Supreme Court New South Wales Medium Neutral Citation: Fuji Xerox Australia Pty Limited v Print Media & Publishing Group (Australia) Pty Limited [2014] NSWSC 112 Hearing dates: 3, 4 February 2014 Decision date: 25 February 2014 Jurisdiction: Equity Division Before: Nicholas AJ Decision: Notice of Motion to set aside default judgment dismissed with costs. Catchwords: PRACTICE AND PROCEDURE - Motion to set aside default judgment - Whether satisfactory explanation for delay - Whether arguable defence on merits - Applicable principles considered - Uniform Civil Procedure Rules 2005, r 36.16. Legislation Cited: Civil Procedure Act 2005 Contracts Review Act 1980 Uniform Civil Procedure Rules 2005 Cases Cited: Kakavas v Crown Melbourne Ltd [2013] HCA 25; (2013) 87 ALJR 708 Petelin v Cullen (1974) 132 CLR 355 Reinehr Industrial Lease & Finance Pty Ltd v Jordan (Court of Appeal (NSW), Street ACJ, Hardie and Glass JJA, 4 June 1974, unrep) Category: Interlocutory applications Parties: Fuji Xerox Australia Pty Limited (Plaintiff/Respondent) Print Media & Publishing Group (Australia) Pty Limited (First Defendant) Rahul Krishna Raju (Second Defendant) Sharda Nand (Third Defendant/Applicant) Representation: Counsel: D L Cook (Plaintiff/Respondent) L E Judge (Third Defendant/Applicant) Solicitors: Polczynski Lawyers (Plaintiff/Respondent) Hemant Prakash & Associates (Third Defendant/Applicant) File Number(s): 2011/398334 Publication restriction: Nil Judgment 1On 4 February 2014, I dismissed the third defendant's (Mrs Nand) Notice of Motion filed 26 August 2013 to set aside the default judgment entered on 23 August 2012 against the first defendant (Print Media) and her in the amount of $265,806.48. Mrs Nand was ordered to pay the plaintiff's costs. These are my reasons. 2The plaintiff sued Mrs Nand upon a guarantee given by her to the plaintiff in aid of an agreement for the lease of printing equipment by the plaintiff to Print Media of which the second defendant (Raju) was the director and secretary. Print Media defaulted under the agreement and the plaintiff subsequently terminated the lease and moved to recover the equipment. By Statement of Claim filed on 27 March 2012 the plaintiff claimed amounts payable under the agreement by Print Media and Mrs Nand. Mrs Nand failed to file a defence. 3In support of the application Mrs Nand contends that the evidence demonstrates a defence on the merits and an appropriate explanation for her default. Background 4A summary of the relevant history, agreed or otherwise established on the evidence, is as follows. 5Mrs Nand is 63 years of age and has lived in Australia since 1973. She is the owner of an investment residential property at Doonside and two residential properties at Cranebrook. 6On 17 August 2011 Mrs Nand signed a form of guarantee in favour of the plaintiff at the request of, and witnessed by, Raju. 7On 19 August 2011, the plaintiff entered into the agreement with Print Media. On 25 November 2011 the agreement was terminated for non-payment of rent. 8On 8 December 2011, in a telephone conversation with the plaintiff's solicitor, Mr Cooper, Mrs Nand was advised of the guarantee. She denied signing any document for the plaintiff and requested a copy. It was sent to her the next day. 9On 9 December 2011 the plaintiff commenced these proceedings by summons against Print Media, Raju and Mrs Nand seeking recovery of the debt payable under the agreement, and possession of the equipment leased to Print Media. The originating process and supporting documents were served the same day. 10By letter of 13 December 2011, the plaintiff's solicitors asked Mrs Nand for information in support of her denial that she had signed the guarantee. She was advised that the proceedings were listed for hearing on 15 December 2011, and urged to seek legal advice. She replied by email that day in which she said: I have spoken to Rahul Krishna Raju to fix this issuse , i am not in these matter (sic) he said he will sort it out asap. Please contact to him rather then me (sic). 11By letter of 16 January 2012 to Mrs Nand the plaintiff's solicitors advised of the consent orders made on 15 December 2011 for recovery of the equipment, and of the listing of the summons for directions on 6 February 2012. She was warned that if she did not attend orders might be made in her absence. She was urged to seek legal advice. 12On 28 March 2012 the statement of claim was served on Mrs Nand by email. She then phoned Raju who told her not to worry as he was looking after the matter, and would arrange a lawyer for her "...to fix this people up". 13On 12 April 2012 Mrs Nand was served personally with the statement of claim. 14On 23 April 2012 Raju, on behalf of Print Media and Mrs Nand, wrote to the Registrar. He sought an adjournment to obtain legal representation. 15On 24 April 2012 the plaintiff's solicitors notified Mrs Nand that the proceedings had been listed for directions on 27 April 2012. They advised that objection would be taken to Raju continuing to assert he was acting on her behalf. She was urged to seek legal representation, and informed that in the event of non-attendance the Court would be asked to make orders in her absence. 16On 27 April 2012 Raju wrote to the Registrar on behalf of the defendants. Again, he sought an adjournment of the directions hearing to obtain legal representation. 17On 1 May 2012 the plaintiff's solicitors wrote to Mrs Nand advising of directions made on 27 April 2012, including that she file her defence by 10 May 2012. She was warned that immediate application for default judgment would be made if no defence were filed. Mrs Nand then spoke to Raju, who informed her that his payment of $5,000 for lawyer's fees had "bounced". He said he had no money, and asked what she wanted to do. No appearance or defence was filed as ordered. 18By letter of 23 May 2012, the plaintiff's solicitors provided Mrs Nand with details of the claim against her under the guarantee and a history of the correspondence. She was reminded of her breach of orders and directions, and warned that, unless a defence was filed by 30 May 2012, default judgment in the sum of $325,068.85 would be sought. She was urged to obtain legal advice. She made no reply. Similar warnings were given in letters of 28 June, and 11 July 2012. 19On 22 June 2012 Mrs Nand and Raju wrote to the Registrar seeking an adjournment to obtain legal representation. They advised that they would comply with the orders of the Court. 20By email of Friday, 27 July 2012, Raju and Mrs Nand informed the Registrar that they understood the seriousness of the matter, and were immediately arranging for legal representation, and would file their defence before the end of the coming week. 21By letter of 1 August 2012, the plaintiff's solicitors informed the defendants of their request to the Registrar to determine the motion for default judgment. There was no reply. 22On 23 August 2012 default judgment in the amount of $265,806.48 was entered against Print Media and Mrs Nand. 23On 16 October 2012 Mrs Nand was served with a Notice of Motion for an examination order. She failed to attend on 15 November 2012 as ordered, and did not correspond with the plaintiff's solicitors about it. 24On 9 January 2013 the plaintiff's solicitor, Mr Edney, had a telephone conversation with Mrs Nand in which he advised her that Raju had done nothing in the proceedings, that she could not rely upon him, and that the matter was serious. Although Mrs Nand said she would call him back after speaking to Raju, she did not do so. 25By letter of 22 January 2013 to Mrs Nand, the plaintiff's solicitors reiterated that Raju had failed to protect her interests, resulting in the judgment against her. The letter included: 3.2 Further, Mr. Raju legally cannot represent you in Court since he is not a solicitor. Therefore, whatever Mr. Raju may be telling you, you cannot leave the matter in his hands. ... 3.4 Therefore, if you are for any reason unable to take care of this matter yourself it is essential that you obtain your own solicitor as a matter of urgency. ... 3.7 As we have already warned above, if you continue to ignore this matter we will apply to have you arrested for failing to comply with the Court's orders. 26On 21 March 2013 Mrs Nand was represented by a solicitor at the return of the plaintiff's Notice of Motion seeking her arrest. She was directed to make any application to set aside the default judgment by 15 April 2013. Her examination was adjourned until 4 April 2013 when she was represented by a solicitor but did not herself appear. The Court ordered the Motion for her arrest be heard on 12 April 2013. 27By email of 26 July 2013 Mrs Nand's solicitor, Mr Hemant Prakash, requested that the plaintiff's solicitors provide information as to the proceedings and foreshadowed an application to move to set aside the judgment. 28On 16 August 2013 the Bankruptcy Notice was served upon Mrs Nand on behalf of the plaintiff. 29On 26 August 2013 the Notice of Motion to set aside the judgment was filed. The Principles 30Under Part 36, rule 36.16(2)(b) of the Uniform Civil Procedure Rules 2005, the Court may exercise its discretion to set aside a default judgment. The principles are well known. In summary, the Court's task is to balance the competing interests of the parties, and to determine whether or not the interests of justice require that the defendant be permitted to contest the plaintiff's claim. Generally, the defendant is expected to demonstrate a good defence on the merits, and provide an explanation for the failure to defend which shows that in the circumstances it should be excused. Relevant factors include the reasons for the default which occasioned judgment being entered (including whether or not the plaintiff warned of the intention to seek the entry of judgment); any delay in taking steps to have the judgment set aside; and whether that delay has operated to the prejudice of the plaintiff; and the defendant's apparent prospects of success in the proceedings. 31Relevant also is the application of ss 56, 58 and 59 of the Civil Procedure Act 2005 (the Act) which provide for the efficient conduct of the proceedings with regard to the dictates of justice. By s 56(3) a party to civil proceedings is under a duty to participate in the processes of the court, and to comply with its orders and directions. Determination 32I turn first to the circumstances of the failure to defend which resulted in the default judgment. 33Judgment was entered on 23 August 2012, about 21 months after commencement of these proceedings on 9 December 2011. Throughout this period the plaintiff's solicitors communicated with Mrs Nand on numerous occasions, the purpose of which was to notify her of the progress of the proceedings, listings for directions, and to warn her of the plaintiff's intention to obtain judgment for the amount claimed. The first letter of this kind was sent to Mrs Nand on 13 December 2011. It included the plaintiff's affidavit evidence, and advised of the fixture on 15 December 2011. She was urged to seek legal advice. She replied by email that day stating, in effect, that she had left the matter to Raju to fix, and they should contact him rather than her. Thereafter, until judgment was entered, she did not communicate directly with the plaintiff's solicitors or seek legal advice. 34Mrs Nand attributed her failure to file her defence and for her delay in moving to set aside the judgment to her continued reliance upon Raju to resolve the proceedings without her involvement. 35Analysis of the evidence demonstrates that, in the circumstances, her continued reliance upon Raju was unreasonable, and provided no basis upon which her failure to act and delay should be excused. It was not disputed that Mrs Nand understood the significance of the plaintiff's claim, and the warnings repeatedly conveyed to her in the communications from its solicitors which, relevantly, began with the letter of 24 April 2012. Early on she was made fully aware that objection was made to Raju acting for her, and of the desirability of her having legal representation. Indeed, her evidence was that months before judgment was entered she knew that the matter was serious, and of the need for legal representation, yet she did nothing about it. The failure of Raju to resolve the matter, or otherwise assist, was plainly evident from the plaintiff's persistence with the claim against her. 36In my assessment, Mrs Nand, who appeared to be an intelligent woman, simply chose to ignore the claim, and to take no step to protect her interests. She provided no explanation for continuing to rely upon Raju when it was obvious that it was detrimental to her interests to do so. Furthermore, no rational explanation was proffered for the failure to comply with the Court's directions as to filing a defence, or for the failure to take advantage of the opportunities provided over a long period to do so. Contrary to her obligation under s 56(3) of the Act, she failed altogether to participate in the Court's process and to comply with its orders and directions. 37In my opinion, the inevitable conclusion is that Mrs Nand deliberately chose to take her chances with Raju. Her choice exposed her to the risk, of which she had been made aware, that judgment would be entered against her for a substantial sum. The risk eventuated. In the circumstances, I do not think the interests of justice require that the Court should excuse, or relieve, her from the consequences of her failure to defend the claim. 38On the present application the failure to establish an adequate explanation for her failure to defend and for delay must be considered in the light of all the circumstances which, in this case, require consideration of whether Mrs Nand has an arguable case on the merits. 39Mrs Nand accepted she signed the guarantee, but alleges she is not bound by it. In summary, her case is that, prior to signing the document, Raju represented to her that it was an application for shares in Print Media and, induced thereby, she signed it in the belief that it was. Her signature was witnessed by Raju. She contends that she never intended to execute the document as a guarantee. 40In her proposed amended defence are pleaded defences which, in summary, raise issues of non est factum, a claim for relief under the Contracts Review Act 1980; want of consideration; unconscionable conduct on the part of the plaintiff; undue influence on the part of Print Media and Raju; and misrepresentation (unspecified). 41Mrs Nand gave evidence of the circumstances in which she signed the document. She said that at about 7.00 pm on an evening in August 2011 she met Raju at a McDonald's restaurant in Liverpool. He presented her with a document he described as a Share Certificate. In her affidavit sworn on 17 August 2013 she deposed: 50. The Second defendant then presented me with an A4 sheet paper (sic). The portion of the A4 sheet facing me had 2 boxes. The Second Defendant said: "Aunty you will just have to sign here. This is your share certificate for the Media Group" I said: 'Nothing is filled in this box. What am I signing?" He said: "This is your 50% share certificate for the Media Group. Once you sign then we can get loan for the Media Group as well (sic)" I said: "I have never signed blank forms for bank loans" He said: "Aunty trust me, we have to work together on this. I have to go. I have number of meetings after this (sic). I will call and discuss this further with you later." 51. I reluctantly signed the document in what I recall to be a signature on an A4 single sheet in a box. There were no other hand writings on the paper at all except 2 boxes. I recall if the Second Defendant witnessed my signature in my presence. I was not given to read any other materials or documents apart from the single AF (sic) sheet. I then left McDonalds' (sic) as the Second defendant dashed out taking the signed documents within 20 minutes. 42In her affidavit of 28 January 2014 she said she told Raju that she did not have her glasses. She also said she would have been unable to read the documents relating to the guarantee without her glasses. 43In cross-examination Mrs Nand said she was unhappy to sign because the form was blank, with nothing filled in. She said that although Raju told her he would not let her down she was worried because she doubted what the document was. Curiously, Mrs Nand agreed (T p43, ll 1-4) that the idea that Raju had told her the document was a share certificate only occurred to her months after she received the letter of 13 December 2011 from the plaintiff's solicitors. She also said it was an oversight that she omitted reference to being without her glasses in her affidavit of 17 August 2013. She maintained that, despite the fact that when she was without her glasses she was unable to read the document, she reluctantly signed it having accepted what Raju had told her. 44The approach to be taken was explained by Street ACJ in Reinehr Industrial Lease & Finance Pty Ltd v Jordan (Court of Appeal (NSW), Street ACJ, Hardie and Glass JJA, 4 June 1974, unrep): ...a court hearing an application such as the present is not concerned to embark upon the adjudication of the truth or otherwise of the case which is sought to be advanced by a defendant; the court is concerned rather to evaluate such evidence as is put forward in order to see whether, in the interests of justice, a defendant who has for some procedural default been deprived of a right to due determination of his defence, should nevertheless be put back into the position of enjoying that right. This necessarily involves care being taken not to embark upon attempted resolutions of conflicts in evidence given by a defendant who may have been cross-examined during the course of an application to set aside default judgment. 45In my opinion the evidence goes no further than to show that Mrs Nand signed a document which she did not read, and which her friend told her was a share certificate. Apparently she was unable to read because she was without her glasses. There was no evidence to suggest that at the time she was unable to make a judgment as to her own best interests, or that her mind had been overborne. There was no evidence to show that had she wanted to obtain her glasses she would not have had the time or opportunity to do so. There was no factual foundation established capable of shifting responsibility for her own conduct to either the plaintiff or to Raju. 46In Petelin v Cullen (1975) 132 CLR 355 at 359-360 the High Court of Australia, with reference to the defence of non est factum, said: The principle which underlies the extension of the plea to cases in which a defendant has actually signed the instrument on which he is sued has not proved easy of precise formulation. The problem is that the principle must accommodate two policy considerations which pull in opposite directions: first, the injustice of holding a person to a bargain to which he has not brought a consenting mind; and, secondly, the necessity of holding a person who signs a document to that document, more particularly so as to protect innocent persons who rely on that signature when there is no reason to doubt its validity. The importance which the law assigns to the act of signing and to the protection of innocent persons who rely upon a signature is readily discerned in the statement that the plea is one "which must necessarily be kept within narrow limits" (Muskham Finance Ltd v Howard [1963] 1 QB 904 at 912) and in the qualifications attaching to the defence which are designed to achieve this objective. The class of persons who can avail themselves of the defence is limited. It is available to those who are unable to read owing to blindness or illiteracy and who must rely on others for advice as to what they are signing; it is also available to those who through no fault of their own are unable to have any understanding of the purport of a particular document. To make out the defence a defendant must show that he signed the document in the belief that it was radically different from what it was in fact and that, at least as against innocent persons, his failure to read and understand it was not due to carelessness on his part. Finally, it is accepted that there is a heavy onus on a defendant who seeks to establish the defence. All this is made clear by the recent decision of the House of Lords in Saunders v Anglia Building Society [1971] AC 1004, esp at 1019. 47Furthermore, in Kakavas v Crown Melbourne Ltd [2013] HCA 25; (2013) 87 ALJR 708 the High Court of Australia said at 715C-D [20]: Second, equitable intervention does not relieve a plaintiff from the consequences of improvident transactions conducted in the ordinary and undistinguished course of a lawful business. A plaintiff who voluntarily engages in risky business has never been able to call upon equitable principles to be redeemed from the coming home of risks inherent in the business. The plaintiff must be able to point to conduct on the part of the defendant, beyond the ordinary conduct of the business, which makes it just to require the defendant to restore the plaintiff to his or her previous position. 48Upon the whole of the evidence in this application I am left unpersuaded that Mrs Nand has a good or arguable defence on the merits. The evidence falls short of demonstrating that her failure to read and understand the guarantee was not due to carelessness on her part. In my opinion, it indicates that it was open to her to decline to sign until she had obtained her glasses, and had read the document. The evidence strongly supports the findings that it was careless of her not to do so. Conclusion 49For the above reasons I was satisfied that the Notice of Motion should be dismissed, with costs. ********** 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: 26 February 2014