The following is purely fictitious and any similarity is coincidental.
Mr Wang is from a wealthy Chinese family. He bought some properties in Australia and made some investments after he migrated to Australia. Although he had lost some money by investing a restaurant, he has always kept a positive attitude. He always tells himself that it is common to make profit and to make loss from time to time. However, one day while he was playing video games at home, a loud bang came through the front door. When he went to open the door, a sheriff was standing there and served him a court notice, notifying him that his property will be sold according to the court notice.
Needless to say, Mr Wang was in complete shock upon hearing this news.
In reality, incidents like this are becoming more and more common. Sometimes a person may find that their savings get deducted by the bank without any reasons, or get a Bankruptcy Notice out of nowhere. The questions always are, “Why is my money gone? That was just a very minor dispute, I didn’t even go to court, how can the court possibly make such orders?”
The relevant legal procedure here is a common procedure in the common law legal system – Default Judgement. Mr Wang was the victim of a very carefully planned 5-step scam who took advantage of Mr Wang’s ignorance about the Australian legal system.
Step 1: Mr Wang bought a franchised restaurant owned by a major developer and leased a shop as recommended by them. Mr Wang assumed that the developer is trustworthy as it is a reputable and famous company. Therefore, he signed several contracts with the developer without seeking any independent legal advice. However, after Mr Wang started his business, he found that the performance of his business and the number of clients nearby were nowhere near as what the developer had promised. Unable to keep up with his bills, Mr Wang at last decided to simply close shop and abandon the business.
Step 2: The developer and the landlord then conspired to take action against Mr Wang. The landlord asked his solicitor to prepare a statement of claim and filed it to the court. After the document was filed he served it to Mr Wang. Seeing that the landlord was very polite towards him, Mr Wang thought this was probably just another reminder for rental payment. He put it aside without thinking twice about it.
Step 3: After a few months, the sheriff came to notify Mr Wang regarding the compulsory auction of his property. He was informed by the sheriff that the plaintiff applied to have Mr Wang’s property sold while he was absent from court.
Step 4: Mr Wang immediately went to the landlord to discuss about the order. The landlord then took out a prepared document for him to sign. He advised Mr Wang that the court notice will be withdrawn as long as he pays for the outstanding rent according to this document. Again, Mr Wang signed the document without seeking any legal advice. Just as he thought he was safe from any further legal troubles, he received another letter from a new landlord asking for a huge amount of future rent. Turns out, the document he signed in fact states that in addition to the amount outstanding, Mr Wang agrees to further pay all the future rent as well.
Step 5: Mr Wang finally realized that he needed to seek professional help. After reading the contract Mr Wang signed with the landlord, the solicitor told Mr Wang that the contract is full of unfair clauses. These contracts indemnify the previous landlord of all wrongdoings, in addition to Mr Wang having to pay the new landlord all future rent.
It is obvious now that the previous landlord, the new landlord and the developer have carefully fabricated an elaborate trap for Mr Wang. Then why did Mr Wang’s house get auctioned? According to Australian legislations, Mr Wang should have taken actions within 28 days after he received the statement of claim, either defending himself or appearing in court. Normally, the solicitor of the defendant would go through the content of the statement of claim and discuss with the defendant his or her options. If the solicitor thinks they have sufficient time and information, the solicitor would defend the defendant base on legal principles and evidence. If the solicitor thinks there is not sufficient time or information, he or she would apply for more time to prepare for a defence. Unfortunately, Mr Wang did not take any legal action after he received the statement of claim. Therefore, the plaintiff simply applied for a Default Judgment, which is a judgment usually in favour of a plaintiff when the defendant has not responded to a summons or has failed to appear before a court.
Mr Wang argued for his innocent based on his ignorance. But the cruel reality is that ignorance is not an acceptable excuse to the court. An alternative for Mr Wang is to go through a withdrawal procedural of the court notice. However, the withdrawal procedure is much more complicated because the court will need to consider the impact of the withdrawal on the plaintiff and the defendant. Even if the withdrawal is successful, the applicant of the withdrawal procedure will have to pay for the default judgement application fee and all the fees during the compulsory executive procedure.
Another question Mr Wang had was why did the contract signed by Mr Wang and the previous landlord cannot be cancelled if it was full of unfair clauses. The reason is there is one term in the contract signed between Mr Wang and the developer safeguarding the interests of the new landlord. The developer and the previous landlord made use of this term to dispose of their responsibilities easily. They also misled Mr Wang to sign the unfair clauses by making use of the Default Judgement. By changing the landlord, they can be completely innocent and require Mr Wang to continue to pay for the expensive rent as the new landlord is a bona fides third party.
In this case, the solicitors of Accuro Legal analyzed the legal facts and contracts carefully with the client and explained to the court the reasons for not appearing on the Court with sufficient evidence. The court finally set aside the Default Judgment. In addition, the solicitors of Accuro Legal found evidence for the client that the new landlord is actually not innocent and cannot be protected as a bona fides third party. This means that the unfair clauses in the contract should not be accepted.
We would like to remind all Chinese property owners in Australia that Australian properties are public information, which is different from China. Anyone can access to property information after paying a nominal fee. In order to avoid your property being forced-auctioned, our recommendation is to establish a trust company and put your property on trust to protect your ownership of the property. In addition, we would like to remind our clients that it is your obligation to make sure that you can receive potential summons or other legal notices. Therefore, providing valid details and postal address in your contracts is vital. If you receive any legal documents, please contact your solicitor about your strategies immediately so that you can be fully prepared for any potential litigations or out-of-court settlements. Last but not least, do not sign any legal documents without first consulting a legal representative. The law does not work in a more tolerable way simply because of your ignorance. You must be responsible for all of your own signatures.
This is written by Annette Leung and Mira Liu of Accuro Legal. If you wish to use the content of this article please credit our authors. Thank you.
This article does not constitute legal advice and should not be relied upon as such. It is intended only to provide a summary and general overview on matters of interest and it is not intended to be comprehensive. You should seek legal or other professional advice before acting or relying on any of the content.