Compton v Ramsay Health Care Australia Pty Ltd; Ramsay Health Care Australia Pty Ltd v Compton

[2016] NSWSC 1331

Supreme Court

New South Wales

Medium Neutral Citation:	Compton v Ramsay Health Care Australia Pty Ltd; Ramsay Health Care Australia Pty Ltd v Compton [2016] NSWSC 1331
Hearing dates:	9 September 2016
Date of orders:	13 September 2016
Decision date:	13 September 2016
Jurisdiction:	Equity - Commercial List
Before:	McDougall J
Decision:	Plaintiff’s application under r 36.15, to set aside judgment in 2014/164906 summarily dismissed. Stay that judgment for 2 months.
Catchwords:	PRACTICE AND PROCEDURE – application for summary dismissal – plaintiff in 2016 proceedings (Compton) seeks an order that judgment in 2014 proceedings be stayed or set aside – defendant (Ramsay) applies for summary dismissal of the 2016 proceedings – where there was a hearing on the merits and judgment in favour of Ramsay in 2014 proceedings – whether interests of justice dictate that the judgment be set aside, UCPR r 36.15 – principle of finality of litigation – where there are ongoing proceedings in the Federal Court – whether judgment should be stayed pending the outcome of those proceedings – balance of competing considerations – stay granted on limited basis
Legislation Cited:	Civil Procedure Act 2005 (NSW) Corporations Act 2001 (Cth) Uniform Civil Procedure Rules 2005 (NSW)
Cases Cited:	Alexander v Ajax Insurance Co Ltd [1956] VLR 436 Burrell v The Queen (2008) 238 CLR 218 H R Turner & Son Pty Ltd v Rhodes [1970] 1 NSWR 305 Hughes v Justin [1894] 1 QB 667 Perpetual Trustees Australia Ltd v Heperu Pty Ltd (No. 2) (2009) 78 NSWLR 190
Category:	Procedural and other rulings
Parties:	2016/189647: Adrian John Compton (Plaintiff) Ramsay Health Care Australia Pty Ltd (Defendant)   2014/164906: Ramsay Health Care Australia Pty Ltd (Plaintiff) Adrian John Compton (Second defendant)
Representation:	Counsel: T Di Francesco (Compton) CRC Newlinds SC / J Hynes (Ramsay)   Solicitors: Pavuk Legal (Compton) Minter Ellison (Ramsay)
File Number(s):	2016/189647 and 2014/164906

Judgment   (ex tempore – revised 13 september 2016)

1. HIS HONOUR: On 10 March 2015, the Court entered judgment in favour of the present defendant (Ramsay) as plaintiff against the present plaintiff (Mr Compton) as defendant, in what I will call the 2014 proceedings, for an amount in excess of $9.8 million: [2015] NSWSC 163. Mr Compton seeks in these proceedings (the 2016 proceedings):

1. a stay of that judgment pursuant to s 135 of the Civil Procedure Act 2005 (NSW); and

2. an order pursuant to r 36.15 of the Uniform Civil Procedure Rules 2005 (NSW) setting aside that judgment.

2. Mr Compton has filed a notice of motion in the 2014 proceedings seeking equivalent relief. There is also a question as to whether a further defendant should be joined.

3. I am concerned today with Ramsay's application in the 2016 proceedings for an order for summary dismissal, pursuant to UCPR r 13.4, of Mr Compton’s r 36.15 claim. I am concerned also with Mr Compton's application for a stay.

Background

4. Ramsay made an agreement with a company known as Compton Fellers Pty Ltd (in liquidation) (CFPL) under which CFPL managed the acquisition of medical consumables used by Ramsay and its subsidiaries in the group's health care business. The agreement was at some stage documented in writing. However, the business relationship had been in place for some time before that written agreement was made.

5. In about November 2012, Mr Compton gave a written guarantee to Ramsay of CFPL's obligations to Ramsay under the distribution agreement.

6. The distribution agreement provided in effect for Ramsay to fund CFPL's business by prepaying for purchases and for services provided. There was a complex scheme of rebates, allowances and "true-ups". In effect, the business was conducted on a running account basis.

7. It is common ground that the business relationship came to an end in June 2013. Thereafter, Ramsay conducted some analysis of the state of the account between it and CFPL. Ramsay concluded that it was owed some millions of dollars. It sued CFPL and Mr Compton to recover the alleged debt.

8. CFPL went into liquidation. There was thus a stay of the proceedings against it by virtue of s 473B of the Corporations Act 2001 (Cth). Ramsay did not seek leave to proceed against CFPL.

9. Mr Compton defended the proceedings, but only on the basis that he did not give the guarantee on which he was sued. He did not dispute the amount of the debt that was claimed, as it was finally "proved".

10. Hammerschlag J heard the case in 2015 and gave judgment on 6 March 2015. His Honour concluded that Mr Compton had executed the guarantee in his personal capacity, thereby signifying objectively his intention to be bound by it. His Honour expressly noted at [6] that "quantum is not in dispute". That was entirely consistent with Mr Compton's Commercial List Response, which I note was filed on his behalf by a very experienced solicitor on 24 July 2014.

11. Mr Compton was represented throughout the hearing. The evidence that he served, pursuant to the Court's directions, included an affidavit of a Ms Anna Stevis, a former employee of CFPL, sworn 21 November 2014. Ms Stevis deposed that, among other things, she had performed an analysis of the balance between Ramsay and CFPL. She concluded that Ramsay's claim was overstated, and that the correct amount owing by CFPL to Ramsay was about $2.2 million.

12. That affidavit was not read. Mr Compton's solicitor in the 2016 proceedings, Ms Curci, said that Mr Compton could not afford to pay $2.2 million, and thus that from his perspective, there was no point in challenging Ramsay's evidence as to the amount of the debt.

13. Whilst I accept that those were Ms Curci's instructions, I think that there is also much force in the submission put by Mr Newlinds of Senior Counsel, who appeared with Mr Hynes of Counsel for Ramsay both in the 2014 proceedings and in the 2016 proceedings, that Mr Compton was in any event wary of calling Ms Stevis because he feared (on the basis of the documentary evidence) that her evidence would be damaging to his "non est factum" defence.

14. Ramsay had served an affidavit from its group financial controller, Mr Hirner, which replied to the affidavit of Ms Stevis. Since the affidavit of Ms Stevis was not read, Mr Hirner's affidavit was not read. However, Mr Hirner's affidavit set out, by reference to numerous documents, the proof of the amount of Ramsay's claim. He referred to another affidavit by a Mr Shoaib, dealing with "rebates" said to be owed by CFPL to Ramsay. Mr Hirner concluded, on the basis of his and Mr Shoaib's investigations, that the amount CFPL owed Ramsay was indeed the amount for which judgment was entered.

15. In those circumstances (by which I mean, the circumstances that quantum was not in dispute and the affidavit of Ms Stevis was not read), Ramsay proved the amount of its claim by a "Dobbs" certificate. The guarantee that (Hammerschlag J found) Mr Compton had signed provided for such a certificate to be prima facie evidence of the amount owed.

16. Mr Compton did not pay the amount of the judgment debt. Ramsay served a bankruptcy notice on him in respect of the judgment debt. Mr Compton did not comply. Ramsay commenced a proceeding in the Federal Court for a sequestration order. Mr Compton opposed the making of that order and sought to go behind the judgment. Flick J held that it was not open to Mr Compton to do so.

17. On appeal, the Full Court of the Federal Court held that it was open and appropriate to do so. It remitted the proceeding to a judge at first instance to undertake the exercise. That application has not been heard. Nor has the remitted proceeding been further dealt with. Ramsay has sought special leave to appeal from the decision of the Full Federal Court.

18. As part of his case in the bankruptcy proceeding, Mr Compton procured a further affidavit from Ms Stevis. As I understand it, she says that it is now her opinion, after a far more extensive analysis of the financial records, that the true position is that, if anything, Ramsay owes money to CFPL.

19. In response (in the Federal Court proceeding), Ramsay procured and served a further affidavit from Mr Hirner. Mr Hirner went through Ramsay's records and concluded that although prima facie the amount of the debt was the amount in excess of $9.8 million that had been certified and for which judgment had been given, there were invoices rendered by CFPL to Ramsay, totalling more than $3.4 million, that remained unpaid.

20. Mr Hirner said that Ramsay accepted liability for some (but not all) of those invoices. As I understand it, it would follow, from the terms of the distribution agreement, that the amount of CFPL's indebtedness to Ramsay should be reduced by the amount of the invoices that were given to Ramsay that are admitted or proved to be owing.

21. Further, and as between Ramsay and CFPL, CFPL would be entitled, on any proof of debt lodged by Ramsay, to set off the admitted or proved invoices against the amount of Ramsay's claim. See s 553C of the Corporations Act.

22. I repeat that Ramsay has not procured judgment against CFPL. Thus, CFPL is free to do as it does, and dispute the amount of the debt.

23. In the meantime, CFPL's liquidator Mr Albarran has conducted his own analysis of the state of the account. He has concluded that Ramsay owes CFPL more than $2 million. He has made demand for that sum, by letter dated 19 May 2016.

24. I do not know if Ramsay has lodged a proof of debt. If it has done so, it does not appear to have been adjudicated by Mr Albarran.

The KPMG report

25. It will be noted that, with the exception of Ms Stevis' first affidavit and Mr Hirner's first affidavit, the only evidentiary material dealing with quantum postdates the date of judgment. It is therefore of at best marginal relevance to the relief sought under r 36.15. Of course, it could be relevant in principle to the question of a stay under s 135.

26. The material as to the true state of the balance of the account on which Mr Compton relied in the 2016 proceedings is a report prepared by KPMG for Ramsay dated 23 January 2015. That report deals with a number of matters, including the flow of funds between Ramsay (identified by the acronym RHC) and CFPL (identified by the acronym MCH - a reference to its business name, Medichoice).

27. The KPMG report was addressed to Mr Fitzmaurice of Ramsay. He was the person who signed on behalf of Ramsay the Dobbs certificate by which Ramsay proved the amount of its claim against Mr Compton in the 2014 proceedings. In the absence of evidence to the contrary, I would infer, simply from the chronology, that Mr Fitzmaurice had read and considered the KPMG report before - and in all likely well before - the hearing.

28. The report was prepared for a number of purposes. They included, investigation of the movement of funds advanced by Ramsay to CFPL, and investigation of transactions that CFPL had conducted with selected entities. It is apparent that another of the purposes was to seek to determine the extent to which the flow of funds had been adequately accounted for in the various records that were made available to KPMG.

29. KPMG noted that there were information gaps within CFPL's MYOB accounting records and its other books and records. They noted, further, that there were limited documents available to support individual transactions. However, KPMG concluded that, with some significant exceptions:

[t]he source and application of funds analysis did not otherwise directly identify any material transactions that were not, on face value, in the ordinary course of business.

30. KPMG did identify a transaction between CFPL and Mr Compton "which had been inconsistently recorded in MYOB". They added that there was "a risk that other transactions have not been accurately recorded ... and/or that the descriptions on the bank statements were misleading”.

31. KPMG noted expressly that they had:

identified documents or details on MYOB files that were able to corroborate balances being claimed in the ongoing legal case for RHC against MCH and Adrian Compton....

32. KPMG reported that, following what they said was an unsuccessful mediation, Ramsay commenced the 2014 proceedings. They noted that the gross amount claimed was, in round figures, $9.88 million. However, KPMG stated, they understood "from RHC that there are offsetting balances against this total". They noted also that when the distribution agreement was terminated, "RHC took control of the majority of MCH stock in partial settlement of outstanding balances owed by MCH".

33. Frequently throughout the report, KPMG noted "numerous cases of transactions in the bank statements not being recorded in MYOB". Further, they noted, "there were transactions listed in MYOB ... that do not correspond to transactions in the bank statements". KPMG noted failure to carry out reconciliations, lack of consistency in year end cash balances, and transactions in the bank statements that had insufficient details to enable them to be properly analysed.

34. One way or another, similar comments were made throughout the report.

35. In those circumstances, KPMG concluded that the material held on CFPL's server was incomplete, and that KPMG could not verify the completeness or accuracy of the MYOB files. That, KPMG said, limited their analysis.

36. Nonetheless, having said all that, KPMG concluded that "at a high-level ... KPMG analysis did not ... identify any material transactions that were not on face value in the ordinary course of business". There were noted exceptions, but I do not need to deal with those.

37. Mr Di Francesco of Counsel, who appeared for Mr Compton in the 2016 proceedings (but not in the 2014 proceedings), drew attention to KPMG's reconciliation of the cash flows. He submitted, correctly, that the analysis showed the cash flows in and out basically balanced. The variances were very small, about $115,000 in the case of the Australian dollar accounts, and $135 in the US dollar accounts. Given that the relevant cash flows exceeded $147 million and $19 million respectively, those discrepancies (if they are discrepancies) are insignificant.

The application under r 36.15

38. It is convenient to deal with this application first. I start by setting out the rule:

36.15   General power to set aside judgment or order

(1)     A judgment or order of the court in any proceedings may, on sufficient cause being shown, be set aside by order of the court if the judgment was given or entered, or the order was made, irregularly, illegally or against good faith.

(2)     A judgment or order of the court in any proceedings may be set aside by order of the court if the parties to the proceedings consent.

39. Mr Di Francesco expressly disavowed fraud. His case, under r 36.15, was in effect that when Ramsay pressed for judgment against Mr Compton for the full amount certified by the Dobbs certificate, it acted against good faith because it then had available to it material - the KPMG report - suggesting that there may not have been anything owing.

Approach to application of r 36.15

40. The application of the rule was discussed by the Court of Appeal in Perpetual Trustees Australia Ltd v Heperu Pty Ltd (No. 2) (2009) 78 NSWLR 190. The Court (Allsop P, Campbell JA and Handley AJA, in a single judgment) said of the rule, at [16], [17]:

[16] The focus of r 36.15(1) is on the judgment or order that is attacked, and the question is whether it was “given … entered, or … made” irregularly etc. The focus is on irregularity in those steps, not on the merits of any decision, or the irregularity of other steps in the proceedings, or in the proceedings below.

[17]    The rule applies with particular force to default or consent judgments and orders, and those given or made ex parte. It can only have limited application to judgments and orders made or entered after a hearing on the merits at which all parties were represented and fully heard.

41. Their Honours indicated the practical application of those principles, to the facts before them, in the following paragraphs, [18], [19]. I set out those paragraphs:

[18]    In our judgment, the orders of this Court pronounced orally on 23 April

following the publication of reserved reasons were not “given or … made” irregularly. The irregularities relied upon occurred prior to the filing of the notice of appeal, indeed before and during the hearing of the matter at first instance.

[19] The judgment and orders entered in the system later on 23 April were not entered prematurely, and they correctly reflected those pronounced in open court and set out in the hard copies given to the parties. In our judgment they were not entered irregularly and the case is not within r 36.15(1).

42. The decision in Heperu emphasised that the rule was to be applied bearing in mind the "central and pervading tenet of the judicial system" against re-litigation of controversies that are finally settled by judicial decision (see at [32], citing Burrell v The Queen (2008) 238 CLR 218 at [15]). Thus, their Honours said in Heperu, the power conferred by the rule was one to be exercised in a way that should seek not to subvert the principle of finality.

43. The other significant matter that emerges from the judgment in Heperu is that the focus of the rule is on irregularity in the steps leading to the entry of judgment or making of the order that is impugned. It is not on the merits of the judgment or irregularities in the anterior conduct of the proceedings. Thus, as indeed the Court noted at [17], the principal application of the rule is to judgments made by consent or entered ex parte or by default.

44. Mr Di Francesco raised a separate point in relation to "irregularity". I shall return to that.

The parties' submissions

45. Mr Newlinds submitted that there had been a judgment given after a hearing on the merits. In that hearing, he noted, Mr Compton explicitly chose not to contest quantum. True it was that Ramsay had relied on a Dobbs certificate. However, by the terms of the guarantee, that was only prima facie evidence. Thus, the course taken by Ramsay did not preclude Mr Compton from challenging quantum if he wished to do so.

46. In those circumstances, Mr Newlinds submitted, there could be no want of good faith.

47. Mr Di Francesco submitted that it was relevantly in bad faith (or against good faith) for Ramsay to press for judgment knowing, as it must have known, of the contents of the KPMG report. That, he submitted, must have raised a doubt as to whether anything was owing; let alone as to whether the amount certified was owing.

48. Mr Newlinds submitted in reply that there was nothing in that report, properly read, to suggest that Ramsay was not entitled to proceed, as it had done, on the basis of Mr Hirner's affidavit.

49. The "irregularity" point raised by Mr Di Francesco was that it was irregular to enter judgment for an amount which, on the evidence, is more than was then due.

Decision

50. I start by acknowledging the proposition, too well-known to require the citation of authority, that the power to dismiss a claim summarily, without a hearing on the merits, is one to be exercised sparingly. The claim must be manifestly groundless, or doomed to fail, to justify summary dismissal.

51. That principle needs to be considered, for the purposes of this case, bearing in mind:

1. the insistent and fundamental public interest in the finality of a judicial decision; and

2. the relationship between that principle and s 56 of the Civil Procedure Act: something that can only be worked out on a case by case basis.

52. Mr Compton provided a statement of particulars of the grounds relied on under r 36.15. To some extent those particulars referred to matters that occurred after entry of judgment. As I have noted, such matters cannot be directly relevant to the analysis since by definition they were unknown at the relevant time. They could perhaps be relevant if they were seen to bear on the likelihood of something known at the time to be a possibility (for example, that the amount owing was much less than $9.8 million) in fact proving to be correct.

52. Otherwise, one way or another, the particulars revolved around the KPMG report. It is enough, to illustrate that point, to set out paras 15, 21, 24, 33 and 35:

15.   The KPMG Report to Ramsay dated 23 January 2015 (addressed to Paul Fitzmaurice (Group Executive, Corporate and Commercial Operations, Ramsay) (“the KPMG report”) reports on an analysis undertaken by KPMG (at Ramsay’s request) of all cash flows and a reconciliation of them to the bank accounts of CFPL.

…

21.   The KPMG report shows that all money received by CFPL from Ramsay of CH2, to permit the procurement of stock for Ramsay by CFPL and pay for all the costs of that procurement and as a fee for doing the procurement, or on the purchase of such stock from CFPL by CH2, save for immaterial exceptions, was used for procurement of stock that went to Ramsay or payments to Ramsay or the payment of costs and overheads of CFPL for which Ramsay was liable to reimburse CFPL as part of the quarterly true and reimbursement obligations.

…

24.   Mr Compton contends that Ramsay’s contentions as to the amount owing in February 2015 were against good faith because they so neglected the basic cash and stock position between the parties, described in the KPMG report, or, put another way, neglected the existence of offsets to be credited to CFPL because of the right of CFPL to be reimbursed its costs of carrying out the relationship with Ramsay, and Ramsay’s obligations to act fairly to Mr Compton as a guarantor, that it amounted to being against good faith to set up an unsupportable debt claim.

…

33.   At the February 2015 trial, Ramsay relied upon a dobbs certificate claiming that the amount owing by Ramsay to CFPL was $9,810,312.33 but Ramsay through those persons on Ramsay’s behalf who (i) instructed KPMG; and (ii) those persons who received the KPMG report on behalf of Ramsay (which includes at least Mr Fitzmaurice), knew, or should have known, that the amount in the dobbs certificate was not accurate and did not take into account the set offs or reimbursements to CFPL required under the contractual relations between CFPL and Ramsay, including schedule 3 of the Written Agreement.

…

35.   Given the amount of the dobbs certificate claim, it is most likely that Ramsay’s dobbs certificate did not take into account or disclose all of the offsetting balances or amounts to be applied in reduction of the dobbs certificate sum under the contractual arrangements between CFPL and Ramsay, despite Ramsay being aware of them, by having earlier instructed KPMG about them. Otherwise the preparation of the certificate simply ignored and failed to consider the position of CFPL’s expenditure, relative to the net funds that CFPL had received from Ramsay, or CH2. A debt of over $9 million would require either over $9 million in assets to be in CFPL, or to have been removed from CFPL. KPMG’s report negated any possibility of either situation and the amount certified in the dobbs certificate was not correct.

54. No doubt, the material referred to in those paragraphs was before or available to Mr Fitzmaurice when he signed the Dobbs certificate. No doubt, Mr Fitzmaurice should have been careful to ensure, so far as he could, that the certificate was correct. But he had available to him Mr Hirner's first affidavit. That affidavit (I repeat, from the group financial controller) swore to the debt that Mr Fitzmaurice certified. Why was it against good faith for Mr Fitzmaurice to rely upon that affidavit, and why was it against good fifth to put aside whatever could be gleaned from the KPMG report? It is far from obvious those questions that should be answered in favour of Mr Compton.

55. It cannot be said that the KPMG report is cast in conclusive language. The "findings" that it makes are expressly described as "provisional". They go no higher than indicating provisionally, and with the numerous gaps identified in the evidence to which the report refers, that "at a high level", material transactions appear to have been recorded and that the cash balances, in and out, appear to reconcile. They record, of course, at the same high level that there appeared to be no material discrepancies in the balance of materials.

56. Suppose all that to be correct. The real question in the 2014 proceedings was: who owed what to whom under the complex scheme for subsidies, rebates, allowances, et cetera, set out by the distribution agreement? That question was made more complex because the distribution agreement commenced at a point when the parties' trading relationship had been running for some time. In effect, the various requirements of the agreement subsumed whatever was the existing state of affairs, and balance of accounts.

57. Mr Di Francesco submitted that if the cash and asset balances were correct (as the KPMG report suggested), one party could not owe the other $9.8 million or anything like that amount. The first answer is that that I have just given: the impact of the scheme for subsidies, rebates, allowances and the like. The other answer is that if Mr Di Francesco's submission were correct, the liquidator's contention (which Mr Di Francesco supported enthusiastically), that Ramsay owed CFPL more than $2 million, must be equally incorrect.

58. Mr Di Francesco relied on KPMG's reference to "offsetting balances". It is correct that KPMG records that Ramsay had acknowledged to them the existence of such offsetting balances. But the report gives no indication of their magnitude. And in fact, the claim as certified was less, although only by about $70,000, than the gross debt reported to KPMG. I add that there is no obvious reason why Mr Fitzmaurice should have queried with Mr Hirner the amount of the offset that apparently was effected.

59. There is a wider view. It requires consideration. The question of whether something was done "against good faith" must be looked at in context. The context includes the obvious fact, known to Ramsay, that Mr Compton had put on evidence showing at best a substantial debt still owing by CFPL. Ramsay was entitled to assume that Mr Compton had had whatever opportunity he had to test quantum. If, in those circumstances, he chose not to read the affidavit going to it, and not to dispute quantum, how could it be against good faith for Ramsay to proceed on the basis of its entitlement as equally claimed and certified by its group financial controller? Again, it is not at all clear why this question should be answered in favour of Mr Compton.

60. Leaving aside fraud (as the paradigm example of a judgment recovered against good faith), the scope for r 36.15 to operate after a hearing on the merits must be very limited. As the Court of Appeal said in Heperu, the most obvious classes of case where the rule might operate are default judgments, consent judgments and ex parte judgments.

61. I should note that Mr Di Francesco submitted that there had been no hearing on the merits. He put that, because he said, Mr Compton had not contested the question of quantum. I do not agree with that submission. My reasons for not agreeing will be apparent from what I have said.

62. In this case, in my view, both the public interest in finality of litigation and the requirements of s 56 of the Civil Procedure Act dictate that the application under r 36.15 must fail, insofar as it is based on the proposition that the judgment was recovered against good faith. In my view, there is simply nothing in the material on which Mr Compton relied, as identified by his statement of particulars, that if proved could properly support the conclusion for which Mr Di Francesco argued.

63. It follows, on the question of good faith at least, that Ramsay has made good its claim for summary judgment.

64. I turn to the question of the suggested irregularity. The cases on which Mr Di Francesco relied were all cases of default judgments. The first was a decision of the Prothonotary in this Court, H R Turner & Son Pty Ltd v Rhodes [1970] 1 NSWR 305.

65. The plaintiff in that case issued a specially endorsed writ for a stated amount of money. It signed default judgment for want of appearance. The defendant sought to set aside the judgment. In the course of the hearing, it became apparent that there was an overstatement of the amount due. The Prothonotary stated at 309 that:

No creditor is entitled to recover more than is due to him. Although in this type of application, the onus is not on the plaintiff to prove that the amount for which he has signed judgment, is due to him, nevertheless when it is challenged and he takes issue thereon and puts in evidence his own documents and gives oral evidence on them and the documents and the evidence cast grave doubt that he is entitled to recover the amount for which he has signed judgment, I think I must take notice of the state of affairs disclosed. I have grave doubts that the plaintiff is entitled to a judgment for $17,259.53 and I do not think I should allow a judgment to stand, when so far as the evidence before me goes, it is for an amount of $6962.62 greater than what is due.

66. In short, the Prothonotary said, where the evidence on the application itself showed that the amount was overstated, it could not be consistent with the interests of justice to permit the judgment to stand.

67. The second case on which Mr Di Francesco relied was the decision of Sholl J in Alexander v Ajax Insurance Co Ltd [1956] VLR 437. In that case, the plaintiff sued the defendant claiming indemnity under a policy of insurance. The plaintiff signed judgment in default of appearance. Sholl J set aside the judgment. As his Honour made clear at 449, he did so because the claim was not one for a debt or liquidated demand at all, and thus was not within the rule pursuant to which the default judgment was entered. His Honour came to that view because the policy was purely an indemnity policy, not an agreed value, or as his Honour put "valued", policy. That case has nothing to do with the facts with which I am concerned.

68. The third case relied upon was the decision of the English Court of Appeal in Hughes v Justin [1894] 1 QB 667. In that case, the plaintiff issued a writ claiming an amount of money. He compromised the claim with the defendant. The amount of the compromise was paid in part. The plaintiff however procured default judgment for the full amount claimed. Hardly surprisingly, the Court of Appeal held that the judgment must be set aside. The reasons were succinctly expressed by Lopes LJ at 670. The judgment was irregular, because the plaintiff had in effect represented to the Court that there was a greater amount owing than what was due.

69. Those cases are all far removed from the present case. In each case, the outcome was obvious on the particular facts. None of those cases supports the proposition that, after a hearing on the merits, "irregularity" may be discerned for the purpose of r 36.15, and acted upon, where there is some perceived discrepancy between the plaintiff's proof of quantum and other material in the plaintiff's possession.

70. It follows that the application under r 36.15, whether based on the judgments having been obtained upon good faith or upon it being irregular must fail and as I said, that Ramsay is entitled to summary judgment.

The application for a stay

71. As I have noted, the stay is sought pursuant to s 135 of the Civil Procedure Act. That section reads as follows:

135    Directions as to enforcement

(1)    The court may, by order, give directions with respect to the enforcement of its judgments and orders.

(2)    Without limiting subsection (1), the court may make any of the following orders:

(a)    an order authorising the Sheriff to enter premises for the purpose of taking possession of goods under a writ of execution,

(b)    an order prohibiting the Sheriff from taking any further action on a writ,

(c)    an order prohibiting any other person from taking any further action, either permanently or until a specified day, to enforce a judgment or order of the court,

(d) an order requiring the Registrar-General to cancel any recording of a writ for the levy of property that, under section 105 of the Real Property Act 1900, has been made in the Register under that Act, either generally or in relation to specified land.

72. By reference to s 58(1) of the Civil Procedure Act, the discretion to stay a judgment of the Court is to be exercised in accordance with the dictates of justice, of course considered in the particular factual context in which the application to stay is brought.

73. Mr Di Francesco submitted that his client's ultimate legal liability was that amount, if anything, that CFPL was shown to owe Ramsay. On the evidence, he submitted, it could well be that the debt might turn out to be one owed by Ramsay to CFPL.

74. Mr Newlinds submitted that his client had recovered judgment after a final hearing on the merits, in which quantum was not put in issue, and that the dictates of justice did not require a stay. He submitted, further, that Mr Compton's liability under his guarantee was a liability as a principal debtor, and that Mr Compton had expressly agreed that his liability was not to be affected by any set-off or counterclaim as between Ramsay and CFPL.

75. Mr Di Francesco submitted that CFPL's statutory right of set-off under s 533B of the Corporations Act was available regardless of the guarantee. Mr Newlinds accepted that proposition. Of course, that proposition, and Mr Newlinds' acceptance of it, applies only to the position as between CFPL and Ramsay.

76. Mr Di Francesco referred to evidence in the bankruptcy proceeding in the Federal Court. That evidence showed, he submitted, that there was a real and serious question as to whether CFPL in fact owed anything to Ramsay. In those circumstances, Mr Di Francesco submitted, there should be a stay until the true amount stated of the accounts between Ramsay and CFPL was resolved one way or the other.

77. Mr Newlinds acknowledged that Ramsay could not recover more than was due. However, he submitted, it was not necessary for it to give credits that might be available to CFPL under s 533B of the Corporations Act because of the terms in which the guarantee had been given.

78. The guarantee was given by cl 3.1:

The Guarantor irrevocably and unconditionally guarantees to Ramsay:

(a)   the payment of the Guaranteed Money on time and in accordance with the Contract; and

(b)   the compliance by the Contractor of its obligations under the Contract on time and in accordance with the Contract.

79. The expression "Guaranteed Money" is defined as follows:

Guaranteed Money means all money that the Contractor is or may at any time be liable (actually, prospectively or contingently) to pay to Ramsay on any account whatever under, in relation to or arising from the Contractor’s performance, or purported performance, of its obligations under the Contract (including, without limitation, all fees, costs, charges, losses, indemnities or damages and all moneys which Ramsay becomes actually or contingently liable to pay to, for or on behalf of the Contractor either alone or jointly with any other person) and includes money which the Contractor would be liable to pay but for its insolvency.

80. The full extent of the guarantee is found in cl 4.1:

The Guarantee and Indemnity:

(a)   extends to the present and future balance of all the Guaranteed Money (including in respect of any contingent liability of the Contractor in connection with the Contract);

(b)   is not wholly or partially discharged by the payment of any Guaranteed Money, the settlement of any account or anything else; and

(c)   continues until, subject to clause 9, all Guaranteed Money has been paid in full.

81. By cl 4.3, the liability is expressed to be a principal and independent obligation. Nonetheless, in substance, the guarantee is (relevantly for present purposes) one to pay whatever CFPL owes Ramsay. That is what creates the present problem. Although the judgment fixes that liability at $9.8 million, as between Ramsay and Mr Compton, Ramsay acknowledges that the true liability could be up to $3.4 million less. If the liquidator's analysis (or for that matter the analysis in the second affidavit of Ms Stevis) be correct, the position could indeed be that Mr Compton owes nothing at all because Ramsay in fact would owe money to CFPL.

82. The situation is totally unsatisfactory. Ramsay, which should have the means of proof, is unable to come up with a figure on which it now stands (except for the amount of the judgment). And that is so, although it has had the benefit of KPMG's analysis (which I note was conducted in conjunction with Ramsay's lawyers Minter Ellison), and the benefit of its own accounting staff's repeated efforts to come up with a figure that is accurate.

83. I do not think that I can put to one side the liquidator's analysis. Although I do not doubt that he has put the claim at the best and highest, the fact is that he is an officer of the Court. I should not assume that he would put forward the result of his analysis unless he was satisfied, on reasonable grounds, that it is sustainable.

84. The other complicating factor is that Ramsay's attempted enforcement action, its attempt to bankrupt Mr Compton, is effectively bogged down in the Federal Court. I hasten to add I mean no disrespect. The present position is that a primary judge will be required to reconsider the matter unless and until the High Court, having granted special leave, hears the appeal and allows it. If the matter is to be heard by a primary judge, he or she will be required to go behind the judgment. The question will be, what is the true balance owing?

85. Ramsay points to no obvious prejudice that would flow from a stay. It has not said, for example, that Mr Compton has assets against which it would seek to enforce the judgment. Nor has it put that a stay would have any present adverse impact on its sequestration proceeding.

86. On the one hand, if Mr Compton is granted a stay, he would be rewarded for his decision not to contend quantum. On the other hand, if he does not get a stay, Ramsay would be entitled to enforce the judgment notwithstanding that, on its own evidence in the Federal Court proceeding, the judgment appears to exceed - perhaps by some millions of dollars - the true amount of its entitlement.

87. There is a further prospective nightmare. If special leave is refused, and if the Federal Court investigates the true state of the accounts, there is at least a prospect that there would be inconsistent conclusions. One would be the judgment of this Court fixing the liability at $9.8 million. The other, hypothetically, would be the judgment of the Federal Court fixing the liability at $X (and perhaps $X dollars owed to CFPL). There would in short be two decisions of superior Courts of this country holding that the "true" state of the debt was two totally different and irreconcilable amounts.

88. Even if those hypothetical inconsistent conclusions can properly coexist in the parallel universe of the law, they would be an affront to the real universe of common sense.

89. In my view, balancing the competing considerations as best I can, it cannot be said that the application for a stay is hopeless. Thus, I should proceed to deal with it, since it was argued on the merits.

90. It follows from what I have said that it seems to me that the dictates of justice dictate that a stay should be granted, but on a limited rather than a permanent basis.

91. At one point, I thought that a stay should be for no more than the amount of $3.4 million of "overlooked" invoices. But considering the evidence overall, I am far from persuaded that the position might not significantly improve, from Mr Compton's perspective. On the contrary, having regard to all the conflicts and uncertainties in the evidence, I am by no means satisfied that the true position could not end up being that CFPL owes either nothing, or very little.

92. It is undesirable that the question of the amount due should be considered in two courts. I note of course that Mr Newlinds submitted that there was neither the need nor the power to take accounts, since Mr Compton's liability to his client was fixed by the judgment of this Court. However, once the Federal Court goes behind the judgment debt, the taking of accounts is precisely what will happen.

81. In my view, the proper course is to grant a stay for a period of two months, with liberty to apply so that if circumstances change, it can be revoked, modified or extended.

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Decision last updated: 20 September 2016