My understanding of Aussie civil procedure law (ie., how the cases are run - which is the relevant law here, not the laws on defamation) is that it allows summary judgement if a defendant doesn't appear - or if they don't file a response to a statement of claim. There are some situations where summary judgement wont be granted, even though it has been requested, which are usually situations where the judge determines that there is an arguable case - ie., where the defendant may well be right.
Of equal relevance, there's a rule in all of the English based legal systems called forum conveniens. That rule starts with a presumption that you file and hear a case in the "defendant's court" unless there is a really strong case from the claimant that it should be held in "their" court.
Applying those two rules to this case - Thorpe should've filed in France since that is where L'Equipe is based. I can't think of any really obvious and sound reasons for him being able to claim forum conveniens - after all, he's a well travelled, well heeled guy who has a number of international dealings. France is an established country with a strong legal system and well developed defamation laws. On top of that, the majority of the people who would've read the article and "formed a lesser opinion of Thorpe" (essential elements for proving defamation) would've been in France. Therefore, to my mind, the suit should've been filed in France.
As for summary judgement - I'd be guessing it'd be unlikely to be awarded as there'd be at least some evidence that could be disputed. I make this comment based on common sense and the usual circus that we see whenever any athlete is charged with doping offences.
So, to me it sounds like Thorpe never had any intention of pursuing this suit and it was all for show - something along the lines of the same "I'll make a fuss and then find a reason to abandon the case - but you'll all still remember I made the fuss and think I'm innocent" strategy that a well known american cyclist employs quite often. BTW - this isn't to necessarily say that I think Thorpe doped - I don't know enough about him and his history to pass comment on that ...
Only other possible explanations that I can see are that he got some really bad legal advice in the first place (possible) or that the reporting in whichever rag this came from is pretty crappy and a whole heap of salient details were omitted (equally possible ...)
Here endeth the lesson on Civil Procedure 101 ...