Background
On 18 July 2025, Justice Stewart entered default judgment against Francesco Anthony Morella for nearly AUD $3.5 million plus interest and costs. Although Morella was represented at the hearing, the judge granted default judgment due to multiple defaults in the lead-up to trial. The underlying causes of action merged into the judgment, creating res judicata.
Morella filed an application for leave to appeal on 31 July 2025, which was dismissed on 17 November 2025 for his default of appearance. Nearly ten months later, on 25 May 2026, Morella filed an interlocutory application seeking to set aside the default judgment. The application raised a critical procedural question: whether a monetary default judgment that is final in form and effect can nonetheless be revisited as an interlocutory order.
At the hearing on 25 June 2026, Morella did not press his application.
The Court’s Holding
Justice Stewart dismissed the application and ordered Morella to pay indemnity costs. The court held that under Federal Court Rules 2011, rr 39.05(a) and (c), a default judgment can only be set aside if it was either made in the absence of a party or is interlocutory. Since Morella was represented and present (through his solicitor), the first exception did not apply.
The court noted a doctrinal dispute in recent authorities about whether a default judgment in monetary sums is final or interlocutory. While one Full Court decision (Monks v Pieman Resources) suggested it is interlocutory, more recent authority (Fair Work Ombudsman v New Switch Electrical) concluded that the better view is that such judgments are final. Even if the judgment were interlocutory, the application had “very poor prospects,” being brought ten months after entry with no adequate explanation for the delay and no reasonable basis for setting it aside.
The court emphasized that applying the general rule—that judgments cannot be revisited after entry except by appeal—Morella’s only remedy would have been an appeal, which he had already pursued and lost.
Key Takeaways
- A default judgment entered against a represented party remains final in form and effect; the exception for judgments made “in the absence of a party” does not apply.
- Recent authority (Fair Work Ombudsman v New Switch Electrical, 2026) supports the view that monetary default judgments are final, not interlocutory, leaving appeal as the exclusive remedy.
- Unreasonable delay in bringing a set-aside application (10 months here), combined with poor prospects and a history of litigation defaults, justifies dismissal with indemnity costs.
- Costs of collateral applications arising from creditor’s petitions can be treated as incidental thereto and payable under Bankruptcy Act 1966 (Cth), s 109(1)(a).
Why It Matters
This decision clarifies an important gap in interlocutory doctrine: whether default judgments in monetary sums, despite being final in effect, retain an interlocutory character permitting revisitation. By endorsing the view that they are final, the court reinforces a bright-line rule that judgment debtors must pursue appeals, not collateral set-aside applications, to challenge default judgments. This prevents tactical delays and abuse of process.
The judgment also signals judicial intolerance for repetitive challenges to final judgments, particularly where the applicant has already had a full appellate opportunity and then waits months to pursue a side application without explanation. The award of indemnity costs—elevated beyond ordinary costs—serves as a deterrent against meritless litigation designed to delay insolvency proceedings.