Asiapac Securities Pty Ltd v Ashlee Holdings Pty Ltd

1. [1]

   HER HONOUR: By notice of motion filed 12 December 2014, the first defendant seeks an order that default judgment entered on 13 September 2012 be set aside pursuant to rule 36.16(2)(a) of the Uniform Civil Proceedings Rules 2005 (NSW) (“UCPR”).

2. [2]

   The plaintiff is Asiapac Securities Pte Ltd (“Asiapac”). The first defendant is Ashlee Holdings Pty Ltd (“Ashlee”). The second defendant is Garry Robert Fulton (“Mr Fulton”).

3. [3]

   There are two related proceedings, these and proceedings 2014/140627 Trajkovski v Asiapac Securities Pty Ltd. Both parties’ submissions and this judgment should be read in conjunction with the judgment in the other proceedings (Trajkovski v Asiapac Securities Pte Ltd [2015] NSWSC 1432). This judgment should be read first.

4. [4]

   Paul and Helen Trajkovski (“Mr and Mrs Trajkovski”) are potential beneficiaries of a trust of which Ashlee is trustee. Mr Trajkovski relied on his affidavits dated 10 December 2014, 22 May 2014 and 27 June 2014. Mrs Trajkovski relied on her affidavit dated 10 December 2014. The Trajkovskis also relied on the affidavit of Gabrielle Kara Polczynski dated 9 April 2015. Asiapac Securities relied on two affidavits of Michael La Motte dated 26 November 2012 and 19 March 2015. No deponent was cross examined.

5. [5]

   Both Mr and Mrs Trajkovski set out in their affidavits the circumstances that have given rise to the entry of default judgment and their delay in seeking to set it aside. The paragraph numbers that appear below are reference to those that appear in Mrs Trajkovski’s affidavit. For the purposes of this notice of motion and the motion in the 2014 proceedings only, I accept their evidence and acknowledge that it will be the subject of contest at trial.

Background

1. [6]

   Asiapac is a Singapore registered company, of “dormant” status.

2. [7]

   Ashlee is a New South Wales registered company and is the trustee of the Trajkovski Family Trust (“the trust”). The trust was set up under a deed of settlement dated 9 December 1994 [3]. Both Mr and Mrs Trajkovski are potential beneficiaries of the trust [4]. Mr and Mrs Trajkovski are husband and wife. Ashlee was the registered proprietor of three parcels of land as trustee for the trust, a property at Grasmere (“the Grasmere property”) and two properties at Ingleburn, one on Devon Road (“the Devon Road property”) and one on Bosci Road (“the Bosci Road property”) [5].

3. [8]

   Prior to September 2014, Mr and Mrs Trajkovski owned and operated a business called “Pegs R Us” at the Devon Road property. The Devon Road property contained a factory with plant, equipment and machinery. Pegs R Us was the sole source of income for Mr and Mrs Trajkovski [6]. The Grasmere property is their residential home.

4. [9]

   I shall start with the circumstances that Mr and Mrs Trajkovski say gave rise to these proceedings and the entry of judgment.

Dealings with Mr Fulton – and the “hijacking” of Ashlee

1. [10]

   Mrs Trajkovski was the director of Ashlee. Mr Garry Fulton (“Mr Fulton”) had worked for Mr Trajkovski and had been a friend of Mr and Mrs Trajkovski for over 20 years. Mr Fulton stored equipment at the Bosci Road property and occasionally came onto that property with the Trajkovski’s consent to access his equipment [21]. It is alleged that Mr Fulton lodged a false form with ASIC changing the director of Ashlee to himself and resigning Mrs Trajkovski from that position. Counsel for Ashlee and Mr and Mrs Trajkovski described the actions of Mr Fulton as a “hijacking” of Ashlee.

2. [11]

   Around July or August 2011, Ashlee refinanced a loan which resulted in the Bosci Road and Devon Road properties becoming unencumbered. The certificates of title for the Bosci Road and Devon Road properties had been returned to Ashlee by the former mortgagee. Mrs Trajkovski placed the certificates of title in a safe that Mr Trajkovski had at the Devon Road property [22].

3. [12]

   In about August 2011, Mr and Mrs Trajkovski were considering building a factory at the Bosci Road property. Mrs Trajkovski was present at the time her husband had a conversation with Mr Fulton. She heard them say words to the effect:

4. [13]

   In about September 2011, Mr and Mrs Trajkovski were sorting through documents at the Devon Road property office. They had the following conservation:

5. [14]

   In late September 2011, Mr and Mrs Trajkovski decided not to pursue developing the Bosci Road property. That meant that Ashlee did not require any loans. Mrs Trajkovski had a conversation with Mr Fulton to the following effect:

6. [15]

   Mrs Trajkovski has known Mr Fulton for over 20 years and she trusted that the certificates of title for the Bosci Road and Devon Road properties were safe in his solicitor’s possession and would not be misused [26].

7. [16]

   A few weeks later, Mrs Trajkovski had a conversation with Mr Fulton to the following effect:

8. [17]

   During the period October 2011 to July 2013, Mrs Trajkovski periodically had conversations with Mr Fulton as follows:

9. [18]

   While Mr Fulton made many excuses, he never handed the certificates of title back to the Trajkovskis.

The credit agreement

1. [19]

   On 5 October 2011, Mr Fulton, purporting to be the director of Ashlee executed a credit agreement with Asiapac which contained a form of charge on "all property" of Ashlee. Asiapac has never held a registered interest in the Grasmere property.

2. [20]

   The loan was between Ashlee as borrower and Asiapac as lender with Mr Fulton as guarantor. Asiapac advanced $600,000 to Ashlee (clause 3.1) for a period of three months (clause 1.1.28). Clause 4.2.1 provided that Ashlee must pay interest on the amount of the advance (less any amount prepaid) at the “Funding Rate”, which interest would be calculated for the term of the loan in advance on the date of the advance and payable on the date the advance is made.

3. [21]

   So far as interest is concerned, at clause 1.1.13 the “Funding Rate” meant 7.0% per month. Clause 4.2.3 provides that if Ashlee made payment of an instalment of interest, or of the principal outstanding within three days of each date for payment thereof and no default had occurred, Asiapac would accept payment of interest calculated at the “Rate” in lieu of interest calculated at the “Funding Rate”. The “Rate” meant 2.8% per month below the “Funding Rate” from time to time. (clause 1.1.24).

4. [22]

   Finally, clause 1.1.12 relevantly defines fees as follows

5. [23]

   In summary, the loan of $600,000 was a short term one. It was for three months only at an interest rate of 7.0% but, if paid on time, it was reduced to 5.2%. So if the loan had been for a 12 month period, the interest rate would have been 84% but if payments were made on time it would have reduced to a yearly rate of 62.4%.

6. [24]

   On 5 October 2011, Ashlee mortgaged the Devon Road property and the Bosci Road property to Asiapac. This mortgage was registered.

7. [25]

   In about January 2012, Ashlee was in default under the credit agreement and the mortgage.

8. [26]

   Mr and Mrs Trajkovski did not receive any of the proceeds of the credit agreement.

The pleadings in the statement of claim

1. [27]

   On 7 May 2012, Asiapac filed a statement of claim seeking possession of the Devon Road and Bosci Road properties and judgment in the sum of $717,300.87.

2. [28]

   Asiapac’s statement of claim pleads as follows.

3. [29]

   Mr Fulton is the director of the company and guarantor [2]. Ashlee is the registered proprietor of the land at the Devon and Bosci Roads properties [3] and [4].

4. [30]

   On 5 October 2011, Ashlee executed a registered mortgage in favour of Asiapac (“the mortgage”) [5]. The mortgage was executed in consideration of certain advances and accommodation granted or to be granted to Asiapac by Ashlee and Mr Fulton and incorporated the provisions of memorandum registered at Land and Property Information NSW as No. QXXXX [6].

5. [31]

   Pursuant to the mortgage, Ashlee and Mr Fulton secured to Asiapac the obligations of Ashlee and Mr Fulton under a credit agreement dated 5 October 2011 and accepted a loan of $600,000 from Asiapac [7]. It was an express term of the credit agreement that Ashlee and Mr Fulton would pay instalments of principal and interest in accordance with the terms of the credit agreement [8].

6. [32]

   In breach of the credit agreement Ashlee and Mr Fulton are in default in respect of payment of principal and interest on the due date [9].

The history of these proceedings to default judgment and beyond

1. [33]

   As at October 2011, Mrs Trajkovski says that she had no knowledge that Mr Fulton had negotiated a loan with Asiapac. She says she did not authorise Mr Fulton to make an application for the loan either as director of Ashlee or on her own behalf. Mrs Trajkovski says that she believed that Mr Fulton was to do no more than make an enquiry as to the potential amount Ashlee might be able to borrow [33].

2. [34]

   It should be noted that the mortgage did not include the Grasmere property, nor does the statement of claim seek any orders in relation to the Grasmere property.

The defence and applications filed by Mr Hancock on behalf of Ashlee

1. [35]

   On 17 September 2012, John Hancock, described as solicitor for the defendant (singular), filed a defence on behalf of both Ashlee and Mr Fulton. The defence at paragraphs [2] and [4] plead:

2. [36]

   Mr and Mrs Trajkovski say that they did not instruct Hancock Solicitors to act for Ashlee in making an application to set aside default judgment. They say that they were not aware that any solicitors had acted for Ashlee until after August 2013, when their solicitor Mr Geikie provided that information to them [37]. To the best of their knowledge, Mr Fulton instructed Hancock Solicitors but he did not disclose the existence of the proceedings to Mr and Mrs Trajkovski until after August 2013 [38].

3. [37]

   On 5 September 2012, Asiapac obtained default judgment against Ashlee for possession of the Devon Road and the Bosci Road properties. On 26 September 2012, writs of possession were issued in respect of Devon Road and Bosci Road. On 13 September 2012, Asiapac obtained default judgment in relation to the monetary sum.

4. [38]

   On 12 November 2012, Hancocks solicitors, on behalf of Mr Fulton and Ashlee, filed a notice of motion seeking that the statement of claim be struck out and the execution of the writs of possession on the Devon Road and Bosci Road properties be stayed. Mr Fulton affirmed affidavits in support dated 6 and 12 December 2012.

5. [39]

   On 13 December 2012, the Court made directions for the filing of affidavits and submissions.

6. [40]

   On 21 January 2013, Hancocks solicitors filed an amended notice of motion of behalf of Ashlee and Mr Fulton. The motion sought orders, inter alia, for further stays on the execution of the writs of possession in relation to the Devon and Bosci Road properties and an order to set aside default judgment. Mr Hancock affirmed a further affidavit dated 18 January 2013. Mr Frank Nicholson, a friend of Mr Fulton who introduced Mr Fulton to the mortgage broker, also affirmed an affidavit on 18 January 2013. The defendants did not comply with the directions.

7. [41]

   On 21 January 2013, the applications for a stay of execution of the writs of possession were refused by McDougall J.

8. [42]

   On 29 January 2013, Adamson J in her ex tempore judgment stated (at [5] to [9]):

9. [43]

   When Adamson J dismissed the motion, once again it was Mr Hancock, instructed by Mr Fulton, on behalf of Ashlee, who filed this motion.

10. [44]

    On 22 August 2013, Ashlee lodged registered caveat number AHXXXX, over the Devon Road and Bosci Road properties.

11. [45]

    On 7 May 2014, a further writ was issued in relation to the Devon Road property.

12. [46]

    On 9 May 2014, Mr and Mrs Trajkovski commenced the 2014 proceedings in respect of material that was situated on the Bosci Road property.

13. [47]

    Asiapac took possession of the Devon Road and Bosci Road properties as mortgagee and effected power of sale. On 27 November 2014, the Bosci Road property was sold. On 16 March 2015, the Devon Road property was sold.

14. [48]

    In the case of those properties, Asiapac obtained the benefit of indefeasibility of its interest as mortgagee under s 42 of the Real Property Act 1900 (NSW), having registered the mortgages (allegedly fraudulently executed by Mr Fulton) on the title of those properties. On the basis of the principles in Perpetual Trustees Victoria Ltd v Tsai [2004] NSWSC 745; Vella v Permanent Mortgages Pty Ltd [2008] NSWSC 505 and Printy v Provident Capital Limited & Anor [2007] NSWSC 287, Asiapac had a prima facie right to exercise the rights of a mortgagee in respect of those properties.

15. [49]

    Ashlee accepts that as the properties at Devon Road and Bosci Road have been sold, the default judgment so far as it concerns those properties cannot be set aside. Also, Ashlee seeks that judgment for the monetary sum only be set aside.

16. [50]

    As at 20 May 2015, Asiapac calculates that the unpaid balance owing to it is $1,538,559.78 and calculated as follows:

17. [51]

    It is important to appreciate that the initial loan was for the sum of only $600,000 plus interest. Even though the Devon Road and Bosci Road properties have been sold and those funds credited to the loan balance, the amount owing, as at 20 May 2015, is $1,538,559.78.

Setting aside default judgment

1. [52]

   The power to set aside judgment is contained in UCPR 36.15 and 36.16. They relevantly read:

2. [53]

   The most recent Court of Appeal authority in considering an application to set aside default judgment pursuant to UCPR 36.16 is Stankovic v Magee [2014] NSWCA 439. In Stankovic, Macfarlan JA (with Basten and Gleeson JJA agreeing) stated:

3. [54]

   Another consideration to be taken into account when determining whether default judgment should be set aside was expressed by Priestley JA in Cohen v McWilliam (1995) 128 FLR 263; (1995) 38 NSWLR 476 at 481 quoting from the Federal Court in Davies v Pagett (1986) 10 FCR 226; (1986) 70 ALR 793:

Explanation for delay

1. [55]

   I accept that the Trajkovskis had no knowledge of Mr Fulton changing the directorship of Ashlee, nor the existence of the credit agreement. Nor did they have any knowledge of the entry of default judgment against Ashlee on 5 September 2012. They were unaware of Mr Fulton’s attempts to set aside default judgment on the writs of possession.

2. [56]

   On 5 August 2013, the Trajkovskis first became aware of the existence of these proceedings when the Sheriff served a writ of possession and a notice to vacate at the Devon Road property. That notice required the occupier to vacate the property by 5 September 2013 [7].

3. [57]

   On the same day, 5 August 2013, Mr and Mrs Trajkovski obtained a company search of Ashlee and land tile searches in relation to the Grasmere property and the Devon Road and Bosci Road properties from Ken Neville, solicitor of Branston Neville Lawyers Pty Ltd [8]. Mr and Mrs Trajkovski were then advised by Mr Geikie, of Hogan Geikie Poole Lawyers, that the searches recorded a number of transactions, including that on about 15 September 2011, Mr Fulton lodged two ASIC forms 484 removing Mr and Mrs Trajkovski and appointing himself as the sole director/secretary and shareholder of Ashlee. They were also advised by Mr Geikie that on 11 October 2011, a mortgage was registered on the titles of each of the Devon Road and Bosci Road properties [10(a) and (b)].

4. [58]

   By letter dated 6 August 2013, Mr Geikie wrote to the lawyers for the Asiapac advising them of a fraud against Mrs and Mrs Trajkovski and Ashlee and requesting an extension of time before further action [11]. On 30 August 2013, Asiapac agreed to extend time for them to vacate the Devon Road property to 27 September 2013 [13].

5. [59]

   On 25 September 2013, Mr Geikie wrote to Ms Gardis, solicitor for Ashlee, explaining:

6. [60]

   During the period from 27 September 2013 until 6 May 2014, Mr and Mrs Trajkovski carried out investigations as to how Asiapac had obtained registered mortgages over the Devon Road and Bosci Road properties and why a caveat was lodged on the Grasmere property by Ashlee [14].

7. [61]

   On 21 November 2013, Mrs Trajkovski obtained copies of the documents that had been lodged with ASIC, in relation to Ashlee, for the period September 2011 until August 2013 [15]. These documents revealed that on 15 September 2011, a “change to company” form was lodged at ASIC by Compulodge on behalf of Ashlee. The form had to be signed by a current officeholder of the company. It is signed purportedly by Mrs Trajkovski in her capacity as director.

8. [62]

   The form is entitled “Appointment company office holder” and relevantly reads:

9. [63]

   The ASIC records show that the appointment date on the form is 15 March 2011 and shows that these changes were recorded by ASIC and were effective as of 15 September 2011. There was also a change to members shareholders. The two fully paid, beneficially held shareholdings held by Mrs Trajkovski were changed to be held by Mr Fulton. The date of change is recorded as 15 September 2011.

10. [64]

    On 6 May 2014, the Trajkovskis say that without prior notice, Michael La Motte (“Mr La Motte”), on behalf of Asiapac, arrived at the Bosci Road property with people from A CMI Waste Management and Raytons Pty Ltd who began removing goods from the premises [16].

11. [65]

    On 9 May 2014, Mr and Mrs Trajkovski obtained orders from the Supreme Court restraining Asiapac from removing the goods and chattels that were then stored at the Bosci Road property which did not belong to Ashlee. The goods belonged to Mr and Mrs Trajkovski personally and other people who had stored goods at the Bosci Road property with the permission of Ashlee and Mr Trajkovski [17].

12. [66]

    On 18 May 2014, the Trajkovskis instructed Kells (their current solicitors) to act for them. On 29 May 2014, the Trajkovskis instructed Kells to undertake further investigations into the events leading to the registration of the mortgages and the apparent execution of a loan agreement in the name of Ashlee. Kells have obtained copies of files from other solicitors and accountants who acted for Ashlee during the time Mr Fulton was shown as a director in ASIC’s records [18].

13. [67]

    In June 2014, Ashlee requested copies of documents from Compulodge which were provided by Compulodge at about that time. In particular, one of the documents was a copy of an ASIC form 362 entitled “Notification of Appointment or Cessation of a Registered Agent by a Company” that purports to give authorisation to Compulodge to act on behalf of Ashlee. The form purports to have been signed by Mrs Trajkovski on 14 September 2011 [19]. Mrs Trajkovski says that the signature on that document is not her signature. She did not authorise Compulodge to act on behalf of Ashlee; she did not sign this document and she never engaged Compulodge to act on behalf of either Ashlee or herself [20].

14. [68]

    On 12 December 2014, the notice of motion to set aside default judgment was filed.

15. [69]

    On 9 March 2015, directions were made and the matter was stood over to 9.00 am on 2 April 2015.

16. [70]

    On 2 April 2015, further directions were made for the filing of affidavits and submissions. On 24 April 2015, this motion was listed for hearing on 6 August 2015.

17. [71]

    From 15 September 2011 to 29 January 2013, Ashlee was effectively under the control of Mr Fulton, being the date when the application to have default judgment set aside was dismissed. As outlined in the history of these proceedings, up until 29 January 2013, Mr Fulton was the alter ego of Ashlee.

18. [72]

    On 5 August 2013, when the Sheriff attended the Devon Road property, the Trajkovskis first became aware of the existence of these proceedings. After they became aware of this, they made enquiries to ascertain how this situation had come about. The Trajkovskis also took separate proceedings to restrain Asiapac from removing goods and chattels from the Bosci Road property. On 12 December 2014, Ashlee and the Trajkovskis filed this motion to have default judgment set aside. They filed evidence and submissions in accordance with court orders. It is my view that in these circumstances, Ashlee and the Trajkovskis have provided a satisfactory explanation for the delay in seeking to set aside the default judgment.

Proposed defence

1. [73]

   Ashlee says that Mr Fulton acted in fraud of Ashlee; he lodged a false Form 484 so that ASIC’s register showed him to be the director when he never was. The proposed defence is based upon the well known case of Barnes v Addy (1874) 43 LJ Ch 513; (1874) 22 WR 505.

2. [74]

   A copy of the proposed defence is annexed to the affidavit of Gabrielle Polczynski sworn 9 April 2015. The proposed defence traverses the pleadings in the statement of claim. Relevantly, Ashlee denies that Asiapac granted advances to it and denies that it established the mortgage. Ashlee pleads that the mortgage and the credit agreement were not executed by it and were executed without the knowledge or consent of a genuine director of Ashlee [7]. Ashlee also denies that it was bound by the credit agreement [8]. It follows that Ashlee says that it is under no obligation to make payments and is not in default.

3. [75]

   In summary, Ashlee contends that firstly, none of the provisions of the Corporations Act 2001 (Cth) (focusing on ss 127, 128 and 129) render valid the fraudulent execution by Mr Fulton (Australia and New Zealand Banking Group Ltd v Frenmast Pty Ltd (2013) 282 FLR 351; [2013] NSWCA 459); secondly, Mr Fulton was in the position of a fiduciary of Ashlee; thirdly, the circumstances surrounding the execution by Mr Fulton of the subject documents were such that Asiapac had constructive knowledge of Mr Fulton’s fraud and breach of fiduciary duty but continued to deal with Mr Fulton notwithstanding that knowledge; and finally, Asiapac is liable to Ashlee for equitable compensation as a result.

4. [76]

   After reviewing the history and explanations set out in the reasons for delay, I accept that the defence is made on a bona fide basis.

The law

1. [77]

   The plaintiff relies upon Barnes v Addy. In Farah Constructions Pty Ltd v Say-Dee Pty Ltd (2007) 230 CLR 89; [2007] HCA 22, in a unanimous decision, the High Court summarised what has come to be known as the “rule in Barnes v Addy” at [111] to [112]:

2. [78]

   Hasler v Singtel Optus Pty Ltd; Curtis v Singtel Optus Pty Ltd; Singtel Optus Pty Ltd v Almad Pty Ltd [2014] NSWCA 266; (2014) 87 NSWLR 609 provides further detailed discussion of the meaning of accessory liability for knowing assistance in dishonest and fraudulent design and the meaning of “dishonest and fraudulent design”.

3. [79]

   So far as the second limb of Barnes v Addy, (the knowing assistance), is concerned, counsel for Ashlee and Mr and Mrs Trajkovski drew this Court’s attention to correspondence between Mr La Motte, an authorised officer of Asiapac, and the solicitors acting for Asiapac in relation to the credit agreement with Ashlee. There is no doubt that this credit agreement was commercially favourable to Asiapac, to say the least. Counsel for Ashlee submitted that Asiapac, through Mr La Motte, had knowledge of Mr Fulton’s fraudulent conduct in changing the directorship of Ashlee from Mrs Trajkovski to himself (T5.40).

4. [80]

   The relevant correspondence is as follows:

5. [81]

   On 14 September 2011, Melanie Magill, securities clerk at IDI Securities, emailed Evelyn Gardis, of Taylor and Scott, Asiapac’s solicitor in NSW, relevantly stating:

6. [82]

   On 14 September 2011, Trevor Watts, lawyer IRDI Securities, emailed Mr La Motte of Areca Finance Short Terms Funders, (also cc’d to Ms Gardis of Taylor and Scott, Asiapac’s solicitor in New South Wales) advising:

7. [83]

   On 22 September 2011, Mr La Motte emailed Melanie Magill stating:

8. [84]

   In other words, it is alleged that Mr La Motte knew that as at 14 September 2011, Helen Trajkovski is the director of Ashlee and that he should insist upon Mrs Trajkovski and Mr Fulton obtaining separate independent legal advice. It also appears that Mr La Motte did not heed this advice, and became aware that a change of directorship took place the next day whereby Mrs Trajkovski resigned and Mr Fulton was appointed sole director of Ashlee. Mr La Motte was then in a position to finalise the advantageous credit agreement involving Ashlee through Mr Fulton.

9. [85]

   Counsel for Asiapac relied upon Hudson Investments Group Ltd v Atanaskovic [2010] NSWSC 1055, where Davies J, on a summary judgment application at [44] to [47] stated:

10. [86]

    The facts in Hudson Investments Group differ from this case. Here, it is alleged Mr Fulton fraudulently changed the directorship to himself so he could act on behalf of the trust, and Mr La Motte on behalf of Asiapac. It is my view that in these circumstances, referred to in the correspondence, it is arguable that Asiapac, through Mr La Motte, had knowledge of Mr Fulton’s fraudulent conduct. In my view, the second limb of Barnes v Addy is arguable. I might add here that I think that the defence is bona fide.

Sections 127(1), 128 and 129 of the Corporations Act

1. [87]

   Counsel for Asiapac submitted that even if the proposed defence falls within Barnes v Addy, it does not matter because the provisions ss 127(1), 128 and 129 of the Corporations Act are fatal. Counsel for Ashlee argued that the assumptions contained in ss 128 and 129 of the Corporations Act do not apply, because Asiapac, when dealing with Mr Fulton, was not dealing with Ashlee nor with a person authorised to deal with Ashlee.

2. [88]

   Sections 127(1), 128 and 129 of the Corporations Act relevantly read:

3. [89]

   Section 128 of the Corporations Act is entitled “Entitlement to make assumptions”. The assumptions a person is entitled to make are set out in s 129. The assumptions can be made even if an officer or agent of the company acts fraudulently or forges a document in connection with the dealings: s 128(3). Also a person may assume that anyone who is held out by the company to be an officer or agent of the company has been duly appointed; and has authority to exercise the powers and perform the duties and customarily exercised or performed by that kind of officer or agent of a similar company: s 129(3). Another assumption that can be made under s 129 is that a person may assume that anyone who appears, from information provided by the company that is available to the public from ASIC, to be a director or a company secretary of the company has been duly appointed; and has authority to exercise the powers and perform the duties customarily exercised or performed by a director (s 129(2)).

4. [90]

   In these current proceedings, ASIC records that Mr Fulton is a director of Ashlee as at 13 September 2011, so Asiapac may assume that he has the authority to enter into the credit agreement on behalf of Ashlee. But this assumption will be negated (s 128(4)) if at the time of the dealings they knew or suspected that the assumption was incorrect.

5. [91]

   As previously stated, there is evidence to suggest that Asiapac, through Mr La Motte, knew that as at 14 September 2011, Mrs Trajkovski is the director of Ashlee and that he should have insisted upon Mrs Trajkovski and Mr Fulton obtaining separate independent legal advice. It also appears that Mr La Motte

6. [92]

   did not heed this advice, and became aware that a change of directorship took place the next day whereby Mrs Trajkovski resigned and Mr Fulton was appointed sole director of Ashlee. It is arguable that s 128(4) Corporations Act is applicable. If that is so, the assumptions in ss 128 and 129 do not assist Asiapac.

7. [93]

   Counsel for Asiapac drew this Court’s attention to Australia and New Zealand Banking Group Ltd v Frenmast Pty Ltd, but this case does not appear to assist Asiapac.

8. [94]

   Ashlee and the Trajkovskis have provided a satisfactory explanation for delay. Ashlee has a bona fide and arguable defence. There is also a fundamental duty of this Court to do justice between the parties. In the exercise of my discretion, in these circumstances, Ashlee should be afforded the proper opportunity to have a trial on its merits. Therefore, I order that the default judgment entered on 13 September 2012 be set aside. Costs are reserved.

   1. (1)

      The default judgment entered 13 September 2012 is set aside.

   2. (2)

      Costs are reserved.