TTW Financial Pty Ltd v TSF Group Pty Ltd & Ors

1. [1]

   This case involves default on a loan agreement secured by a guarantee and mortgage over real property in Strathfield and came before the Court on Tuesday this week in circumstances of some urgency. While the urgency had diminished to a degree by the time the matter was heard, it remained important to resolve the current issue quickly.

2. [2]

   By an amended notice of motion filed 17 July 2025, Stephen James Moore (the second defendant) sought several orders in relation to proceedings in which TTW Financial Pty Ltd (the plaintiff) obtained default judgment and a writ of possession after Faulkner J struck out the original defence following a brief hearing on 17 April 2025. The orders made by Faulkner J were made by consent after his Honour pointed out some of the problems with the defence as it was originally filed. In addition to striking out the defence, his Honour noted that the plaintiff intended to move immediately to obtain default judgment and granted leave for the plaintiff to apply for the issue of a writ of possession on terms that the writ lie in the Registry for 14 days.

3. [3]

   Events have somewhat overtaken the orders originally sought in the notice of motion and Mr Moore no longer seeks most of those orders. In particular, the parties reached agreement that an auction of the Strathfield property, which was scheduled for 26 July 2025, should be delayed and that a real estate agent acceptable to Mr Moore will take over the marketing campaign and conduct the sale of the property at the delayed auction.

4. [4]

   Essentially, at this point, Mr Moore seeks an order that the default judgment be set aside and that he have leave to file an amended defence within 14 days. He also seeks orders as to the distribution of the proceeds of the sale of the property and a number of ancillary or facilitative orders. He does not seek to prevent, or further delay, the auction. Nor does he now attempt to somehow set aside the writ of possession after its execution. He does, however, seek an order that he be allowed to stay at the property pending the sale to ensure it is presented in its best light to potential purchasers and because he says he currently does not have a home.

5. [5]

   The plaintiff opposes the making of the orders and submits the defences raised in the proposed defence are untenable, not reasonably arguable or otherwise destined to fail. It points to what it says is the unexplained delay in the second defendant acting to seek to set aside the default judgment and to the prejudice it may face if the judgment is set aside.

6. [6]

   The parties filed a joint court book of 528 pages including affidavits by the second defendant and the plaintiff’s solicitor, and three exhibits were tendered including earlier loan and guarantee agreements (Ex 1 and 2) and a new proposed defence (Ex B) which was hot off the press.

Overview of relevant principles

1. [7]

   There was no dispute between the parties as to the principles governing the application to set aside the judgment.

2. [8]

   Rule 36.16(2) of the Uniform Civil Procedure Rules 2005 (NSW) provides the court with a discretionary power to set aside or vary a default judgment, except for a default judgment delivered in open court. In exercising its discretion, the court must consider whether it is in the interests of justice to provide the applicant with an opportunity to defend the matter “on the merits”: Dai v Zhu [2013] NSWCA 412 at [83], citing Reinehr Industrial Lease & Finance Pty Ltd v Jordan (Court of Appeal (NSW), 4 June 1974, unrep).

3. [9]

   An applicant is required to demonstrate that they have a “bona fide defence”, meaning that there is “an arguable or triable issue” which has been asserted in good faith: see, for example, Dai v Zhu at [89]-[92]. The court requires affirmative evidence, generally in the form of an affidavit, and the mere assertion by an applicant that they have a defence with merit, or the receipt of legal advice to that effect, is insufficient: Magnate Projects Pty Ltd v Youma Constructions (No 2) Pty Ltd [2005] NSWCA 331 at [54]-[55]. In National Australia Bank Ltd v McCarthy [2014] NSWSC 1819, Hall J summarised some of the principles as follows:

4. [10]

   The court is not required to determine the strength of the defence or the likelihood of it succeeding in order to find that an applicant has a bona fide and arguable defence: Reinehr Industrial Lease & Finance Pty Ltd v Jordan and Magnate Projects Pty Ltd v Youma Constructions (No 2) Pty Ltd at 52.

5. [11]

   The court will also consider the explanation for, and the extent of, any delay on behalf of the applicant in seeking to set aside the default judgment, as well as any prejudice caused to other parties as a consequence of that delay: Pham v Gall [2020] NSWCA 116 at [55]-[56] and [98]. As noted by Payne JA in Pham v Gall at [98]:

6. [12]

   Finally, the court may take into account the reason for the default, considering the strength of the proposed defence in assessing the sufficiency of the explanation (Pham v Gall at [112] and [158]), and whether the respondent provided any indication of their intention to seek default judgment: Commonwealth Bank of Australia v Wales [2012] NSWSC 407 at [24] citing Pope v Aberdeen Transport Co Pty Ltd [1965] NSWR 1550.

7. [13]

   In the present case, the real issue is whether there is an arguable defence. However, I will first deal with the delay and the potential prejudice to the plaintiff each of which is also relevant to the decision I have reached.

Chronology and delay

1. [14]

   To appreciate the force in the plaintiff’s arguments, it is best to begin, as its counsel (Mr Oakes) began, with a brief chronology of relevant events. I will include some dates to which Mr Oakes did not refer in his very helpful opening remarks, and note that some of the dates may not be precise and are based on evidence scattered throughout the documents and affidavits in the court book (Ex A):

2. [15]

   While that is an incomplete chronology of events, it will serve for the purpose of the present application.

3. [16]

   The plaintiff emphasised the lack of any cogent or reasonable explanations for the delays between the orders of 17 April 2025 and the filing of the notice of motion seeking to set aside the default judgment. For example, the evidence is vague as to what Mr Moore did after the conferences on 1 and 5 May 2025 at which it must be assumed or inferred that he was made aware of the need for urgent action. His affidavits are silent on the steps he took after 5 May 2025 and before his new solicitors contacted the plaintiff’s solicitors on 13 June 2025. There was then a further, largely unexplained, delay of a month before the notice of motion was filed.

4. [17]

   Against those matters, it is not disputed that Mr Moore has, throughout the period covered by the foregoing chronology, suffered from a range of health problems. It is not necessary to detail those problems but his affidavits provide some details and there is a letter confirming some of his medical conditions from his treating doctor. I proceed on an acceptance that he has some cardiac issues and a disabling back condition causing severe pain and requiring quite strong painkilling medication. I also accept that he saw a neurosurgeon on 16 July 2025 and is booked for “back surgery” on 22 August 2025 and will be in hospital for three to four days. Exactly how these medical issues impacted on, or caused, the delays between May and July is not entirely clear. However, I am prepared to proceed on an assumption that they may have had some impact on Mr Moore’s seemingly dilatory response to his predicament. Even so, the extent of the delay and vagueness of the explanations tend to militate against granting the relief to an extent.

5. [18]

   On the other hand, the lengths of the delays were not particularly egregious and a defence was initially filed in a timely fashion even though it was struck out. It is also significant that Mr Moore now seeks only to litigate the amount of interest to be paid, and there is no suggestion that the auction or sale of the property will be delayed further. If the sale goes to plan, the plaintiff should be able to recoup the principal sum relatively soon.

Prejudice to the plaintiff

1. [19]

   Had the objective of this application been to set aside the writ of possession or seek to further delay the auction, the prejudice to the plaintiff would have been a matter of great significance. However, the parties now appear to be working together to achieve the best purchase price. As the chronology shows, Mr Moore had been seeking to sell the property even before he (and/or his company) entered the loan agreement, guarantee and mortgage. Much of the ancillary relief he sought (or seeks) in the current application was (or is) calculated to ensure that the best sale price is achieved. The plaintiff agreed to postpone the auction. It also agreed, subject to approval of the agency agreement, to retain the real estate agent of Mr Moore’s choice. Mr Moore’s affidavit suggests he has not had much luck with the agents he has engaged over the last 12 months.

2. [20]

   The plaintiff pointed to the “presumptive prejudice” arising from the delay and to some costs already incurred, and likely to be incurred, resulting from the delay, additional steps in the litigation caused by the default, and arranging for the sale of the property.

3. [21]

   The extent to which this ultimately results in prejudice to the plaintiff will turn on the price for which the property is sold. The parties agreed that there is no current, or necessarily accurate or reliable, valuation or appraisal. Even so, Mr Oakes more or less accepted in argument that the amount that will be recouped upon the sale of the property will exceed the amount of the current debt but not necessarily “by a huge amount”. [1] Meanwhile, interest will continue to accrue on the debt, at least at court rates, if not at the generous rates agreed to in the loan agreement.

4. [22]

   Another relevant consideration in this regard is the fact that the Court can give the parties an expeditious hearing date. Unless the second defendant somehow attempts to delay or interfere with the sale – an unlikely scenario given his interest in selling the property which he accepts he cannot get back – the prejudice to the plaintiff in allowing the defendant to litigate its belatedly formulated defence is not a compelling consideration in the circumstances of this case.

Is there an arguable defence?

1. [23]

   At the commencement of the hearing on Tuesday, Mr Cleary confirmed that there was no suggestion that the defendants would (or could) attempt to argue that the principal part of the debt was not outstanding or that Mr Moore could somehow retain title to the Strathfield property. In short, the issue would be the amount of interest payable on the principal sum. He said:

2. [24]

   As noted earlier, the second defendant withdrew any suggestion that the notice of default and demand was not properly served.

3. [25]

   In short form, the defences relied on and articulated in the proposed defence tendered on the application (Ex B) arose under (1) the National Credit Code (Cth) (the Code) and the National Consumer Credit Protection Act 2009 (Cth), (2) the law of unconscionability and (3) the Contracts Review Act 1980 (NSW).

4. [26]

   The second and third of those matters were not pleaded in the defence that was struck out by Faulkner J. The first matter was pleaded in the original defence but in different terms. Mr Oakes submitted, amongst other things, that the “supposed defence is simply a resurrection of the defective defence pleaded on 13 March 2025.”

5. [27]

   The strike out in April was based on the proposition that the Code does not apply to loans made to a corporation. The plaintiff maintains that, even as re-pleaded, the defence remains untenable and unarguable as a matter of law. Reliance was placed on cases such as Brackenridge v Bendigo and Adelaide Bank Ltd [2021] SASCA 129 at [125] and on the following observations of Gzell J in Equititrust v SLJM Pty Ltd [2010] NSWSC 1059:

6. [28]

   The plaintiff relies on the fact that the loan agreement, on its plain terms, evidenced a loan to the first defendant company, TSF Group Pty Ltd, and submits that Mr Moore is not the borrower or debtor in any relevant sense. It stresses that it was for precisely this reason that the defendants consented to the order striking out the pleading in April.

7. [29]

   Mr Cleary submitted, in conformity with the revised pleading, that the arrangement was a “sham” in the sense that it masked the reality of the situation which (it will be contended if the matter proceeds to trial) becomes clear when the three relevant documents – that is, the loan agreement, deed of guarantee and mortgage – are read together. He relied on the fact that Mr Moore was the guarantor and mortgagor, the registered owner of the property subjected to the mortgage, and that he was the sole director of the company nominated as the borrower. He referred to cases supporting “the tendency of contemporary Australian law to favour substance over form”: Raftland Pty Ltd v Commissioner of Taxation of the Commonwealth of Australia (2008) 238 CLR 516; [2008] HCA 21 at [151] (“Raftland”). Mr Cleary acknowledged the “dirth” of applications that have raised the issue and conceded he was unable to find an authority that supported his contention.

8. [30]

   Mr Cleary accepted that these arguments may not meet with success at the trial, but submitted it was at least arguable and that there was enough evidence before the Court to conclude that there was a triable issue. He also made what I considered to be a somewhat ambitious submission that this argument received some support in the definitions within clause 1.2 of the deed of mortgage which provided that “the singular includes the plural and vice versa”.

9. [31]

   The plaintiff noted that Raftland concerned sham arrangements set up in the context of revenue cases. Mr Oakes submitted that it made little sense that the second defendant would structure the loan, guarantee and mortgage in this way, thus avoiding the provisions of the Code, and then be permitted to argue that “he intended to enter into an arrangement which would have the Code apply and, on his case, make the arrangement non-compliant and potentially void.”

10. [32]

    Putting aside the submission concerning clause 1.2 of the deed of mortgage, upon which the pleading is not dependant, and which is merely a matter concerning the construction of the terms of the documents, I am satisfied that the second defendant has an argument that the provisions of the Code apply to the transaction, or series of transactions. Whether the case of Raftland applies, or whether it is distinguishable on the basis that it concerned a “sham argument [which] really captures itself more in the context of anti-avoidance provisions”, [3] will be a matter to be determined once the evidence on both sides is tendered and tested.

11. [33]

    Given my conclusion as to the arguments concerning the applicability of the Code, it is not necessary to go into much detail in relation to the defences relying on general concepts of unconscionability and the provisions of the Contracts Review Act.

12. [34]

    Mr Oakes was correct to submit that this was not a case of drastically unequal bargaining power. Mr Moore had been conducting the business of an architect and involved in property developments for a number of years. He had a solicitor when the documents were executed. Further, the arrangement he entered with the plaintiff was an attempt to re-finance and on better terms than the loan agreement evidenced by Ex 1.

13. [35]

    There was an interesting enough debate as to whether the arrangement between the parties was properly categorised as “purely asset lending” and Mr Cleary relied on what was said by the Court of Appeal in Perpetual Trustee Company Limited v Albert and Rose Khoshaba [2006] NSWCA 41 at [128] where the potentially “fruitless” nature of such an enterprise was highlighted. Conversely, Mr Oakes referred to Stubbings v Jams 2 Pty Ltd (2022) 276 CLR 1; [2022] HCA 6 where Kiefel CJ, Keane and Gleeson JJ noted (at [4]) that the lender’s submission that there was “nothing inherently unconscionable about asset‑based lending” was conceded. It should be noted their Honours went on to hold that, in all of the factual circumstances of that case, enforcing the guarantee was unconscionable.

14. [36]

    I accept that the evidence presented on this aspect of the case was not extensive and that there is some uncertainty surrounding the role of the intermediary (Sam Niu) through whom the plaintiff and the second defendant came to create legal relations. It may be that the evidence will not establish any form of agency but on Mr Moore’s evidence on this application, certain inferences may be available. If no connection between Mr Niu and the plaintiff is established, questions will arise as to whether the plaintiff “knew or ought to have known” that the second defendant was not in a position to service the repayments for the loan.

15. [37]

    Ultimately, I am satisfied there was sufficient material in the second defendant’s affidavits on the motion to give rise to an arguable case of unconscionability or under the Contracts Review Act.

Conclusions, ancillary relief and orders

1. [38]

   I am satisfied that the second defendant has established that he has an arguable case to obtain some relief at a final hearing of the matter. I am not persuaded that the delay was so egregious, or that the potential prejudice to the plaintiff was so substantial, that the second defendant should be denied the opportunity to litigate the issues that will be raised by the proposed amended defence.

2. [39]

   I am not persuaded that it is necessary or desirable to make any of the ancillary orders sought by the second defendant. These include an order that the second defendant be permitted to re-enter the property. The case has reached the stage where the plaintiff (now as the mortgagee in possession) is entitled to possession of the property. Any arrangement to allow Mr Moore to re-enter pending the sale or final hearing will have to be made by consent. I will not make any such orders, despite the sympathy that Mr Moore’s current circumstances may invoke.

3. [40]

   It remains in the best interests of both parties that the sale occur expeditiously and at the highest price. Co-operation between the parties will facilitate this and is to be encouraged. As the owner and designer of the renovations, Mr Moore has some expertise and ideas as to how to present the property to achieve a formidable return. However, his involvement will have to be by agreement between the parties. The plaintiff has possession and is entitled to sell the property to recoup the principal of the loan advanced almost a year ago.

4. [41]

   I will order expedition of the trial and fix a hearing date. The available dates were canvassed at the hearing of the motion and 11-12 September 2025 was suitable to the plaintiff. Regrettably, the defendants’ solicitor may need to brief alternative counsel.

5. [42]

   I have considered the parties’ submissions as to costs and decided that the costs of and incidental to the notice of motion should be costs in the cause.

6. [43]

   For those hastily assembled reasons, I make the following orders: [4]

   1. (1)

      The default judgment entered on 1 May 2025, other than the judgment for possession of the land, be set aside insofar as it concerns the second defendant.

   2. (2)

      The second defendant to file an amended defence on or before 8 August 2025.

   3. (3)

      The matter be listed for an expedited hearing with an estimate of two days on 29-30 September 2025.

   4. (4)

      The plaintiff to file and serve its evidence on or before 22 August 2025.

   5. (5)

      The second defendant to file and serve his evidence on or before 5 September 2025.

   6. (6)

      The plaintiff to file any evidence in reply on or before 17 September 2025.

   7. (7)

      The parties are to notify each other which witnesses will be required for cross-examination on or before 19 September 2025.

   8. (8)

      The matter is listed for mention and status review before the Registrar on 17 September 2025.

   9. (9)

      The parties are to file a joint court book on or before 5:00 pm on 22 September 2025.

   10. (10)

       The costs of and incidental to the notice of motion be costs in the cause.

   11. (11)

       Money recouped on the sale of the property is to be distributed as follows