New South Wales District Court CITATION: Sediey & Imperi v Hraiki [2008] NSWDC 395 JUDGMENT DATE: 17 October 2008 JURISDICTION: District Court of New South Wales JUDGMENT OF: Cogswell SC DCJ DECISION: The default judgment is set aside. CATCHWORDS: CIVIL - application to set aside default judgment - no defence filed - whether there is an acceptable explanation for the failure to file a defence - whether there is a bona fide defence to the claim - evidence that defendants had not received statement of claim - assertion of forgery of signatures by defendants' son Edgar Sediey PARTIES: Mabel Imperi Wagih Hraiki Amal Hraiki FILE NUMBER(S): 1336/2008 COUNSEL: Mr O'Connor for the plaintiffs Mr FFF Salama for the defendants JUDGMENT 1. The plaintiffs in this case have sued the defendants for a debt. The debt claimed is $330,000. The plaintiffs say that they lent that amount to the defendants on 8 February 2007. The plaintiffs filed a statement of claim on 8 April 2008. However, the defendants did not file any defence to the statement of claim. The plaintiffs obtained default judgment on their claim against the defendants. The defendants are now asking me to set aside that default judgment. 2. I have power to do that and the two most important factors are those referred to by Mr O'Connor who appears for the plaintiffs. They are whether there is an acceptable explanation for the failure to file a defence and whether there is a bona fide defence to the claim. I am satisfied of both for the following reasons. 3. As for the explanation for no defence, Mr O'Connor pointed to evidence in the case that the statement of claim had been served upon both defendants. That evidence was in the form of two affidavits of service which indeed assert that the process server delivered the statement of claim to each defendant on 11 April 2008. In addition, there is evidence that a year before, some solicitors had written to the defendants a letter of demand for the loan. That was a letter dated 28 May 2007 and one was addressed to each defendant. Mr O'Connor points to evidence that both defendants received those letters. The evidence he points to is in the form of advice receipts bearing signatures which purport to be that of each defendant. Mr O'Connor then argues that given the evidence of receipt of the letter of demand at the end of May 2007 and of the statement of claim in April 2008, there is no explanation for the failure to file any defence to the claim within the time. If that evidence of receipt of the documents is accepted then Mr O'Connor is right. 4. However, he properly put to each of the defendants, both of whom were called by Mr Salama who appeared for them, that they had received both the letter and the statement of claim. Each of the defendants denied that they had received either document. There was nothing about the evidence of either defendant that left me with the impression that they were attempting to deceive me or not telling the truth. Demeanour is not a completely safe guide to assessing the credibility of witnesses, nevertheless I give it some weight in this case. Both defendants impressed me as doing their best to tell the truth. 5. There is, as Mr O'Connor points out, the evidence of the signatures on the Australia Post documents. Those signatures need to be seen in this context. What the defendants say in this case is that they never signed the loan documents. They positively assert that the signatures on the loan documents purporting to be theirs are forgeries. They suggest that the forgeries were committed by their own son. It is therefore open to argument that the signatures appearing on the Australia Post document were forged by the same person. I do not need to make a definite finding about that, but I do note some small variation in the conclusion of the signature of Mr Hraiki on his affidavit compared to the conclusion of the signature which appears on the advice receipt. 6. As for the service of the statement of claim, I prefer the evidence of both plaintiffs who are present here in court and have been cross-examined and have given me the impressions which I have already referred to, to the affidavit evidence of Mr Smith. I should make it clear that this does not involve any finding that Mr Smith is lying or not telling the truth. It is, as the authorities suggest, not for me to adjudicate on the truth or otherwise of the case which the defendant seeks to make. I do find, however, that the evidence given by both defendants has a degree of consistency about it; and for the reasons I have given I accept it. Once that evidence is accepted then there is in turn an acceptable explanation for the delay which is contained in both affidavits. 7. I turn now to the second question of whether there is a bona fide defence. As I said, the defendants say that they never signed the loan documents. They assert that their son forged their signatures. Mr O'Connor puts to them that of course they did sign the documents. He challenges their credibility which perhaps I should have referred to a short time ago in another way, that is, he asks them some questions about a Mr Tabchouri, a solicitor. Neither defendant, from my recollection of their evidence this morning, recollected Mr Tabchouri acting for them formerly in any legal capacity. 8. Mr O'Connor points to a mortgage document which is witnessed by Mr Tabchouri and both defendants. That does raise some question about the truth or accuracy or reliability of their recollection. However on the other hand there is evidence that is unchallenged that the defendants' son has been charged by the police with a number of offences including mortgage fraud. Although that evidence is based upon Mr Hraiki's information and belief, there is no evidence to contradict it. That evidence is powerfully consistent with their own account of their son forging their signatures. 9. As I said, it is not for me on this application to make any determination about the truth or otherwise of what is asserted. There seem to be a number of issues which would be appropriately ventilated between the defendants and the plaintiffs. But the defendants assert what would be, if accepted, a very solid defence, namely that their signatures have been the subject of forgery. I do not find that that defence lacks bona fides. I think that they should be given an opportunity to defend this claim and for that reason I propose to order that the judgment obtained by the plaintiffs against the first and second defendants on 23 May 2008 be set aside. Now, what other orders gentlemen? SALAMA: I think your Honour what we should do is, as the notice of motion has stated, the defendant will be paying the plaintiffs' costs, if your Honour made that order. 10. I make an order that both defendants pay the plaintiffs' costs thrown away in obtaining default judgment. SALAMA: And the third order is that rather than us seek orders in terms of a timetable would your Honour be minded to put the matter back in the registrar's list whereby it would be case managed for further timetable. HIS HONOUR: Mr O'Connor? O'CONNOR: I have no objection, your Honour. HIS HONOUR: And I stand the matter over into the registrar's list. O'CONNOR: Would you be able to give us a date now, your Honour? HIS HONOUR: I don't think I can. We don't have dates do we? No. O'CONNOR: So the registry will I guess contact the parties? HIS HONOUR: I don't know the answer to that Mr O'Connor. SALAMA: I think usually if the - if your Honour just puts it back into the list, your Honour can either give it-- HIS HONOUR: The trouble is I don't have dates to give. SALAMA: A date to be notified by the registry, your Honour, I think is the appropriate order. The registry then writes to the instructing solicitors notifying them. O'CONNOR: Alternatively your Honour, if it could be stood over to judicial registrar McDonald's list on a Thursday. HIS HONOUR: Why don't I do that? O'CONNOR: She deals with the registrar's list. Judicial Registrar McDonald's list on Thursdays. HIS HONOUR: What do you think of that Mr Salama? Mr O'Connor suggests it goes over to Judicial Registrar McDonald's list on a Thursday. I could stand it over - you two nominate a Thursday and I'll put it over. What do you say to that? SALAMA: Yes, that's - no objection. DISCUSSION AS TO SUITABLE DATE HIS HONOUR: I stand the matter over to the Judicial Registrar's list next Thursday 23 October 2008. I'll put that in the file, the statement of claim, the notice of motion and the affidavits. I assume they stay on the file. What about the exhibits, do you want those returned? O'CONNOR: Yes please, your Honour. HIS HONOUR: I'll just make sure I've got them all. I return the exhibits and you can sort out whose they are. Anything else gentlemen? SALAMA: Yes. Can I just clarify one point in respect to the costs order? HIS HONOUR: Yes. SALAMA: Pursuant to the notice of motion, the costs order was that the first and second defendant pay the plaintiff's costs straight away in obtaining the default judgment. HIS HONOUR: Yes, that's right. SALAMA: It would also be fair that the first and second defendants obtain an order for costs in respect of the motion itself. HIS HONOUR: In addition I order that the-- O'CONNOR: Would you hear me on that, your Honour? HIS HONOUR: What, that the-- O'CONNOR: I think that what Mr Salama is arguing that you should make a costs order against the plaintiff on this motion today. HIS HONOUR: No, you're not saying that are you? SALAMA: In respect of the motion - in respect of the costs-- HIS HONOUR: The application, you're saying costs follow the event. You won, they should pay your costs? SALAMA: Yes, just for the motion of today. HIS HONOUR: I understand. SALAMA: But in respect to the costs of obtaining default judgment by the plaintiff-- HIS HONOUR: Yes, I've given that order. Yes, what do you say about that? O'CONNOR: My submission would be that those costs include having to appear today. I mean, this motion would be completely unnecessary had the defendant responded to the statement of claim. It's ordinary that on a motion of this nature, even if the defendant succeeds, it's still required to pay the plaintiffs' costs. HIS HONOUR: So you say the defendant should pay the plaintiffs' costs. O'CONNOR: Of this application. It's the defendant's application of the court. The court's conceded to its application and made the orders, but we shouldn't be penalised because of the defendant's-- HIS HONOUR: Didn't follow the procedures. O'CONNOR: Correct, your Honour. I thought that was what the order your Honour made was, including today's motion. HIS HONOUR: No, the only order I made was in the terms of the notice of motion which was costs thrown away by the - that the first and second defendants pay the plaintiffs' costs thrown away in obtaining a default judgment. I haven't made any other order, but I'm hearing that what you're saying is that they should pay you for the costs of the motion. O'CONNOR: For the inconvenience and cost of having to come here. HIS HONOUR: Well, the costs? O'CONNOR: Yes, your Honour. HIS HONOUR: What do you say to that, Mr Salama? SALAMA: Well, your Honour, costs follow the event. The defendants have succeeded on their motion and the general course is that costs follow the event on the motion, and if the defendants have succeeded which is what your Honour's ordered we're entitled to costs of the motion only. HIS HONOUR: I know what you mean, but I'm just thinking. You see on the one hand you were entitled to - you can understand the plaintiff's point of view. They're doing nothing apart from issuing their statement of claim and you do nothing, don't file anything, they get their - they serve all the letters and things they have to do and so they get default judgment, which is normal. On the other hand, your case is that well look we know nothing about it. Our son's running around like a loose cannon signing everything and we find that the first thing we know about it is-- SALAMA: Look I can accept that, your Honour, but there was an offer for the plaintiff to consent to the motion and us pay their costs of today and there was no response. O'CONNOR: Your Honour, this might assist you-- HIS HONOUR: Well, we're not in America. The custom is that one person makes their submissions and the other person responds. O'CONNOR: Sorry, your Honour. SALAMA: There was an offer by my instructing solicitors to the plaintiffs' solicitors to consent to the motion to set aside default judgment on the basis that the first and second defendants pay the plaintiffs' costs. No response was made to that which is why we're here today. Therefore-- HIS HONOUR: Well, no response was made because they were running it. They decided that they'd want to run it, and one can understand why they'd want to run it, they've got two signed documents from Australia Post-- SALAMA: I don't dispute that, your Honour, but-- HIS HONOUR: --which look a bit like the signatures on the mortgage, but maybe - I mean one can understand them wanting to run it. SALAMA: The question for your Honour to determine is what happens after a party succeeds on a motion or a hearing, and the general principal is, as your Honour's aware, that costs follow the event. HIS HONOUR: Correct. SALAMA: And I just move on that general principle 11. On that basis, all right. I'm going to order the defendants to pay the plaintiffs' costs of the motion. Anything else? O'CONNOR: Your Honour, if I could - exhibits returned. HIS HONOUR: I've just done that through the court officer. ADJOURNED TO THURSDAY 23 OCTOBER 2008 ********** 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.