Qi, in the matter of S&Q Group Pty Ltd (No 2)

This Federal Court decision is about an unsuccessful attempt to set aside a default judgment on a cross-claim. The Court refused the application and left the default judgment in place.

The practical lesson is procedural rather than substantive. The reasons do not fully explain the underlying commercial dispute, but they clearly explain why the Court would not reopen the judgment. The applicants did not show a compelling explanation for their defaults, and they did not show a sufficiently powerful merits case to justify disturbing a judgment that had already been entered.

For businesses, the case is a reminder that litigation can be lost through non-compliance, not just through losing at trial. Repeated missed deadlines, weak evidence explaining delay, and failure to keep company parties properly represented can have lasting consequences.

The parties in the interlocutory application were the cross-respondents, David Wei, ANC and Gongwei, and the cross-claimants, the S&Q companies. The Court's reasons identify ANC and Gongwei as entities of which Mr Wei was a director. The judgment does not fully set out the underlying commercial dispute, so the safest public reading is to focus on the procedural events that led to the application.

On 13 February 2026, Kennett J had already entered default judgment for the S&Q companies on their cross-claim against Mr Wei, ANC and Gongwei. That earlier judgment was given under rule 5.23 of the Federal Court Rules 2011, and the reasons for it were set out in an earlier decision. The present case was the follow-up application by the losing cross-respondents to have that judgment undone.

The cross-respondents filed their interlocutory process on 27 February 2026. They sought orders setting aside the default judgment, allowing them to pay the cross-claimants' costs thrown away, and granting leave to file a defence in the form annexed to their application. So the Court was not deciding the underlying cross-claim itself. It was deciding whether the judgment already entered should be reopened.

The procedural history showed a pattern of delay. The cross-claim had been filed on 5 June 2025. Time for Mr Wei and Gongwei to file defences was extended by consent on 22 August 2025. Mr Wei then received further extensions on 10 September 2025 and 2 October 2025. The final extension required a defence by 16 October 2025. That deadline was not met. The application for default judgment was then filed on 5 November 2025.

Representation was also an issue. Gongwei had solicitors on the record only between 7 August and 16 September 2025. ANC had never been represented and had not filed a notice of address for service. Neither company had sought dispensation from the usual rule requiring a corporation to be represented by a legal practitioner. At the time the default judgment application was filed and heard, neither ANC nor Gongwei was legally represented.

Mr Wei tried to explain the defaults by pointing to financial pressure, full-time study, psychological stress, family issues and problems with lawyers. He said he had some initial assistance from solicitors retained by his wife and her accounting firm, but that arrangement ended because of potential conflicts and because those parties ceased to be parties to the proceeding. He said he lacked funds to retain lawyers during 2025, was studying full time from March 2024 to October 2025, and was under significant stress. He also said he engaged solicitors in October 2025, that they filed a notice of acting on 6 November 2025, later ceased acting in January 2026, and that he retained his current solicitors on 2 February 2026, shortly before the hearing of the default judgment application.

The central issue was whether the Court should set aside the default judgment. The application relied on rule 39.04 of the Federal Court Rules 2011. Because ANC and Gongwei were technically absent when judgment was given, due to not being legally represented, rule 39.05(a) was also potentially relevant as an additional source of power.

But the Court drew an important distinction between the technical position and the real substance of what had happened. ANC and Gongwei were absent because they were not legally represented, yet they were not ignorant of the application for default judgment. Their director, Mr Wei, was also a party and was present at the hearing. He was the only witness for the cross-respondents on the setting aside application, and he did not give any separate explanation for the companies' lack of engagement. The Court therefore treated the companies' non-appearance as part of Mr Wei's inadequate engagement with the proceeding, rather than as a separate basis for relief.

That mattered because the Court considered that, to the extent there was any difference between the principles under rules 39.04(2) and 39.05(a), the former should be applied here. In other words, this was not treated as a case where absent parties innocently missed a hearing and should readily be let back in. It was treated as an application to reopen an already entered judgment in circumstances where the applicants knew what was happening and had failed to engage properly.

The Court also made clear what the application was not about. The cross-respondents did not point to any error or misconception in the original default judgment. They did not submit that the earlier procedural orders involved any lack of procedural fairness. So there was no complaint that the Court had made a mistake, overlooked a legal point, or denied them a fair process. That left them with what the judge described as a difficult task, because the discretion to vary or set aside orders is exercised sparingly, with great caution and rarely, having regard to the public interest in finality of litigation.

The Court referred to authority explaining that the power exists to cure injustice, particularly where the injustice would otherwise be irremediable. But the judge noted that the original default judgment had already been entered in the knowledge that, if not set aside, it would effectively conclude the cross-claim apart from damages. The Court also noted that the default judgment had not been premised on any view that there was no arguable defence. It had proceeded on the assumption that such a defence might exist. That point became critical when the Court later considered the merits.

Kennett J dismissed the interlocutory process and ordered the cross-respondents to pay the cross-claimants' costs of that application. The Court held that the cross-respondents had not demonstrated the kind of injustice that required the default judgment to be set aside.

The reasoning had two main parts. First, the explanation for default was not compelling. Secondly, the merits case was not put high enough to justify reopening the judgment. The Court treated both points as important. This was not a case where one strong factor overcame the weakness of the other.

On the explanation point, the Court accepted some of Mr Wei's evidence. It accepted that he had limited financial resources up to around October 2025. It also accepted that being involved in litigation as a self-represented litigant was stressful. But the Court found those matters did not go far enough. The judge inferred that Mr Wei's limited resources were at least partly a result of his decision to continue full-time study rather than seek paid work to fund litigation. The Court also noted that he was an Australian Fellow Certified Practising Accountant with over 20 years of business experience and could be assumed to have some earning capacity.

The stress evidence was also found to be thin. The Court said that self-represented litigation is stressful, but that is far from unusual. Mr Wei gave little detail about how the stress affected him. He did not say he required or received medical attention. Importantly, the Court noted that the same stress had not prevented him from commencing District Court proceedings against the cross-claimants on 8 April 2025 and maintaining them until 21 November 2025. That undermined the claim that stress explained his inability to comply in the Federal Court proceeding.

The Court then focused on timing. Even if earlier financial and personal difficulties explained some part of the delay, they did not explain the continuing failure to file a defence once solicitors began acting around October or November 2025. The reasons noted that Mr Wei's engagement with legal practitioners after October 2025 had already been mentioned in the earlier default judgment. The possibility that he had not been well served by lawyers was also noted there. But on the present application, that point was still not explored in detail or supported by evidence beyond Mr Wei's own assertions.

On the merits, the cross-respondents did not put their case any higher than saying they had an arguable defence to the cross-claim. Counsel for the cross-claimants accepted that there was an arguable defence to one aspect of the cross-claim. Even so, the Court said that was no more than a starting point in the present circumstances.

The reason was procedural and important. The original default judgment had not been based on a conclusion that there was no arguable defence. It had already been entered on the footing that an arguable defence might exist. So simply returning later and saying there was an arguable defence did not expose any injustice in the original judgment. To justify setting the judgment aside, the cross-respondents needed something more, for example a complete answer to the cross-claim that had not been brought to the Court's attention. The Court said it was unnecessary to recount the detailed evidence and submissions on the substantive defence because the case had not been put at that stronger level.

The result was that the Court found no injustice requiring cure. The application was refused with costs. The default judgment therefore remained in place.

This case is best read as a warning about litigation management. A business can believe it has a real defence and still lose procedurally if it does not comply with court orders and filing deadlines. Once default judgment is entered, the Court is not simply deciding whether the defence looks arguable. It is deciding whether there is a sufficiently strong reason to disturb the finality of an entered judgment.

The decision also shows that broad explanations often fail unless they are specific and evidenced. Financial pressure, stress, family problems and lawyer difficulties may all be genuine. But if they are relied on to excuse default, they need to be connected clearly to the missed steps, supported by detail, and explained across the whole period of non-compliance. Here, the Court accepted some of the background but still found the explanation inadequate.

Another practical point is the separate legal identity of a company. A director's personal involvement does not automatically protect a company party. If a corporation is in Federal Court proceedings, it ordinarily needs legal representation unless the Court allows otherwise. In this case, the companies' lack of representation did not operate as a separate excuse because their director knew about the proceeding and the Court treated the companies' non-appearance as part of the same overall failure to engage.

For founder-led businesses and company groups, this is a governance issue as much as a litigation issue. If one person is carrying the legal file, there needs to be a system for tracking deadlines, managing lawyers, and escalating problems before a deadline passes. Courts may grant extensions, but repeated extensions do not guarantee further indulgence. If the final deadline is missed, the consequences can be severe.

The judgment was delivered on 28 May 2026 by Kennett J in the Federal Court of Australia. It concerned an interlocutory process filed on 27 February 2026 seeking to set aside a default judgment entered on 13 February 2026.

The reasons make clear that the application failed. The Court dismissed the interlocutory process and ordered the cross-respondents to pay the cross-claimants' costs of that process as agreed or assessed.

The public lesson from the case is reliable, but the underlying commercial story remains only partly visible from these reasons. The judgment is therefore most useful as a procedural authority and practical warning about default judgments, company representation and the difficulty of reopening entered orders.