HT Contracting v Palta[2025] QSC 55

SUPREME COURT OF QUEENSLAND

1. [1]
   Rakesh Palta is one of two guarantors upon a loan by a company, HT Contracting, to another company, 79 Grand Hotel.  The loan was not repaid.  HT Contracting filed a claim for the loan debt plus interest against Mr Palta and the other guarantor, Concast Pty Ltd.
2. [2]
   Notices of intention to defend were not filed and HT Contracting successfully applied for default judgment against each guarantor.
3. [3]
   Both guarantors applied to have the default judgment set aside.  It was set aside by consent in respect of the second guarantor Concast, but Mr Palta’s application to set it aside remains in contest.
4. [4]
   Rule 290 Uniform Civil Procedure Rules confers a discretion upon the Court to set aside a default judgment.  Where a default judgment has been obtained irregularly, as Mr Palta alleges, the Court will usually order that it be set aside,^[1] although it remains within the discretion of the Court not to do so.^[2]  Otherwise, potentially relevant considerations include:

   1. whether the defendant has given a satisfactory explanation of the failure to defend within time;
   2. whether any delay by the defendant in making the application to set aside precludes it from obtaining relief;
   3. whether the defendant has a prima facie defence on the merits.^[3]
5. [5]
   The first and third of those considerations are in issue here.  Resolution of the application therefore requires determination of these issues:

1. Was the default judgment irregularly entered?

2. Has Mr Palta given a satisfactory explanation for the failure to file a notice of intention to defend in time?

3. Does Mr Palta have a prima facie defence on the merits?

Was the default judgment irregularly entered?

Why is it alleged the judgment was irregularly entered?

6. [6]
   Mr Palta submits the default judgment was irregularly entered because it was made under the wrong rule.
7. [7]
   The request for default judgment was made under r 283 of the Uniform Civil Procedure Rules.  That rule is concerned with where ‘the plaintiff’s claim against the defendant in default is for a debt or liquidated demand, with or without interest’.  In contrast, r 284 applies where ‘the plaintiff’s claim against the defendant in default is for unliquidated damages’.  A consequential difference between the operation of those two rules is that default judgment under r 283 will specify the amount of the judgment, whereas a default judgment given under r 284 is conditional upon the Court making an assessment of damages owing. 
8. [8]
   Mr Palta submits the default judgement should have been made under r 284, not r 283.  He contends the claim is in the nature of a claim for unliquidated damages because it is a claim for monies allegedly due upon a contractual right of indemnity rather than a claim for a debt or a liquidated demand.  HT Contracting, on the other hand, submits that there was no irregularity because the application for default judgment was ‘for a debt’ and thus properly made under r 283.
9. [9]
   Determination of this issue requires appreciation of the nature of the parties’ agreements, the nature of the claim and the nature of the application for default judgment. 

What was agreed?

10. [10]
    In late March 2022 the borrower, 79 Grand Hotel, entered into a loan agreement with HT Contracting as lender, the agreement being described as an ‘Advance Agreement’.  At that time Mr Palta and Concast also executed the Advance Agreement and entered into separate Deeds of Guarantee and Indemnity with HT Contracting.  Each were purportedly made jointly and severally liable, along with the borrower, for the payment of the monies payable to HT Contracting under the Advance Agreement.
11. [11]
    The Advance Agreement provided for the lending on conditions of $960,000 consisting of an initial advance of $420,000 and a balance of $540,000.  The Advance Agreement provided for the payment of 18 per cent interest per annum on the amount loaned and a default interest rate of 24 per cent per annum in the event of default.  The $420,000 was allegedly due to be repaid within 60 days of the date of the first draw-down, by 31 May 2022, and the balance within nine months of the date of the first draw-down, by 3 January 2023.  No repayments were made. 
12. [12]
    In the event of 79 Grand Hotel’s default under the Advance Agreement, the agreement conferred the right upon HT Contracting to, in turn, exercise its rights under the collateral security referred to in the agreement, which security included each of the Deeds of Guarantee and Indemnity entered into by Mr Palta and by Concast.

What was the nature of the claim?

13. [13]
    HT Contracting’s claim against Mr Palta as first defendant and Concast as second defendant claimed identical relief against each of them, namely:

1. $960,000 as a debt due and owing to the plaintiff;

2. $147,043.37 interest due and owing to the plaintiff to the date of filing this claim and statement of claim;

3. Interest calculated pursuant to the Advance Agreement from the date of filing this claim and statement of claim to the date of payment;

4. Alternatively to orders 2 and 3, interest pursuant to section 58 of the Civil Proceedings Act 2011 (Qld);

5. Costs pursuant to the Advance Agreement in an amount to be assessed; and

6. Alternatively to order 5, costs on an indemnity basis.

14. [14]
    The accompanying statement of claim pleaded a number of terms of Mr Palta’s Deed of Guarantee and Indemnity, including cl 2.1(b).
15. [15]
    It was pleaded that, pursuant to cl 2.1(b) of the deed, Mr Palta ‘is liable for the due and punctual payment of all monies payable under the Advance Agreement by the Borrower (as Principal)’.  It was, in turn, pleaded Mr Palta was liable for payment of the advance of $960,000 and interest.  Particulars of the quantum owing were provided in a schedule annexed to the statement of claim.

What did the application for default judgment seek?

16. [16]
    The request for default judgment asserted a number of historical procedural matters, including that the claim for relief remained unsatisfied.  More particularly, it asserted:

The claim against the defendant is for $960,000 as a debt or liquidated demand without interest. …

The amount of interest claimed, calculated in accordance with the particulars in the statement of claim, is $561,709.28. …

The plaintiff also claims $2,625.65 costs.  …  (emphasis added)

17. [17]
    The request for default judgment particularised the relevant interest rates applied as claimed under the statement of claim and the constituent components of the costs claimed.

Was the plaintiff’s claim against Mr Palta for a ‘debt or liquidated demand’ or ‘unliquidated damages’?

18. [18]
    Whether the present default judgment was irregularly entered turns upon whether the claim for $960,000 was ‘for a debt or liquidated demand’, as r 283(1) requires.  It does not matter that interest was also claimed because r 283(1) speaks of a claim for a debt or liquidated demand ‘with or without interest’.
19. [19]
    Mr Palta submits the claim against him is in the nature of a claim for unliquidated damages ‘insofar as the Plaintiff seeks to enforce liability premised upon the right of indemnity pleaded in paragraphs 16(e) and 16(f) of the Statement of Claim’.
20. [20]
    Paragraph 16 of the statement of claim pleaded a variety of provisions within Mr Palta’s Deed of Guarantee and Indemnity, referred to hereafter as in the pleadings as the Palta Guarantee.  This included the terms of cl 2.1(b) at para 16(d), cl 2.1(c) at para 16(e) and cl 2.1(d) at para 16(f). 
21. [21]
    In summary, cl 2.1(c) provided that Mr Palta indemnified HT Contracting from and against all liabilities and costs occasioned to HT Contracting in consequence of any breach or non-observance of the Advance Agreement or Transaction Documents.  Clause 2.1(d) obliged Mr Palta, on any default or failure by the borrower to observe and perform the terms of the Advance Agreement or Transaction Documents, to pay all liabilities, loss, damages, costs and expenses sustained as a consequence by HT Contracting.
22. [22]
    However, it will be recalled the statement of claim pleads Mr Palta is liable, pursuant to cl 2.1(b) of the guarantee, for the due and punctual payment of all monies payable under the Advance Agreement.
23. [23]
    Clause 2.1(b) relevantly provided:

The Guarantor will be liable jointly and severally with each other Guarantor and the Principal for the due and punctual payment of all monies to be paid by the Principal under the Advance Agreement and Transaction Documents and for the due performance and observance by the Principal of the terms of the Advance Agreement and the Transaction Documents … .

24. [24]
    The statement of claim pleaded Mr Palta was liable under that clause as follows:

17. Pursuant to cl 2.1(b) of the Palta Guarantee, the First Defendant (as Guarantor) is liable for the due and punctual payment of all monies payable under the Advance Agreement by the Borrower (as Principal).

18. The First Defendant is liable to the Plaintiff (as Beneficiary) for the sum of $1,107,043.37 owing under the Advance Agreement, comprising:

(a) $960,000 – Advance; and

(b) $147,043.37 – interest.  (emphasis added)

25. [25]
    Thus, while the statement of claim pleaded the terms of clauses 2.1(b),(c) and (d), it was cl 2.1(b) that was expressly pleaded as making Mr Palta liable for payment of the amount due and owing under the Advance Agreement.
26. [26]
    Clause 2.1(b) thus grounds Mr Palta’s liability as alleged by the claim.  It is not an indemnity clause.  It directly attributes liability to Mr Palta for payment of the debt.  It follows the default judgment was correctly entered per r 283(1).

Has Mr Palta given a satisfactory explanation for the failure to file a notice of intention to defend in time?

27. [27]
    The chronology of major events is:

28. [28]
    As the above chronology demonstrates, the application for default judgment was filed over a year after the expiry of the time within which Mr Palta should have filed his notice of intention to defend.
29. [29]
    Mr Palta deposed that included with the bankruptcy notice served upon him by HT Contracting Pty Ltd on 28 July 2024 was a copy of the default judgment.  He deposed he had been unaware of the judgment being issued against him prior to that time.  That assertion has not been disputed by HT Contracting, which adduced no evidence of any material attempt since its service of the claim upon Mr Palta to communicate with him about his failure to respond to it, let alone any communication regarding its intention to apply for default judgment.  It follows that less than three weeks went by between Mr Palta learning of the entry of the default judgment and the filing of his application to set it aside.  This explains why it is not alleged there was relevant delay in making the present application. 
30. [30]
    Mr Palta has filed a number of affidavits in the course of his application to set aside default judgment.
31. [31]
    Mr Palta’s first affidavit, filed 16 August 2024, deposed the act of service of the claim upon him of 17 March 2023 involved the server handing him ‘a bundle of documents’.  He went on to depose:

17. I did not respond or do anything in response to the Claim, because I was verbally told by Andrew Frane and Joseph Abouchaya, director of the Second Defendant, that they would resolve the dispute.

32. [32]
    This account was enlarged upon a little in Mr Palta’s second affidavit filed 3 December 2024, in which he deposed:

14. I was told by Andrew and Joseph not to do anything in relation to the Claim, and that they would resolve the dispute.  Andrew attended my office and told me that he has been talking to Mark Williams, and everything is under control, and that I did not need to respond to anything as he was taking care of it.

33. [33]
    It follows Mr Palta’s explanation for failing to file a notice of intention to defend in time is that he was told by Andrew Frane and Joseph Abouchaya that they would resolve the dispute and, in turn, told by Andrew Frane that Mr Palta did not need to respond to anything as Mr Frane was taking care of it.
34. [34]
    In cross-examination Mr Palta asserted that he did not actually open the yellow envelope containing the bundle of documents with which he was served, nor understand that what was inside related to legal proceedings.  On his account, when he asked the server who he should contact, the server suggested he contact either Parsons Solicitors (the law firm then acting for HT Contracting) or HT Contracting.  However, Mr Palta testified he did neither of those things, thinking Mr Frane ‘would always be in touch with Mark William’ – presumably a reference to Mark Williams, the general manager and attorney of HT Contracting.  Mr Palta testified:

Then I ring Andrew, “What is [indistinct] you were telling me you are dealing with Mark about everything, you are solving everything, and now what is this?” he said “Okay, don’t worry.  Just come and meet me.  Just give me all the document and we’ll take care of it.”

35. [35]
    Later in his testimony Mr Palta elaborated, saying Mr Frane had told him in this telephone call:

Don’t worry, we are dealing with Mark, we are trying to sell a few properties, we are giving him the money.  Everything will be okay.  You don’t need worry about it.

36. [36]
    Mr Palta’s explanation for failing to file a notice of intention to defend in time suggests naivety in the level of trust he placed in Mr Frane and Mr Abouchaya.  However, such naivety is consistent with the level of naivety inherent in his explanation for entering into the Advance Agreement and Palta Guarantee and Indemnity in the first place. 
37. [37]
    That explanation, dealt with later in these reasons, makes it obvious Mr Palta was very trusting of those who enticed him into this commercial arrangement in the first place.  It is thus unremarkable he trusted their assurances that they would resolve the dispute, and believed he did not have to do anything in response to what he had been served with.  I accept that is a satisfactory explanation for Mr Palta’s failure.  

Does Mr Palta have a prima facie defence on the merits?

What must be proved at this stage?

38. [38]
    The Court’s discretion to set aside a default judgment pursuant to r 290 is unfettered by specific conditions, though of course it must be exercised judicially.^[4]  To the extent the cases suggest relevant considerations, such as whether there is a prima facie defence on the merits, it is to be appreciated the terms of such considerations are not prescriptive.^[5]  They are, in effect, aids to exercising the discretion in a principled way, having regard to the evident purpose of the discretion.^[6]  That purpose is to avoid the injustice which might be caused by judgment following automatically on default.^[7]
39. [39]
    In weighing whether there is a prima facie defence on the merits, the court is in effect checking the defence has not been raised merely as a device for the purposes of having the default judgment set aside and that there exists evidence capable of supporting what appears to be an arguable defence.^[8]  Considering the evidence for that screening purpose is different from the qualitative assessment of evidence which occurs at trial.  With the exception of not acting upon unequivocally incorrect evidence or law, the proper course is to avoid fact finding as if deciding the case at trial. 
40. [40]
    These points are important in the present case, for HT Contracting’s resistance of the application partly relied upon arguments about the reliability of Mr Palta’s evidence as it relates to his defence of unconscionable conduct.

What is the proposed unconscionable conduct defence?

41. [41]
    The proposed amended defence pleads:

27. At no time prior to entering into the Advance Agreement and Palta Guarantee did the Plaintiff take any steps to ensure that the First Defendant had sufficient understanding of the relevant documents.

28. At no time prior to entering into the Advance Agreement and Palta Guarantee did the Plaintiff make enquiries in to the First Defendant’s English language capabilities and understanding.

29. At no time prior to entering into the Advance Agreement and Palta Guarantee did the Plaintiff encourage or advise the First Defendant to seek independent legal or financial advice, with the assistance of an interpreter.

42. [42]
    Paragraph 30 of the proposed defence pleading alleges the Advance Agreement and Palta Guarantee were entered into as a result of conduct that was unconscionable contrary to ss 20 and 21 of the Australian Consumer Law because:

i. the Plaintiff applied pressure (through the Second Defendant) to the First Defendant; and/or

ii. the Plaintiff abused the superior bargaining position that the Plaintiff held as against the First Defendant.

43. [43]
    The proposed pleading alleges at para 31, in the alterative to para 30, that the Advance Agreement and Palta Guarantee were entered into in circumstances in which:

1. the Defendant was in a position of special disadvantage, including because:

i. the Defendant was from a non-English speaking background;

ii. the Defendant was not proficient in reading English;

iii. the Defendant was not advised to obtain, and did not obtain, independent advice prior to entering the Advance Agreement and Palta Guarantee with the aid of an interpreter;

2. the Plaintiff took advantage of the First Defendant’s special disadvantage as a result of the circumstances pleaded at paragraphs 27 to 29 of this defence; and

3. such conduct of the Plaintiff constituted unconscionable conduct within the meaning of the general law.

44. [44]
    The pleading does not expressly allege HT Contracting knew or ought to have known of Mr Palta’s special disadvantage but the allegation that HT Contracting ‘took advantage’ of it carries the obvious implication that HT Contracting did so knowingly.

Is there evidence of Mr Palta’s alleged position of special disadvantage?

45. [45]
    In his first affidavit Mr Palta deposed:

3. English is not my first language.  My first language is Hindi.  I would describe my level of English as ‘social’ only.  My spoken English is better than my reading and writing in English.

46. [46]
    Mr Palta’s second affidavit deposed:

2. My level of English is limited.  My spoken English is moderate, but not fluent.  My written English skills are low, I use Chat GPT to assist with writing emails.  I speak Hindi at home.

3. I run a concrete transport company.  I would describe my level of business acumen as average, and I often seek the advice of others while running this business.  I previously worked as a mortgage broker, however I struggled with this role.

47. [47]
    In his oral testimony Mr Palta gave evidence, without an interpreter, in English with an Indian accent.  He did not answer all questions asked of him responsively to the meaning of the questions.  He expressed himself less fluently and effectively than a person whose first language is English.  He acknowledged in cross-examination that the seminars and sessions he attended to gain his mortgage broking licensing requirements had been conducted in English.  While most of his customers, in the short era he was a mortgage broker, were Indian customers, he acknowledged he had some non-Indian customers who had communicated in English with him. 
48. [48]
    Mr Palta appeared to accept in cross-examination that his concrete transport company business enjoyed financial success before his present difficulties.  He accepted he had been a director or secretary of many companies, although his estimate was that it was between 20 to 30 companies, not the 123 companies which the ASIC records filed by HT Contracting suggested someone named Rakesh Palta had been involved in.  The nature of the companies and his underlying role in them was not materially explored.
49. [49]
    Mr Palta also accepted in cross-examination he had been the defendant in a Victorian case, Iceland Properties Pty Ltd v Palta^[9], in which, in connection with his investment of $2.6 million in a property, he deposed to preparing the loan agreement based on a document he had used in another transaction.  However, that says little as to his level of actual understanding.
50. [50]
    Mr Palta’s experience as a mortgage broker, and more particularly his own experience in business, probably left him with some understanding of guarantees and the obligations typically associated with them, but the depth and accuracy of that understanding is unclear.  For example, when asked whether he had learned what a guarantee was, he answered:

If I borrow money from someone, I am liable to pay them.  So that’s what a guarantee is.

 That answer did not expose even a basic understanding of what a guarantee is. 

51. [51]
    It appears that in the course of his past business dealings, particularly in respect of his own apparently successful business, Mr Palta was assisted by information and advice provided by others.  The extent to which that was independent advice, or advice by interested persons in whom he placed trust, is unclear. 
52. [52]
    The evidence of Mr Palta’s varied background in commerce and his working understanding of English might provide a basis at trial to reject his assertion of special disadvantage flowing from the limitations of his understanding of English.  However, it remains that Mr Palta has advanced evidence in support of that assertion and that evidence is not so demonstrably incorrect as to be ignored in the present exercise. 

Under what circumstances did Mr Palta enter into the Advance Agreement and Palta Guarantee?

53. [53]
    Turning to the circumstances in which he entered into the Advance Agreement and Palta Guarantee, in his first affidavit Mr Palta deposed:

5. I recall that the circumstances of signing those documents was very rushed.

6. I recall Andrew Frane saying to me, words to the effect ‘settlement has to happen ASAP on the 15^th of March otherwise we lose this property.

7. I recall that I felt a lot of stress at the time of signing.  I felt pressured to sign the documents quickly.

8. I recall that I spoke to a lawyer who I am told was named Mr Domantay.  I was directed to attend his office by Andrew Frane.  I was told by Andrew Frane that I needed to sign a document as a ‘mere formality’.  The lawyer provided me with a document that I was told to sign.  I was not given time to read the document.  I did not have an interpreter present to assist me in reading the document anyway.

9. I did not negotiate any aspect of the ‘Advance Agreement’ or the ‘Palta Guarantee’.

54. [54]
    In his second affidavit Mr Palta deposed:

4. On or about March 2022, I was introduced to an Andrew Frane by Joseph Abouchaya, and another man called Omar.  Mr Frane discussed the idea of buying the property situated at 87/89 Bourbong Street, Bundaberg in the State of Queensland (“the Property”).

1. I initially met Joseph and Omar after I went to their steel and scaffold business in Maribyrnong.

2. I met with Andrew and Omar at my office in Doncaster.  Omar introduced Andrew to me as a business partner who had experience in finding good opportunities to invest.  I believed this to be true.

5. Mr Frane represented that as part of the deal, there would not be any loan repayments for a few months and the Property would be rented out straight away.  As a result, we would receive rental income for the various parts of the Property, including the hostel, pub and shops.  It was represented by Andrew that the rental income would be sufficient to cover the loan repayments.

1. Andrew was to manage everything for the business.

2. In terms of the discussion surrounding the deal, it was represented to me by Andrew, Omar and Joseph that we needed to settle the deal as soon as possible so as to not lose the property.  I was told that we needed to rent the Property out as soon as possible and that due to this, there would not be any need to pay the loan back as the rent would cover that.  Once the operation was moving forward we discussed selling individual shops within the Property, and then the hostel/hotel.

6. During the first two weeks of March 2022, there were discussions between myself, Andrew, Dharshani Amararante and Bek Cetinkaya about the settlement terms.  The discussions largely took place via emails, and I was only copied into these.  I was told by Andrew that I didn’t need to get involved until settlement, and that he would take care of everything.  I believed this.

7. I did not view the Property, or discuss the purchase price with anyone other than Andrew.  I was not involved in any negotiations with the deal.  I trusted the representations that were made by Andrew.

8. Andrew then instructed me to attend the office of a Mr Domantay.  Andrew told me that I needed to sign some documents as a mere formality.

9. On 28 March 2022, in the afternoon, I attended Mr Domantay’s office and was told where to sign on the documents.  I was not provided with advice on the documents, nor was I told to obtain legal advice.  I was also not told what the documents were, or what they related too [sic].

10. The documents … were presented to me at Mr Domantay’s office as stated in paragraph 9 above.  I was simply told where to sign, and was not provided with any advice or explanation as to what the documents were …

12. I was not given the opportunity to negotiate any aspect of the Advance Agreement or the Palta Guarantee.

55. [55]
    In cross-examination Mr Palta testified to having met Mr Frane through Omar and Joseph Abouchaya, a director of Concast, having been told Mr Frane was good in finding property investment opportunities.  Mr Palta accepted that Mr Frane acts for a company called Oxford Capital, of which Mr Palta is a director.  He explained Mr Frane discussed the idea of buying a property at Bundaberg, testifying:

I was being told this property was in very good condition, it will be rented straight away, and the first few months’ interest would be paid off by the – it’s a prepaid, and then we don’t need to put any payment, but that will be covered from the rent.  But if in any case we can’t hold this company, we have – we will have the tenancy on this in shops and hotel because it’s perfectly located and perfectly situation, so we will not have any problem in selling them.

56. [56]
    Mr Palta deposed in cross-examination, when asked if it was true that he elected to let Mr Frane deal with the transaction:

Yeah, I thought that because I trust – I trusted them.  I thought if they are getting the best deal and they are doing the best for everyone, so that’s why I trusted him.

57. [57]
    The reasons for Mr Frane’s involvement are not clear on the present evidence but notably it was him, not Mr Palta, who emailed HT Contracting’s Mr Williams a copy of Mr Palta’s list of personal assets and liabilities and the financial records of Mr Palta’s company.
58. [58]
    Taking Mr Palta’s evidence at the highest, he was in a position of special disadvantage because, despite his past experience of commerce, the limitations in his understanding of English left him ill-equipped to appreciate the importance of obtaining truly independent advice and especially vulnerable to erroneous reliance upon the urgings of others to enter into the Advance Agreement and Palta Guarantee.  I do not say that is the only or most likely view of his evidence, but it is the view which should inform assessment of whether he has a prima facie defence of unconscionable conduct. 

Does Mr Palta have a prima facie defence of unconscionable conduct against HT Contracting?

59. [59]
    This leads to the issue of whether the evidence is capable of arguably supporting the inference that HT Contracting took advantage of Mr Palta’s special disadvantage. 
60. [60]
    The proposed defence invokes ss 20 and 21 Australian Consumer Law.  Section 20 has the effect of precluding unconscionable conduct, within the meaning of the unwritten law, in trade or commerce.  In cases of alleged unconscionability, it is the stronger party’s appreciation of the weaker party’s special disadvantage, and in turn the likelihood of its serious affects upon the weaker party’s judgment of its best interests, which makes the stronger party’s conduct, in transacting with the weaker party, exploitative or unconscientious.^[10]  Proof of liability in such cases thus requires proof that the stronger party knew or ought to have known of the weaker party’s special disadvantage.^[11] 
61. [61]
    Section 20 is not limited by the unwritten law relating to unconscionable conduct, per s 21(4), but nonetheless requires, at s 21(3)(a), that the court not have regard to any circumstances that were not reasonably foreseeable at the time of the alleged contravention.  The need for circumstances to be reasonably foreseeable works no practical difference from the above discussed requirement that the stronger party knew or ought to have known of the weaker party’s special disadvantage.
62. [62]
    It follows the pivotal issue is whether there is evidence which, if accepted, is capable of supporting the prima facie inference that HT Contracting knew or ought to have known of Mr Palta’s allegedly disadvantaged position. 
63. [63]
    HT Contracting contends the present case is like De Castro v Burtenshaw Super Pty Ltd,^[12] where I concluded at first instance that there was a complete absence of evidence to support an inference that the lender knew or ought to have known of the circumstances which supposedly made the lender’s conduct unconscionable. 
64. [64]
    I cannot reach the same conclusion here.  There are certainly facts suggesting HT Contracting did not have reason to know of Mr Palta’s special disadvantage.  For instance, it received certificates signed by Mr Domantay, the lawyer Mr Frane directed Mr Palta to attend upon to sign the transaction documents.  The pro forma content of those certificates represented Mr Domantay had advised Mr Palta on the effect of those documents.  Mr Palta’s account is to the contrary, but absent other indicators, the receipt of the certificates by HT Contracting is circumstantial evidence supporting the inference it ought not have known of Mr Palta’s special disadvantage.
65. [65]
    However, if a representative of HT Contracting actually dealt with Mr Palta then a contrary indicator arises as a matter of inference.  That inference is that Mr Palta’s limitations in his understanding of English would have been apparent in communicating with him.  That in turn supports the inference it would have been apparent those limitations left him ill-equipped to appreciate the importance of obtaining truly independent advice and especially vulnerable to erroneous reliance upon the urgings of others to enter into the Advance Agreement and Palta Guarantee.
66. [66]
    I do not say that is the only or most likely inference arising on the evidence before me, but it arises as a reasonable potential inference, taking Mr Palta’s evidence at the highest.  It may well be there exists direct evidence a representative of HT Contracting could provide about its negotiations with Mr Palta to demonstrate it is an unsustainable inference.  However, the application is notable for the paucity of such direct evidence from HT Contracting on that topic or indeed about its dealings with Mr Frane. 
67. [67]
    To remove doubt, it appears HT Contracting did engage in negotiations with Mr Palta, because a solicitor of the firm acting for it in this application deposed to having been informed by HT Contracting’s General Manager and Attorney, Mr Williams that Mr Palta ‘speaks and understands English well, and displayed this during the loan advance negotiations’.  Yet, no direct evidence was forthcoming from Mr Williams about what occurred during those negotiations.
68. [68]
    The upshot is that, taking Mr Palta’s evidence at the highest, there appears to exist a rational circumstantial inference that Mr Palta was in a position of special disadvantage and that HT Contracting knew or ought to have known of it.  It in turn follows that, on such evidence as has been adduced in the application, Mr Palta has a prima facie defence of unconscionable conduct against HT Contracting. 
69. [69]
    I reiterate, that conclusion says nothing as to the objective strength of that evidence or the inference to which it gives rise.  However, in light of that conclusion and my conclusion there has been a satisfactory explanation for failing to file a notice of intention to defend in time, this is an appropriate case in which to exercise the discretion to set the default judgment aside.

Is it appropriate to assess whether Mr Palta has other prima facie defences?

70. [70]
    Mr Palta’s proposed defence pleads three separate defences, the first of which is the defence of unconscionable conduct just dealt with.  Having considered that defence and concluded I should exercise the discretion to set the default judgment aside, the question arises whether it is appropriate for these reasons to consider the prima facie viability of Mr Palta’s second and third defences. 
71. [71]
    It is necessary to explain the character of those two defences.
72. [72]
    The second defence, a penalty defence, alleges the respective 18 per cent and 24 per cent per annum interest rates in the Advance Agreement are void as a penalty because they were not genuine pre-estimates of the damages or losses HD Contracting would incur, were not reasonably necessary to protect HD Contracting’s interests and were extravagant, exorbitant or unconscionable.  I rejected a similar such argument in De Castro v Burtenshaw Super Pty Ltd,^[13] essentially because short term loans may reasonably attract higher interest rates than long term loans.  The very character of the defence meant that weighing whether it was prima facie viable verged on being equivalent to determining the success or failure of the defence at trial.  However, a determination was necessary because it was not otherwise a case in which there were reasons to set aside the default judgment.   
73. [73]
    The third defence, an absence of equivalence defence, alleges HT Contracting failed to obtain similar and co-extensive promises and obligations from all three obligors - 79 Grand Hotel, Mr Palta and Concast - thus allowing Mr Palta to avoid and disclaim liability.  This defence fixes upon an operative difference between the content of the repayment clause, cl 6.1(c), in the Advance Agreement and the repayment clause, cl 2.1(b), in the Palta Guarantee.  Clause  6.1(c) of the Advance Agreement provided:

The Borrower must repay the Lender the Outstanding Principal [i.e. the unrepaid amount of the drawn down total], all Overdue Money and all Other Monies [i.e. all interest, fees, etc payable] in full prior to the Repayment Date.  Other than the amount to be repaid within 60 days of the Draw-down Date pursuant to clause 6.1(a)(i), the Borrower is not entitled to repay the Advance earlier than three months from the Draw-down Date.  In the event the Borrower repays the Outstanding Principal, all Overdue Money and all Other Monies after 3 months from the Draw-down Date but before the Repayment Date, the Borrower must also pay the Lender an amount equal to 1 month’s interest on the Principal Outstanding as at that date, at the Interest Rate. (emphasis added)

74. [74]
    Under cl 6.1(c), the obligation to repay everything is assumed by the borrower only, not by the guarantors.  In contrast, cl 2.1(b) of the Palta Guarantee stipulated, ‘The Guarantor will be liable jointly and severally with each other Guarantor and the Principal [i.e. the borrower] for the due and punctual payment of all monies to be paid by the Principal’.
75. [75]
    In summary, Mr Palta contends cl 2.1(b) implies as a condition precedent or interdependent condition that HT Contracting will procure from each co-obligor, namely the borrower and both guarantors, a joint and several promise extending to the due and punctual payment of all monies payable under the Advance Agreement.   It is submitted that condition was not met, the payment obligation only being imposed upon the borrower by cl 6.1(c) of the Advance Agreement, with the consequence Mr Palta is not liable to HT Contracting or entitled to disclaim liability by election.
76. [76]
    Pivotal to whether the absence of equivalence defence has at least a prima facie foundation is the vexed question of whether a court would be prepared to imply the afore-mentioned condition in the face of Mr Palta deciding to enter into the Palta Guarantee without it.  In short, the determination of whether such a defence has a prima facie foundation will almost inevitably require decision making of a kind verging on equivalence to determining the success or failure of the defence at trial. 
77. [77]
    The character of both defences therefore means that my articulated consideration of whether they are prima facie arguable would be tantamount to an advisory to the parties about the viability of each defence at trial. 
78. [78]
    I am conscious of the general desirability of deciding all material arguments advanced at a hearing lest reversal of one such decision on appeal leaves the matter unresolved for want of a decision on an alternative or additional argument below.  However, it is important to bear two related considerations in mind. 
79. [79]
    Firstly, the present decision is whether to exercise a discretion to set aside the default judgment.  In weighing the exercise of that discretion, the issue of whether there is a prima facie defence is not the only consideration.  
80. [80]
    Secondly, there is the mixed consideration of the character of the two other defences and the fact that I have decided to exercise my discretion to set aside the default judgment regardless of those other two defences.   Any substantive assessment of those two defences, given their character, may have the undesirable and unnecessary effect of being seen to pre-judge substantial components of a case which I have decided should be allowed to proceed. 
81. [81]
    Those considerations lead me to conclude it is not appropriate to assess whether Mr Palta has other prima facie defences.

Conclusion

82. [82]
    The considerations that Mr Palta has given a satisfactory explanation for his failure to file a notice of intention to defend in time and that he has a prima facie defence on the merits, compel the conclusion I should exercise my discretion to set the default judgment aside.
83. [83]
    I record for completeness that I do not overlook the possibility there may be another consideration of potential relevance to the exercise of my discretion, namely that the claim remains current as against Concast, the second defendant.  It would be a concerning, if not unjust, outcome if Mr Palta was precluded from defending his claim but Concast did so successfully, particularly if via a defence which could have applied equally to Mr Palta.  That Concast may pursue a defence of potentially equal application to Mr Palta is not a fanciful prospect in that its guarantee was in the same terms as Mr Palta’s.  Further, I note its defence, filed while this judgment was reserved, lays claim to a defence of misleading and deceptive conduct associated with HT Contracting’s allegedly knowing non-disclosure of the fact the property to be purchased was subject to an enforcement notice which would preclude its use to generate income to repay the loan.  Such a defence looms as at least potentially applicable to Mr Palta, albeit that it was not foreshadowed in his proposed defence.  These are obviously speculative considerations but they illustrate the potential relevance, to the exercise of the discretion to set aside a default judgment, of the point that the same claim against a second defendant remains live.
84. [84]
    This point was not argued.  Given my conclusion that the default judgment should be set aside, it was unnecessary to invite argument on the point.  I express no concluded view about it.

Orders

85. [85]
    I have concluded the default judgment should be set aside.  It will be necessary to hear the parties as to costs, if costs are not agreed.
86. [86]
    My orders are:

1. The default judgment entered against the First Defendant is set aside.
2. The First Defendant will file and serve any Notice of Intention to Defend and Defence by no later than 4pm 9 April 2025.
3. I will hear the parties as to costs, if costs are not agreed in the meantime, at 9.15am 23 April 2025 (out of town parties having leave to appear via video link).