Supreme Court New South Wales Medium Neutral Citation: Westpac Banking Corporation & Anor v Simon Wakim [2011] NSWSC 414 Hearing dates: 6 May 2011 Decision date: 10 May 2011 Jurisdiction: Equity Division - Commercial List Before: Einstein J Decision: Notice of motion dismissed. Defendant to pay the plaintiff's costs of the application. Catchwords: Notice of motion seeking to set aside default judgment - Principles - No arguable defence - Prejudice to plaintiff Cases Cited: Autodesk Inc v Dyason [No. 2] (1993) 176 CLR 300 New South Wales Bar Association v Smith (unreported, NSWCA 4 July 1991) Pittalis v Sherefettin [1986] QB 868 Smith v New South Wales By Association (1992) 176 CLR 256 Category: Procedural and other rulings Parties: Westpac Banking Corporation (First Plaintiff) St George Financing Limited (Second Plaintiff) Simon Wakim (Defendant) Representation: Mr Robertson (First and Second Plaintiffs) Ms Nolan (Defendant) Henry Davis York (First and Second Plaintiffs) Deutsch Partners (Defendant) File Number(s): 2009/00298737 Judgment The notice of motion 1The defendant moves on a notice of motion seeking to set aside a default judgment entered in these proceedings on 23 July 2010. 2The original proceedings were brought by St George Bank Limited and St George Finance Limited against Mr Simon Wakim. 3The relief claimed by the plaintiffs against the defendant is for the sum of $3,069,753.75 together with interest. 4The commercial list statement filed by the plaintiffs identified the issues in terms of whether the defendant is to pay the above described moneys, interests and costs pursuant to guarantees and the general terms and conditions and the cheque terms and conditions. In essence the plaintiffs' contentions are founded upon the plaintiffs' advances to a company associated with Mr Wakim. 5The plaintiffs claimed that by guarantees and indemnities dated 20 September 2007 and 31 January 2008 given by the defendant to the plaintiffs in consideration of the plaintiffs granting or affording or continuing to grant and forward advances or accommodation to the company, the defendant guaranteed to the plaintiffs on the terms and conditions set out in those documents, the payment, when demanded in writing, of all money owing or payable by the company, including under the cheque plus count, and various other facilities. 6The plaintiffs claimed that in breach of obligations under the facilities the company defaulted and that the defendant has failed to pay the amount owing to the plaintiff under the guarantees. The defendant's contentions 7The Defendant sought to set aside the default judgment pursuant to Uniform Civil Procedure rule 36.15 based on the following claims: (1)The default judgment was entered in proceedings which were irregularly commenced as proceeding for a liquidated claim in circumstances where they should have properly been unliquidated; (2)By reason of the irregularity in the proceedings the default judgment was also brought for the same liquidated claim and was thereby irregularly entered; and (3)The notice of motion and affidavit in support of the default judgment both being dated 30 April 2010, were not served on the defendant despite the plaintiffs being on notice on or about 16 April 2011 that the defendant's former solicitors had ceased to act. The default judgment was entered in the absence of the defendant being given an opportunity to be heard, was in breach of the rules of procedural fairness and was thereby irregular; (4)The default judgment should be set aside in the discretion of the Court. Mr Wakim has a legitimate explanation for his defaults and for his delay in seeking to set aside the default judgment and he has a good defence on the merits to the proceedings. The plaintiffs' response 8The plaintiffs sought to address each of these grounds, arguing that none of them were sufficient to warrant setting aside the default judgment. 9In reference to the alleged irregularities in initiating the proceedings and entering the judgment, the plaintiffs responded: (1)the proceedings were commenced by summons and commercial list statement; (2)the proceedings included a claim under a guarantee which is clearly a liquidated claim; and (3)pursuant to Rule 16.8 if a Plaintiff's claim includes both liquidated and unliquidated claims, the Plaintiff may obtain default judgment on the liquidated claim as if it were the only claim. 10As to the defendant's submission that he was not properly served the notice of motion and supporting affidavit resulting in procedural unfairness, the plaintiff submitted that: (1)The motion on which the default judgment was entered, as indicated in the Orders was dated 19 March 2010. At that date the defendant's former solicitors were still acting. A notice of ceasing to act was not filed until April; and (2)In any event, on the filing of the notice of ceasing to act, the defendant, having failed to notify an alternative address for service, was in default of appearance. By virtue of Rule 10.16 the filing of a document was taken to have the same effect as service of the document on the person. 11Finally, turning to defendant's prayer for the Court to exercise its discretion and set aside the default judgment the plaintiffs submitted: (1)Mr Wakim has neither a legitimate explanation for his default and delay in seeking to set aside the default judgment nor does he have a good defence to the merits to the proceedings; (2)The defence set out in the proposed commercial list response cannot succeed. It relies upon implied terms that are inconsistent with the express terms of the bailment agreement; (3)Paragraph 26 to 30 of the proposed commercial List response also relies upon an apparent allegation that the plaintiff repudiated the guarantees. Such an allegation cannot possibly succeed. (4)Finally, paragraph 21 of the proposed commercial list response proceeds on an erroneous construction of the guarantees. The consideration referred to in clause 1.1 of the guarantees was provided at the moment of execution of the guarantees and was not an ongoing consideration. 12A chronology exposes the following : DATE EVENT 16-Dec-2009 Plaintiff files Commercial List Summons and Commercial List Statement 11-Mar-2010 Defendant files "Defence" 19-Mar-2010 Plaintiff files Notice of Motion seeking, amongst other things, (1) an order that the defendant answer the plaintiff's interrogatories; (2) that the Court strike out certain paragraphs of the defendant's defence; and (3) leave to file for default judgment 01/04/2010 (on or about) Plaintiff serves Interrogatories on Defendant 23-Jul-2010 Default Judgment entered in favour of Plaintiff 15-Sep-2010 (on or about) Official Receiver issues Bankruptcy Notice against the defendant 16-Oct-2010 Defendant's act of bankruptcy 23-Nov-2010 Plaintiff files Creditors petition in Federal Magistrates Court Proceeding No 2530 of 2010 02-Feb-2011 First Return of Hearing of the Creditors' Petition. Plaintiff provides documents requested by defendant's solicitor 04-Feb-2011 Creditors' petition deemed served by order of the Federal Magistrates Court 02-Mar-2011 Second Return of Hearing of the Creditors' Petition Defendant serves Notice of Motion to Set Aside Default Judgment dated 23 July 2010 (without supporting affidavit) 08-Apr-2011 Defendant serves Notice Stating Grounds of Opposition to Application for order of sequestration (without supporting Affidavit of David Deutsch sworn 7 April 2011) 13-Apr-2011 Third return of Hearing of the Creditors' Petition. Federal Magistrates Court Proceeding adjourned to 3 May 2011 29-Apr-2011 First Return of Notice of Motion to Set Aside Default Judgment dated 23 July 2010. Judgment Reserved, and Supreme Court Proceeding adjourned to 6 May 2011. 02-May-2011 Fourth Return of Hearing of the Creditors' Petition. Federal Magistrates Court Proceeding adjourned to 17 May 2011. 06-May-2011 Hearing of Notice of Motion to Set Aside Default Judgment dated 23 July 2010 The principles 13It is convenient to commence with a consideration of the principles. Clearly the court has jurisdiction to entertain a motion to set aside or vary a judgment provided that the motion is filed before entry of the judgment. As was pointed out by the defendants in their written submissions the position at common law as stated in Smith v New South Wales By Association (1992) 176 CLR 256 at 265 was as follows: "It has long been the common law that a court may review, correct or alter its judgment at any time until its order has been perfected". 14In Autodesk Inc v Dyason [No. 2] (1993) 176 CLR 300 at 302-3, Mason CJ identified various circumstances in which, under the authorities, the Court has exercised the jurisdiction to reopen a judgment which has apparently miscarried. One of the circumstances identified was the case of New South Wales Bar Association v Smith (unreported, NSWCA 4 July 1991) in which the New South Wales Court of Appeal reconsidered orders previously made in view of an argument that the Court had mistakenly assumed that particular evidence had not been given at earlier hearings. Another example given was Pittalis v Sherefettin [1986] QB 868 in which a judge recalled orders the day after the day they were made upon determining that he had erred in a material matter in his approach to the case. The guiding principle, as stated by Mason CJ (at 302) is as follows: "These examples indicate that the public interest in the finality of litigation will not preclude the exceptional step of reviewing or rehearing an issue where a court has good reason to consider that, in its earlier judgment, it has proceeded on a misapprehension as to the facts or the law." The relevant contractual documents 15Exhibit 1 constituted a folder setting out across some 168 odd pages, the details of the contractual documents, identifying the guarantor as the defendant and the customer as the Company Wakim or Prestige Pty Ltd. The date of the Guarantee and indemnity being 20 September 2007. 16The following were important provisions of the Guarantee and indemnity : Guarantee and Indemnity 20 September 2007 Financier: St George Bank Limited St George Finance Limited Level 13, 182 George Street, Sydney NSW 2000 Guarantor: Simon Wakim 93 Rogers Street, Kingsgrove NSW 2208 Customer: Wakim Prestige Proprietary Limited ABN 49117160 362 C/- Simon Wakim, 144 Milperra Road, Revesby NSW 2212 Limits: Limited - See special conditions attached as Annexure A Date of guarantee and indemnity: 20 September 2007 Warning + You should seek independent legal and financial advice on the effect of this guarantee and indemnity before you agree to sign it. + You can refuse to sign this guarantee and indemnity. + There are financial risks involved in signing this guarantee and indemnity (for example, it may become necessary for you to sell your assets so that you can pay us). + You have the right to limit your liability under this guarantee and indemnity in accordance with the Code of Banking Practice and as allowed by law. + You can request information about the transaction or facility to be guaranteed (including any existing facility with us to be refinanced by the new facility). + This guarantee and indemnity covers liability under a future credit contract to the extent the future credit contract (together with all other existing credit contracts secured by this guarantee and indemnity) is within a limit previously agreed in writing by you. Purpose of this guarantee and indemnity and extent of your obligations 1.1 This guarantee and indemnity is entered into in consideration of us providing or continuing to provide financial accommodation to the customer or not immediately enforcing rights against the customer at your request. 1.2 By signing this guarantee and indemnity, you could become liable to pay us: (a)under the guarantee in clause 2 (b)under the indemnity in clause 3 (c)costs and other expenses under clause 4 (d)interest under clause 5. However, the maximum amount we can recover from you is set out in the special conditions attached to this guarantee and indemnity. Changes to rights Our rights protected 8.1 Rights given to us under this guarantee and indemnity and your liabilities under it are not affected by any act or omission by us or by anything else that might otherwise affect them under law or otherwise, including: (a)the fact that we vary or replace any arrangement under which the guaranteed money is expressed to be owing, such as by increasing the credit limit or extending the term; or (b)the fact that we release the customer or give them a concession, such as more time to pay; or (c)the fact that the customer opens another account with us; or (d)the fact that we release, lose the benefit of or do not obtain any security; or (e)the fact that we do not register any security which could be registered; or (f)the fact that we release any person who guarantees any of the customer's obligations; or (g)the fact that the obligations of any person who guarantees any of the customer's obligations may not be enforceable; or (h)the fact that any person who was intended to guarantee any of the customer's obligations does not do so or does not do so effectively; or (i)the death, mental or physical disability or insolvency of any person including your or the customer; or (j)changes in the membership, name or business of a firm, partnership, committee or association... Your rights are suspended 9. As long as any of the guaranteed money remains unpaid, you may not, without consent: (a)reduce your liability under this guarantee and indemnity by claiming that you or the customer or any other person has a right of set-off or counterclaim against us; or (b)exercise any legal rights to claim to be entitled to the benefit of another guarantee, indemnity, mortgage, charge or other security given in connection with the guaranteed money or any other amount payable under this guarantee and indemnity. (For example, you may not try to enforce any mortgage we have taken to ensure repayment of the guaranteed money.); or (c)claim an amount from the customer, or another guarantor of the customer's obligations, under a right of indemnity; or (d)claim an amount in the insolvency of the customer or another guarantor of the guaranteed money (including a person who has signed this guarantee and indemnity with you)... What you acknowledge and declare 10.1 You acknowledge that you are responsible for making yourself aware of the financial position of the customer and any other person who guarantees the guaranteed money. 10.2 Your declare that: (a)neither you, nor if you are a corporation, any director or other person beaches any law or any obligation to another person by signing this guarantee and indemnity and that all necessary authorisations to do so have been obtained; and (b)your obligations under this guarantee and indemnity are valid and binding and enforceable in accordance wit hits terms; and (c)if you are a corporation, you benefit by entering into this guarantee and indemnity; and (d)all information given by you or on your behalf (such as financial statements) is correct and not misleading; and (e)since the date the information was given there has been no change in your financial circumstances which may have a material adverse effect on our ability to meet your obligations under this guarantee and indemnity; and (f)you have not withheld information that might have caused us not to enter into any arrangement with us; and (g)unless otherwise stated in this guarantee and indemnity, you are not signing this guarantee and indemnity as a trustee of any trust or settlement; and (h)all declarations made by you in each other arrangement with us are correct and not misleading; and (i)you have power to carry on our business and you are not in breach of any law or obligation; and (j)there is no pending or threatened court or other proceeding affecting you except those in which a decision against you would be insignificant... How we may exercise our rights.. 19.4 We are not liable for any loss caused by the exercise or attempted exercise of, failure to exercise, or delay in exercising, a right or remedy, whether or not caused by our negligence... Guarantee and Indemnity 31 January 2008 Financier: St George Bank Limited Level 4, 60 Phillip Street, Parramatta NSW 2150 Guarantor: Simon Wakim 93 Rogers Street, Kingsgrove NSW 2208 Customer: Wakim Prestige Proprietary Limited ACN 117 160 362 93 Rogers Street, Kingsgrove NSW 2208 Limits: Date of guarantee and indemnity: 31.01.08 Warning + You should seek independent legal and financial advice on the effect of this guarantee and indemnity before you agree to sign it. + You can refuse to sign this guarantee and indemnity. + There are financial risks involved in signing this guarantee and indemnity (for example, it may become necessary for you to sell your assets so that you can pay us). + You have the right to limit your liability under this guarantee and indemnity in accordance with the Code of Banking Practice and as allowed by law. + You can request information about the transaction or facility to be guaranteed (including any existing facility with us to be refinanced by the new facility). + This guarantee and indemnity covers liability under a future credit contract to the extent the future credit contract (together with all other existing credit contracts secured by this guarantee and indemnity) is within a limit previously agreed in writing by you. Purpose of this guarantee and indemnity and extent of your obligations 1.1 This guarantee and indemnity is entered into in consideration of us providing or continuing to provide financial accommodation to the customer or not immediately enforcing rights against the customer at your request... 1.4 This guarantee and indemnity takes effect as a cross-guarantee and cross-indemnity when one or more of the customers are the same as one or more of you. In those circumstances it is a separate guarantee and indemnity in relation to each customer as if that person were: (k)the only person included in the definition of "customer"; and (l)excluded from the definition of "you". Bailment facility Facility limit: $3,000,000 Including the following sublimits: Used goods: $3,000,000 The bailment account balance for each facility must not exceed the facility limit or any sublimit for that facility. However, in certain circumstances, you may make arrangements with us to temporarily exceed the new goods limit on any facility. We may set additional terms and conditions and require additional security in return for agreeing to the temporary excess. This may include but not be limited to reducing any other new goods limit. Purpose: To provide a bailment facility for goods to be sold to customers Wakim Prestige Proprietary Limited. Bailment: We may agree to bail goods to you in accordance with the bailment agreement. A "drawdown" is taken to have occurred whenever any goods are bailed to you under the bailment agreement. Bailment fee: We charge bailment fees. They are calculated, for a month, by applying to the average daily bailment account balance for that month the bailment fee rate being the St George 30 day Bank Bill Swap Reference Rate on the first business day of that month, plus a margin based on retail volume as follows: For a month, the Net Amount Financed by us under credit agreements entered into under the dealer agreement during the month; for that month Bailment fee rate margin per annum $1 - $250,000 2.50% $250,001 - $500,000 2.00% $500,001 - $750,000 1.50% >$750,001 1.00% For example, if the retail volume for a month is $520,000, then the applicable margin is 1.50%. This calculation does not include an allowance for GST liability. You must pay the total amount. Deposits Although we have the right under the bailment agreement to require you to deposit with us any amounts we specify, you are also required to make the following deposits: Used goods: 0% of their purchase price up to the end of the initial bailment term for those goods. Initial bailment term: Used goods: 180 day from the date they are first bailed to you. Bailment agreement 20 September 2007 Ownership and bailment Extent of your interest 4.1 The bailed goods are obtained by you as our bailee for safekeeping and for the purpose of display on terms of this agreement. The bailed goods always remain our property during the term of their bailment under this agreement. You do not have any interest in, or option over, the bailed goods. You do not have any licence to use the bailed goods in any way, other than as contemplated by this agreement. 4.2 You may deliver the bailed goods to us at any time. We may demand possession of, or take possession of, the bailed goods at any time. We may do this without notice to you and even though there has not been any default by you under this agreement or the facility agreement... Things we may do at any time 14.1 We may assign or otherwise deal with our rights under this agreement in any way we consider appropriate. If we do this, you may not claim against any assignee (or any other person who has an interest in this agreement) any right of set-off or other rights you have against us. 14.2 We may enter land and buildings owned or occupied by you, any place where the bailed goods are located, your places of business and your registered office to: (a)inspect and test the bailed goods; or (b)take possession of the bailed goods; or (c)find out whether you are complying with this agreement; or (d)carry out our rights under this agreement; or (e)inspect and copy records relating to you, your subsidiaries or the bailed goods; or (f)investigate your financial affairs or business or the financial affairs or business of your subsidiaries... Indemnities 16.1 You indemnify us against, and you must therefore pay us on demand for, liability, loss or costs (including consequential or economic loss) we suffer or incur: (c) in doing anything you should have done under this agreement; or (d) in connection with any defect or alleged defect in title to any bailed goods purchased by, or on behalf of, us; or (e) in connection with any loss or damage to the bailed goods; or.. Certificates 19 We may give you a certificate about a matter or about an amount payable in connection with this agreement. The certificate is sufficient evidence of the matter or amount, unless it is proved to be incorrect. Prompt performance 29 If this agreement specifies when you must perform an obligation, you must perform it by the time specified. You must perform all other obligations promptly. How we exercise our rights 21.1 We may exercise a right or remedy or give or refuse our consent in any way we consider appropriate, including by imposing conditions. 21.2 If we do not exercise a right or remedy fully or at a given time, we can still exercise it later. 21.3 We are not liable for loss caused by the exercise or attempted exercise of, failure to exercise, or delay in exercising, a right or remedy, whether or not caused by our negligence. Variation and waiver 25.1 A provision of this agreement, or right created under it, may not be waived except in writing signed by the party or parties to be bound. 25.2 We may vary any provision of this agreement as we choose, If we do, we must notify you and the change takes effect from the time we specify in the notice. No arguable defence 17The bailment agreement has already been referred to. Clause 4.2 was in the following terms : You may deliver the bail goods to us at any time. We may demand possession of, or take possession of, the bail goods at any time. We may do this without notice to you and even though there has not been any default by you under this agreement or the facility agreement. 18Turning to the defendant's contention set out in the defendant's response at paragraph 20, that response read as follows : It was an implied term of the Bailment Agreement (among the facilities) to do nothing of their own motion to put to an end to the state of circumstances, under which, alone, the financial accommodation arrangements between the Plaintiffs and the company could be operative ["the Business Efficacy Term"). 19Mr Robertson, counsel for the plaintiff took the court to BP refinery where their Lordships put the matter as follows : "Their Lordships do not think it necessary to review exhaustively the authorities on the implication of a term in a contract which the parties have not thought fit to express. In their view, for a term to be implied, the following conditions (which may overlap) must be satisfied: (1)it must be reasonable and equitable (2)it must be necessary to give business efficacy to the contract, so that no turn will be implied if the contract is ineffective without it (3)it must be so obvious that it goes without saying (4)it must be capable of clear expression (5)it must not contradict any express term of the contract." 20I accept that the implied term set out in paragraph 20 of the defence is utterly inconsistent with and fails immediately by reference to the fifth requirement. It is directly contradictory of clause 5 (4.2). That is, St George can take possession of the bail the goods at any time and without notice and without default. 21Clause 21.1 , 21.2, 21.3, and 21.4 could not have been clearer : We may exercise a right or remedy or give or refuse how consent in any way we consider appropriate, including by imposing conditions If we do not exercise a right or remedy for legal or at a given time, we can still exercise it later We not liable for loss caused by the exercise or attempted exercise of, failure to exercise, would delay in exercising, a right or remedy whether or not caused by own negligence Our rights and remedies under this agreement : (1)Are in addition to the other rights and remedies given by law independently of this agreement and (2)May be exercised even if this involves a conflict of duty or we have a personal interest in their exercise 22Nor is there any substance in paragraphs 21 of the proposed defence. The relevant rights bargained for have already been clearly set out. 23Nor is there any substance in the defendant's contention seeking to draw in aid the concept of repudiation by a creditor of a guarantee. 24The defendant's contention is sought to suggest that there was an ambiguity in the terms of relevantly clause 1.1 of the Guarantee which has already been set out. That contention was expressed in the following fashion : Now the consideration is posited in the alternative, but I would say that the alternative in this case should be read inclusively as opposed to an exclusively. It is just a question of construction, but that would be a matter of substance to be dealt with at the trial. The contention is that more particularly about the second alternative for consideration, which is the Guarantee and indemnity is entered into in consideration of us, not immediately enforcing rights against the customer at your request 25In my view this contention is unsubstantiated by authority and in the context of these proceedings must be rejected out of hand. 26The consideration referred to in clause 1.1 of the guarantees was provided at the moment of execution of the guarantees and was not an ongoing consideration. The credit of the defendant 27The defendant gave evidence and was cross-examined. His explanation for the delay was inadequate and not credible. Even assuming in his favour that he first became aware of the default judgement towards the end of January this year, there had been no alacrity at all in preparing a defence. A defence was filed in March to set the default judgement aside but it was only on the night before the hearing that any document purporting to be a defence and any affidavit from the defendant was served. Had he sought to move with alacrity this matter may have been dealt with a long time ago in the circumstances. 28It should not be overlooked that the defendant's notice of motion is pursued after judgment entered in these proceedings as long ago as July 2010 . That length of time requires that the defendant explain his position. That explanation is rejected. The simple fact is that the defendant time and time again during his cross-examination exhibited a tendency to either refused to answer questions put to him or to prevaricate with the cross examiner. Without being exhaustive is evidence under cross examination included : Q. Mr Wakim, do you understand what you've put in your affidavit? A. To a degree, yes. Q. That's the document of 11 March. And what you're saying in that affidavit is that the defence, as far as you're concerned, is accurate and reliable? A. From what I'm led to believe, yeah. Q. And what I want to put to you is that when you in paragraph 4A denied or, in the alternative, did not admit to signing any guarantees dated 20 September 2007 and 31 January 2008 that was false? A. That I did sign or that I didn't sign? Q. You're denying or, in the alternative, not admitting signing. In other words, you are saying, "I did not sign or I don't know whether I signed"? A. Well, I would've said I don't recall signing any guarantees. Q. But you knew - you've already agreed with me that you knew you had signed guarantees? A. Okay. Q. So that was a false statement, wasn't it, Mr Wakim? A. It doesn't seem false to me though because I didn't understand what guarantees was. This was given to me by Mr Shamieh and drafted for me by Mr Shamieh, so this is what I was led to believe is what the case was. I didn't understand the way he had put it together for me to sign. Prejudice to the plaintiff 29The plaintiff is plainly prejudiced by the late application. It has had bankruptcy proceedings which have been on foot for some time. They are being adjourned. They have been adjourned on a number of occasions already. 30Hence the explanation for delay is insufficient. 31The critical question is whether or not the defendant has put forward a reasonable or arguable defence. In my view the defence put forward by the defendant is simply not arguable on any assessment. Decision 32The defendant has neither a legitimate explanation for his default and delay in seeking to set aside the default judgement does he have a good defence to the merits of the proceedings. 33For those reasons the notice of motion filed by the defendant on 2 March 2011 is dismissed. 34The defendant is to pay the plaintiffs' costs of the application. ********** 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: 12 May 2011