New South Wales Supreme Court CITATION : Bakovski & Anor v Mitrevski [2006] NSWSC 1173 HEARING DATE(S) : 7 November 2006 JUDGMENT DATE : 9 November 2006 JURISDICTION : Common Law Division JUDGMENT OF : Associate Justice Harrison DECISION : (1) Default judgment entered on 7 April 2006 is set aside; (2) The defendant is to pay the plaintiffs' costs incurred firstly, in obtaining default judgment and secondly, the costs of this motion; (3) Defendant to file and serve defence and any cross claim within 14 days; (4) Status Conference to be allocated as soon as possible. Court to notify the parties of the date. CATCHWORDS : Set aside default judgment LEGISLATION CITED : Uniform Civil Procedure Rules 2005 (NSW) - 36.16 CASES CITED : Cohen v McWilliam (1995) 38 NSWLR 476 Davies v Pagett (1986) 10 FCR 226 George Bakovski - First Plaintiff PARTIES : Vera Bakovski - Second Plaintiff Robert Mitrevski - Defendant FILE NUMBER(S) : SC 14262/2005 COUNSEL : Mr J T Johnson - Plaintiffs Ms L Young - Defendant SOLICITORS : Owen Hodge Lawyers - Plaintiffs Heidtman & Co Lawyers - Defendant IN THE SUPREME COURT OF NEW SOUTH WALES COMMON LAW DIVISION ASSOCIATE JUSTICE HARRISON THURSDAY, 9 NOVEMBER 2006 14262/2005 - GEORGE BAKOVSKI & ANOR v ROBERT MITREVSKI JUDGMENT (Set aside default judgment) 1 HER HONOUR: By notice of motion filed 6 July 2006 the defendant seeks firstly, an order pursuant to Rule 36.16 of the Uniform Civil Procedure Rules 2005 (NSW) (UCPR), that the judgment entered on 7 April 2006 be set aside; secondly, an order pursuant to Rule 2.1 of the UCPR that there be directions made for the further conduct of these proceedings; and thirdly, an order that execution on the judgment entered on 7 April 2006 be stayed pending the hearing of this motion. 2 The first plaintiff is George Bakovski. The second plaintiff is Vera Bakovski. The defendant is Robert Mitrevski. The first plaintiff relied on his affidavit dated 2 August 2006. The second plaintiff relied on her affidavit dated 2 August 2006. The defendant relied on his affidavits dated 11 July 2006 and 15 August 2006. The law 3 Rule 36.16 of the UCPR provides: "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) the judgment or order has been entered under Part 16 (Default judgment), or …" 4 On 7 April 2006 default judgment was entered against the defendant. 5 One of the considerations to be taken into account when determining whether default judgment should be set aside was expressed by Priestley JA in Cohen v McWilliam (1995) 38 NSWLR 476 at 481 quoting from the Federal Court in Davies v Pagett (1986) 10 FCR 226: "It is, however, another question whether concern about the extent of delays, either in a particular case or generally, should, in the absence of prejudice in the particular case, be taken into account in exercising a discretion to set aside a default judgment. The fundamental duty of the court is to do justice between the parties. It is, in turn, fundamental to that duty that the parties should each be allowed a proper opportunity to put their cases upon the merits of the matter. Any limitation upon that opportunity will generally be justified only by the necessity to avoid prejudice to the interests of some other party, occasioned by misconduct , in the case, of the party upon whom the limitation is sought to be imposed. The temptation to impose a limitation through motives of professional discipline or general deterrence is readily understandable; but, in our opinion it is an erroneous exercise of the relevant discretion to yield to that temptation. The problem of delays in the courts, egregious at it is, must be dealt with in other ways: for example, by disciplinary actions against offending practitioners and by a comprehensive system of directions hearings or other pre-trial procedures which enable the court to supervise progress – and, more pertinently, non-progress – in all actions…" 6 For the defendant to succeed in his or her application to set aside default judgment, they must give an adequate explanation for the delay in filing their defence and show that they have a defence on its merits. A Court, when hearing such an application, must be mindful of its fundamental duty to do justice between the parties. Explanation for delay 7 The defendant has admitted that he was served with a statement of claim in these proceeding personally in late September or early October 2005. A person is said to have given the document to him and said words to the effect: "Here is a Statement of Claim." 8 The defendant deposed (Aff 11/07/2006) that, although he realised that this was an official document from the Supreme Court of New South Wales, he did not understand what would occur if he did not seek legal advice. He also said that he did not understand "what it all meant" as he was not familiar with Court documents. The defendant also deposed that, at this time, he was not doing well financially, so he could not afford to see a solicitor. The defendant further deposed that he "didn't think anything would happen about the document unless it went to Court and I though that I would have to be told by someone that I should be in Court to argue about it or hear about it." 9 While the defendant has provided an explanation for delay, it reflects very poorly upon him. For a man who has commercial experience, being a property developer, to ignore Court process is, to say the least, reckless and foolish. Whether there is an arguable defence 10 The Bakovskis and the Mitrevskis are interwined as family. While the defendant has deposed to a convoluted arrangement involving deals with the Bakovskis, the Bakovskis' son Nicholas and Anne Thanudchang, there are only two written documents between the plaintiffs and defendant in evidence. It is common ground that Robert Mitrevski paid the Bakovskis $100,000 in three instalments between 30 March 2004 and 1 July 2006. 11 The first document is a deed of acknowledgment of debt which states: "I, Robert Mitrevski, Director of Demar Investment NSW Pty Ltd, on my own behalf and on behalf of the company, hereby acknowledge as follows:- 1. $750,000 advanced by Crown & Gleeson Securities Pty Ltd and secured by a mortgage dated 26th August 2004 between Crown & Gleeson Pty Ltd, ACN: 101 885 938 and George and Vera Bakovski over land being Volume 86 Folio 1353 and being advanced to Denmar Investments NSW Pty Ltd by you. 2. $386,250.00 advanced by Accom Finance Pty Ltd and secured by a mortgage dated 13th August 2004 between Accom Finance Pty Ltd and George and Vera Bakovski over land being Folio 6/1/677 being advanced to Denmar Investments NSW Pty Ltd by you, are still due and payable to you by Denmar Investments NSW Pty Ltd and in its default by me personally. Dated: 9/4/04 ……………………….. ROBERT MITREVSKI" 12 While a signature purporting to be that of Robert Mitrevski appears at the foot of the page, he denies that it is in fact his signature. From this document it appears that the advance of $750,000 was made to Demar Investments NSW Pty Limited by Mr Mitrevski. 13 The other document is a handwritten one. It states: "17-10-04 I Robert Mitrevski is wiling to pay to George Bakovski & Vera Bakovski he money loand on the propertys & interest including in approx 3 months time 1,280,000 up to above date." (sic) 14 Mr Mitrevski admits that his signature appears on this document. 15 There are two different versions of the arrangement surrounding the advance of the money to Mr Mitrevski (or Demar Pty Limited). Both versions are supported by affidavit evidence. On Mr Mitrevski's evidence, the arrangement was a joint venture arrangement, with the Bakovskis investing and taking returns an investors, rather being repaid as if they had loaned the money. 16 On the Bakovskis' evidence, the money was purely a loan. The Bakovskis apparently knew nothing of a Liverpool development. Whether the version put by the Bakovskis or Mr Mitrevski is correct will ultimately be a matter of credit, which can only be ascertained at a hearing when the witnesses are cross-examined. It is my view that the defendant had an arguable defence. The Bakovskis have not given any evidence as to any hardship or prejudice caused by the delay. 17 The Bakovskis' Counsel submitted that there is no defence to the loan of $386,250 but that does not take into account whether the sum of $100,000 should be credited to that loan. This matter would more appropriately be dealt with at trial. 18 It is my view that, as it is a fundamental duty of the Court to do justice and to provide each party with a proper opportunity to present their case, the default judgment should be set aside. Costs 19 As Mr Mitrevski has been granted an indulgence by this Court he should pay the plaintiffs' costs incurred firstly, in obtaining the default judgment and secondly, in relation to their costs of this motion. The plaintiffs sought that these costs should be paid forthwith. The usual rule should apply that the costs are payable at the conclusion of the proceedings. The Court orders: (1) The default judgment entered on 7 April 2006 is set aside. (2) The defendant is to pay the plaintiffs' costs incurred firstly, in obtaining default judgment and secondly, the costs of this motion. (3) Defendant to file and serve defence and any cross claim within 14 days. (4) Status Conference to be allocated as soon as possible. Court to notify the parties of the date. ********** 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.