendant pursuant to an order for substituted service which had been made by the Federal Circuit Court and that it was the service of that Notice which alerted him to the fact that a judgment had been entered against him. 6. That Notice named the plaintiff as the creditor. There is no evidence that the second defendant has ever had any dealings with the plaintiff, other than those which give rise to these proceedings. It follows that it must have been abundantly clear to the second defendant, when he was served with the Bankruptcy Notice, that the issue of that Notice stemmed from the proceedings brought against him in this Court. It follows that, leaving aside his failure to take any steps in the proceedings following the service of the statement of claim, there was a further 5 month delay between the time at which the second defendant was served with the Bankruptcy Notice and the date on which the present motion was filed. The medical evidence 1. In his affidavit of 27 October 2020, and in his oral evidence, the second defendant attributed his lack of attention to the matter to the fact that he had been diagnosed with testicular cancer in June 2019. I should make it clear that I do not, in any way, underestimate the seriousness of that diagnosis, nor do I underestimate the effect that such a diagnosis would have had on the second defendant. However, when the evidence relating to this issue is analysed, it does not properly explain why, having been served with the statement of claim in July 2019, the second defendant failed to file a defence, and took a lengthy period of time to bring the present application. 2. In this regard, the report of Dr Hovey is of particular importance. [58] On the basis of that report I am satisfied that at least by 26 May 2020, a little less than five months before the present motion was filed, the second defendant gave a history which included telling Dr Hovey that his energy levels had improved and that he was "very busy at work". The second defendant accepted that this had been recorded in Dr Hovey's report. [59] However, when it was put to him that the history accurately represented the fact, and that he had been very busy at work throughout his chemotherapy treatment, his response (in part) was: [60] Totally not right, incorrect. Where she got that from I don't know (emphasis added). 1. In a further demonstration of what I consider to be the second defendant's inherent unreliability as a witness, he later appeared to accept that he was in fact the source of that part of Dr Hovey's recorded history. [61] 2. Even if it is accepted that the second defendant was in ill health for a period (as he clearly was), I am satisfied that by the time of his review by Dr Hovey in May of this year, his condition was improving to the point where he was, as he informed her, "busy at work". It was only a little over a week before his consultation with Dr Hovey that the second defendant had been served with the Bankruptcy Notice. The five month delay which followed in bringing the present motion is entirely unexplained. It is also noteworthy that the report of Dr Hovey makes no reference to the plaintiff having provided a history of having experienced memory loss or "fogginess of the brain" which he asserted in his affidavit of 6 October 2020. The proposed defence 1. In terms of the proposed defence, and leaving aside the obvious deficiencies in the form in which it has been pleaded, the following observations can be made. 2. To begin with, there is a complete absence of sworn evidence from the second defendant confirming the various assertions which are sought to be raised by way of a defence to the plaintiff's claim. The significance of the absence of such evidence is heightened by the fact that a number of assertions which have been made by the second defendant are not reflected in the proposed defence at all. 3. For example, in his affidavit of 27 October 2020 which was sworn prior to the proposed defence being made available, the second defendant asserted that his defence to the plaintiff's claim would allege that the plaintiff had (inter alia) "engaged in fraudulent… conduct through his failure to disclose conflicts of interest, and illicit payments of commissions to 3rd parties which had not been disclosed …". No allegation of fraud is made in the draft pleading which has been provided to the Court, and there is no reference of "illicit payments of commissions to third parties" forming any part of the defence. It is to be noted that the affidavit of 27 October 2020 was apparently filed by Mr Bastick who then acted for the second defendant. I infer in these circumstances that in preparing it, Mr Bastick did so on the second defendant's instructions. 4. Further, in circumstances where the "non-enforcement" promise is pivotal to the proposed defence (it having been pleaded as a complete defence to the plaintiff's cause of action), the second defendant made no assertion, in any of the three affidavits which he filed in support of the present application, that such a promise had ever been made. That is to say nothing of the fact that the very existence of the non-enforcement promise is entirely at odds with the express terms of the guarantees. The assertion that the terms of the guarantee are somehow ambiguous because the non-enforcement promise was a condition of the guarantee in each case is completely at odds with the absence of any reference, in the guarantee, to the non-enforcement promise (or anything like it). Prima facie, the second defendant's assertions in this respect would seem to fall foul of the parol evidence rule. In these circumstances, whether the guarantees attract the provisions of the CRA is not something that I need to consider any further. 5. Moreover, in his affidavit of 27 October 2020, the second defendant asserted that he had not been given the opportunity to obtain independent legal advice prior to signing the guarantees. Leaving aside the express acknowledgement in the guarantees which is directly to the contrary, there is no pleading in the proposed defence alleging unconscionability based upon the second defendant's assertion. 6. In all of these circumstances I am not satisfied that the proposed defence is bona fide, or that it raises any triable issue. The prejudice to the plaintiff 1. I accept the submission advanced on behalf of the plaintiff that in light of the steps taken to enforce the judgment entered against the second defendant, and given that the proceedings as between the first defendant and the plaintiff have been listed for hearing, there would be considerable prejudice to the plaintiff if, at this late stage, the judgment which he had regularly obtained was set aside. Quite apart from the time and cost to which the plaintiff has been put in enforcing the judgment, in light of the second defendant's conduct to date I could have no confidence whatsoever that if the judgment were set aside he would be in a position to proceed to hearing in April next year. 2. Moreover, the joinder of the second defendant to those proceedings would seemingly lengthen them, to the point where there would be a real risk that the hearing may not be able to be completed within the two days which have presently been allocated. That gives rise to the real risk that the proceedings would be further delayed, to the prejudice of the plaintiff. Allowing such a situation to occur, bearing in mind my findings against the second defendant, would be obviously prejudicial to the plaintiff and would be at odds with the just, quick and cheap resolution of the matter as a whole. ORDERS 1. In light of the conduct of the first defendant to date, I have come to the view that the proceedings as between he and the plaintiff should be case managed from this point onwards to ensure that they are ready to proceed to trial on the date which has been allocated. I therefore make the following orders: 1. The notice of motion filed by the first defendant is dismissed. 2. The notice of motion filed by the second defendant is dismissed. 3. I reserve the question of costs in respect of each motion. 4. In the absence of agreement being reached between the parties, each party is to file written submissions as to costs within seven days, such submissions not exceeding two pages in length. 5. The proceedings as between the plaintiff and the first defendant are listed for directions before me on 7 December 2020 at 9:15am ********** Endnotes 1. Bhundia v Sommers and Neylon (No 1) [2020] NSWSC 1639. 2. At [4]. 3. At [6]. 4. At [7]. 5. At [5]. 6. T4.49-T5.1. 7. See for example Hoxton Park Residents Action Group Inc v Liverpool City Council [2012] NSWSC 1026 at [89]. 8. MHG Plastic Industries Pty Limited v Quality Assurance Services Pty Limited [2002] FCA 821 at [31]-[34]. 9. Rule 42.21(1A)(l). 10. Rule 42.21(1A)(e). 11. Willey v Synan (1935) 54 CLR 175; [1935] HCA 76 at 179-180 per Latham CJ and at 184 per Dixon J; Amalgamated Mining Services Pty Limited v Warman International Limited (1988) 88 ALR 63 at 65-66 per Wilcox J. 12. Exhibit B. 13. T19.43-T19.45. 14. T20.28-T20.29. 15. T19.47-T19.49. 16. At [7]. 17. T20.31-T20.35. 18. T21.21-T21.31. 19. Exhibit C. 20. T21.49-T22.36. 21. T27.49-T28.24. 22. T30.45-T32.43. 23. T23.36-T24.31. 24. T25.17-T26.23. 25. T33.43-T34.28. 26. T28.28-T29.19. 27. CB33. 28. CB37. 29. CB39. 30. CB80. 31. Affidavit of Mark Slater, CB94. 32. CB81. 33. CB81. 34. CB81. 35. Exhibit B. 36. At 5C. 37. At 5D. 38. At [15]. 39. [2013] NSWCA 412 at [66]; [83]. 40. [2019] NSWCA 283 at [48]-[52]. 41. Dai at [84]-[88]; J & M McNamee Holdings at [52]. 42. At [14]. 43. T24.13-T24.17. 44. At T5.41-T5.44. 45. At T6.20-T6.23. 46. At [6]. 47. At [5]. 48. T25.44; T26.19-T26.20; T26.23. 49. T26.19. 50. T26.20. 51. T26.23. 52. At [4]. 53. At [4]. 54. At [4]. 55. At [6]. 56. At [6]. 57. At [9]. 58. Exh C. 59. T22.18. 60. T22.22. 61. T31.47-T31.50. DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated. Decision last updated: 01 December 2020