Federal Court Grants Default Judgment in Unjust Enrichment Case

OUTCOME: Allowed in Part

FEDERAL COURT OF AUSTRALIA

[APPELLANT] [COMPANY] v [NAME] [2019] FCA 1268 File number: NSD 397 of 2019

Judge: [NAME] J

Date of judgment: 15 August 2019

Catchwords: PRACTICE AND PROCEDURE – application for default judgment – where respondents have not appeared before Court – originating process and statement of claim taken to be served – applicant entitled to make default application CORPORATIONS – misleading or deceptive conduct – whether first respondent contravened s 12DA of the [NAME] Commission Act 2001 (Cth) – where pleaded facts do not support pleaded representations – applicant not entitled to default judgment against first respondent CORPORATIONS – unjust enrichment – where funds were not used for the purpose that they were advanced – failure of consideration – applicant entitled to default judgment against second respondent

Legislation: [NAME] Commission Act 2001 (Cth) ss 12BAA, 12BAB, 12DA, 12GF, Bankruptcy Act 1966 (Cth) s 54C Corporations Act 2001 (Cth) s 601AB Property Law Act 1974 (Qld) s 56 Federal Court Rules 2011 rr 5.01, 5.02, 5.22, 5.23, 5.32, 8.06, 10.31, 10.32, 16.32 Uniform Civil Procedure Rules 2005 (NSW) r 14.12(1)(f)

Cases cited: [NAME] Commission v [NAME] [COMPANY] [2001] HCA 1; (2001) 204 CLR 559 [COMPANY] v [COMPANY] [2014] FCA 979 [NAME] v [NAME] Management [COMPANY] [2003] FCA 1025; (2003) 47 ACSR 285 [COMPANY] [NAME] v [NAME] (No 2) [2011] FCA 1227

Date of hearing: 16 May 2019

Registry: New South Wales

Division: General Division

National Practice Area: [NAME]-area: Economic Regulator, Competition and Access

Category: Catchwords

Number of paragraphs: 70

Counsel for the Applicant: [redacted]

Solicitor for the Applicant: [redacted]

Counsel for the Respondents: [redacted]

ORDERS NSD 397 of 2019

BETWEEN: [APPELLANT] 610 547 147) Applicant

AND: [NAME] First Respondent

[COMPANY] ([NAME]) Second Respondent

JUDGE: [NAME] J DATE OF ORDER: 15 August 2019

THE COURT ORDERS THAT:

1. Default judgment be given against the second respondent in the sum of $1,130,067.00.

2. The second respondent pay the applicant's costs of the application for default judgment against the second respondent.

3. Otherwise, the interlocutory application filed 2 May 2019 be dismissed.

4. Liberty be granted to the applicant's [APPELLANT] to approach the associate to [APPELLANT] J to have the proceeding listed for a case management hearing no later than 30 September 2019. Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

REASONS FOR JUDGMENT

[NAME] J: 1 By interlocutory application filed on 29 April 2019, the applicant ([APPELLANT[NAME]) applied for default judgment against the respondents in an amount of $1,130,067.00. 2 Rule 5.23(2)(b) of the Federal Court Rules 2011 (Rules) provides: If a respondent is in default, an applicant may apply to the Court for: ... (b) if the claim against the respondent is for a debt or liquidated damages – an order giving judgment against the respondent for: (i) the debt or liquidated damages; and (ii) if appropriate, interest and costs in a sum fixed by the Court or to be taxed; ... 3 Rule 5.23(2)(c) provides: If a respondent is in default, an applicant may apply to the Court for: ... (c) if the proceeding was started by an originating application supported by a statement of claim, or if the Court has ordered that the proceeding continue on pleadings — an order giving judgment against the respondent for the relief claimed in the statement of claim to which the Court is satisfied that the applicant is entitled. 4 By r 5.22, a party is in default if the party fails to: (a) do an act required to be done, or to do an act in the time required, by these Rules; or (b) comply with an order of the Court; or (c) attend a hearing in the proceeding; or (d) prosecute or defend the proceeding with due diligence. 5 By r 5.01, a party or the party's lawyer must attend the Court on the return date fixed in the originating application. 6 By r 5.02, a respondent who has been served with an originating application must file a notice of address for service, in accordance with Form 10, before the return date fixed in the originating application. 7 By [NAME], a respondent must file a defence, in accordance with Form 33, within 28 days after service of the statement of claim. 8 In support of the application, [APPELLANT[NAME] relied upon the affidavits of: (1) [APPELLANT], law clerk, affirmed 29 April 2019 and 15 May 2019; (2) [NAME], [NAME] [NAME] agent, sworn 29 March 2019 and 15 May 2019; and (3) [COUNSEL], solicitor, affirmed 10 April 2019. 9 Neither of the respondents appeared before the Court on [APPELLANT[NAME]'s application for default judgment.

Relevant legal principles 10 In [COMPANY] v [NAME] (No 2) [2011] FCA 1227, the Court outlined a number of principles relevant to the discretion to enter default judgment, including the following (at [20]-[25]) (citations omitted): [20] First, the power ... remains discretionary. ... Just as the discretion must be exercised [cautiously] where it is the applicant that is in default ... the same caution must be exercised where it is the applicant who is seeking orders as against a defaulting respondent. … [22] Second, the discretionary power to enter a default judgment is enlivened when (as in the present case) an applicant applies to the Court for an order. Rule 5.23(2) provides that where a respondent is in default "an applicant may apply to the Court". ... [23] Third, there is a difference in the terms in which the ambit of the power conferred by the former r 3(2)(c) ("the relief... that the applicant appears entitled to on the statement of claim") and the wording of the current r 5.23(2)(c) ("the relief claimed in the statement of claim to which the Court is satisfied that the applicant is entitled"). Notwithstanding that difference in language, the requirement imposed is not that an applicant prove by way of evidence the claim sought to be advanced; the requirement is that the Court needs to be "satisfied" on the face of the statement of claim that the applicant is entitled to the "relief" claimed. ... The facts as alleged in the statement of claim are deemed to have been admitted by a respondent. ... [24] Fourth, to be satisfied that an applicant "is entitled" to the relief claimed in the statement of claim, the Court needs to be satisfied that "each element of the relevant civil wrong involved is properly and discretely pleaded in the statement of claim". ... [25] Fifth, in addition to the facts alleged in a statement of claim, the Court may permit recourse to limited further evidence. But it may not admit evidence which would alter the case as pleaded. 11 In [COMPANY] v [COMPANY] [2014] FCA 979, I recorded out the following relevant principles at [10]-[14]: [10] The condition in rule 5.23(2)(c) of the Rules, that the Court be satisfied that the applicant is entitled to relief before judgment is entered against the respondent, does not require proof by way of evidence of the applicant's claim, although evidence may be adduced: Australian Competition and Consumer Commission v [COMPANY] (2006) 236 ALR 665, [2006] FCA 1427 at [44]; [NAME] v [COMPANY] (in liq) [2011] FCA 1129 at [9]. [11] However, the applicant must demonstrate, on the face of the statement of claim: a. a claim for relief sought; and b. that the court has jurisdiction to grant that relief. [NAME] [COMPANY] v Bose [2006] FCA 94 at [20]. [12] An applicant will appear to be entitled to the relief sought in the statement of claim if each element of the relevant civil wrong is properly and discretely pleaded: [COMPANY] v Seagle [2005] FCA 1239; (2005) 146 FCR 400 at [24]; [COMPANY] v Seagle (2008) 79 IPR 7, [2008] FCA 1417 at [20]. [13] [ADDRESS] may permit recourse to further limited evidence but cannot admit evidence that would alter the case as pleaded: [COMPANY] v [NAME] (No 2) [2011] FCA 1227 at [25] ("[NAME]"). [14] If an order for relief under rule 5.23(2)(c) is made, it gives the applicant a special privilege to gain judgment without proof of the applicant's claim – a severe disadvantage to the respondent. As a result, the rules governing default judgment are strictly construed and the discretion must be exercised cautiously: [NAME] v [NAME] [NAME] [COMPANY] [1972] VicRp 5; [1972] VR 46 at 49; [NAME] at [20].

Are the respondents in default? 12 [APPELLANT[NAME] contended that the respondents are in default of each of rr 5.01, 5.02 and 16.32. 13 Dealing with [NAME] first, in order to demonstrate default, [APPELLANT[NAME] is first required to demonstrate service of the statement of claim. 14 The statement of claim was served on the second respondent ([NAME]) on 21 March 2019, as evidenced by Ms [RESPONDENT] 29 March 2019 affidavit. 15 On 11 April 2019, I made an order pursuant to r 10.24 of the Rules, relevantly that the originating process dated 8 March 2019 (comprising the application, the statement of claim and the genuine steps statement, all filed on 15 March 2019) be served on the first respondent (Mr [RESPONDENT]) by way of an email to a specified address and by post to two postal addresses. 16 The statement of claim was served on Mr [NAME] by letters dated 12 April 2019 and by an email sent on 12 April 2019 in accordance with the 11 April 2019 order. 17 The 11 April 2019 order did not specify when the documents would be taken to be served: cf. r 10.24(c). By r 10.32, a document that is served on a person under r 10.31 is taken to be served on the person, relevantly: (a) if the document was sent by pre-paid post—on the fourth business day after the document was sent; or … (c) if the document was sent by electronic communication—on the next business day after the document was sent. 18 Rule 10.31 provides for service of a document "that is not required to be served personally". In this case, the statement of claim was not required to be served personally on Mr [NAME] by reason of the 11 April 2019 order. 19 Accordingly, the statement of claim is taken to be served on Mr [NAME] on 15 April 2019 in respect of its communication by way of email and 18 April 2019 in respect of its service by post. 20 Taking the later date (in Mr [NAME] favour), it follows that Mr [NAME] was required by [NAME] to file a defence to the statement of claim by 16 May 2019 and [NAME] was similarly required to file its defence by 18 April 2019. 21 Neither respondent has filed a defence. 22 At the time that [APPELLANT[NAME] filed its default judgment application, [NAME] was in default within the meaning of r 5.22(a) by reason of its non-compliance with [NAME]. In addition, [NAME] was in default within the meaning of r 5.22(a) and r 5.22(c) by reason of its non-compliance with r 5.01 and r 5.02 set out above because it did not attend the Court on the return date fixed in the originating application, which was 11 April 2019 and, having been served with the originating application, it did not file a notice of address for service, in accordance with Form 10, before 11 April 2019. 23 At the time that [APPELLANT[NAME] filed its default judgment application, Mr [APPELLANT] was in default within the meaning of r 5.22(c) by reason of his non-compliance with r 5.01 because of his failure to attend the return date fixed in the origination application. That non-compliance occurred in the context of [APPELLANT[NAME]'s failure to serve the originating documents prior to the return date, as required by r 8.06, which in turn occurred because of [APPELLANT[NAME]'s inability to locate Mr [APPELLANT]. Rule 5.02 has no relevant application because Mr [NAME] was not served with the originating application prior to 11 April 2019. 24 In the end, I am satisfied that [APPELLANT[NAME] was entitled to make its default judgment application pursuant to r 5.32(2) because each of the respondents was in default of r 5.22(a) and r 5.22(c) at the time that the application was made.

[APPELLANT[NAME]'s claim 25 The originating application claims the following relief, on the grounds stated in the statement of claim: (1) $1,130,067 due and payable as a debt, or alternatively in damages or in equitable damages, or in damages under s 12GF of the [NAME] Commission Act 2001 (Cth) ([NAME]). (2) Damages for economic loss under s 12GF of the [NAME]. (3) Damages for unjust enrichment. (4) Damages for monies had and received. (5) A guarantee in a form to be settled by the Court and executed by the "respondent" in favour of [APPELLANT[NAME]. (6) Interest. (7) Costs. 26 The statement of claim refers to the following relevant parties: (1) The applicant, [APPELLANT[NAME], which is alleged to be the trustee of the "[COMPANY]" (Trust) pursuant to a trust deed dated 3 February 2016, and which allegedly undertook the pleaded conduct in its capacity as trustee of the Trust. The sole director and secretary of [APPELLANT[NAME] is [NAME]. (2) The first respondent, Mr [RESPONDENT], who was allegedly a residential property investor and developer and who had an agent named [RESPONDENT]. (3) The second respondent, [NAME], a company of which Mr [RESPONDENT] was allegedly sole director, company secretary, shareholder and agent, and Mr [NAME] was an agent. (4) [NAME] [COMPANY] ([COMPANY]), another company of which Mr [NAME] was allegedly sole director, company secretary, shareholder and agent. [COMPANY] was deregistered on 23 March 2018 pursuant to s 601AB of the Corporations Act 2001 (Cth). (5) [COMPANY] ([COMPANY]), also a company of which Mr [NAME] was allegedly sole director, company secretary, shareholder and agent. [COMPANY] was deregistered voluntarily on 25 January 2017, on the application of Mr [NAME] under s 601AB. (6) Lot 49 [COMPANY] ([COMPANY]), a company of which Mr [NAME] is the sole shareholder, formerly the sole director and company secretary and the son of the current sole director and company secretary. [COMPANY] allegedly undertook and completed the subdivision and property development of [ADDRESS], Queensland (49 Pinelands development). 27 The statement of claim alleges that Mr [NAME] and Mr [NAME] made an oral agreement on 6 April 2016 to the effect that: (1) [APPELLANT[NAME] would advance funds, by way of a loan, to one or more of the companies used by Mr [NAME] as vehicles for property developments (defined as the "Loan"); (2) the security for the loan would include [NAME] giving to [APPELLANT[NAME] a personal guarantee, by which he guaranteed the repayment of funds advanced by [APPELLANT[NAME] (guarantee representation); and (3) in consideration for the loan, [APPELLANT[NAME] would receive an "agreed percentage" of the net profits made on the property developments towards which funds advanced under the loan were applied. 28 The statement of claim pleads that, at the time when the agreement was made, Mr [NAME] made the following three representations: (1) a false representation that [COMPANY] and [COMPANY] had property developments underway on the land comprising lot 133 on RP112930 (lot 33 development) and lot 57 on RP112929 (lot 57 development); (2) that funds advanced by [APPELLANT[NAME] would be used to finance these developments; and (3) that, in consideration for financing these developments, [APPELLANT[NAME] would receive a 20% share in the net profit of these developments and would be allocated a corresponding 20% shareholding in [COMPANY] and [COMPANY]. 29 It is not clear why the "agreed percentage" is not identified as 20% in the pleading of the oral agreement but, rather, as a separate representation. 30 It is alleged that the oral agreement was "reduced to a written contract" dated 14 April 2016 and titled "Acknowledgement of Terms" in the following terms, annexed to the statement of claim: On behalf of [NAME] [[COMPANY] and [NAME] [[COMPANY] (the Companies), I confirm the following terms:

1. The Companies are currently undertaking two developments at 13 - [ADDRESS] and 77 - [ADDRESS] respectively (the [COMPANY]);

2. The trustee of the [COMPANY] will invest the sum of $1,180,067.00 in the developments as follows: (a) $140,000.00 - 7 days after the date of this letter; and (b) $1,040,067.00 - 21 days after the date of this letter.

3. In return for the investment set out above, the trustee of the [COMPANY] will receive upon finalisation of [COMPANY] a 20% share of profit as set out in item 5 below;

4. The trustee of the [COMPANY] will be provided with the following security: (c) [sic] issue to the trustee of the [COMPANY] of 3 shares in each of the Companies representing a 20% interest in each of the Companies; and (d) Personal guarantee of [NAME]. Our accountant has been instructed to commence the process of issuing the shares.

5. Profit will be calculated and paid as follows: (a) As determined by the director(s) (acting reasonably on the advice of the Companies' accountant) after the final lot in the development(s) is sold, all debts relating to the developments are paid; and (b) Method of payment will be in accordance with how the Companies' accountant advises is best for the Companies (e.g. shareholder dividend or otherwise). Please accept this letter as confirmation and undertaking on behalf of the Companies of the terms agreed between us. Yours faithfully [signed] [NAME] Director of [[COMPANY] and [[COMPANY] confirm your agreement with these terms by signing below: [signed] [NAME][.] 31 I note that this document refers to "investing" funds, rather than lending, and does not refer to repayment of a loan. Nevertheless, the pleading continues with repeated references to the alleged loan of funds by [APPELLANT[NAME], apparently pursuant to the oral agreement by use of the term "Loan" referred to above. 32 It is next alleged that Mr [APPELLANT] knew that, in deciding to advance funds, [APPELLANT[NAME] (through Mr [APPELLANT]) would, and did, rely on the guarantee representation and the terms of the written contract; and that [NAME] directed [APPELLANT[NAME] to pay the advance under the Loan to the bank account of [NAME]. 33 It is then alleged that, relying on the guarantee representation and the terms of the written contract, [APPELLANT[NAME] advanced $1,180,067 "under the Loan" to [NAME] "on behalf of Mr [NAME]" by bank transfers of $140,000 on 15 April 2016 and $1,040,967 on 17 May 2016. 34 [APPELLANT[NAME] alleges that it agreed to a recommendation that property development to be financed by the "Loan" would instead be "a project a few doors down", that is, the 49 Pinelands development, rather than the lot 133 development and the lot 57 development, with the return due to [APPELLANT[NAME] to increase from 20% to 27% of net profit. 35 However, it is alleged, at no time did Mr [NAME] (or Mr [NAME], on behalf of Mr [APPELLANT] or any relevant company) inform [APPELLANT[NAME] that neither [COMPANY] nor [COMPANY] had a role in developing the 49 Pinelands development, but that the funds advanced "under the Loan" were instead "allocated by" Mr [NAME] to [COMPANY]. 36 Further, it is alleged, at no time has Mr [NAME] performed the guarantee representation by providing the applicant with a written guarantee. 37 Based on these alleged facts, the statement of claim contends that: (1) Mr [NAME] is estopped from denying there exists between him and [APPELLANT[NAME] a binding agreement in the terms of the guarantee representation. (2) In the alternative, para 4 of the written contract amounts to a "memorandum or a note of a promise" within the meaning of s 56(2) of the Property Law Act 1974 (Qld) made in writing by Mr [NAME], and in the premises is enforceable as a contract of guarantee against Mr [NAME]. 38 Next, the statement of claim pleads the following additional facts. 39 On 3 April 2018, Mr [APPELLANT] caused $50,000 to be paid to [APPELLANT[NAME] by bank transfer, in part repayment of the Loan. 40 By letter of demand to Mr [APPELLANT] dated 2 October 2018, [APPELLANT[NAME] demanded, inter alia, the repayment "under his guarantee" of the amount advanced "under the Loan". 41 Mr [APPELLANT] has not responded to [APPELLANT[NAME]'s letter of demand, and nor have [COMPANY] nor [NAME] responded to "that letter of demand". 42 Based on these alleged facts, the statement of claim contends that the amount of $1,130,067 is due and payable to the applicant by Mr [APPELLANT] as a debt "under the guarantee". 43 Further, the statement of claim contends that, by reason of Mr [APPELLANT] refusal to make payment under the guarantee, [APPELLANT[NAME] has suffered loss and [RESPONDENT] in the amount of $1,130,067, being the full amount of the loan less the part repayment already made. In support of this contention, the statement of claim states that [APPELLANT[NAME] cannot recover from [COMPANY] or [COMPANY] since they are both deregistered. 44 Next, the statement of claim pleads the following facts in support of a claim for damages under s 12GF of the [NAME]: (1) Mr [NAME] conduct pleaded in the statement of claim was conduct undertaken by him in trade or commerce. (2) The written contract was a facility through which Mr [NAME] (which I take to be a mistake, the intended reference being [APPELLANT[NAME]) made a financial investment intended to generate a financial return to Mr [NAME] and was thus both a financial product within the meaning of s 12BAA of the [NAME] and a financial service under s 12BAB(1AA) of the [NAME]. (3) Mr [NAME] conduct was misleading or deceptive or likely to mislead or deceive, in contravention of s 12DA of the [NAME] in that: (a) Mr [NAME] made the guarantee representation but did not provide the guarantee; (b) Mr [NAME] made the three representations set out at [28] above, but did not cause any shares to be allocated as required by para 4 of the written contract; (c) Mr [APPELLANT] omitted to inform [APPELLANT[NAME] that the funds advanced under the loan were "allocated away" from [COMPANY] and [COMPANY] to [COMPANY]. (d) In contravention of s 12DA of the [NAME], [NAME]: (i) aided, abetted, counselled or procured Mr [NAME] contravention at (a); (ii) was otherwise, directly or indirectly, knowingly concerned in, or party to, Mr [NAME] contravention at (a); or (iii) otherwise conspired with Mr [NAME] to contravene s 12DA of the [NAME]. (By way of particulars to this contention, [APPELLANT[NAME] refers to Mr [APPELLANT] positions as [NAME]'s director, company secretary, and shareholder, and also its agent, and contends that Mr [NAME] knowledge is to be imputed to [NAME].) (4) The conduct pleaded has caused the applicant loss and [RESPONDENT] in an amount comprising: (a) $1,130,067; and (b) further damages corresponding to the loss of a share of profits. (5) By reason of these matters and s 12GF of the [NAME], Mr [APPELLANT] and [NAME] are jointly and severally liable to the applicant for loss and [RESPONDENT]. 45 Further, the statement of claim contends that, in the circumstances, [NAME] has been unjustly enriched by the receipt of the loan or, alternatively, the loan is money had and received by [NAME] to the benefit of [APPELLANT[NAME].

Jurisdiction 46 The statement of claim includes a claim under the [NAME]. I accept that, where the Court has jurisdiction to determine a matter of a particular kind, it has accrued jurisdiction to determine the whole of the controversy: [NAME] Commission v [NAME] [COMPANY] [2001] HCA 1; (2001) 204 CLR 559.

Accordingly, I am satisfied that the Court has jurisdiction to determine the whole of the controversy the subject of the statement of claim.

Is [APPELLANT[NAME] entitled to default judgment Against Mr [APPELLANT]? 47 On the face of the statement of claim, [APPELLANT[NAME] transferred $1,180,067 to [NAME] "on behalf of Mr [NAME]" and at his direction, and in reliance on the guarantee representation and the terms of the written contract which refers to developments being undertaken by [COMPANY] and [COMPANY]. Rather than providing the loan funds to [COMPANY] and [COMPANY], Mr [NAME] caused the loan funds to be used for the development of the 49 Pinelands development, which was a project owned by [COMPANY]. 48 Ultimately, counsel for the applicant, [APPELLANT], did not rely on the claim in debt based on a guarantee given by Mr [NAME], in the absence of any written guarantee of the kind required by s 56 of the Property Law Act and the allegation that Mr [NAME] did not provide a written guarantee. 49 Further, there is no pleading of consideration to support a guarantee. In this regard, there is an alleged representation that, in consideration for financing the relevant developments, [APPELLANT[NAME] would receive a 20% share in the net profit of these developments but no reference is made to the guarantee as consideration for the advance of loan funds. 50 There is an alternative pleading that para 4 of the written contract is enforceable as a contract of guarantee against Mr [NAME]. Section 56(2) of the Property Law Act provides: (2) A promise, or memorandum or note of a promise, in writing shall not be treated as insufficient for the purpose of this section merely because the consideration for such promise does not appear in writing or by necessary inference from a written document. 51 In the written contract, the promise is to provide the trustee with the "following security … personal guarantee of [NAME]". The obligation secured, or to be secured by the guarantee is not clearly specified in the written contract. As noted above, the written contract does not refer to the sum of $1,180,067.00 as a loan, or mention its repayment. Rather, the written contract referred to a 20% share of profit as the "return for the investment".

Accordingly, I am not satisfied on the face of the statement of claim (supplemented by the written contract) that the written contract contains an enforceable guarantee by Mr [NAME] of a principal obligation owed by [COMPANY] and [COMPANY] to repay the sum of $1,180,067.00. 52 The second claim against Mr [NAME] is for damages pursuant to s 12GF of the [NAME]. 53 Section 12GF provides relevantly: (1) A person who suffers loss or [RESPONDENT] by conduct of another person that contravenes a provision of Subdivision C (sections 12CA to 12CC) or Subdivision D (sections 12DA to 12DN) may recover the amount of the loss or [RESPONDENT] by action against that other person or against any person involved in the contravention. … (1B) Despite subsection (1), if: (a) a person (the claimant ) makes a claim under subsection (1) in relation to: (i) economic loss; or (ii) [RESPONDENT] to property; caused by conduct of another person (the defendant ) that was done in contravention of section 12DA; and (b) the claimant suffered the loss or [RESPONDENT]: (i) as a result partly of the claimant's failure to take reasonable care; and (ii) as a result partly of the conduct referred to in paragraph (a); and (c) the defendant: [redacted] (ii) did not fraudulently cause the loss or [RESPONDENT]; the damages that the claimant may recover in relation to the loss or [RESPONDENT] are to be reduced to the extent to which the court thinks just and equitable having regard to the claimant's share in the responsibility for the loss or [RESPONDENT]. Note: [NAME] also applies proportionate liability to a claim for damages under this section for a contravention of section 12DA. 54 Section 12GF applies where a person who suffers loss or [RESPONDENT] by conduct of another person that contravenes, relevantly s 12DA of the [NAME]. 55 Section 12DA(1) provides that a person must not, in trade or commerce, engage in conduct in relation to financial services that is misleading or deceptive or likely to mislead or deceive. 56 Section 12BAB(1)(b) provides relevantly that a person provides a "financial service" if they deal in a financial product. 57 Section 12BAA(1)(a) provides that relevantly, subject to s 12BAA(8), a "financial product" is a facility through which, or through the acquisition of which, a person makes a financial investment. Section 12BAA(4) provides, for the purposes of s 12BAA, that a person "makes a financial investment" in certain circumstances. A note to s 12BAA(4) gives the following example of an action that constitutes making a financial investment under s 12BAA(4): (a) A person paying money to a company for the issue to the person of shares in the company (the company uses the money to generate dividends for the person and the person, as a shareholders, does not have control over the day-to-day affairs of the company). 58 Paragraph 29 of the statement of claim pleads: The Contract was a facility through which the first respondent [Mr [RESPONDENT]] made a financial investment intended to generate a financial return to the first respondent and was thus both a financial product within the meaning of section 12BAA of the [[NAME]] and a financial service under section 12BAB(1AA) of the [NAME]. 59 As noted earlier, I assume that para 29 was intended to plead that the written contract was a facility through which [APPELLANT[NAME] made a financial investment etc. This allegation is inconsistent with the earlier pleading which, on three occasions, alleges that the relevant funds were advanced "under the Loan". By r 16.06, a party must not plead inconsistent allegations of fact or inconsistent grounds of claims except as alternatives. As [APPELLANT[NAME] has not pleaded para 29 in the alternative, I do not consider that it is entitled to default judgment on the basis that the funds advanced were a financial investment within the meaning of s 12BAA, rather than a loan. 60 In any event, I do not accept that any of the three alleged contraventions of s 12DA are capable of constituting misleading or deceptive conduct on the facts pleaded. As to the first alleged contravention, the guarantee representation is a representation about a future matter. The statement of claim does not plead facts from which it could be concluded that Mr [NAME] did not have reasonable grounds for making the representation. As to the second alleged contravention, any omission by Mr [NAME] to cause the allocation of shares is not capable of being characterised as misleading or deceptive. To the extent that it is suggested that the representation to cause the allocation of shares was misleading or deceptive, the pleading is insufficient for the same reason as for the first alleged contravention. As to the third alleged contravention, the pleading is insufficient to support a finding that the alleged loss was "by" Mr [APPELLANT] omission to inform [APPELLANT[NAME] that the funds advanced under the loan were "allocated away" to [COMPANY], I am not satisfied that [APPELLANT[NAME] is entitled to default judgment against Mr [APPELLANT]. In any event, where [NAME]'s only default prior to the filing of the interlocutory notice was to fail to comply with r 5.01 in circumstances in which he had not yet been served with the originating process, I would been very reluctant to exercise the discretion in favour of default judgment against him. 62 After judgment was reserved, [APPELLANT[NAME]'s [APPELLANT] sent to the Court a Notice of Declaration of Intention to Present a Debtor's Petition (Suspension of Creditor Enforcement) issued by the Australian Financial Security Authority in respect of Mr [NAME] pursuant to s 54C of the Bankruptcy Act 1966 (Cth). [APPELLANT[NAME]'s [APPELLANT] confirmed that, if default judgment was granted, [APPELLANT[NAME] would not seek to enforce that judgment during the stay period set out in the notice. 63 [APPELLANT[NAME]'s [APPELLANT] also noted that the notice attached a summary of financial affairs of Mr [APPELLANT] which identified an unsecured liability to [APPELLANT[NAME] in the amount of $1,130,067.00. [APPELLANT[NAME] did not seek leave to re-open the application for default judgment to tender the summary of financial affairs, or suggest that this apparent admission by Mr [NAME] provided a further basis for the default judgment sought. 64 Subsequently, [APPELLANT[NAME]'s [APPELLANT] also informed the Court that, as at 1 July 2019, Mr [APPELLANT] had not presented a debtor's petition.

is [APPELLANT[NAME] entitled to default judgment against [NAME]? 65 On the facts pleaded, I accept that [NAME] has been unjustly enriched by receipt of funds from [APPELLANT[NAME]. On the oral agreement, as pleaded, the amounts were to be advanced to [COMPANY] and [COMPANY]. On the written contract, [APPELLANT[NAME] agreed to invest the funds paid to [NAME] in developments then being undertaken by [COMPANY] and [COMPANY]. [APPELLANT[NAME] subsequently agreed that its funds would be used to finance the 49 Pinelands development but on the basis that its investment was in [COMPANY] and [COMPANY]. 66 On the facts pleaded, [NAME] applied [APPELLANT[NAME]'s funds to its own use, without the consent of [APPELLANT[NAME]. Thus, [APPELLANT[NAME]'s funds were advanced to [NAME] for a consideration which failed ([NAME] v [NAME] Management [COMPANY] [2003] FCA 1025; (2003) 47 ACSR 285 at [51]) and [NAME] was unjustly enriched by the amount of the funds paid to it at [APPELLANT[NAME]'s expense. 67 I am satisfied that the following three elements of the restitutionary claim was properly and discretely pleaded, namely: (1) The enrichment of [NAME] (statement of claim para 16); (2) The enrichment was at [APPELLANT[NAME]'s expense (also statement of claim para 16); (3) The enrichment was unjust because the money paid by [APPELLANT[NAME] was for the purpose of investing in [COMPANY] and [COMPANY] but was used by [COMPANY] in relation to which [APPELLANT[NAME] had no contractual relationship (statement of claim paras 9, 10, 16, 18 and 19). 68 Accordingly, I am satisfied that [APPELLANT[NAME] is entitled to an order that [NAME] pay to [APPELLANT[NAME] the amount claimed and, consequently, to default judgment in that sum. 69 As noted above, [APPELLANT[NAME] makes an alternative claim for relief paid on "money had and received by [[NAME]] to the benefit of" [APPELLANT[NAME]. This is a "common count", permitted in New South Wales by r 14.12(1)(f) of the Uniform Civil Procedure Rules 2005 (NSW). There is no analogous rule in the Rules. I am not satisfied that [APPELLANT[NAME] is entitled to default judgment on the basis of this claim.

Conclusion 70 I will make an order giving judgment in [APPELLANT[NAME]'s favour against [NAME] in the sum of $1,130,067.00. Costs should follow the event. Otherwise, the application for default judgment will be dismissed. [APPELLANT[NAME]'s [APPELLANT] may approach my associate for a further case management hearing to be held not later than 30 September 2019. I certify that the preceding seventy (70) numbered paragraphs are a true copy of the Reasons for Judgment herein of the [NAME] [NAME].

Associate: Dated: 15 August 2019