Background
On 5 May 2026, the Federal Court entered default judgment against Lutfi-Proctor Holdings Pty Ltd and IEM Management Pty Ltd after no defences were filed. The proceeding was then referred for an assessment of damages.
Nine weeks later, Ihab Anthony Rockwell Lutfi, the first defendant, applied under r 39.05 of the Federal Court Rules 2011 (Cth) to set aside the default judgment. He also sought a stay. Mr Lutfi was an undischarged bankrupt, disqualified from acting as a director of the second defendant, and had not been granted leave to represent the corporate defendants. The third defendant had been deregistered in March 2026.
The Court’s Holding
O’Sullivan J dismissed the application to set aside the default judgment. The material relied on by Mr Lutfi did not establish a genuinely arguable defence for the second defendant, provide a satisfactory explanation for the default, or adequately explain the delay in applying after judgment. The purported 2024 defence did not respond to the allegations against the second defendant.
The Court also found that setting aside judgment would cause prejudice not adequately remedied by costs or security, because the matter was already progressing to an assessment of damages and there was significant doubt whether the second defendant could meet a judgment or costs order. The application was an abuse of process and an unjustifiable use of judicial resources. The stay application was dismissed because there was no enforcement to stay while damages remained to be assessed.
Key Takeaways
- A party seeking to set aside default judgment must show a defence with real merit, explain the default and delay, and address prejudice to the opposing party.
- An undischarged bankrupt cannot use a corporate defendant to litigate without authority or leave to represent it.
- The second defendant was ordered to pay the plaintiff’s indemnity costs of both interlocutory applications.
Why It Matters
The decision illustrates the Federal Court’s unwillingness to reopen a corporate default judgment where the applicant lacks authority to act for the company, advances no viable pleaded defence, and delays without adequate explanation. It also confirms that a stay request may be misconceived where liability has been determined but damages are still to be assessed.