Resort Living Group Pty Ltd v Strategic Advisers Group LLC (No 4)

1. [1]

   There are two notices of motion before this Court, one by the plaintiff and the other by the first and second defendants.

2. [2]

   By notice of motion filed 15 July 2022, the first defendant, Strategic Advisers Group LLC and the second defendant, Mr Saviano, seek an order setting aside the default judgment entered against them in these proceedings on or around 7 March 2022. The order is sought pursuant to rule 36.15(1) and/or rule 36.16(2) of the Uniform Civil Procedure Rules 2005 (‘UCPR’).

3. [3]

   By notice of motion filed on 12 August 2022, the plaintiff seeks orders that:

   1. (1)

      The motion filed by the first and second defendants on 15 July 2022 be struck out pursuant to r. 13.4 of the Uniform Civil Procedure Rules 2005 (NSW) as the proceedings are an abuse of process of the Court.

   2. (2)

      An order that the first and second defendants pay the costs of his motion on an indemnity basis.

4. [4]

   The plaintiff is Resort Living Group Pty Limited (ACN 159 788 593). Mr Saviano appeared by Videolink from the United States for the first and second defendants. Both parties were self-represented. Mr Saviano is the sole director and sole shareholder of the first defendant. While Mr Saviano had legal representation that included the preparation of the notice of motion to set aside a default judgment and his affidavits. On 29 May 2023, the defendants’ solicitors filed a notice of ceasing to act before the hearing on 2 June 2023. Mr Saviano relied upon his affidavits affirmed on 12 July 2022 and 27 September 2022 and was briefly cross-examined. The plaintiff relied on volumes of material comprised of affidavits and submissions.

5. [5]

   I shall deal with the defendants’ notice of motion filed 15 July 2022 first, as if that is unsuccessful, there is no need to deal with the plaintiff’s notice of motion dated 12 August 2022.

Background

1. [6]

   Strategic Advisers is a company incorporated in Washington, D.C., USA for the purpose of arranging international financial agreements. Mr Saviano (a US citizen who is otherwise known as “Nino”) is the sole director and sole shareholder of Strategic Advisers.

2. [7]

   In or around mid-2019, Mr Saviano was introduced to Mr David Hawkins by a finance broker named Kumar Krishna. Mr Hawkins was and is the sole director and shareholder of Resort Living Group Pty Limited (‘Resort Living’), an Australian company with its registered office in NSW. Mr Krishna made the introduction on the basis that Resort Living needed to obtain finance, and Strategic Advisers was in the business of arranging finance.

3. [8]

   In or around October 2019, Strategic Advisers agreed to seek to arrange finance for Resort Living by procuring a 100% cash backed standby letter of credit (‘SBLC’) from a European bank with a face value of €50 million which would then be “monetised” by another European bank (via a separate loan agreement, with the principal to be repayable within 12 months) for 40% of the SBLC’s face value or €20 million (‘transaction’). In exchange, Resort Living agreed to pay Strategic Advisers a deposit of €110,000 (‘deposit’) and a percentage commission on the transaction.

4. [9]

   The transaction was not formalised until Resort Living was able to provide the deposit to Strategic Advisers, that did not occur until around 23 July 2020. On 28 July 2020 Resort Living and Strategic Advisers entered into an agreement entitled “Private Deed of Agreement on Delivery of Standby Letter of Credit Swift MT760 and Monetisation” (‘Agreement’). The agreement is a most unusual one, as the agreement seems to be a speculative and one that was poorly drafted.

5. [10]

   On 28 July 2020, the parties entered a written agreement described as ‘Private Deed of Agreement on Delivery of Standby Letter of Credit Swift MT760 and Monetisation’.

6. [11]

   The agreement relevantly reads:

7. [12]

   Under the heading ‘Special Conditions’ the Deed of Agreement states:

8. [13]

   Under the heading ‘Limit of liability’ the Deed of Agreement states:

9. [14]

   Under the heading ‘Arbitration’ the Deed of Agreement states:

10. [15]

    Pursuant to the agreement, the first and second defendants agreed to provide the plaintiff with a 100% Cash Backed Standby Letter of Credit (the “Letter of Credit”) from ING Bank located in Amsterdam in the Netherlands (“ING”) with a face value of €50,000,000, and the plaintiff agreed to pay a deposit of €110,000 to the first and second defendants for its provision.

11. [16]

    On 28 July 2020, the plaintiff paid the total deposit to the first defendant, for which the first and second defendants provided a receipt. The total cost of the deposit was equivalent to approximately $183,000 (AUD) at the time of payment.

12. [17]

    In summary pursuant to the agreement, the plaintiff was to receive the Letter of Credit to be issued by French Bank, Credit Mutuel Bank (“Credit Mutuel”). The first and second defendants were then to trade the Letter of Credit with ING and to make available for the benefit of the plaintiff a payment of €20,000,000 being forty per cent (40%) of the face value of the Letter of Credit, within ten banking days after the receipt and confirmation of the trade.

13. [18]

    Under the Deed of Agreement, the delivery of the monetised funds of €20,000,000 was to have been received by the plaintiff on or before 15 September 2020. No moneys were received by the plaintiff by that date.

14. [19]

    In late October 2020 the plaintiff received a draft of the Letter of Credit from Credit Mutuel. It apparently was a cause for concern for the plaintiff because an international bank had misspelt the word “Amsterdam” (its own location) on two occasions.

15. [20]

    Time passed, but the plaintiff did not receive the Letter of Credit in its correct form. In December 2020, the plaintiff discovered that the Letter of Credit was only partially cash and partially gold backed. This was unacceptable to ING. So over Christmas, January and February the plaintiff allowed the first and second defendant’s time to convert it from partially cash backed to fully cash backed so that the plaintiff could get full drawdown of the facility. That has never occurred.

16. [21]

    While there is a heading ‘Assignment and termination’ in the agreement, there is no clause under that heading which refers to termination, nor is there a clause dealing with the circumstances where the Deed of Agreement can be terminated. The Deed of Agreement does refer to a “Notice of Termination”.

17. [22]

    Under the heading ‘Construction principles’, the last paragraph stipulates:

18. [23]

    According to Mr Saviano in his affidavits affirmed 12 July 2022 and 27 September 2009, after the agreement was executed, it became very difficult for Strategic Advisers to obtain any assurances about the procurement of a 100% cash backed SBLC. Based on his experience in arranging similar transactions, Mr Saviano knew that unless the SBLC was 100% cash backed it was going to be very difficult, if not impossible, to monetise. The inability to obtain a 100% cash backed SBLC in or around 2020 arose, he says, at least in part, due to the economic conditions occasioned by the COVID-19 pandemic.

19. [24]

    Mr Saviano also deposes after the execution of the agreement through to the beginning of 2021, Strategic Advisers and Resort Living began exploring alternative arrangements for completing the transaction, including by considering whether it was possible to enter into agreements with alternative banks than those which were contemplated by the parties in the agreement. At the same time, Strategic Advisers also continued to attempt to complete the transaction as planned.

20. [25]

    Again on Mr Saviano’s version of events, by late February 2021, the relationship between Strategic Advisers and Resort Living began to deteriorate. On 25 February 2021, Mr Hawkins, on behalf of Resort Living, sent Mr Saviano a demand for the payment of €20 million within 10 banking days. On 9 March 2021, Mr Hawkins sent a further demand to Mr Saviano for the payment of €20 million by 11 March 2021. On 11 March 2021, Mr Hawkins sent a document entitled “Notice of Default and Demand” for the payment of €393,153,000 within 5 banking days. On 19 March 2021, Mr Hawkins repeated his demand for €393,153,000. On 24 March 2021, Mr Hawkins sent Mr Saviano a draft Statement of Claim for €393,153,000 that alleged this amount was owed to Resort Living by the first and second defendants for breach of contract. According to Mr Saviano, Mr Hawkins never provided any substantiation of the amounts claimed. Despite correspondence sent to Mr Hawkins by Mr Saviano, the parties have been unable to resolve the dispute.

21. [26]

    On 31 May 2021, Resort Living commenced these proceedings by filing a Statement of Claim against Strategic Advisers and Mr Saviano (and “Solutions Management”) as the third defendant. It was later held that Solutions Management was not a legal entity. The plaintiff claimed AU$30,927,914 (being the €20 million that was to be loaned to Resort Living at the exchange rate of AUD1.00/EUR0.65). It is common ground that Resort Living paid €110,000 as a deposit to Strategic Advisers. Strategic Advisers still holds that money.

22. [27]

    The statement of claim (‘SC’) sought the following relief:

23. [28]

    In particular, the statement of claim pleaded at [17]:

24. [29]

    I shall summarise the defendant’s draft defence in more detail later in this judgment under the heading “Bona fide defence?”

25. [30]

    The history of the matter and the nature of the claim sought and the relationship between the parties is set out in my judgment in Resort Living Group Pty Ltd v Strategic Advisers Group LLC [2021] NSWSC 1418 (‘my first decision’) and Resort Living Group Pty Ltd v Strategic Advisers Group LLC (No 2) [2021] NSWSC 1473 (‘my second decision’).

26. [31]

    On 3 November 2021, in my first decision, I addressed contentions that were raised in the defence of the first and second defendants which were to the effect that the Court lacked jurisdiction, either by reason of a lack of a territorial nexus or by the terms of an arbitration agreement set out in the agreement between Resort Living and Strategic Advisers reproduced earlier in this judgment. In my first decision, I did not enter summary judgment on the basis that the plaintiff had not served a notice of termination.

27. [32]

    On 3 November 2021, I also adjourned the proceedings to 16 November 2021. I ordered the plaintiff to send the first decision to the first, second and third defendants and to direct their attention to my orders. Finally, I ordered the plaintiff to provide an updated affidavit setting out its claim for damages on the next hearing date. It appears that the first and second defendants received notification of my orders as the next hearing date, they filed a “Reply on the next day, namely 4 October 2022.

28. [33]

    On 16 November 2021, in my second judgment at [3] and [4], set out the pleadings in the “Reply” as follows:

29. [34]

    At [6] of my first judgment, I concluded:

30. [35]

    At [7], I stated that it was ‘not appropriate to assess damages against Kumar Solutions Management (the third defendant) as it does not appear to be a legal entity’. Since that date the third defendant has no longer had a role to play. Hence, the third defendant will not be mentioned again.

31. [36]

    On 9 December 2021, in Resort Living Group Pty Ltd v Strategic Advisers Group LLC [2021] NSWSC 1622 (‘the third decision’), two notices of motion were heard by Beech-Jones CJ at CL. The first was by the first and second defendants who sought that the proceedings be struck out due to lack of jurisdiction. In his honour’s ex tempore judgment, that notice of motion was dismissed, the plaintiff in its notice of motion sought that the defence be struck out for want of due dispatch and leave to apply for default judgment.

32. [37]

    His Honour concluded that “the current position appears to be that even though they [the first and second defendants] have raised a defence, the first and second defendants do not want to pursue it”. His Honour then proceeded to strike out Strategic Advisers’ and Mr Saviano’s defence and granted leave to Resort Living to apply for default judgment against them.

33. [38]

    His Honour made the following orders:

34. [39]

    UCPR r 16.2(1) reads:

35. [40]

    The plaintiff filed an affidavit in support his application for default judgment. On 3 March 2022, Registrar Jones entered default judgment as follows:

36. [41]

    It was in early April 2022, when Mr Saviano says that he found out about the default judgment. That was when Resort Living commenced enforcement action against him and Strategic Advisers in the United States.

37. [42]

    The defendants’ relied upon UCPR rules 36.15 (irregularity) and 36.16 (default judgment) to set aside the default judgment. I shall deal with them in turn.

38. [43]

    UCPR rule 36.15(1) reads as follows:

39. [44]

    Rule 36.15(1) of the UCPR contains a general power to set aside a judgment on sufficient cause being shown, including where a judgment was made “irregularly”, illegally or against “good faith”. The first and second defendants only rely upon “irregularities”. In the context of r 36.15, “irregularity” means an irregularity in the steps which resulted in the entry of the judgment itself, not the merits of the judgment or any irregularities in the anterior conduct of the proceedings (Perpetual Trustees Australia Limited v Herperu Pty Ltd (No. 2) [2009] NSWCA 387 at [16] (‘Herperu (No. 2)’). Although the Court retains a discretion about whether to exercise this power, Manhari Recycling Pty Ltd v Compass Global Holdings Pty Ltd [2021] NSWCA 252 (‘Manhari Recycling’) at [17] (Payne JA with whom Bell P and Beech-Jones CJ at CL agreed). It must be exercised judicially, and “sufficient cause will usually be demonstrated where the irregularity caused injustice, and the injustice would be alleviated by setting aside that irregular judgment” (Manhari Recycling at [17]). The defendants only relied upon the irregularity ground referred to in UCPR 36.15(1).

40. [45]

    First, the default judgment awards “unliquidated damages” against Strategic Advisers and Mr Saviano, but there is no indication that the damages claimed by Resort Living were assessed as required under r 16.7 of the UCPR. The terms of the default judgment indicate that the plaintiff was awarded liquidated damages. In this respect we note that the amount of AU$30,931,176.70 that was awarded is not properly characterised as fixed or calculable and there would otherwise appear to be no evidentiary basis to conclude that Resort Living lost the amount of AU$30,931,176.70. It’s the defendant’s submission that the plaintiff’s statement of claim does not even claim liquidated damages.

41. [46]

    Second, the default judgment wrongly duplicates the liability of Strategic Advisers and Mr Saviano. Even if the statement of claim revealed a cause of action against Mr Saviano (which is discussed further below) Resort Living’s claim is for AU$30,931,176.70 as against these defendants on a joint and several basis. The default judgment awards the plaintiff AU$30,931,176.70 against both Strategic Advisers and Mr Saviano.

42. [47]

    Third, and relatedly, a judgment will be irregular when it has been entered for more than is due (HR Turner & Son Ltd v Rhodes [1970] 1 NSWR 305; Workers’ Compensation Nominal Insurer v Roland Building Services [2008] NSWSC 13). There is no explanation or rationale for why the award of damages is equal to 100% of the amount that was anticipated Resort Living would borrow from a third-party lender. This irregularity is particularly striking because even according to its own statement of claim, Resort Living would have been required to repay that amount within 12 months. The damages awarded by the default judgment therefore place Resort Living in a substantially better position than it would have been in had the Agreement been performed. Effectively, via the default judgment, Resort Living has been able to transform a €20 million loan repayable in 12 months into €20 million.

43. [48]

    In addition to an irregularity, there must be “sufficient cause” to set aside the relevant judgment. It will generally not be appropriate to set aside a judgment or order if the irregularity is inconsequential, including when an irregularity has been waived or condoned or relates to a matter that was not identified as an issue in the proceedings: see Heperu (No. 2); Avery v Saree Holdings Ltd [2012] NSWSC 463.

44. [49]

    Conversely, “sufficient cause” is likely to be held to exist where (i) there is no relevant allegation against a particular defendant, (ii) the basis of the claim is inconsistent with material evidence or, (iii) the claim is contradicted by unchallenged evidence: Manhari Recycling at [35]–[47].

45. [50]

    Insofar as Mr Saviano is concerned, he submitted that he had sufficient cause to set aside the default judgment exists because no allegation is made against him in the statement of claim and nor was he party to the agreement. Furthermore, Resort Living has not identified any basis on which its pleaded claim against Mr Saviano can be maintained. The default judgment therefore results in substantial injustice as against Mr Saviano that would be alleviated if set aside.

46. [51]

    Insofar as Strategic Advisers is concerned, it is submitted that Resort Living’s claim against it for breach of contract (which is denied) is inconsistent with the express terms of the agreement and otherwise results in a €20 million windfall for Resort Living when this Court has not assessed Resort Living’s losses. No consideration appears to have been given to the fact that (as Resort Living conceded) this amount was repayable to the third-party lender who was neither Strategic Advisers nor Mr Saviano. The injustice that would result as against Strategic Advisers if the default judgement were not set aside is therefore readily apparent.

47. [52]

    The plaintiff has alleged fraud, breach of contract and liquidated damages against the defendants.

48. [53]

    The plaintiff says that the decisions of Manhari Recycling and the decision of Pham v Gall (2020) NSWCA 116 (‘Pham’) do not apply because in each of those cases there was no fraudulent acts/conduct on the part of the parties seeking to set aside the judgment against them.

49. [54]

    Conversely, the defendants’ motion to set aside a regular judgment has been lawfully obtained. It was the defendants who have sought to perpetrate a fraud upon the plaintiff.

50. [55]

    In simple terms, this case is solely about a contract between two parties, where the first and second defendants failed to deliver on their contractual promise, and by seeking to perpetrate fraudulent documents upon the plaintiff, they collectively sought to cheat and defraud the plaintiff of both moneys paid, and moneys to be delivered.

Resolution

1. [56]

   First, the statement of claim seeks liquidated damages in the sum of AUD $30,929,914.00 (as reproduced earlier in this judgment).

2. [57]

   In the statement of claim, Strategic Advisers Group LLC was named as first defendant and Sebastian Saviano was named as second defendant. It was pleaded at [5]:

3. [58]

   The pleading in the statement of claim pleads an allegation of fraudulent representations made between the first and second defendants. In any event, the first and second defendant’s defence is identical in relation to both the first and second defendants. Second, the second defendant has admitted that he is the director of the first defendant. It follows that he is a director and is liable for the actions of the second defendant and that there are causes of action pleaded against him.

4. [59]

   Third, in relation to the rationale for why the award of damages is equal to 100% of the amount that Resort Living would borrow from a third party, it may have been because that is what it was expected to receive had the defendants fulfilled the terms of the contract. There was no defence putting this in issue, nor was there any pleading raised that required the loan to be repaid in 12 months. Had a defence been filed alleging the matters, the result may well have been different.

5. [60]

   The defendants have to show sufficient cause in order to have the judgment set aside on the ground of “irregularity”. The defendant did not file a defence within 28 days of being served with the statement of claim, nor did they seek legal advice until judgment had been entered against them. The first and second defendants repeatedly wilfully ignored the earlier decisions made by the Court. On 3 November 2022, I stated: While the first and second defendants did not appear at the hearings on 6 September 2021 and 24 September 2021 despite being notified of the orders, on 3 November 2021, I stated that in order to achieve justice and to afford the defendants procedural fairness, they should be given one last chance to argue their defences in court. To give them the chance to do so, the plaintiff is to send a copy of this judgment to the first and second defendants and if they do not appear and litigate their defence, save exceptional circumstances, I will strike out their defence and enter judgment against them. I would also assess damages against the third defendant on this date.

6. [61]

   As already mentioned, the next day on 4 November 2022, the defendants filed a reply, which I described as an “Amended Defence”. In the “Reply”, Strategic Advisers and Mr Saviano maintained their position in relation to the Court’s jurisdiction and provided some additional context around the claims being made by Resort Living.

7. [62]

   At the hearing on 16 November 2022 (‘my second decision’), once again the defendants did not appear. Nevertheless, I determined that the “Reply” raised triable issues. I ordered that the first and second defendants were to file an amended defence by 30 November 2021 and stood the plaintiff’s notice of motion to strike out first and second defence and the defendant’s notice of motion seeking dismissal of the statement of claim over to 2 December 2021. I ordered that the Court was to forward a copy of the judgment of the parties by email. No affidavits were filed by the first and second defendants in compliance with my earlier order.

8. [63]

   On 9 December 2021, Beech-Jones CJ at CL stated in his ex tempore judgment at [11]:

9. [64]

   His honour dismissed the defendant’s notice of motion and struck out the document entitled “Reply”.

10. [65]

    It is my view the first and second defendants wilfully disregarded court orders and failed to appear at Court on 24 September 2021 and 3 November 2021. On 3 November 2021, I specifically warned them that if they did not appear to litigate their defence, save exceptional circumstances, I would strike out their defence and enter judgment against them, but they still did not respond. The defendants were also aware of the hearing on 16 November 2022, but did not appear.

11. [66]

    It was only when the second defendant became aware that judgment had been entered against both him and the first defendant and despite the earlier court orders, that they actually took action to set aside the judgment. Next under the heading ‘Set aside default judgment’, I have referred to whether the defence is bona fide. I decided that it is not and specifically refer to paragraphs [86]-[88] of this judgment. I also refer to this history of default judgments and the defendant’s unsatisfactory explanation for delay.

12. [67]

    In these circumstances, I am of the view that the first and second defendants have not demonstrated “sufficient cause”. The first and second defendant’s application pursuant to UCPR 36.15 fails.

Setting aside a default judgment

1. [68]

   UCPR r 36.16 reads:

2. [69]

   The principles for setting aside a default judgment are well settled. In J & M McNamee Holdings Pty Ltd v Mungerie Vale Pty Ltd (t/as Greenwood Group Realtors) [2019] NSWCA 283 (‘J & M McNamee’) Gleeson JA (Brereton JA and Simpson AJA agreeing) summarised all of the matters that a Court should have regard to in exercising its discretion on the question of whether or not to set aside a default judgment at [48] to [52]:

3. [70]

   The first and second defendants submitted that they have provided a satisfactory explanation for failing to properly defend the proceedings in that their default was brought about by extenuating circumstances that rendered Mr Saviano incapable of managing his personal and professional affairs at the time.

4. [71]

   The first and second defendant’s explanation for delay was provided by Mr Saviano. Their explanation for delay is as follows. First, Strategic Advisers was involved in acrimonious legal proceedings in Florida, USA, in which Strategic Advisers was the plaintiff and which resulted in death threats against Mr Saviano. These proceedings impacted Mr Saviano’s mental health in a negative way and this impact was later exacerbated by the stresses imposed on the business of Strategic Advisers by the COVID-19 pandemic and the decline in Mr Saviano’s physical health.

5. [72]

   Second, the delay between the entry of the default judgment and taking steps to have the judgment set aside, and the potential prejudice to other parties arising from the delay, are minimal and readily explicable by the time required to prepare the notice of motion to set aside the default judgment. Mr Saviano first became aware of the default judgment on or around 1 April 2022. On 3 May 2022, Mr Saviano contacted the Sydney office of Quinn Emanuel seeking legal representation to challenge the default judgment. Before filing the notice of motion to set aside the default judgment, Quinn Emanuel had to review all the materials relevant to the case, obtain access to and review the court file, consider the merits of the case, and engage and brief counsel.

6. [73]

   Ultimately, the delay between the first and second defendants becoming aware of the default judgment and the filing of the notice of motion to set aside the default judgment has been a little over 3 months. The delay in having this notice of motion heard since July 2022 has been due to the need to hear a separate notice of motion filed on 12 August 2022 by Resort Living seeking security for costs against the first and second defendants. The delay has therefore not been due to any action on the part of the first and second defendants. At all relevant times the first and second defendants have agitated for this notice of motion to be heard. While this explanation for the delay between when Mr Saviano became aware of the existence of the judgment and the filing of the notice of motion to set aside default judgment is satisfactory. However, the explanation for the prior disregarding of the court’s orders has not been satisfactorily explained.

7. [74]

   This delay has not caused Resort Living or any third party any real prejudice. In contrast, the first and second defendants will suffer significant prejudice if they are not given the opportunity to defend resort living’s claim on the merits in this Court, given the substantial sum of money involved and the strength of their potential defences to the claim.

8. [75]

   I interpose here, delay is not limited here to the period of filing delay between default judgment and the notice to set aside the default judgment. The wilful disregard of the Court’s orders is also a relevant consideration. Under the heading ‘Reasons for failing to defend proceedings after 16 November 2021, Mr Saviano deposed in his affidavit affirmed 12 July 2022:

9. [76]

   It is telling that the first defendant has not provided any medical evidence to support his contentions in relation to his ill health.

10. [77]

    On 29 June 2021, Strategic Advisers and Mr Saviano filed a notice of appearance. On 30 June 2021, Strategic Advisers and Mr Saviano filed a document styled as a “Defence” and a notice of motion which challenged the Court’s jurisdiction to hear Resort Living’s claim and sought the dismissal of the statement of claim based on the existence of an arbitration clause contained in the agreement.

11. [78]

    Neither Strategic Advisors nor Mr Saviano appeared before the Court at the hearings that were held on 1 July 2021, or 6 and 24 September 2021, on the basis that Mr Saviano considered that appearing would be inconsistent with their challenge to this Court’s jurisdiction. Mr Saviano says that he did not receive the notices sent by the Court in relation to the hearings held on 20 July 2021 and 3 August 2021, so he was unable to consider whether he or Strategic Advisers should appear on those occasions, although given his views about the Court’s jurisdiction at this time it is unlikely that either he or Strategic Advisers would have appeared.

12. [79]

    Over this period, Strategic Advisers and Mr Saviano explains that he did not have Australian legal representation, and his attempts at finding Australian legal representation in or around August 2021 proved unsuccessful.

13. [80]

    In these circumstances, it is my view that the first and second defendant have ignored the court orders because they did not agree with them. This explanation is a most unsatisfactory one.

14. [81]

    I accept that in determining whether a defendant has a bona fide defence on the merits, “the court does not embark on a hearing of the full merits of the case” and “all that is necessary is for the defendant to show that the defence is asserted bona fide and that there is an arguable or triable issue” ( Dai v Zhu [2013] NSWCA 412 at [92]-[93]).

15. [82]

    The defence of Strategic Advisers and Mr Saviano in relation to this case is plainly arguable. Indeed, the strength of the defence is readily apparent and a factor that should be considered in relation to the potential for injustice in this case if the default judgment is not set aside (see Pham at [44] (Leeming JA) and [158] (McCallum JA)).

16. [83]

    Strategic Advisers and Mr Saviano have prepared a draft defence to the statement of claim. Both the defendants admit that they entered into a deed of agreement (‘the agreement’) dated 28 July 2020. The defendants also admitted the terms of the agreement that the plaintiff paid the AU€110,000 deposit. At the hearing Mr Saviano admitted that he still has the deposit.

17. [84]

    In cross-examination, Mr Saviano admitted that he still holds the deposit. In the amended defence, at 12(f), (g) and (h), the defendants plead:

18. [85]

    The defendants admit that they have not paid the money to the plaintiff under the deed of agreement but deny that they are obliged to do so. They admit being served with a notice of demand. Strategic Advisers and Mr Saviano both submitted that they have a bona fide defence to the plaintiff’s claim. I have already set these out and discussed them earlier in this judgment.

19. [86]

    At the hearing on 2 June 2023, the plaintiff relied on a letter from a law firm named Penlaw International addressed to him dated 31 January 2023 (‘Ex B’). It states:

20. [87]

    It was signed by Henry Page. In summary, Mr Page has been advised that the SWIFT dated 20 November “…is a notorious fake” and the issuing bank’s purported letter of credit, alleged by Credit Mutual, denies that it is a true document.

21. [88]

    In relation to the contents of this letter, Mr Saviano gave the following evidence at the hearing:

22. [89]

    The plaintiff denies Mr Saviano ever offered to pay the money back.

23. [90]

    These submissions are similar to those made earlier in this judgment in relation to part 36.15 (irregularity). They are as follows:

24. [91]

    First, there is no claim in contract available against Mr Saviano because he is not party to the Agreement. The statement of claim has not pleaded that Mr Saviano was a party to the agreement or any other agreement, and reveals no cause of action against Mr Saviano, and therefore cannot support a default judgment against him (Manhari Recycling at [34] (Payne JA with whom Bell P and Beech-Jones CJ at CL agreed)).

25. [92]

    Second, and in respect of Strategic Advisers who is the relevant party to the agreement, any breach of the agreement is denied. This denial is premised upon events that occurred between the execution of the agreement and around February/March 2021, including the COVID-19 pandemic and its impact on global financial markets and the business of ING, and the terms of the agreement which stipulate that: (a) neither party could hold another party accountable for failure due to uncontrollable market conditions; (b) strategic advisers was only obligated to use reasonable endeavours to complete the transaction; (c) the transaction schedule and any time schedules provided or contracted were estimates based on the information available at the time and delays were allowed if caused by market conditions and outside parties, including banks; (d) the warranty that Credit Mutuel would, upon receipt of the SBLC, make available €20 million for Resort Living’s benefit was a conditional obligation, the precondition to which was never fulfilled; and/or (e) in the event of a failure to deliver the SBLC, Strategic Advisers was only obligated to refund the deposit paid by Resort Living, which it offered to do on a number of occasions.

26. [93]

    Third, further or in the alternative to Strategic Advisers’ and Mr Saviano’s defence to the statement of claim that is based on the terms of the Agreement, strategic advisers’ draft defence pleads that the agreement was frustrated when ING confirmed it was unwilling to provide a 100% cash backed SBLC.

27. [94]

    Fourth, Strategic Advisers contends that it is not apparent that Resort Living has not suffered any loss. So even if Strategic Advisers did breach the deed of agreement (which is denied), Resort Living is not entitled to damages in the amount of AU$30,927,914, as it was only entitled to receive the €20 million under the agreement as a loan from a third party (and therefore provided pursuant to a separate agreement) and that loan was repayable after 12 months. Further and in any event, Resort Living has not provided particulars of the loss (if any) it has suffered.

28. [95]

    The plaintiff’s submissions

29. [96]

    Under the document titled ‘Private Deed of Agreement on Delivery of Standby Letter of Credit Swift MT760 and Monetisation’ dated 28 July 2020 it was agreed that:

30. [97]

    In the light of Mr Saviano’s admission that he still retains the €140,000 deposit and that the document procured in accordance with the deed of agreement, he gave a rather peculiar explanation to this Court, namely that if the document is a fake, he was the one defrauded because he was in charge of the deposit. In the circumstances, this pleading is not a bona fide defence.

31. [98]

    It is my view that the first and second defendants have not given a satisfactory explanation for delay, nor do they have a bona fide defence. In the exercise of my discretion, justice is best served if the judgment is not set aside.

32. [99]

    The first and second defendants’ application to set aside the default judgment on the basis of irregularity or on the basis of the law to set aside the default judgment fails and the first and second defendant’s notice of motion filed 15 July 2022 is dismissed.

33. [100]

    Costs are discretionary. Costs normally follow the event. The plaintiff acted for himself, so he is not entitled to costs. Also, the first and second defendants acted for themselves. In these circumstances, the appropriate order as to costs is that I make no order as to costs.

34. [101]

    It is now not necessary to deal with the plaintiff’s notice of motion. I dismiss the plaintiff’s notice of motion filed 12 August 2022. For the same reasons as above, I make no order as to costs.

    1. (1)

       The first and second defendant’s notice of motion filed 15 July 2022 is dismissed.

    2. (2)

       The plaintiff’s notice of motion dated 12 August 2022 is dismissed.

    3. (3)

       There be no order as to costs.