HG INVESTMENT CAPITAL HOLDINGS PTY LTD v ORANGE GAMING PTY LTD

1. [1]

   This judgment involves an application by the second defendant to set aside a default judgment.

2. [2]

   On 6 January 2025, a default judgment was entered for the plaintiff against the second defendant in the sum of $10,005,487.00.

3. [3]

   On 4 March 2025 the applicant filed a notice of motion to set aside the default judgment pursuant to rr 36.15 and 36.16 of the Uniform Civil Procedure Rules 2005 (NSW) (UCPR) or the inherent power of the Court.

4. [4]

   The applicant is Benjamin Thomas Madsen (Madsen) who is also the second defendant. The first defendant is Orange Gaming Pty Ltd (Orange Gaming). Madsen was sued as guarantor and is represented by R Thrift of counsel. The respondent is HG Investment Capital Holdings Pty Ltd (HG) who is also the plaintiff and is represented by J Hynes of counsel.

5. [5]

   Madsen relies on his affidavits dated 4 March 2025, 12 June 2025 and 21 July 2025. HG relies upon the affidavits of service of Justin Richards (Richards) sworn 9 December 2024 and 13 June 2025; the affidavit of Nicholas Matthew Roche affirmed 11 June 2025; the affidavit of Thomas James Wallace (Wallace) sworn 13 June 2025; and the affidavit of Jeffrey David Siddle sworn 1 July 2025. Richards and Madsen were cross examined as to whether Madsen was served with the statement of claim.

6. [6]

   By way of statement of claim filed on 13 November 2024, HG relevantly alleges:

   1. (1)

      Madsen guaranteed moneys advanced to the first defendant pursuant to a loan agreement (as varied);

   2. (2)

      the first defendant defaulted on repayment;

   3. (3)

      the parties then entered into a deed of forbearance, pursuant to which the defendants acknowledged and agreed to repay the ‘debt’, defined as $10,000,000; and

   4. (4)

      each of the defendants are liable to pay the sum of $10,000,000.

Background

1. [7]

   The proceedings concern a claim for the recovery of a debt outstanding to HG in the amount of $10 million arising from a loan arrangement that was initially entered into in September 2023. The liability of Madsen in respect of the debt arose from a written guarantee given by him dated 8 September 2023 (guarantee). Pursuant to the terms of the guarantee, Madsen guaranteed the obligations of the first defendant borrower, Orange Gaming, under a loan agreement dated 8 September 2023 which provided for an advance of $4 million (loan agreement). The guarantee also extended to a further advance of $3.25 million under a written variation to the loan agreement which was provided under a deed of variation of loan agreement dated 20 October 2023 (deed of variation). The liability of Madsen under these arrangements was confirmed and acknowledged in a deed of forbearance dated 18 June 2024 (deed of forbearance).

2. [8]

   Madsen was the director of Orange Gaming until 17 April 2024. He executed the loan agreement, the guarantee, the deed of variation and the deed of forbearance in his personal capacity and/or in his capacity as director of Orange Gaming.

3. [9]

   On 20 January 2025, Orange Gaming went into voluntary administration. On 4 February 2025 Mr Peter Krejci was appointed liquidator of the company.

4. [10]

   HG contends that Madsen failed to file a defence within 28 days of service of the statement of claim. On 3 January 2025, a notice of motion seeking default judgment was filed pursuant r 16.3 of the UCPR. On 6 January 2025, default judgment was entered against Madsen for the sum of $10,005,487.

The law – setting aside default judgments

1. [11]

   Madsen relies on the Uniform Civil Procedure Rules 2005 (UCPR). Rule 36.15(1) provides:

2. [12]

   Rule 36.16(2) provides:

3. [13]

   The principles relevant to the application of UCPR r 36.16 are well established. Where a default judgment is entered regularly in accordance with the rules, the court must consider whether there would be some purpose in setting aside the judgment. Ultimately, the court must consider the interests of justice.

4. [14]

   The relevant principles were set out in the decision of McColl JA in Dunwoodie v Teachers Mutual Bank Ltd [2014] NSWCA 24 at [43]-[46] (‘Dunwoodie’):

5. [15]

   Central to the analysis under UCPR r 36.16 is whether a defendant can provide a satisfactory explanation for the delay in filing a defence and demonstrate a defence on the merits; that is, one that is “fairly arguable in law or fact”.

6. [16]

   Factors relevant to the exercise of that discretion relevantly include:

   1. (1)

      The existence of a “defence on the merits”, such that there may be a real likelihood of injustice if the defendant were precluded from arguing its defence: Dai v Zhu [2013] NSWCA 412 at [89]-[90] (‘Dai’).

   2. (2)

      The reasons for the default that occasioned judgment: Dai at [89].

   3. (3)

      The reasons for, and the extent of, any delay in taking steps to have the judgment set aside, and the potential prejudice to other parties arising from that delay: Pham v Gall [2020] NSWCA 116 at [55]-[57] and [98] (‘Pham’). Where a defendant was unaware of the proceedings, this will be a significant discretionary factor in favour of setting aside the default judgment.

7. [17]

   The court must be satisfied that the apparent defence is genuinely relied upon and gives rise to a triable issue. However, enquiry about the existence of a “defence on the merits” does not involve a determinative adjudication on the ultimate substantive strength of the proposed defence; nor does it require the court to form an opinion about the likelihood of the proposed defence being successful. On the other hand, impressions about the apparent strength of the defence may influence assessment of the sufficiency of the explanation for the default: see Pham at [112] and [158].

8. [18]

   It should be observed that the application of these principles is subject to the Civil Procedure Act 2005 (NSW) (CPA), including the court’s duty to give effect to the “overriding purpose” identified in s 56(1) of the CPA to facilitate the “just, quick and cheap resolution of the real issues in the proceedings”: Dunwoodie at [46].

9. [19]

   Having regard to the above principles, the Court ought to set aside the default judgment pursuant to UCPR r 36.16(2)(a) for the following reasons:

   1. (1)

      the draft defence is genuinely relied on and gives rise to a triable issue;

   2. (2)

      Madsen was unaware of the proceedings until 5 or 6 February 2025 and then acted expeditiously in filing the motion, together with a draft defence, in less than a month; and

   3. (3)

      there is no prejudice to HG in circumstances where Madsen was not properly served prior to the default judgment being entered.

10. [20]

    An exercise of the unfettered discretion that UCPR r 36.16 confers requires a consideration of the applicant’s explanation for the failure to file a defence and whether they have a bona fide defence. Emmett JA said in Violi v Commonwealth Bank of Australia [2015] NSWCA 152 at [127] (‘Violi’):

11. [21]

    Madsen’s explanation for his delay is premised upon a contention that he was not served with the statement of claim on 4 December 2024. A rejection of Madsen’s evidence as to not having been served will inevitably lead to the conclusion that the Court has no satisfactory explanation from Madsen as to why he did not file a defence in accordance with the requirements of the rules. Such a conclusion will count heavily against a grant of a setting aside of the default judgment.

12. [22]

    In the event that it is found that Madsen was validly served on 4 December 2024 (that is, a rejection of Madsen’s position in relation to the matter), the Court will not be satisfied as to the existence of an adequate explanation for the purpose of r UCPR 36.16, such that the discretion under the rule to set aside the default judgment ought not to be exercised.

Irregularly entered judgment

1. [23]

   In Choi v Secretary, Department of Communities and Justice (No 2) [2022] NSWCA 264 at [24], Ward P (Meagher and Leeming JJA agreeing) relevantly explained the operation of UCPR r 36.15 as follows:

2. [24]

   Madsen again submitted that he was not served with the statement of claim and, therefore, was not relevantly “in default” (within the meaning of rr 16.2-16.3 of the UCPR). Default judgment ought to be set aside pursuant to UCPR r 36.15(1).

3. [25]

   Alternatively, the failure to personally serve the statement of claim would of itself be a sufficient reason to set aside the default judgement, as Madsen has been denied natural justice and an opportunity to meet the claims made: see Hoskins v Van Den-Braak (1998) 43 NSWLR 290 at 293 (Mason P, Priestley and Beazley JJA agreeing), which was applied in Hammond v Gerard Malouf & Partners [2012] NSWSC 664 (Hislop J) at [28], where an originating process had not been properly served.

4. [26]

   In Violi, Emmett JA also discusses the discretion under UCPR r 36.15 at [76] (footnotes omitted):

Evidence as to the service of the statement of claim

1. [27]

   The Court is faced with two accounts of what happened on the morning of 4 December 2024. HG’s evidence is that Madsen was personally served with the statement of claim by Richards, a licenced process server. Madsen’s evidence is that he was not. I granted leave to counsel for HG to cross examine Madsen, and to counsel for Madsen to cross examine Richards only on the issue of service of the statement of claim.

2. [28]

   Madsen deposes that the first time that he became aware of the proceedings was when he was served with a letter dated 3 February 2025, issued by HG's solicitors which served a copy of a bankruptcy notice (together with the orders made on 6 January 2025). Madsen received this letter on 5 or 6 February 2025.

3. [29]

   In these circumstances the default judgment was entered irregularly and ought to be set aside pursuant to UCPR r 36.15(1) or alternatively, the inherent power of the court.

4. [30]

   Richards gave evidence that he served Madsen with the statement of claim on 4 December 2024. Richards swore this evidence in two affidavits, dated 9 December 2024 and 13 June 2025. He was cross examined at the hearing on 27 August 2025 as to service of the statement of claim.

5. [31]

   Richards is a licenced process server. He is a sole trader who contracts to Polo CPI. He serves documents all over Sydney and typically takes between 5 and 30 service jobs per day. He described his workload as flexible.

6. [32]

   On 13 November 2024, Polo CPI was instructed to have Madsen served with the statement of claim together with a letter. These instructions were given by an email from Lucy Newman, a legal secretary at Macpherson Kelley, who acted for HG. This email contained instructions regarding how to serve Madsen. The email stated that Madsen would arrive at the office building between 8:00am and 9:30am and would enter the building from the carpark via the café entrance. The email instructed that Madsen was only to be served at or around the café entrance of the office building. The email attached photos of the entrance to the building, and photographs of Madsen including his passport, driver’s licence and a photograph of him with a woman.

7. [33]

   These instructions were passed on to Richards via an agent sheet from Polo CPI’s office.

8. [34]

   On 15 November 2024, Richards wrote a surveillance report. In this report, Richards said he conducted surveillance in the lobby of the office building from 7:30am to 9:30am. Richards was unable to identify and serve Madsen on this day. The surveillance report contained a photograph of Richards’ position at the café entrance.

9. [35]

   According to the affidavit Richards swore on 9 December 2024, Madsen was personally served with the statement of claim at 7:50am on 4 December 2024 at the café located in the foyer of the office building, known as Artistry Garden. Richards says that on this occasion he identified Madsen by reference to driver’s licence and passport photos. Richards’ evidence is that at the time of service he asked Madsen, “Are you Mr Ben Madsen, the person referred to in these documents?”, to which Madsen responded, “Yes, I am”. Richards then handed Madsen the documents. Richards gave evidence that he has an actual memory of serving the documents on Madsen.

10. [36]

    During cross examination Richards said that he would have asked, “Are you Ben Madsen?” and shown him the documents before handing them to him.

11. [37]

    Richards’ evidence is that he makes notes on an app while conducting a service job, and that these notes are later used to write the affidavit and surveillance report. During cross examination, Richards said that somebody else in the Polo CPI office typed the affidavit dated 9 December 2024 based on his notes and reflecting a template. Richards accepted that the conversation recorded in that affidavit was not verbatim.

12. [38]

    HG submitted that in order to reject Richards’ evidence it would be necessary for the Court to find that he was either lying or that two extraordinary events occurred at the time of service, namely: (i) Richards misidentified Madsen when comparing his identity to three photographs; and (ii) that by sheer coincidence the person whom he asked, “Are you Ben Madsen?”, was either a person who also went by the name Ben Madsen (albeit with the same features as those in the photographs) or that person lied to Richards when he acknowledged that he was such a person.

13. [39]

    Madsen gave evidence that he was not served with the statement of claim on 4 December 2024. Madsen affirmed this evidence in an affidavit dated 21 July 2025 and was cross examined on his evidence in this Court on 27 August 2025.

14. [40]

    During cross examination, Madsen said he cannot recall precisely what he did before work on 4 December 2024. He agreed that his place of work is at the office building above Artistry Gardens.

15. [41]

    The carpark printout document of Dexus, who runs the carpark beneath the building, shows Madsen entering the carpark at 7:44am on 4 December 2024 (CB tab 18).

16. [42]

    Madsen’s evidence is as follows.

17. [43]

    On a usual day at the office, he does not go to Artistry Garden as he purchases coffee elsewhere. However, Madsen does on occasion purchase breakfast from Artistry Garden. When walking from the carpark to his office, Madsen does not walk through Artistry Garden.

18. [44]

    Artistry Garden is not open on weekends. Madsen never dines at Artistry Garden on weekends.

19. [45]

    Madsen has a credit card with his bank. When he makes a purchase with his credit card, it may sometimes appear on his statement in the following days. His credit card statement shows transactions at Artistry Garden dated Sunday, 1 June 2025, and Sunday, 15 June 2025, but does not show any transaction at Artistry Garden on 4 December 2024. Madsen accepted in cross examination that this neither proved nor disproved his being at Artistry Garden on that date as there may have been other transactions which related to purchases on 4 December 2024 that appear under another date on the statement. The card statement shows a transaction dated 4 December 2024 at Skittle Lane, a different coffee shop to Artistry Garden.

20. [46]

    Madsen denied that he was near Artistry Garden at 7:50am on 4 December 2024.

21. [47]

    Madsen specifically denied that Richards approached him and asked, “Are you Ben Madsen?”; that he said, “Yes, I am”; and that he was handed documents, including the statement of claim.

22. [48]

    In re-examination, Madsen said that when strangers ask if he is Ben Madsen he does not respond, as he has an ASIC suppression, has had threats on his past work and is cautious about security.

23. [49]

    Annexed to the affidavit of Wallace, managing director of Gibraltar Capital Pty Ltd, dated 13 June 2025, is a WhatsApp conversation between himself, Michael Birch and Madsen. In this conversation, Madsen said on 5 December, “I have a shitty day today”. On 6 December 2024, Madsen uses the phrase “… try to resolve the legal processes underway …”. Madsen contended in cross examination that this message was referring to the proceedings against his wife, and processes other than these proceedings.

24. [50]

    Wallace deposed in his affidavit:

25. [51]

    Madsen admitted in cross examination that he complained to Wallace during these phone calls about having been served with the proceedings: T15 [38]-[40].

26. [52]

    During cross examination Madsen accepted that it is likely he met with Mr Wallace on 12 December 2024. However, he denied that he complained to Mr Wallace on that day about these proceedings. Rather, Madsen said that he complained to Mr Wallace about a separate action against his wife.

27. [53]

    Madsen submitted that the above evidence of the witnesses will need to be considered against the following objective facts:

    1. (1)

       HG asserts that Madsen was personally served at 7.50am on 4 December 2024. Apart from the evidence of Richards, there is no other evidence of service, or of any informal service.

    2. (2)

       The evidence of Mr Wallace, a funds manager and advisor to HG, demonstrates that he, and another advisor to HG, were in nearly daily contact with each other, in respect of the debt the subject of these proceedings, in December 2024. These proceedings are not mentioned at all in these messages.

    3. (3)

       Madsen became aware of these proceedings after being served with a bankruptcy notice on or about 5 or 6 February 2025.

    4. (4)

       Thereafter, Madsen retained solicitors and filed both the present motion, and an application to stay the bankruptcy notice, on 4 March 2025.

Resolution

1. [54]

   For the purposes of this application, I am unable to determine on the balance of probabilities whether or not Madsen was in fact served with the statement of claim. It is necessary to assess competing versions as to service of the statement of claim and it is difficult to determine Madsen’s credibility on this issue alone. Hence, this is an issue best dealt with at trial.

A defence on the merits

1. [55]

   I now turn to consider whether Madsen has a defence on the merits.

2. [56]

   The parties to the loan agreement dated 8 September 2023 are HG (as lender) and Orange Gaming (as borrower).

3. [57]

   Clause 4.1 of the loan agreement provides:

4. [58]

   Clause 11.16 of the loan agreement:

5. [59]

   The parties to the deed of guarantee dated 8 September 2023 are HG (as lender) and Madsen (as guarantor). Clause 5 of the deed of guarantee provides:

6. [60]

   The parties to the deed of forbearance dated 18 June 2024 are HG (as lender), Orange Gaming (as borrower), as well as Madsen and four other parties (as guarantors). Clauses 3.3-3.5 of the deed of forbearance provide:

7. [61]

   Clause 5 of the deed of forbearance:

8. [62]

   In respect of the draft defence, Orange Gaming entered into the loan agreement with HG on or about 8 September 2023. There was a variation to this loan agreement, and a further advance of funds under that second agreement in October 2023, but Madsen says that he was not a party to that agreement. He provided a guarantee in respect of the loan agreement but says that on a proper construction of the variation to the loan agreement, no further or expanded guarantee was provided. Madsen pleads that to the extent the guarantee is found to so extend, that he executed the variation to the loan agreement due to a misrepresentation about his ongoing risk under the guarantee, namely, that HG was taking out additional security sufficient to cover any potential liability of Orange Gaming under the loan agreement, as varied. Madsen pleads that he is entitled to relief in respect of the variation to the loan agreement. This same relief must extend to the deed of forbearance as it is dependent upon, and expressly refers to, the loan agreement (as varied) and further refers to the additional securities under the variation to the loan agreement which form the basis of HG’s misleading conduct.

9. [63]

   According to Madsen, the proper construction of the guarantee, and the conduct of HG in respect of the variation to the loan agreement, raise triable issues that he should be permitted to prosecute.

10. [64]

    In the event that the Court is to consider the merits of the draft defence, the following matters do not appear to be in issue between the parties: (a) the fact of the execution by Madsen of the guarantee and all of the other related transactional documents; (b) the fact of the advances under the first loan agreement and the deed of variation; and (c) the calculation of the amount that is claimed to be owing.

11. [65]

    By the draft defence, Madsen admits that he guaranteed (by the guarantee) the obligations of Orange Gaming pursuant to the loan agreement, but he does not admit that the guarantee extended to the liability under the deed of variation.

12. [66]

    There appear to be two bases for this non-admission:

    1. (1)

       first, a contention that the deed of variation was entered into following an “implied representation” made by HG that the “risk to [Madsen] was negligible given the other security that would be provided”, namely, the mortgaged ‘Bondi property’ and the ‘Newtown property’; and

    2. (2)

       second, a contention that on a proper construction of the deed of variation, it did not amend or provide a “guarantee in respect of the variations to the Loan Agreement, including the Further Advance” (implied representation).

13. [67]

    As to the implied representation, paragraphs 15-18 on pages 4 and 5 of the affidavit of Madsen dated 12 June 2025, are referred to as particulars of the representation. These paragraphs refer to Madsen’s belief that:

14. [68]

    The draft defence alleges a contravention by HG of s 18 of the Competition and Consumer Act 2010 (Cth), Sch 2 – Australian Consumer Law (ACL) and an entitlement to have the deed of variation set aside or declared void and an entitlement to compensation. The second defendant’s written submissions dated 21 July 2025, refer to Madsen’s entitlement to “relief in respect of the variation to the Loan Agreement”. Madsen has not filed any cross claim in the proceedings seeking relief under s 18 of the ACL or otherwise.

15. [69]

    Ignoring this procedural issue, and despite the vagueness of the allegation as to an implied representation, the defence advanced by the draft defence contains several fundamental difficulties such that it cannot be regarded as a defence on the merits.

16. [70]

    First, the alleged representation appears to arise from a belief held by Madsen that he would have a limited exposure given the existence of other security. How this belief, arising from Madsen’s apparent understanding of the security position (rather than anything expressly represented by HG), could found a claim under s 18 of the ACL is far from clear. Moreover, the alleged representation (to the extent that there was one made by HG) could not be characterised as being a representation of any fact by HG, but rather a mere statement of opinion or belief held by HG as to the security position. It is well established that a statement of opinion or belief, which turns out to have been unfounded, is not a misrepresentation.

17. [71]

    Second, to the extent that there is a complaint that HG did not take or register certain security (such as for example, register the mortgage on the Newtown property), the terms of the loan agreement, as varied by the deed of variation, expressly permitted HG to waive any of the conditions precedent to making the advances (including the provision of security) – see cl 4.2 of loan agreement.

18. [72]

    Third, it is also well established that there is no implied condition to any contract of guarantee that a creditor must have recourse to any other security before enforcing the guarantee instrument against the guarantor. This is consistent with the language of the guarantee – see for example cl 5 which provides for the guarantee being a principal obligation and not ancillary to any other obligation.

19. [73]

    Fourth, irrespective of any alleged implied representation, by the deed of forbearance, Madsen pleaded that he contracted out of any related complaint. There are several provisions of the deed of forbearance which prevent Madsen from challenging his guaranteed liability to HG under the guarantee (the subject of HG’s claim in these proceedings). In particular:

20. [74]

    Clause 13.1 of the deed of forbearance:

21. [75]

    The deed of forbearance is pleaded in the statement of claim. Other than non-admissions or denials, the draft defence raises no positive challenge to the validity or enforceability of the deed of forbearance.

22. [76]

    HG submitted that Madsen’s written submissions filed 25 July 2025, raised a contention that the “same relief must extend to the Deed of Forbearance as it is dependent upon, and expressly refers to, the Loan Agreement (as varied) etc”. This submission is clearly misconceived. Aside from the fact that there is no relief claimed in the proceedings by Madsen, nothing is pleaded in the draft defence which challenges the deed of forbearance and moreover, as a matter of fact, the deed of forbearance came about after the deed of variation and, by virtue of its provisions, Madsen acknowledged the enforceability of the guarantee, including to the extent of the liability claimed against him in this proceeding.

23. [77]

    The draft defence pleads that on a proper construction, the deed of variation did not “amend the 2D or provide a guarantee in respect of the variations to the Loan Agreement including the Further Advance”. It is assumed that the reference to “2D” is a reference to the loan agreement. The particulars of the allegation cross-refer to [11(b)]-[11(d)] of the defence. None of these sub-paragraphs would appear to have anything to do with the construction of the deed of variation.

24. [78]

    Irrespective, on its terms, there can be no argument that the deed of variation did not provide for an amendment to the loan agreement (in the form of the loan agreement annexed to the deed of variation and marked “A”) and further that the guarantee extended to providing security. Relevantly:

25. [79]

    Even if it could be said that there is some lack of clarity in relation to the drafting of the deed of variation or even an argument that the guarantee is not captured as further security (neither of which is the case), such an argument would again fail given the operation of the deed of forbearance. By the deed of forbearance and particularly cl 5.1(b)(ii), (iv) and (v), Madsen acknowledged and agreed, inter alia, that the guarantee secured the $10 million debt outstanding to HG.

26. [80]

    Having regard to the above submissions concerning the draft defence, it could not be said that the draft defence presents a defence on the merits and one that is fairly arguable in law or fact. For these reasons, to the extent that Madsen seeks to set aside the default judgment on the basis of r 36.16 of the UCPR, that application must fail.

27. [81]

    If the Court determines the default judgment was not entered irregularly, it should still set aside that judgment and allow Madsen to defend these proceedings on the merits. The decision to set aside the judgment pursuant to UCPR r 36.16(2) is a discretionary one. In this case, there is a very real prejudice to Madsen if this discretion were not exercised in his favour, including in respect of his career. By contrast, HG will need to continue with these proceedings against the other defendants regardless.

28. [82]

    Before turning to Madsen’s proposed defence, two further points should be noted about the plaintiff’s written submissions filed 11 August 2025:

    1. (1)

       HG complains that Madsen has not filed any cross claim against HG. Putting aside whether this would be a reasonable or efficient course in the face of a subsisting default judgment, a cross claim is not necessarily required in order to rely on s 18 of the ACL as a defence; and

    2. (2)

       HG asserts that Madsen does not have any present entitlement to contribution. An entitlement to contribution arises where judgment has been given against one surety, even prior to any payment of the judgment.

29. [83]

    HG’s contention that the misleading representation is a mere opinion or belief, requires an assessment of the content of the alleged conduct, the context, subject matter and surrounding circumstances. That is, determining whether a statement is one of fact or opinion depends upon all the relevant surrounding circumstances. This is a question of fact that is not appropriate to finally determine on an interlocutory basis. Instead, consistently with the principles set out in Dai, Madsen need only show that there is an arguable or triable issue.

30. [84]

    The particulars of the misleading conduct, referred to in Madsen’s affidavit dated 12 June 2025, include: possible representations as to future matters, for example, that the security provided (by way of the Bondi and Newtown properties) was to be registered; and that should any defaults occur, HG would exercise its rights over these properties, which is also pleaded at paragraph 11 of the draft defence. Pursuant to s 4 of the ACL, it is for HG to demonstrate, as a matter of fact, that it had reasonable grounds for making these representations. Again, this is a factual enquiry that is not appropriate to be resolved on this application.

31. [85]

    HG’s second point, that the provision of security could be waived by it, does not properly state the terms of the loan agreement, and in any event, is irrelevant in the context of a representation from HG as to either the present fact of such registration or its intention to do so. Clause 4.1 of the loan agreement contains no condition precedent as to the registration provision of security. It is unclear what part of cl 4.1 HG refers to in its submissions. Nonetheless, it should be noted that cl 4.1(1) provides a condition precedent to an ‘advance’ that the “Lender holds such security as the Lender considers appropriate…”. This clause refers to the term ‘security’, and should be construed to mean security generally, that is, the condition precedent could operate to protect the lender if it considered further security was required. It should not be construed to refer to the ‘security’ set out in item 7 of the schedule. Accordingly, the ‘securities’ were required to be provided regardless.

32. [86]

    HG’s third point likewise does not address the alleged representations or whether they were misleading. That the guarantee, entered into prior to the deed of variation, contained certain clauses that would be understood by a lawyer as allowing HG to enforce the guarantee as it chooses, does not impact a representation as to the fact of or HG’s intention as to other securities to be provided in respect of the later deed of variation.

33. [87]

    HG’s fourth point is tied to its assertions in respect of the deed of forbearance more generally.

34. [88]

    The deed of forbearance refers in its recitals and in cl 5.1 to the ‘securities’ being the security provided in respect of the loan agreement as varied. In this context, the deed of forbearance was intended to address the alleged default under the loan agreement. As this deed continued to refer to the securities, it carried forward the state of affairs Madsen understood in respect of the deed of variation – that is, he personally would be at limited risk in the context of the provision of this security. There is no inconsistency for Madsen to sign a document acknowledging liability, whilst having been misled into believing that his personal liability would be addressed by HG’s recourse to securities provided by others.

35. [89]

    More particularly, cl 3 is not an answer to Madsen’s misleading conduct defence. A generally worded release cannot extend to a claim that a party does not know of at the time the release was entered: Grant v John Grant & Sons Pty Ltd (1954) 91 CLR 112; [1954] HCA 23 at 130. This principle was reviewed in Reid v Commonwealth Bank of Australia (2022) 109 NSWLR 149; [2022] NSWCA 134, where it was held that:

    1. (1)

       this is an area where the subjective intentions of the parties may legitimately inform the analysis: see Bell CJ at [3]; Leeming JA at [34]; and

    2. (2)

       while there may be an exception to this principle however, determining the scope of equitable intervention in advance of trial is problematic: Leeming JA at [52].

36. [90]

    It follows that should HG seek to rely on the releases in cl 3 of the deed of forbearance, the equitable construction of these releases will be in issue and should be left to a final hearing.

Resolution

1. [91]

   The draft defence raises s 18 of the ACL as a defence. However, it is my view that it should be pleaded by way of cross claim. A defence under s 18 of the ACL does involve ascertaining the facts and circumstances surrounding the signing of the documents. Madsen has given some affidavit evidence on the guarantee, the deed of variation and the deed of forbearance. In these circumstances, the matters raised in the defence in relation to s 18 of the ACL should be permitted to go to trial.

2. [92]

   In making this decision I have considered CPA s 56. Decisions under UCPR rr 36.15 and 36.16 are discretionary, and both are dependent upon the issue as to whether or not the statement of claim was properly served. It is my view that justice is best served if these proceedings go to trial.

Orders

1. [93]

   The Court orders that:

   1. (1)

      The default judgment entered by the plaintiff against the second defendant dated 6 January 2025 is set aside.

   2. (2)

      Costs are reserved.

   3. (3)

      The registry is to allocate a date for a directions hearing.