DISTRICT COURT OF QUEENSLAND

CITATION:	Rely-on Super Pty Ltd v Jakeman & Ors [2013] QDC 265	
PARTIES:	RELY-ON SUPER PTY LTD (ACN 137478678) AS TRUSTEE OF THE RELY-ON SUPERANNUATION FUND
(Plaintiff)
v
BARRY LEE JAKEMAN AS TRUSTEE OF THE PEAK DOWNS HIDEAWAY NO 1 UNIT TRUST
(First Defendant)
and
BARRY LEE JAKEMAN
(Second Defendant)
and
KATHRYN ELLEN JAKEMAN
(Third Defendant)	
FILE NO/S:	BD4601/12	
DIVISION:	Civil	
PROCEEDING:	Application	
ORIGINATING COURT:	District Court Brisbane	
DELIVERED ON:	21 October 2013 	
DELIVERED AT:	Rockhampton	
HEARING DATE:	11 October 2013	
JUDGE:	Smith DCJ	
ORDER:	1.	The application is allowed.
2.	The default judgment entered on 13 January 2013 is set aside on the following conditions:
(a)	That the Third Defendant pay to the plaintiff’s solicitors the costs of and incidental to the entry of the judgment, the enforcement proceedings against her and this application on an indemnity basis as agreed or assessed.  
(b)	The Third Defendant is to pay into court the sum of $20,000 for security for costs.
(c)	The defence is to be filed within 28 days. 
3.	Liberty to apply.
4.	I will hear the parties on the form of order 
	
CATCHWORDS:	PRACTICE AND PROCEDURE- Application to set aside default judgment- whether adequate explanation for delay- whether there is a defence on the merits- conditions of setting aside judgment 
Uniform Civil Procedure Rules 1999 (Q) r 290
Aboyne Pty Ltd v Dixon Homes Pty Ltd [1980] Qd.R. 142
Cook v D A Manufacturing Co Pty Ltd [2004] QCA 52
Garcia v National Australia Bank Ltd (1998) 194 CLR 395
National Mutual Life Association of Australasia Ltd v Oasis Developments Pty Ltd [1983] 2 Qd.R. 441
Pratt v Parker [2013] QSC 147
Troiani and Anor v Alfost Properties Pty Ltd [2002] QCA 281
Yankee Doodles Pty Ltd v Blemvale Pty Ltd [1999] QSC 13	
COUNSEL:	Mr. D. de Jersey for the Third Defendant 
Mr. D. Favell for the Plaintiff 	
SOLICITORS:	Holman Webb Lawyers for the Third Defendant 
Stoddart Legal Pty Ltd for the Plaintiff	
Introduction
[2]	This is an application by the Third Defendant, Kathryn Ellen Jakeman, to set aside a default judgment entered against her on 9 January 2013 for the amount of $157,606.03 together with interest and costs.  
[3]	The application is pursuant to r 290 of the Uniform Civil Procedure Rules.
[4]	The judgment is regularly entered.
[5]	The principles associated with such an application are well settled.  
[6]	In National Mutual Life Association of Australasia Ltd v Oasis Developments Pty Ltd [1983] 2 Qd.R. 441 MacPherson J held at 449:
“The principal question remaining is whether the judgments obtained in default of appearance … should be set aside.  In Aboyne Pty Ltd v Dixon Homes Pty Ltd [1980] Qd.R. 142, Kelly J regarded an application to set aside such a judgment, when regularly entered, as requiring the court to consider whether the defendant had given a satisfactory explanation of its failure to appear; any delay in making the application; and whether the Defendant had a prima facie defence on the merits.  Speaking generally, it may be said that it is the last of these considerations that it is the most cogent.  It is not often that a defendant who has an apparently good ground of defence would be refused the opportunity of defending, even though a lengthy interval of time had elapsed provided that no irreparable prejudice is thereby done to the plaintiff.” (my underlining).
[7]	This principle was adopted by the Court of Appeal in Cook v D A Manufacturing Co Pty Ltd [2004] QCA 52 where the court held that:
(a)	Whilst the Defendant in such a case will address the question of the failure to appear, delay and defence on the merits, the discretion to set aside a default judgment is unconditional. 
(b)	The courts place significant weight on whether the Third Defendant is able to demonstrate an arguable defence on the merits, this being “the most cogent” of the three matters referred to by Kelly J in Aboyne (supra).
[8]	In Yankee Doodles Pty Ltd v Blemvale Pty Ltd [1999] QSC 134 Atkinson J at [13] noted:
“The defendant must demonstrate ‘a very compelling reason’ for the failure to appear and that it has a plausible defence either in law or in fact.”
[9]	I do not see that this statement necessarily conflicts with the statements made in Cook and National Mutual.  If there is a conflict I note that in Troiani and Anor v Alfost Properties Pty Ltd [2002] QCA 281 at 7.8 that the Court of Appeal considered that “… much less significance is now ascribed to delay than may have been the case at some times of the past.”
Background
[10]	The claim in this case is for monies due pursuant to a contract between the Plaintiff and the First Defendant and pursuant to a guarantee signed by the Second Defendant and Third Defendant.  The claim was issued from the District Court on 26 November 2012.  There is no doubt on the material that the claim was served on the Third Defendant on 4 December 2012 at 5.25 p.m. at 562 Glenview Road, Pullenvale (see affidavit of service – Phillip Grogan).  There is also no doubt that the judgment in this instance was issued on 10 January 2013.  The material discloses that a copy of the judgment was posted to the Third Defendant on 15 January 2013.  Further, on 21 March 2013 the court issued an enforcement hearing summons against the Third Defendant.  This was served on 9 April 2013 at 6.30 p.m. on her together with a Form 71 statement of financial information (see affidavit of Kerren Enkera).
[11]	The Third Defendant failed to attend the hearing and a warrant was issued for her arrest.  She turned up for a resumed hearing on 29 May 2013 but the matter was adjourned for her to provide further documentation.  
[12]	Thereafter a bankruptcy notice was issued in September 2013.  Apparently those proceedings have been adjourned pending the hearing of this application.  The application to set aside the default judgment was filed in this court on 18 September 2013.  
[13]	So it may be seen there is a reasonably significant delay.
Submissions of the parties
[14]	The Third Defendant submits as follows:
(a)	She was not aware of the proceeding until April or May 2013.
(b)	This is consistent with how she conducted herself in the 28 year marriage.
(c)	There is a sufficient explanation for the failure to file a defence.
(d)	There is a prima facie defence on the merits.
(e)	In the circumstances the Third Defendant should be given the opportunity to defend the claim.  
[15]	The Plaintiff submits as follows:
(a)	The Third Defendant’s claim she has no recollection of being served should be rejected in light of Mr. Grogan’s evidence.
(b)	The Third Defendant’s evidence on “satisfactory explanation” is unsatisfactory and should be rejected.
(c)	The delay is excessive.
(d)	The Third Defendant’s alleged defence is “convenient” and disbelief of her on other aspects of her evidence “infects” the alleged defence.
(e)	Her story is not even corroborated by Mr. Jakeman.
(f)	She has given mortgages over the property 6 times and is not the most “constrained” home maker. 
Third Defendant’s affidavit
[16]	The Third Defendant in her affidavit sworn 4 October 2013 says that she is a qualified yoga instructor.  She has been married to Barry Jakeman, the Second Defendant, for 28 years.  
[17]	She says that Barry together with John Speedy owned Global Management (a project and construction company) for about 15 years.  For the last six years Barry has also turned to developing boutique properties.  She alleges that she knew Barry had become involved in property development but the details were unknown to her. 
[18]	A few years ago she learned that a new development which Barry was involved in at Capella was opening.  She learned about this in a conversation with some other people.  She in fact was not invited to the opening and had no idea about the development until she heard of it through other people.  
[19]	She says that other than their joint investment property investments (two investment properties on the Sunshine Coast) she has never knowingly been involved in her husband’s business and investment activities.
[20]	She knew that her husband had a company called Jakeman Corporation Pty Ltd but did not know it was used for other reasons.
[21]	She says she only became aware that he had a family trust after meeting with her solicitors on 12 September 2013.  
[22]	Ms Jakeman alleges that she has no recollection of being served with the District Court proceedings (paragraph 10).  She says that she is confident she would have remembered if she had been served with the proceedings because it would have impacted on her Christmas.  She says her practice is to hand documents of which she takes delivery to Barry.  They do not discuss such documents.
[23]	She alleges the first notice she had of the District Court proceedings was in about April or May 2013 when she was served with a summons to attend the enforcement hearing.  She alleges at [13]:
“Had the District Court proceedings come to my attention I would have filed a defence.  I say more about the defence which I would have instructed my solicitors to file in the paragraphs that follow below in this, my affidavit.”
[24]	Turning then to events after service of the claim and statement of claim, the Third Defendant alleges that she did not receive any correspondence from the plaintiff or the plaintiff’s lawyers by post.   She says that her husband collects and deals with all of her mail.  The letterbox is located about half a kilometre away from their house and is locked, and the husband is the only person with a key to the letterbox, which he keeps in his car.  She has her own email address which she uses for her work. 
[25]	She recalls being personally served with an enforcement hearing summons in about April or May 2013.  She alleges that she went to her husband and showed him the document to ask him what it meant.  He took it from her and told her he was taking care of it and she didn’t have to worry about it.  She recalls receiving an email from the court on or about 24 May 2013 (Exhibit KEJ1).  This email discloses that the Deputy Registrar informed her that a warrant had been issued for her arrest as a result of her non-attendance at the enforcement hearing.  
[26]	That day, the Third Defendant alleges her husband informed her he had called the court and she needed to attend in person.  Her husband told her that she had to reply to the email and say she would appear at the next hearing date.  She told Barry she did not understand why she had to go to court, did not know what it was about and why she was involved.  She alleges she did not fully understand that she was a defendant in the District Court proceedings and that default judgment had been entered against her personally in those proceedings.  At this time her husband explained that he and his business partners owed some people money and the loan related to a hotel development project being undertaken in North Queensland.  He said that she would be asked questions about those issues.  She did not know and was not told that her own assets and affairs were in any way an issue in the court proceedings.  She alleges that had she known that her own assets including the house were threatened, she would have taken steps immediately to defend herself from the claim she now knows about and would have engaged solicitors.  KEJ2 is the email she sent back to the court on 24 May 2013.
[27]	With respect to the statement of financial affairs she says that her husband told her that she needed to sign the document.  She alleges her husband had filled this out for her.  Indeed, during the hearing of this application the Plaintiff conceded that the document indeed was filled out by the husband.  The Third Defendant alleges she attended court on 29 May 2013.  She was shocked and confused when taken to a courtroom and told that her husband could not be present with her and asked to swear on oath for the purpose of being cross-examined.  She says that she had not read the financial statement prior to signing it.  The enforcement hearing was a traumatic experience and was a blur.  She alleges that at the time of attending the enforcement hearing she still did not realise what was going on other than the plaintiff was owed money from her husband and Mr Speedy.
[28]	She attended the District Court again on 2 July 2013 with her husband in accordance with the court’s request but was not required for further questioning on that date and simply waited for her husband outside the courtroom.  
[29]	She recalled receiving an email from Stoddart Legal to her work email address on or about 12 July 2013.  This email is not attached to the Third Defendant’s affidavit but is in Ms Stoddart’s (Exhibit SES14) and is clear that the Third Defendant was advised that insolvency proceedings by way of bankruptcy proceedings were to be commenced.
[30]	The Third Defendant again says that she forwarded the email to her husband and the husband assured her that he was looking into the matter and she did not need to do anything about it.  She did not read the email, she alleges, and knew that her husband Barry was dealing with Stoddart Legal.  He told her he was in the process of negotiating terms of settlement with the plaintiff.   
[31]	The Third Defendant then swears to having a prima facie defence on the merits.  She alleges in paragraph 16 of her affidavit that:
(a)	She had no understanding of the alleged loan transaction the subject of the plaintiff’s proceedings against her.  
(b)	Exhibit KEG3 is an email purported from Mr Jakeman to Chris Aldridge which states, inter alia, “Kathryn has always been an innocent in our dealings and has no idea about anything to do with your share purchase/agreement and the administration of same.”  No objection was taken to this email being tendered nor was any objection taken as to the basis of admissibility.  In the circumstances it is in evidence and on its face is a statement made by Mr Jakeman of his wife’s ignorance which is not an irrelevant consideration here.
(c)	The Third Defendant says she does not recall signing the alleged loan agreement and the first time she saw it was on 12 September 2013 when Barry gave her a copy to provide to her solicitors.  She found out at that time from her husband there was next to no equity in her house.
(d)	She has looked at the document and she accepts it looks like her signature but does not recall signing it.  It seems clear however, looking at the document, it is the Third Defendant’s signature and indeed Mr de Jersey took no point on this at the hearing of the application.
(e)	She says she never received any legal advice with respect to the execution of the document. 
(f)	She did not obtain any direct or immediate gain personally from the alleged loan transaction.  She alleges ignorance of the entire loan transaction.
[32]	She swears that the defence exhibited as KEJ5 is a true and correct copy of her draft defence.  The defences she raises are:
(a)	The first and/or Second Defendant made false representations to her prior to her signing the document;
(b)	She signed the document without negligence and did not know it was one under which she would be personally liable;
(c)	The document was never explained to her;
(d)	She alleges that it would be unconscionable for the terms of the guarantee to be enforced against her, as she did not understand the purport and effect of the guarantee document or the transaction and it should have been apparent to the plaintiff that the Third Defendant and Mr Jakeman were married and the Third Defendant may repose trust and confidence in her husband in matters of business.
Ms Stoddart’s affidavit
[33]	Ms Stoddart is the solicitor with the carriage of this action on behalf of the Plaintiff.
[34]	She says that her firm forwarded a letter of demand to the Third Defendant dated 21 February 2012 (SES1). 
[35]	The claim and statement of claim were filed on 26 November 2012.  They were served by Mr Grogan on the Third Defendant on 4 December 2012 (SES2).  It is clear on the evidence the Third Defendant accepted service.
[36]	Judgment was entered on 13 January 2013 and sent by post to the Third Defendant on 15 January 2013 (SES 3).
[37]	On 25 January 2013 a statement of financial position was sent to the Third Defendant (SES 7).
[38]	On 19 March 2013 the application for the enforcement hearing was made.  On 9 April 2013, this application was served on the Third Defendant (SES 8).
[39]	On 26 April 2013 Stoddart legal received an undated but signed copy of the statement of financial position of the Third Defendant (SES9).
[40]	The Third Defendant failed to appear at the enforcement hearing on 26 May 2013. A warrant for her arrest was issued.  She was advised about this on 24 may 2013 by email (SES10).  She later that day emailed the registrar advising she would attend the hearing on 29 May 2013 (SES12).
[41]	At the hearing on 29 May 2013 the Third Defendant gave evidence admitting she was aware there was a judgment debt against her, acknowledged that she could “lose” her properties if bankrupted and did not question the judgment.  I note that the parties did not tender the transcript of that hearing.  It is not clear if the Third Defendant was asked as to matters relating to her proposed defence.  The hearing was adjourned so the Third Defendant could gather financial information.  This was provided.  The Third Defendant appeared at a resumed hearing on 2 July 2013 and the order discharged as she had provided the relevant information.
[42]	On 12 July 2013 a bankruptcy notice was served on the Third Defendant (SES14). This was personally served on 26 August 2013 (SES 15).
[43]	On 16 September 2013 Holman Webb was engaged by the Third Defendant and correspondence between the lawyers ensued.
[44]	Title searches show that the Third Defendant is the registered owner of three properties and she has signed six mortgages between 1995 and 2005. 
Affidavit in reply
[45]	By way of reply the Third Defendant in an affidavit sworn 10 October 2013 swears:
(a)	Her husband regarding the enforcement hearing on 29 May 2013 told her she needed to attend court.  She did not know she was a defendant.  She thought she was going to be questioned over her husband’s dealings in a hotel development project in North Queensland.
(b)	 She was shocked and confused on 29 may 2103.
(c)	She alleges she still did not realise she personally owed money.
(d)	She had been told she was “third in line”.
(e)	She was never asked about the loan document at the enforcement hearing.
(f)	It was not until after 12 September 2013 when she engaged lawyers that she became fully aware of the loan agreement and its consequences.
Conclusions on the evidence
[46]	The Plaintiff did not seek to cross-examine the Third Defendant, although she was present in court.  Having said that I have my doubts as to what the Third Defendant says on the issue of her knowledge of the judgment. The fact is she was personally served with the claim and statement of claim.  One would think she would have appreciated what this meant.
[47]	I have my doubts as to the veracity of the Third Defendant’s evidence regarding her state of knowledge at the time of the enforcement hearing and the time of service of the bankruptcy notice.  It seems unlikely she would not appreciate, by this time at least, that the claim was also against her.
[48]	My conclusion, after considering the evidence, is that the Third Defendant knew that a judgment had been issued against her and she “put her head in the sand”.  She did however hand the matter to her husband to sort out.
[49]	I do accept, however, that she had left matters to her husband to negotiate and I accept that the husband was really in control of the financial affairs of the relationship.  So whilst I do not accept entirely the plaintiff’s account, there are parts of the Third Defendant’s account I do accept (bearing in mind she was not challenged in cross-examination).
[50]	In conclusion, it is my determination in this case that the explanation for the delay is not entirely satisfactory.  However counterbalanced against that is the fact that the Third Defendant has raised a defence on the merits concerning the enforceability of the guarantee.  
Defence on the merits
[51]	The Third Defendant relies on the principles expressed in Garcia v National Australia Bank Ltd (1998) 194 CLR 395.
[52]	Taking the Third Defendant’s evidence at its highest it may well be that she may be able to establish that enforcement of the guarantee is unconscionable.
[53]	In those circumstances I find there is a defence on the merits here.
Exercise of the discretion
[54]	In those circumstances, the existence of a defence on the merits being the most “cogent” point, it seems to me that the exercise of the discretion is such that I should set aside the default judgment but on terms.  
[55]	I expressly indicate I have taken into account the explanation for the failure to file a defence and the explanation for delay in reaching my conclusion.
[56]	It also seems to me that any prejudice occasioned to the plaintiff may be cured by a costs order and an order that the Third Defendant provide security for a two day trial in the District Court.
[57]	In view of the Third Defendant’s failure to take adequate steps to protect her position earlier and the fact she is seeking an indulgence from the court I exercise my discretion by ordering her to pay the plaintiff’s indemnity costs of and incidental to the enforcement proceedings and this application.  I note that Henry J made a similar order in Pratt v Parker [2103] QSC 147. 
[58]	As was said in Troiani (supra) at pp 9, the usual order in the case of the setting aside of a regularly entered judgment is that the Defendants should have to pay the Plaintiff’s costs.
[59]	I have determined that indemnity rather than standard costs should be paid in light of the significant delay by the Third Defendant.
[60]	The Plaintiff has sought a total of $23,296.36. The Third Defendant does not agree with this assessment. In the circumstances the amount should be assessed. 
[61]	I also consider it appropriate for the Third Defendant to provide security in this case. Whilst I accept there is a defence on the merits it is clear that her credit will be the subject of challenge at trial. I have not accepted her on aspects of her evidence. She has delayed the conduct of  this matter.
[62]	It is appropriate for her to provide security for the Plaintiff’s costs of a two day district court trial.    
[63]	The Plaintiff submits the sum should be $30,640. I consider this to be high. I will fix the amount in the sum of $20,000.
Orders
[64]	In the circumstances, my orders are as follows:
1.	The application is allowed.
2.	The default judgment entered on 13 January 2013 is set aside on the following conditions:
(a)	That the Third Defendant pay to the plaintiff’s solicitors the costs of and incidental to the entry of the judgment, the enforcement proceedings against her and this application on an indemnity basis as agreed or assessed.
(b)	The Third Defendant pay into court the sum of $20,000 by way of security for costs within a period as discussed with counsel. 
(c)	The defence is to be filed within 28 days. 
[65]	I will hear submissions as to the form of the order.