Federal Court of Australia

Actgall Pty Ltd (in liq) v Morella (No 2) [2026] FCA 827

ORDERS

THE COURT ORDERS THAT:

1.    The first defendant’s interlocutory application filed 25 May 2026 be dismissed.

2.    The first defendant pay the plaintiffs’ costs of the interlocutory application on an indemnity basis.

3.    The plaintiffs’ costs of the interlocutory application be treated as costs of and incidental to the creditor’s petition (ACD94/2025) and payable in accordance with s 109(1)(a) of the Bankruptcy Act 1966 (Cth).

Note:    Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

REASONS FOR JUDGMENT

(Delivered ex tempore; revised from transcript)

STEWART J:

1    On 18 July 2025, I granted default judgment against the first defendant, Mr Morella: see Actgall Pty Ltd (in liq) v Morella [2025] FCA 830. Although Mr Morella was represented that day, and therefore is regarded as having been present, I granted default judgment because of a number of defaults in the lead up to the hearing. In doing so, I was satisfied (as recorded at [47]-[54]) that on the evidence relied on by the plaintiffs, judgment should be granted in their favour.

2    The terms of the orders that I made were that judgment be entered against the defendants for various money sums amounting to nearly $3.5m, plus interest and costs. The judgment was entered on the same day. The underlying causes of action are said to have merged in the judgment, which creates a res judicata: Tomlinson v Ramsey Food Processing Pty Ltd [2015] HCA 28; 256 CLR 507 at [20]; and see also Zetta Jet Pte Ltd v The Ship “Dragon Pearl” (No 2) [2018] FCAFC 132; 265 FCR 290 at [51] per Allsop CJ, Moshinsky and Colvin JJ specifically in relation to a default judgment.

3    On 31 July 2025, Mr Morella filed an application for leave to appeal against the judgment (in proceeding ACD67/2025). That application was ultimately dismissed by Moshinsky J on 17 November 2025 under r 5.23(1) of the Federal Court Rules 2011 (Cth) on the ground that Mr Morella was in default of appearance at the hearing of the application.

4    Subsequently, on 25 May 2026, Mr Morella filed an interlocutory application in the original proceeding to set aside the default judgment. The application raises a pertinent question, being in what circumstances does this Court have the power to set aside its own judgment in the nature of the judgment in question. That ultimately turns on whether a default judgment that is final in form and effect is nevertheless to be regarded as interlocutory.

5    Rule 39.05 sets out the circumstances in which a judgment which has been entered can be varied or set aside. One of the grounds under that rule is where the judgment was interlocutory (r 39.05(c)) and another is if the judgment was made in the absence of a party (r 39.05(a)). As the default judgment made on 18 July 2025 was not made in the absence of Mr Morella, as explained, in order for it to be revisited under r 39.05 it must be an interlocutory judgment. None of the other paragraphs of r 39.05 can apply in the present circumstances. For example, it is not alleged that the default judgment was obtained by fraud (r 39.05(b)).

6    As a general rule, “a court or judge has no power to review, rehear, vary or set aside any judgment after it has been passed and entered”; any remedy against the judgment lies in an appeal: International Finance Trust Co Ltd v New South Wales Crime Commission [2009] HCA 49; 240 CLR 319 (International Finance Trust) at [129]. An exception to that general rule is if the judgment was given in the absence of a party: International Finance Trust at [130]. But, as explained, that exception does not apply in this case.

7    In a recent case concerning similar circumstances to the present, where default judgment was granted in monetary sums not in the absence of the defendant, the Full Court stated that the decision of the primary judge was interlocutory in nature such that the applicant required leave to appeal: Monks v Pieman Resources Pty Ltd [2025] FCAFC 121 at [34] (Monks). No authority or reasoning was offered for that statement, it apparently reflecting a common position between the parties.

8    Given the nature and effect of such a default judgment, as explained, there may be some question as to whether the statement by the Full Court is an accurate statement of the law. More recently, in Fair Work Ombudsman v New Switch Electrical Pty Ltd (Appeal) [2026] FCA 415 at [16]-[29], the authorities on this question were traversed in some detail and it was concluded that the better view is that a default judgment in the nature of the one in this case is to be regarded as final: see in particular at [29]. The learned judge’s attention was apparently not drawn to Monks as it is not discussed in the judgment.

9    In any event, the interlocutory application in this case to set aside the default judgment was not pressed by Mr Morella today. It was formally listed for hearing today in a case management hearing on 5 June 2026 at which Mr Morell was represented. It was also programmed for hearing today, including in relation to the serving of evidence and submissions. The application no longer being pressed, the most appropriate course is to dismiss it with costs.

10    The plaintiffs seek an order for indemnity costs in circumstances where the application was brought and ultimately not pressed, and where, as they submit, it had no prospects.

11    My assessment of the affidavit of Mr Morella filed in support of the interlocutory application on 25 May 2026 is that it had very poor prospects even if the default judgment was regarded as interlocutory. The application was brought some 10 months after the default judgment was made, that judgment having been made in his presence through (at least) his then solicitor, so he is taken to have known about it from then. There is no adequate explanation of why it was not brought earlier. It also identifies no reasonable basis on which the default judgment might be set aside.

12    The plaintiffs have been put to the trouble of responding to the application for nothing, and also in circumstances where my orders of 5 June 2026 for submissions, further evidence and hearing preparation were not complied with by Mr Morella. That follows a long history of defaults by him in the proceeding. In the circumstances, the proper costs order to do justice between the parties and as a mark of the Court’s displeasure at the pursuit of meritless litigation, is to order indemnity costs against Mr Morella. Those costs should be treated as costs of and incidental to the creditor’s petition (in proceeding ACD94/2025), which is also listed for hearing before me today. The application to set aside the default judgment was clearly an effort to stave off, or at least delay, the determination of the creditor’s petition.

13    I make the following orders:

(1)    The first defendant’s interlocutory application filed 25 May 2026 be dismissed.

(2)    The first defendant pay the plaintiffs’ costs of the interlocutory application on an indemnity basis.

(3)    The plaintiffs’ costs of the interlocutory application be treated as costs of and incidental to the creditor’s petition (proceeding ACD94/2025) and payable in accordance with s 109(1)(a) of the Bankruptcy Act 1966 (Cth).

Associate:

Dated:    26 June 2026