New South Wales Supreme Court CITATION : Neil Timber v Murphy & Anor [1999] NSWSC 1095 CURRENT JURISDICTION : Common Law FILE NUMBER(S) : 11678/1999 HEARING DATE(S) : 1 November 1999 JUDGMENT DATE : 11 November 1999 Neil Timber Limited (Plaintiff) PARTIES : v Michael John Murphy (First Defendant) Deborah Louise Murphy (Second Defendant) JUDGMENT OF : Master Malpass Mr R Harper (Plaintiff) COUNSEL : N/A (First Defendant) Mr P Strasser (Second Defendant) Phillips Fox (Plaintiff) SOLICITORS : N/A (First Defendant) Barwick Boitano (Second Defendant) CATCHWORDS : Application to set aside default judgment; no question of principle. ACTS CITED : N/A Garcia v National Australia Bank Ltd (1998) CASES CITED : Aust Contract Reports 90-096. Yerkey v Jones (1939) 63 CLR 649. DECISION : See paragraph 22. THE SUPREME COURT OF NEW SOUTH WALES COMMON LAW DIVISION MASTER MALPASS THURSDAY 11 NOVEMBER 1999 11678/1999 NEIL TIMBER LIMITED v MICHAEL JOHN MURPHY & ANOR JUDGMENT 1 The proceedings were commenced by Statement of Claim filed on 13 July 1999. The process made a claim for inter alia possession of a property known as 330 Singles Ridge Road Winmalee (the property). 2 The defendants (who are husband and wife) are the registered proprietors of the property. On 3 July 1996, they gave a mortgage over the property to the plaintiff. The mortgage was given to secure a Deed of Guarantee and Indemnity given inter alia by the first defendant. It had been given to secure an indebtedness owed by International Lumber Products Pty Limited (the company) to the plaintiff (an indebtedness that arose out of trading arrangements between the plaintiff and the company). On 9 June 1998, the defendants executed a Deed Poll. The Deed Poll was executed at a time when the company was in grave financial difficulty. It gave priority to ANZ Bank in respect of their re-financing of a business debt owed by the company. The Deed Poll acknowledged an indebtedness owed by the company to the plaintiff and the validity of the mortgage. 3 There has been default under the mortgage. The claim for possession is founded on that default. 4 The Statement of Claim was served on 29 July 1999. Following service, an appearance was filed out of time and a Request for Particulars was made. The plaintiff refused the request and subsequently moved for judgment. Default judgment was entered on 30 September 1999. On 1 October 1999, the second defendant attempted to file a Defence. 5 On 18 October 1999, she filed a Notice of Motion. It seeks inter alia that the default judgment be set aside. 6 This application was heard on 1 November 1999. The second defendant has sworn an affidavit. Her solicitor has sworn an affidavit. There has been no cross-examination. The second defendant has tendered a proposed Defence and Cross-claim (Exhibit 1). It is unverified. She has also tendered a copy of Memorandum 379070J (Exhibit 2). The plaintiff has not adduced any evidence. 7 I shall refer briefly to some of the material that appears inter alia from the affidavits. This reference is not intended as an exhaustive recitation of relevant material. 8 The second defendant was not a shareholder in the company. It had been owned and controlled by the first defendant and John Ernest Pearce (Pearce). She was a director of it for a short period, following Pearce's resignation. Also, she worked for the company during a brief period. 9 The second defendant signed the mortgage following pressure and assurances from the first defendant (including assurances that the company was sound and that the house was not at risk). Further, she had been led to believe that a mortgage would be given by Pearce to secure the company's indebtedness. 10 Prior to the signing of the mortgage she did see a solicitor (who she describes as the solicitor for the company). Her affidavit is silent as to whether or not the solicitor gave her any advice. She does not say that he failed to give her any advice as to the nature and effect of the mortgage. She does not say that she then lacked understanding of the purpose and effect of the transaction. She does complain that he failed to give her any explanation concerning the financial position of the company or the financial or commercial risk that she would be undertaking by signing the mortgage. 11 The second defendant says that she has no tertiary qualifications and no business experience. She says that if she had appreciated that she was undertaking a substantial risk that she would lose the house, she would not have signed the mortgage. She says she did not read the mortgage and her attention was not drawn to the fact that the provisions of the memorandum were to be incorporated into the mortgage. 12 The second defendant says that she has never dealt with any person on behalf of the plaintiff and that there were no negotiations between her and the plaintiff in relation to the mortgage. 13 She says that she felt that she had no option but to sign the Deed Poll (even though she held a belief that the indebtedness of the company was substantially less than the acknowledged amount). She signed it because she was told by the first defendant and a solicitor that if she did not sign the document then the ANZ was not prepared to restructure the business loan. The consequence of this would be that the ANZ would take possession and sell the property pursuant to its mortgage. 14 It seems clear from this evidence, that she had given another mortgage (to ANZ) over the property to secure the indebtedness of the company. 15 The proposed Defence and Cross-claim is a lengthy document (in substance, the Defence and the Cross-claim raise similar matters). It purports to raise a number of matters in answer to the plaintiff's claim. It suffices to refer to the principal matters raised therein. These are matters of duress, undue influence, unconscionability, unjust contracts and an implied term that a mortgage was to have been obtained from Pearce. 16 The evidence has unsatisfactory features (inter alia the affidavit of the second defendant conveys the impression that it has been carefully drafted to give a selective presentation of material). There was no cross-examination. Submissions were brief. Primarily, the second defendant says that this is a case similar to that considered in Garcia v National Australia Bank Ltd (1998) Aust Contract Reports 90-096. The plaintiff says that the evidence falls well short of showing any entitlement to relief against the plaintiff. 17 The court has a discretionary power to set aside a default judgment. The power is exercised so as to ensure that justice is best served between the parties. The applicant bears the onus of satisfying the court that the relief sought should be granted. 18 The single discretionary consideration agitated by the parties is whether or not the second defendant has a bona fide defence on the merits to the plaintiff's claim for possession of the property. 19 This is an application which has occasioned me some difficulty. I have some reservation about the bona fides of matters now raised by the second defendant by way of Defence and Cross-claim. 20 There is material before the court which has the potential to support a claim for relief founded on the principles applied in Yerkey v Jones (1939) 63 CLR 649. Whilst the claim has the potential to be described as arguable, its prospects of success at any trial may not be good. Its weaknesses may be fully exposed if and when the full picture is presented to the court. 21 With some reluctance, I have finally come to the view that justice would be best served if the default judgment was set aside and the second defendant is given an opportunity to present her case at trial. In my view, it was reasonable for the plaintiff to oppose the application. 22 I order that the default judgment be set aside. I give leave to the second defendant to file a Defence and Cross-claim within seven days. The second defendant is to pay the costs of the Notice of Motion and any costs thrown away by reason of the setting aside of the default judgment. The exhibits may be returned. ********** Last Modified: 11/15/1999 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.