IN THE COUNTY COURT OF VICTORIA
AT Melbourne
COMMERCIAL DIVISION	Revised
Not Restricted
Suitable for Publication	
General List		

Case No. CI-23-05403

DAVID KINSTON (in his capacity as trustee of the DK TRUST)	Plaintiff	
		
v		
		
DAVID WELNER	First Defendant	
		
and		
		
WELNER LAWYERS PTY LTD
(ACN 640 273 552)	Second Defendant	
		
REMI PROPERTY PTY LTD
(ACN 627 712 449 (in liquidation)	Third Defendant	

---

JUDGE:	HER HONOUR JUDGE ROBERTSON	
WHERE HELD:	Melbourne	
DATE OF HEARING:	2 December 2024	
DATE OF JUDGMENT:	12 December 2024	
CASE MAY BE CITED AS:	Kinston (in his capacity as trustee of the DK Trust) v Welner and Ors (Ruling)	
MEDIUM NEUTRAL CITATION:	[2024] VCC 1989		

RULING
---

Subject:	PRACTICE AND PROCEDURE

Catchwords: 	Application to set aside default judgment – application by second defendant seeking review pursuant to r84.03(3) of the County Court Civil Procedure Rules 2018 (Vic) of judicial registrar determination to enter judgment in default of defence in favour of plaintiff – meaning of retail premises

Legislation Cited:	County Court Civil Procedure Rules 2018 (Vic), r21, r28, r37A, r84.03; Civil Procedure Act 2010, s25; Appeal Costs Act 1998 (Vic), s10

Cases Cited:	Johnston v Vintage Developments Pty Limited [2006] FCAFC 171;  Purden Pty Limited v Registrar in Bankruptcy (1982) 43 ALR 512; Re Lifestyle Residences Hobsons Bay Pty Ltd (recs & mgrs apptd) v Guardian Early Learning Centres Pty Ltd [2023] VSC 179; Kostokanellis v Allen [1974] VR 596; Lubura v Nezirevic [2013] VSCA 215; Lysaght Buildings Solutions Pty Ltd v Blanalko Pty Ltd (2013) 42 VR 27; Evans v Bartlam [1937] AC 473; UTSG Pty Ltd v Sydney Metro (No 5) [2019] NSWLEC 107; Victorian Legal Services Board v Kuksal (Adjournment) [2024] VSC 459; Barnes v Addy(1873-74) LR 9 Ch App 244; National Australia Bank Ltd v Trani [2023] VSC 142; Batiste v Gilmour-Latham [2001] NSWCA 392; Messade v Baires Contracting Pty Ltd (Ruling No 5) [2011] VSC 177

Ruling:	Judgment against the second defendant in default of defence is set aside.

---

APPEARANCES:
	Counsel	Solicitors	
For the Plaintiff	Mr D B Clough	Kalus Kenny Intelex	
			
For the First Defendant	No appearance	Minter Ellison	
			
For the Second Defendant	Mr J Korman	Ultimate Business and Legal Solutions	
			
For the Third Defendant	No appearance	-	

HER HONOUR:

Introduction 
1	By application filed 22 October 2024, the second defendant sought review pursuant to r84.03(3) of the County Court Civil Procedure Rules 2018 (Vic) of the decision of Judicial Registrar Bennett made on 10 October 2024 to enter judgment in default of defence in favour of the plaintiff. 
2	Various matters were not in dispute between the parties including that: 
(a)	The first defendant is a solicitor and the sole director, secretary and shareholder of the second defendant;
(b)	The second defendant is a company associated with the first defendant;
(c)	Between 2020 and 2021, the first defendant provided legal services to the plaintiff in respect of three loans to C2 LB1 Fund Pty Ltd (an entity within the Remi Capital group); 
(d)	In January 2022, the first defendant asked the plaintiff if he would lend money again to a company in the Remi Capital group;
(e)	On 31 January 2022, the plaintiff transferred the sum of $400,000 into the second defendant’s trust account;
(f)	On 2 February 2022, the second defendant:
(i)	entered into a loan agreement as lender, signed by the first defendant, with Remi Property Pty Ltd as borrower;
(ii)	entered into a general security agreement as the secured party, signed by the first defendant, with Remi Property Pty Ltd;
(iii)	executed a mortgage as mortgagee to Remi Property Pty Ltd as mortgagor;
(g)	None of the loan agreement, the general security agreement or mortgage provided the plaintiff with any security for the repayment of the $400,000 loan funds paid by the plaintiff into the second defendant's trust account;
(h)	On 2 February 2022, the second defendant paid $206,917.95 to Remi Property Pty Ltd as an advance of funds pursuant to the loan agreement entered into on 2 February 2022;
(i)	On 4 February 2022, the second defendant transferred $133,082.05 from its office account to its general account;
(j)	On 4 February 2022, the second defendant transferred $60,0000 from its office account to its trust account to be held in trust for Remi Capital Pty Ltd on account of expected future legal fees and disbursements;
(k)	Shortly prior to 27 February 2022, the first defendant asked the plaintiff to attend the office of the first defendant;
(l)	The second defendant claims the parties executed a Deed of Assignment of Debts and Securities dated 27 February 2022.  The plaintiff denies he executed the Deed of Assignment but says, even if he did, it was not a direction by the plaintiff to the second defendant to release the $400,000 loan funds from the second defendant’s trust account;
(m)	On 28 February 2022: 
(i)	$400,000 was transferred from the second defendant’s trust account to the second defendant’s office account;
(ii)	$6,000 was transferred from the second defendant’s office account to the plaintiff by way of interest;
(n)	On 31 March 2022, the first defendant paid $4,000 to the plaintiff, purportedly by way of interest;
(o)	On 25 May 2022, Remi Property Pty Ltd and Remi Capital Pty Ltd were placed into voluntary administration;
(p)	On 6 June 2022, the first defendant lodged a mortgage over the property at 265 Duke Street, Sunshine North; 
(q)	On 9 June 2022, a receiver was appointed to Remi Capital Pty Ltd and Remi Property Pty Ltd; 
(r)	On 29 June 2022, Remi Capital Pty Ltd and Remi Property Pty Ltd were placed into liquidation. 
3	By the Statement of Claim dated 24 November 2023, the plaintiff made claims against the second defendant, including that: 
(a)	the second defendant received the plaintiff’s loan funds of $400,000 as a volunteer, knowing the plaintiff’s payment of the $400,000 loan funds was mistaken, and knowing of the first defendant’s associated breaches of trust and fiduciary duty; 
(b)	the second defendant was unjustly enriched by the amount of the loan funds plus interest and should make restitution, and/or should compensate the plaintiff for assisting the first defendant’s breaches of fiduciary duty, and/or held the traceable loan funds on trust for the plaintiff; and 
(c)	the second defendant made loan representations and loan non-disclosures in contravention of, inter alia, s18 of the Australian Consumer Law (Cth). 
4	Shortly after the proceedings were issued, on 5 October 2023, the plaintiff filed a summons seeking a freezing order under provision of r37.A(02) of the County Court Civil Procedure Rules 2018 (Vic).  The freezing order was sought against the first and second defendants.  Ultimately the application was not pursued, and on 13 October 2023, her Honour Judge Marks made orders dismissing the plaintiff’s summons.  The orders also required the first defendant to deliver the plaintiff’s legal files held by the first defendant, relating to the plaintiff’s February 2022 loan to Remi Property Pty Ltd, to the plaintiff’s solicitors’ office no later than 3 November 2023.
5	After seeking a short extension of time to file his defence, the first defendant filed a defence on 22 January 2024. 
6	The second defendant did not file a defence within the time limited by the Rules.
7	On 21 February 2024, the first defendant filed an Amended Defence.  
8	On 4 March 2024, the plaintiff filed and served on the second defendant – who, at that point, had still not filed a notice of defence – a notice of default in compliance with Form 21A, which stated the second defendant had failed to serve a notice of defence within the time limited by the Rules.  The notice also informed the second defendant the plaintiff intended to seek default judgment if the second defendant did not file a defence within seven days.  
9	The second defendant did not subsequently file and serve a defence to the statement of claim upon receipt of the notice of default.  Accordingly, as foreshadowed, the plaintiff electronically filed a Form 60G application for default judgment against the second defendant.  The form stated, in the section titled “HOW OBTAINED”, that the judgment was obtained in default of defence.  
10	The second defendant asserted that when the Form 60G was filed electronically by the plaintiff, the plaintiff’s solicitor selected “Judgment in default of appearance” rather than “Judgment in default of defence”.  The plaintiff, in its submissions, indicated that it was possible that in the process of electronically filing the proper and correctly worded Form 60G, the plaintiff’s solicitor used the CITEC code for a judgment in default of appearance rather than a judgment in default of defence.
11	On 13 March 2024, under Part 2 of Order 28 of the County Court Civil Procedure Rules 2018 (Vic), the Court entered default judgment against the second defendant.  The default judgment was entered in default of defence (“default judgment”).
12	Until 13 March 2024, the second defendant was represented by the first defendant.  On 13 March 2024, the first defendant confirmed to the solicitors for plaintiff that he agreed the second defendant ought to obtain new legal representation in the proceedings.  
13	On 27 March 2024, Norton Rose Fullbright advised the solicitors for the plaintiff and the first defendant that they had commenced to act for the second defendant.  Norton Rose Fulbright informed the solicitors for the plaintiff that they indicated they expected to receive instructions to set aside the default judgment.  Notwithstanding that correspondence, a further three weeks elapsed without further correspondence being received by the plaintiff from Norton Rose Fulbright. No application was made to set aside the default judgment.  
14	Accordingly, on 17 April 2024, the plaintiff’s solicitors served a statutory demand for payment of the judgment debt.  A copy of the statutory demand was sent to Norton Rose Fulbright the same day.  
15	Norton Rose Fulbright acknowledged receipt of the statutory demand.  
16	Subsequently, a notice of change of practitioner was filed on 30 April 2024.  On that date, the second defendant advised the plaintiff that new lawyers had been appointed on 29 April 2024, those new lawyers being the law firm currently representing the second defendant, Ultimate Business & Legal Solutions.  
17	On 3 May 2024, the second defendant purported to file a defence electronically with the Court.  It was in substantially the same form as the amended defence filed by the first defendant on 21 February 2024.
18	On 6 May 2024, a new solicitor for the second defendant, Mr Raj Malhotra, forwarded to the plaintiff’s solicitors under cover of an email, a document titled “Defence of the Second Defendant”.  The document was apparently filed with the Court on 3 May 2024.  The email stated that “the second defendant’s solicitor will send correspondence in the coming days as to the basis of the defective attempt at seeking judgment”; however, no correspondence was received over the following days.  
19	On 7 May 2024, Ms Dong, a solicitor acting on behalf of the plaintiff, telephoned the Court and was informed the defence would be rejected.  
20	Following the email correspondence from the second defendant’s solicitors to the plaintiff’s solicitors on 6 May 2024, no application to set aside the default judgment was made by the second defendant.  
21	On 8 May 2024, Judicial Registrar Bennett made timetabling orders in this proceeding.  Amongst other things, the proceeding was set down for trial on 21 July 2025 as a cause before a judge sitting alone on an estimate of four to five sitting days.
22	On the same day, the statutory demand expired.  No application had been made to set aside the statutory demand.  
23	On 14 May 2024, the plaintiff’s solicitors received instructions to apply to wind up the second defendant.  
24	On 17 May 2024, the solicitors for the second defendant forwarded an email to the plaintiff’s solicitors.  The email stated the judgment had been sought in default of appearance rather than in default of defence and was consequently irregular.  Still, no application to set aside the default judgment was filed.  
25	On 20 May 2024, the plaintiff’s solicitors informed the second defendant’s solicitors that the application had been made in default of defence, and a supporting affidavit had been filed.  They also indicated there had been no reason given by the second defendant for failing to file a defence or for not applying to set aside the default judgment.  
26	When an application to set aside the default judgment had still not been filed on 22 May 2024, the winding up action was issued by the plaintiff.  This was served on the second defendant by his solicitor, Mr Malhotra, on 23 May 2024.  
27	On 23 May 2024, Mr Malhotra indicated to the plaintiff’s solicitors that the winding up application had been issued and said, “there are a number of irregularities meaning that your Default Judgment must be set aside”. 
28	The plaintiff’s solicitors responded to Mr Malhotra the same day, setting out the second defendant’s failure to apply to set aside the default judgment and indicating that the delay was staggering.  
29	No application to set aside the default judgment was forthcoming from the second defendant, save that on 24 May 2024, Mr Malhotra sent an email to the plaintiff’s solicitors stating he had obtained instructions to set aside the default judgment.  Further, on 29 May 2024, Mr Malhotra forwarded an email stating he had briefed King’s Counsel to prepare the material for the application.  Nonetheless, nothing further happened until 11 June 2024 
30	On 11 June 2024, the second defendant issued an application to set aside the default judgment.  
31	Subsequently, on 2 August 2024, the property at 265 Duke Street, Sunshine North was sold by the first mortgagee and title was transferred.  
32	On 10 October 2024, the second defendant’s application to set aside the judgment obtained against it in default of defence was considered by Judicial Registrar Bennett.  Judicial Registrar Bennett ordered that:
(a)	The second defendant’s summons filed 26 June 2024 was dismissed;  
(b)	The second defendant was to pay the plaintiff’s costs of and incidental to the second defendant’s summons.
33	By notice seeking review of the decision of the Court constituted by Judicial Registrar Bennett pursuant to r84.03(3) dated 22 October 2024, the second defendant has sought to review Judicial Registrar Bennett’s decision.
Powers of a judge upon a review application
34	The power of a judge to review an order of the Court constituted by a Judicial Registrar is to be found in r84.03 of the County Court Civil Procedure Rules 2018 (Vic).  Rule 84.03 allows a Judge to review orders made by a Judicial Registrar, either on the Court’s own motion or upon application by a party.  Applications must specify the part of the order under review, the desired outcome, and be served on other parties within 14 days.  The review is conducted as a hearing de novo, where the judge may exercise full powers to confirm, set aside, vary, or issue new orders.  Parties may rely on evidence used before the judicial registrar, and, with leave, introduce new evidence.  A review does not automatically stay the enforcement of the order unless directed by the Court.
35	Rule 84.03 of the County Court Civil Procedure Rules 2018 (Vic) provides:
“84.03	Review by Judge of judicial registrar determinations
	(1)	In this Rule, a reference to a determination includes a reference to a judgment, a direction or an order.
	(2)	This Rule does not apply to a determination of the Court constituted by a judicial registrar under Order 2A of Chapter III of the Rules of the County Court.
		Note
		Rule 2A.29 of Chapter III of the Rules of the County Court provides for a review of such a determination.
	(3)	A determination of the Court constituted by a judicial registrar may be reviewed by the Court constituted by a Judge, on the motion of the Court constituted  by a Judge or on application by a party to the proceeding.
	(4)	An application under paragraph (3) shall be made by notice filed with the Court, stating—
		(a)	whether the whole or part only of the determination is the subject of the review; 
		(b)	if part only of the determination is the subject of the review, which part; 
		(c)	briefly, the grounds on which the review is sought; and
		(d)	what determination is sought in place of the determination that is the subject of the review.
	(5)	A copy of the notice under paragraph (4) shall be served on each other party to the proceeding within 14 days after the date of the determination.
	(6)	A review under this Rule—
		(a)	shall be conducted by way of hearing de novo; and
		(b)	accordingly, is not limited by reference to—
			(i)	the grounds specified in the application in accordance with paragraph (4)(c); or
	(ii)	the reasons given by the judicial registrar.
	(7)	In conducting a review in accordance with this Rule, the Court constituted by the Judge may—
		(a)	exercise all the powers and discretions of the Court with respect to the subject matter of the review; and
		(b)	confirm, set aside or vary the determination of the Court constituted by the judicial registrar or make such further or other determination as may be necessary or as the case requires.
	(8)	On the review, each party may, subject to any proper objections to admissibility—
		(a)	rely upon—
			(i)	any affidavit used before the judicial registrar; and
			(ii)	a transcript of any evidence given orally before the judicial registrar; and
		(b)	by leave of the court, rely upon—
			(i)	in accordance with paragraph (9), an audio or audio visual recording of any evidence given orally before the judicial registrar; and
			(ii)	any affidavit or oral evidence not used or given before the judicial registrar.
	(9)	If a party seeks to rely on evidence given orally before the judicial registrar, the Judge may refer to an audio or audio visual recording of that evidence (rather than only the transcript of that evidence) if the Judge considers that it is appropriate to do so in order to assess the witness's credibility.
	(10)	Except so far as the Court constituted by a Judge otherwise orders, a review under this Rule shall not operate as a stay of execution or of proceedings under the determination of the Court constituted by the judicial registrar to which the review relates.”
Issues on the review application
36	There were essentially two principal issues on the review application.
37	First, whether the judgment obtained by the plaintiff was irregular.
38	Second, if the judgment was regularly obtained, whether the Court should nevertheless exercise its discretion to set aside the judgment.
Was the judgment obtained irregular?
39	I have determined that the default judgment entered against the second defendant was not irregular and should not be set aside on that basis.  
40	Rule 28 of the County Court Civil Procedure Rules 2018 (Vic) deals with the filing of documents.  
41	Rule 28.01 provides that –
“Except as this Rule otherwise provides, a document to be filed in the Court is to be filed electronically in accordance with Part 2 … .”
42	Rule 28.11, found in Part 2, details what the Registrar must do in terms of filing.  It details that the Registrar may accept a document for filing and makes provision for how that is to be done.  It provides: 
“28.11 	Registrar may accept a document for filing
(1) 	If satisfied that a copy of a document sought to be filed electronically in the Court by an authorised provider complies with the requirements of the Rules, the Registrar must— 
	(a) 	retain a copy of the document; and 
	(b) 	record the date and time the document was received and entered in CITEC Confirm; and 
	(c) 	in the case of a document which, if filed personally would be required to be sealed and dated by the Registrar— 
		(i) authorise the affixing by CITEC Confirm of an electronic watermark or electronic stamp containing a facsimile of the seal of the Court to the document; or 
		(ii) 	authorise the production of a filing confirmation notice by electronic communication to the authorised provider.  
(2) 	A filing confirmation notice shall be in Form 28 and shall contain a facsimile of the seal of the Court.
(3) 	If the Registrar receives by electronic communication a copy of a document for filing after 4.00 p.m. on a day the office of the Court is open or on a day referred to in Rule 3.08, subject to the Registrar being satisfied that the document sought to be filed in the Court complies with the requirements of the Rules, the document shall be taken to have been filed at 9.00 a.m. on the next day the office of the Court is open.”
43	Having considered the terms of r28, in my view, there is no procedural irregularity.  Rule 28 contains no requirement that any particular CITEC code be used in filing a document.  What r28 requires is that the documents filed be regular.  All documents that were filed in this case were regular.  The only thing that occurred was the solicitor used an incorrect CITEC code when lodging the document with the Court.  Even if there were to be some issue with the use of an incorrect CITEC code upon lodgement, lodgement of a document by a party with the Court is not the same as filing.  As Tamberlin, Jacobsen and Rares JJ, noted in Johnston v Vintage Developments Pty Limited, citing Purden Pty Limited v Registrar in Bankruptcy, the act of filing a document is the act of the Court, as opposed to the act of lodging it, which is the act of a party.  
44	The judgment obtained in default of defence was filed by the Court using the correct CITEC code for judgment in default of defence.  The procedural requirements for filing under r21.02 of the County Court Civil Procedure Rules 2018 (Vic) were satisfied.
45	The second defendant’s reliance on Re Lifestyle Residences Hobsons Bay Pty Ltd (recs & mgrs apptd) v Guardian Early Learning Centres Pty Ltd is misplaced in this context.  That case relates to statutory demand requirements, which are distinct from the procedural rules governing default judgments under r21.02.
46	I find that the default judgment entered against the second defendant was not irregularly obtained.  The procedural steps mandated by the Rules were satisfied, and the judgment is regular and valid.  Further, even if there was a procedural irregularity, it was so negligible that it did not lead to a need in the interests of justice to set aside the judgment.
If the judgment was regularly obtained, should it nevertheless be set aside?
47	The test for setting aside a default judgment was set out in Kostokanellis v Allen, which was referred to with approval in Lubura v Nezirevic.  The test requires that the Court assess:
(a)	Whether there is a defence on the merits;
(b)	The reasons for the default;
(c)	Whether the application to set aside the judgment was made promptly after the judgment came to the knowledge of defendant;
(d)	Whether, if the judgment was set aside, a suitable award of costs and the giving of security would be adequate to cover the prejudice to the plaintiff in having the judgment set aside.  
48	In Lubura, Warren CJ described the test as being “not all that different from the test for summary judgment”. 
49	The test for summary judgment is set out in s63 of the Civil Procedure Act 2010 (Vic).  
50	Section 63 provides:
“63	Summary judgment if no real prospect of success
(1) 	Subject to section 64, a court may give summary judgment in any civil proceeding if satisfied that a claim, a defence or a counterclaim or part of the claim, defence or counterclaim, as the case requires, has no real prospect of success.  
(2) 	A court may give summary judgment in any civil proceeding under subsection (1)— 
	(a) 	on the application of a Plaintiff in a civil proceeding; 
	(b) 	on the application of a defendant in a civil proceeding; 
	(c) 	on the court's own motion, if satisfied that it is desirable to summarily dispose of the civil proceeding.”
51	Section 63 was considered in Lysaght Buildings Solutions Pty Ltd v Blanalko Pty Ltd.  In Lysaght the Court of Appeal focused on the meaning of “no real prospect of success”.  The Court held that:
(a)	the test for summary judgment under s63 of the Civil Procedure Act 2010 is whether the respondent to the application for summary judgment has a “real” as opposed to a “fanciful” chance of success; and
(b)	the test is to be applied by reference to its own language and without paraphrase or comparison with the “hopeless” or “bound to fail test” essayed in General Steel Industries Inc v Commissioner for Railways (NSW). 
52	Translating that summary judgment test to the context of setting aside a default judgment requires the applicant seeking to set aside the default judgment to satisfy the court that it is appropriate to exercise a discretion as set out in Kostokanellis.  This requires the Court to consider each of the four factors identified in Kostokanellis as approved in Lubura.  
53	Each are important and none can be ignored, but if merits are shown, the court will usually set aside the default judgment, as indicated in Evans v Bartlam, applied in Kostokanellis and Lubura.  
54	To satisfy the court there is a defence on the merits requires the applicant to satisfy the court there is a “real” as opposed to a “fanciful” defence.  
The reasons for failure to lodge a notice of defence
55	The second defendant did not provide a compelling reason why it failed to file a defence.  Other than to identify that it was waiting for the first defendant’s insurer to file the defence of the first defendant, there was little indication given by the second defendant as to why the notice of defence was not filed.  
Whether the application to set aside the judgment was made promptly after the judgment came to the knowledge of the Second Defendant
56	The second defendant delayed in bringing this application and failed to provide a satisfactory explanation for the delay.
57	The second defendant submitted the delay was not as bad as what it may seem at first blush and occurred because the second defendant was hamstrung waiting for the first defendant to file his defence.  Further, the second defendant said that until 13 March 2024, it was represented by the first defendant.  It was not until 13 March 2024 that the first defendant confirmed to the solicitors for plaintiff that he agreed the second defendant ought to obtain new legal representation.  
58	The plaintiff contended to the contrary.  He submitted the first defendant’s defence was filed with the Court on 22 January 2024, several months before the judgment in default of defence was lodged with the Court for filing.  The second defendant was aware of the contents of the first defendant’s defence and took no steps to file a defence of its own.  No satisfactory explanation was provided as to why the second defendant did not file a defence during that time.  
59	The defence the second defendant ultimately sought to file in May 2024 was in substantially the same form as the first defendant’s defence that was first filed in January 2024 and amended in February 2024.  Further, the second defendant had been represented by the first defendant who well knew the contents of that defence.  Even if the fact the second defendant was represented by the first defendant provided some explanation for why the defence was not filed (which I doubt), on 27 March 2024, the second defendant engaged Norton Rose Fulbright to act on its behalf.  Despite this, even after Norton Rose Fulbright was instructed to act on the second defendant’s behalf, no adequate explanation was given as to why a defence was still not filed on behalf of the second defendant, other than the second defendant allegedly changed legal practitioners as they believed Norton Rose Fulbright had not attended to matters in a timely way.  This is not an excuse for not filing a defence.
60	As matters transpired, a notice of change of practitioner was filed on 30 April 2024.  The second defendant advised the plaintiff that new lawyers had been appointed on 29 April 2024.
61	After receipt of that correspondence, the plaintiff continued to follow up with the second defendant on numerous occasions about the defence.  Still no defence was filed.  
62	The second defendant also suggested the first defendant had a medical certificate from 17 April 2024 to 3 May 2024 and that provided a reason for part of the delay in filing a defence.  The medical certificate that was filed for that period certified the first defendant as unfit for normal work.  Certification that a party is unfit for work does not explain why a medical condition prevented the first defendant from instructing the second defendant’s solicitors to file a defence.  The medical certificate did no more than certify the first defendant to be unfit for work.  It gave no indication of the medical condition from which he was suffering, the likely duration of his incapacity or the expected outcome of his condition.  In short, as identified in UTSG Pty Ltd v Sydney Metro (No 5), and as more recently considered by Gorton J in Victorian Legal Services Board v Kuksal (Adjournment), the medical certificate was inadequate, and I place little weight on it. It is notable too, that the second defendant sought to file its defence on 3 May 2024 when it was said the first defendant was deemed unfit for work.  
63	Having considered the submissions of both parties and the explanations given by the second defendant, I have formed the view that the inactions on the second defendant’s behalf plainly constituted delay.  In my view, this delay amounted to a failure of the second defendant to lodge a defence in time.  The reasons given by the second defendant for that delay are not satisfactory.
64	Further, given the obligations of parties to civil litigation, the second defendant’s actions also breached the obligations it had pursuant to s25 of the Civil Procedure Act 2010 (Vic) to act promptly and to minimise delay.  The defence that was sought to be filed in May 2024 was, to all intents and purposes, almost the same as the defence which had been filed by the first defendant.  It would have been a simple step for the second defendant to seek to file their defence much earlier.  That step was not taken.  The evidence suggests that was a deliberate choice made on behalf of the second defendant.  The first defendant had filed a defence on his own behalf.  He could easily have attended to the filing of a defence on behalf of the second defendant, particularly as the ultimate defence which was sought to be filed was essentially the same.
65	In my view, in those circumstances, the delay was a deliberate choice, and it calls into question the second defendant’s bona fides.
Whether there is a defence on the merits?
66	Adopting the Court of Appeal’s interpretation of the test for setting aside a default judgment, the second defendant must demonstrate that it has a “real” chance of succeeding in its defence.  The second defendant does not need to establish the plaintiff’s claim is “hopeless” or “bound to fail”.  It simply needs to establish it has a “real” defence.  
67	The second defendant submitted it does have a “real” defence on the merits to the plaintiff’s claim.  It submitted it has a real prospect of establishing the assignment of the loan from the second defendant to the plaintiff was valid and consequently, the second defendant has no obligation to repay the $400,000 principal debt.  Reliance was placed on Clause 5 of the Deed of Assignment which provided that upon signing the Deed of Assignment, the assignee – here, the plaintiff – discharged the assignor – here, the second defendant – from the principal in the debt.  The plaintiff received the benefit of the loan agreement, and the second defendant gave up that benefit.  Consequently, the plaintiff was obliged to compensate the second defendant for the $400,000 lent.  The second defendant submitted the question whether the Deed of Assignment was signed by the plaintiff, or whether the plaintiff was provided with advice in relation to the Deed of Assignment is an issue best determined at trial.  
68	The second submission made by the second defendant was that there was no breach of fiduciary duty by the first defendant, as solicitor, and the first defendant did not act in a conflict situation by arranging the assignment of the loan from the second defendant to the plaintiff.  Further, the second defendant submitted the second defendant was not knowingly involved in any breach of fiduciary duty in accordance with the principles in Barnes v Addy.  There was no benefit obtained by the second defendant.  The first defendant only had a limited retainer which was for the second defendant to accept funds from the plaintiff, for the first defendant to assign the loan from the second defendant to a lender (the plaintiff) and for the plaintiff to lend the funds held by the second defendant.  
69	Even if there was a benefit obtained by the second defendant, the first defendant provided advice and explained the transaction to the plaintiff and thereby made full disclosure of the conflict to the plaintiff.  The plaintiff thereafter instructed the first defendant to transfer the $400,000 from the second defendant and the parties executed the Deed of Assignment.  To the extent the plaintiff alleged the Deed of Assignment did not act as a direction to disburse funds from the second defendant’s trust account to the first defendant, the second defendant denied the allegation.  It sought to plead the first defendant explained the transaction and advised the plaintiff in relation to it.  In any event, the second defendant denied it was the alter ego of the first defendant.
70	The third submission made by the second defendant was that the first defendant was not negligent by failing to take reasonable care in the provision of legal services.  The act of taking the plaintiff through the Deed of Assignment was sufficient to discharge any duties owed.  
71	The fourth submission made by the second defendant was that the claim that the second defendant was a volunteer was not made out because consideration moved both ways between the parties.
72	The fifth submission made by the second defendant was that the claim for unjust enrichment is not a cause of action.  The claim would fail in any event because there was nothing in the loan agreement that required repayment and the $400,000 was transferred in satisfaction of the Deed of Assignment.
73	The sixth submission made by the second defendant was that the first defendant denied all allegations of misleading and deceptive conduct.  The second defendant submitted that, consequently, it was not knowingly involved in any contraventions of the Australian Consumer Law.
74	The second defendant submitted, taking all those matters into account, if all factual disputes were to be resolved in favour of the second defendant, the defences raised were arguable and exceeded the requisite threshold to set aside the judgment obtained by the plaintiff in default of defence.  Further, if the second defendant were to be granted leave to defend, there would be no prejudice to the plaintiff and no significant impact for the Court, because the proceeding would be continuing against the first defendant in any event and had been set down for trial in July 2025.
75	The plaintiff, in its submissions, focused on two critical areas of the case made against the second defendant and submitted the defences put forward needed to be stronger than merely arguable.
76	First, the plaintiff submitted, the first defendant had an indefensible conflict of interest in releasing the loan funds from the second defendant to the first defendant.  The plaintiff submitted the loan involved a release of funds from one client to another; the first defendant was able to extricate the second defendant from a loan it had made to an insolvent borrower, and the loan funds paid from the second defendant to the first defendant were paid in respect of existing and future legal fees owed to the first defendant.  
77	The plaintiff submitted that even if the Deed of Assignment were to be valid, the first and second defendants could only possibly succeed if the plaintiff had given informed consent to the conflict.  There was no pleading or evidence that informed consent was given, and it was incumbent on the second defendant to adduce evidence on affidavit deposing to the matters raised by way of defence.  There was no evidence the first defendant told the plaintiff the loan funds would be used to pay the first defendant’s legal fees.  There was consequently no evidence to suggest the plaintiff was informed about the conflict.  The second defendant, so it was said on behalf of the plaintiff, was imprinted with the first defendant’s conflict, as the first defendant’s alter ego in accordance with the principles in Barnes v Addy.  In consequence of those matters, the plaintiff submitted there is no substantive defence which the second defendant could successfully raise, and the claims against the second defendant are insurmountable.
78	Secondly, the plaintiff submitted the failure of the plaintiff’s solicitor to register the mortgage under the loan agreement was a breach of fiduciary duty.  The plaintiff attained no benefit at all from the loan transaction.  The Remi companies were insolvent, and no security was in place.  The mortgage was not registered until after the Remi companies were placed in liquidation.  To the extent that the second defendant alleged in the Statement of Claim that the plaintiff agreed the mortgage should remain unregistered due to the property being marketed for sale, such an assertion in a statement of claim alone is insufficient to constitute an arguable defence.  The plaintiff submitted the second defendant had adduced no evidence to establish the plaintiff agreed the mortgage should not be registered.  It was queried how the second defendant would prove the allegation.  It was inherently improbable the plaintiff would have agreed that the mortgage should not be registered.  There were no file notes of conversations to that effect, and the second defendant’s prospects of being able to prove the defence were hopeless.
79	The claim raised by the plaintiff raises very serious allegations against both the first and second defendants.  They cause the Court considerable concern.  
80	The second defendant asserts that it has an arguable defence on the merits to the plaintiff’s claim.  I accept the plaintiff’s submission that to assess the second defendant’s defence requires the Court to consider all factors identified by Warren CJ in Lubura.  None is more important that the other.  All must be synthesised.  Nevertheless, I take into account what was said in Evans v Bartlam, that where a “real” defence is shown, the usual course would be for the Court to set aside the default judgment.  
81	Prior to the introduction of the Civil Procedure Act, to succeed on an application for summary judgment, an applicant would have had to establish that the respondent’s claim or defence was “hopeless”.  That is no longer the test.  The test now is that a defence has no “real” prospect of succeeding.  
82	Insofar as the test for setting aside a default judgment is “not that different from the test for summary judgment”, as stated by Warren CJ in Lubura, an applicant upon an application to set aside a default judgment must establish that their defence is a “real” defence.  
83	I accept, as the plaintiff submitted, there could well be reasonable grounds to suggest that in releasing the loan funds from the second defendant’s trust account to the first defendant, the first defendant acted contrary to his obligations as a fiduciary and the second defendant could thereby be imprinted with the first defendant’s wrongdoing.  However, I also accept that to finally determine this issue, the Court will have to determine various factual issues.  The factual issues to be decided will include whether the loan involved a release of funds from one client to another; whether the first defendant knew the borrower was insolvent when it released the funds held on trust in the second defendant’s trust account to the first defendant; whether the second defendant knew the borrower was insolvent; whether the loan funds paid from the second defendant to the first defendant were paid in respect of existing and future legal fees owed to the first defendant, and whether informed consent was given to the conflict.  
84	Similarly, it is not in dispute the first defendant did not register a mortgage in respect of the land at 265 Duke Street, Sunshine North until after Remi Property Pty Ltd had entered voluntary administration.  Whether that would be negligent or in breach of fiduciary duty or otherwise contrary to representations made to the plaintiff will depend on the terms of the retainer between the first defendant and the plaintiff.  As the second defendant identified, there is no written retainer.  Any retainer is to be implied.  Therefore, to determine its full scope, evidence will be necessary.
85	An application to set aside a default judgment, like a summary judgment application, should be determined on the assumption that all factual issues in dispute would be decided in the second defendant’s favour.  If this were to be the case, the second defendant would establish a “real” defence on the merits.  The defence may not ultimately succeed at trial, but it would at least be arguable.  
86	In those circumstances, I consider the second defendant has established there is a “real” defence on the merits.
Whether, if judgment is set aside, a suitable award of costs and the giving of security would be adequate to cover the prejudice to the Plaintiff in having the judgment set aside
87	In conducting civil litigation, the requirements of the Civil Procedure Act are paramount.  The rules of Court are intended to facilitate the just, efficient, timely and cost-effective resolution of the real issues in dispute.  Parties are entitled to procedural fairness in the conduct of litigation.
88	In National Australia Bank Ltd v Trani, Croft J identified that:
“… the ‘default judgment' mechanism in various contexts provides the means of achieving fair outcomes for all concerned in both a timely and cost-effective manner.  … .
…
 The default judgment mechanism as it is applied in various contexts, does not preclude any party from putting its case if it chooses to do so and subject to a party having an arguable claim and an arguable defence, and not simply fanciful claims and defences.  Moreover, it is an essential mechanism for the situation where a plaintiff issues proceedings to which the defendant does not respond, whether by way of appearance, defence or in other circumstances.  Otherwise, if there were no means of bringing the proceedings to a close by way of judgment, it would be very easy for a defendant to advance its position by thwarting the proceeding by doing nothing.”
89	Where, as here, an application is made to set aside a default judgment, the applicant is seeking an indulgence from the Court.  There is no automatic right for the applicant to succeed in its application.  Further, the terms on which it may do so, are within the discretion of the Court.
90	In Lubura, Robson AJA said:
“In the event of judgment being set aside the Court must consider awarding costs and providing for the giving of security that would adequately cover the prejudice to the respondent in having the judgment set aside.”
91	The second defendant submitted there was no real prejudice to the plaintiff because the case would be continuing against the first defendant. However, I disagree. The plaintiff has lost the $400,000 he lent and the use of that money. The plaintiff will also incur the costs of pursuing the litigation against the second defendant. Despite the prejudice, if judgment is set aside, it is likely that the prejudice could be cured by payment by the second defendant of costs and a suitable award of security.
Exercise of discretion
92	In assessing whether to exercise the Court’s discretion I have considered each of the factors identified in Kostokanellis, and I have also done so in the context of the circumstances of this case.  I have considered the very serious nature of the allegations brought in the plaintiff’s Statement of Claim, I have taken note that although the second defendant has been able to establish a “real” defence, sufficient to set aside the default judgment, and that any prejudice to the plaintiff is likely to be capable of being cured by a suitable award of costs and security, the reason for not filing a defence within the time limited by the Rules was not explained satisfactorily.  Nor was the explanation for the delay at all convincing.  In fact, the delay appeared to have been intentional, and in that sense, the delay disregarded of the second defendant’s obligations under s25 of the Civil Procedure Act.  In all the circumstances, the Court has real concerns about the bona fides of the second defendant.  Nevertheless, the Court is satisfied the default judgment should be set aside; however, it should be set aside subject to conditions.  
Appropriate orders
93	The second defendant submitted that in the event the judgment in default were to be set aside, the appropriate order was for the second defendant to pay the costs of the application to set aside and the cost of the judgment on a standard basis.
94	The plaintiff submitted the Court must consider giving security which adequately covers the prejudice to the plaintiff who is the respondent to the application.  In the plaintiff’s submission, in this case, security should include the costs of applying for and setting aside the judgment in default of defence and costs thrown away by reason of the entry of judgment, including attempted enforcement of the judgment.  That category of costs, the plaintiff submitted, included the costs of the winding up proceedings in the Supreme Court.  
95	In addition, the plaintiff submitted the second defendant should be ordered to pay security for the plaintiff’s future costs of the proceeding and for some or all of the amount at stake.  In that regard, the plaintiff relied on Batiste v Gilmour-Latham. 
96	Finally, the plaintiff submitted there should be a stay on the order to set aside judgment until security is posted to the satisfaction of registrar of the County Court. I accept this submission.
97	The appropriate order for costs is the second defendant pay the plaintiff’s costs of applying for and setting aside the judgment in default of defence and the plaintiff’s costs thrown away by reason of entry of the judgment including the costs of any attempts at enforcement of the judgment, such costs to be taxed on an indemnity basis in the absence of agreement.
98	I do not consider that I have power to order that the second defendant pay the costs of the winding up proceeding.  That is an order best left to the Supreme Court, which may consider such costs to fall within the costs of enforcement of the judgment.
99	As to the provision of security, the Court accepts that it is appropriate that an order for security by made, as a condition of granting the second defendant leave to defend this proceeding.  
100	I am satisfied, in accordance with Batiste that security can include the payment of a sum representing the amount at stake in the litigation.  In this case, as a term of the leave to the second defendant to defend the proceeding, I am satisfied because of the nature of the allegations and the question of the bona fides of the second defendant, it is appropriate that the second defendant provide security for the $400,000 principal at stake in the litigation together with a further sum in respect of the Plaintiff’s future costs of the proceeding, such security to be in a form satisfactory to the registrar of the County Court.  
101	The parties did not make submissions to me about what sum would be an appropriate sum for future security with respect to the proceedings.  In those circumstances, I propose to hear further from the parties as to what an appropriate sum would be, and I intend to order a stay on my orders for a period of 30 days, and I will reserve liberty to the parties to apply with respect to the orders with respect to the orders, particularly if the security is not paid.  
102	A final issue was which party ought to pay the costs of the apprehended bias application before his Honour Judge Wise.  The second defendant submitted both parties should be given a certificate under s10 of the Appeal Costs Act 1998 (Vic).  
103	I am not prepared to order that both parties receive a certificate pursuant to s10 of the Appeal Costs Act 1998 (Vic) in respect of the hearing before his Honour Judge Wise.  
104	Section 10 of the Appeal Costs Act 1998 (Vic) reads as follows:
“10. 	Application for indemnity certificate if civil proceeding discontinued
	(1)	If—
		(a)	the hearing of any civil proceeding is discontinued; and
	(b)	the reason for the discontinuance was not attributable in any way to the act, neglect or fault of any of the parties to that proceeding or their legal practitioners; and
		(c)	a new trial is ordered—
	a party to that proceeding may apply to the court before which the proceeding is discontinued for, and the court may grant, an indemnity certificate in respect of the party’s own costs of the discontinued proceeding.
	(2)	The court may only grant an indemnity certificate under subsection (1) if it is satisfied that the reason for the discontinuance was as set out in subsection (1)(b).
	(3)	A party granted an indemnity certificate under subsection (1) who pays, or is ordered to pay, any additional costs as a consequence of the order for a new trial is entitled to be paid by the Board, on an application made to it by that party in the approved form, an amount equal to that party’s own costs of the discontinued proceeding that the Board considers to have been reasonably incurred.”
105	Pursuant to the section, an indemnity certificate may only be granted if the preconditions in ss(1) are met.  
106	Sub-section (1)(a) requires that a party to a proceeding may apply to the Court before which the proceeding is discontinued, and the Court may grant an indemnity if the “hearing of any proceeding is discontinued”.
107	The only authority dealing with s10 is Messade v Baires Contracting Pty Ltd (Ruling No 5).  It does not discuss how ss(1)(a) is to be interpreted.  The Appeal Costs Act 1998 (Vic) puts in place a process for civil litigants to be compensated for the costs of civil proceedings that are discontinued in certain circumstances.  It does not provide an unfettered right to payment of costs.  The reference in ss(1)(a) to “civil proceedings” is, in my view, intended to describe a process for the determination of rights between parties that is curial in nature.  This is consistent with the purpose of the Act and the sensible limits of the Fund.  Because the application for recusal for apprehended bias did not determine any final rights as between the parties, in my view, the application does not fall within the intended meaning of the phrase “civil proceeding” in the Appeals Costs Act.  I am not prepared to order a certificate under the Appeals Costs Act on that basis.  As to the costs of the application before his Honour Judge Wise, the appropriate order is that there be no order as to costs.
108	I shall hear from the parties in relation to the form of orders, but the orders I contemplate making will be:
(1) 	Judgment in default of defence is set aside. 
(2) 	As a condition of granting leave to defend, the second defendant pay:
(a)	the plaintiff’s costs of applying for and setting aside the judgment in default of defence and the plaintiff’s costs thrown away by reason of entry of the judgment including the costs of any attempts at enforcement of the judgment, such costs to be taxed on an indemnity basis in the absence of agreement;
(b)	security for the $400,000 principal at stake in the litigation together with a further sum in respect of the Plaintiff’s future costs of the proceeding, to be agreed or in default of agreement to be determined by the Court, such security to be in a form satisfactory to the registrar of the County Court;
(3) 	There be no order as to costs of the hearing before his Honour Judge Wise.
(4) 	There be a stay on these orders for a period of 30 days.
(5) 	Liberty to apply with respect to these orders. 
- - -