Earlscroft University Ltd v Brown

Earlscroft University Ltd v George Brown
[2003] SADC 39
Judge Sulan
Civil

This is an application to vary an order made on the 1^st October 2002, by Judge Kelly sitting as a Master of this Court. It is necessary to set out some of the background leading up to Judge Kelly’s order and to this application.
The plaintiff, which is a company incorporated in the Republic of the Seychelles, instituted proceedings in this Court against the defendant alleging that he had defamed it. The plaintiff offered university degrees and it alleged that the defendant had defamed it in statements he had made which it alleged carried the imputations that the plaintiff was not a lawful institution, that it issued bogus and/or false degrees, that it engaged in fraudulent activity and that it operated illegally. The plaintiff sought damages for libel and injunctive relief.
On the 20^th February 2002, the defendant made application pursuant to Rule 100.01 of the District Court Rules (“the Rules”) seeking orders that the plaintiff provide security for costs. The basis of the application included an allegation that the plaintiff had no known assets within the jurisdiction of the Court. This fact was not contested.
On the 11^th April 2002, Master Norman made a consent order that the plaintiff pay into Court the sum of $23,000 as security for the defendant’s costs in the action and that payment be made within 28 days, failing which the plaintiff’s claim would be stayed.
No payment into Court was made, and on the 11^th September 2002, the defendant made a further application seeking orders that the plaintiff’s claim be struck out for want of prosecution and further, that the plaintiff and its solicitor, Mr Tom Doman, be restrained from transferring any monies placed by or on behalf of the plaintiff in Mr Doman’s trust account (in particular the $23,000 currently in this trust account) in relation to the action (save and except for in respect of Mr Doman’s legal fees) until after the payment of the defendant’s costs of the action.
This application came before Judge Kelly on the 1^st October 2002. His Honour made the following order :
“Unless the sum of $23,000 is paid into Court by way of security within 45 days, then this action do stand dismissed with an order for the costs of the action in favour of the defendant. The plaintiff’s solicitor has monies in his trust account but he cannot get instructions in relation to those monies. In the event that he does get those instructions, then the matter will proceed. In the event that he does not, then the defendant will be entitled to costs which are estimated at around about $4,000. It seems to me that it would be proper for me to make an order that the plaintiff’s solicitors retain in their trust account a sum of $4,000 pending further consideration and I will look at that question on the next occasion.”
The order that the plaintiff’s solicitors retain in their trust account the sum of $4,000 pending further consideration, is the subject of the application now before me.
Returning to the history of the proceedings. The matter came before Master Norman on the 28^th January 2003. The plaintiff conceded that consequent upon Judge Kelly’s order, the action itself now stood dismissed. Further, it was conceded that pursuant to the order, the plaintiff was now required to pay the costs of the defendant. Master Norman determined that Judge Kelly’s order requiring the plaintiff’s solicitors to retain $4,000 in their trust account was injunctive in nature and that pursuant to Rule 106.01[1] of the Rules, a Master of the District Court has no jurisdiction to deal with injunctions and he therefore referred the application to a Judge. I observe that Judge Kelly, although sitting as a Master, was able to exercise the jurisdiction of a Judge of this Court and he therefore had jurisdiction to make the order, whereas Master Norman correctly observed that he could not vary an order of an injunctive nature.
[1] [DCR R 106.01] Jurisdiction of District Court Masters [District Court only]
The plaintiff seeks an order setting aside the order of Judge Kelly insofar as it restrains the plaintiff from removing or disposing of the funds currently held in the trust account of Mr Doman, the plaintiff’s solicitor. Ms Freeman, for the plaintiff, submitted that the District Court does not have the jurisdiction to make an injunctive order against a plaintiff in terms of the order made by Judge Kelly. I will come to that argument shortly.
I raised with counsel whether the application by the plaintiff was in effect an appeal from the decision of Judge Kelly. It was submitted by both Ms Freeman and Mr Munt, for the defendant, that the application before me was an application to vary Judge Kelly’s order by discharging it, one of the grounds being that the Judge had no jurisdiction to make the order. Although it was conceded that the application could be characterised as an appeal, both parties urged me to hear and determine the application.
Rule 84.12[2] of the Rules empowers the Court to vary or set aside a judgment or order at any time if the justice of the case so requires. Both parties agreed that it was appropriate for me to determine the application pursuant to that Rule. The scope of Rule 84.12 was considered in Commonwealth Bank of Australia v Foreshaw (1990) 55 SASR 247. Cox J, with whose judgment the Chief Justice and Olsson J agreed, considered whether a summary judgment made pursuant to Rule 25 could be set aside relying on Rule 84.12. It was submitted to the Court in that case that Rule 84.12 did not empower the Court to set aside a summary judgment that had been entered. It was argued that the Rule should be given a restrictive interpretation in light of the rule making power that authorised it and of the principle that there must be an end to litigation and that final judgments are meant to be final. Cox J noted that the only express words of limitation in the Rule are to be found in is final clause which limits the Court to invoking the power “…..if the justice of the case so requires”.
[2] [R 84.12] Court may vary or set aside a judgment or order
His Honour referred to the decision of FAI General Insurance v Southern Cross Exploration (1988) 165 CLR 268, in which the High Court, in considering the words of a New South Wales Rule of Court which gave the Court power to extend time even after the expiration of a time specified by the Rules or by a judgment or order, observed at page 283-284 :
“The plain meaning of these words is very wide. The Court may extend ‘any time’ fixed by ‘any … order’ and may do so as well after as before the time expires and even though the application to extend it is not made until after the time has expired.”
The Court went on to observe that it was a remedial provision which confers on a Court a broad power to relieve against injustice. The Court went on to say :
“The fact that it manifestly is a power to be exercised with caution and, in the case of conditional orders, with due regard to the public policy centred in the finality of litigation does not warrant an arbitrary limitation of the power itself, not expressed in the words of the rule, so as to deny its capacity to apply to circumstances such as those which are to be found in the present case. It would be wrong to so read the rule as to deny to a Court power to prevent injustice in circumstances where the party subject to a conditional order ought to be excused from non compliance.”
Cox J expressed the opinion that Rule 84.12 should be interpreted with the same liberality and it should not be given an unnaturally restricted meaning for fear that anything else would imperil the finality of every judgment or order the Court ever makes.
Rule 84.12 was considered by the Full Court in Cavanagh-Lang v O’Callaghan and Others [2000] SASC 187. Olsson J with whom Wicks and Gray JJ agreed, said at paragraph 47 :
“It cannot be stressed too strongly that, regardless of the principles applicable to resort to the inherent jurisdiction, SCR 84.12, which is of relatively recent origin, stipulates its own test. The sole touchstone for the exercise of the powers conferred by it is that they may be exercised ‘if the justice of the case so requires.”
In support of the plaintiff’s application, Ms Freeman submitted that Judge Kelly did not have the jurisdiction to make the order. To that extent, I consider the application is in the nature of an appeal. The amount, the subject of this application, is $4,000 and the parties have urged me to determine the matter as the costs of an appeal to the Full Court are not justified. I have also had regard to the fact that the order of Judge Kelly was interlocutory in nature and that he made it pending further consideration. I consider that the justice of the case is such that it is appropriate for me to determine the matter pursuant to Rule 84.12.
Ms Freeman submitted that the order was in the form of a mareva injunction and the District Court had jurisdiction to make such an order pursuant to section 31 of the District Court Act 1991 as amended. Section 31(1) provides :
“(1)   A Court may make an order (‘a restraining order’) preventing or restricting dealing with property of a defendant to an action if -
(a)    the action appears to have been brought on reasonable grounds; and
(b)    the property may be required to satisfy a judgment that has been made, or may be, given in the action; and
(c)    there is a substantial risk that the defendant will dispose of the property before judgment is given, or before it can be enforced.”
Ms Freeman submitted that section 31 is limited to restraining orders dealing with property of a defendant and not that of a plaintiff. She further submitted that the limits of the jurisdiction of the District Court as an inferior Court of record are strictly confined by provisions of the various statutes which confer jurisdiction upon the Court and that there is no inherent jurisdiction in the District Court to order that monies be retained in a solicitor’s trust account to provide pre-emptive enforcement of a costs order.
I agree that section 31(1) of the District Court Act is limited to a restraining order preventing or restricting dealing with property of a defendant to an action. It is clear in this case that the order seeks to restrict the plaintiff from dealing with its property in order to secure the defendant in respect of the order for costs made in the defendant’s favour.
The Inherent Jurisdiction
The question then arises as to whether the District Court has an inherent jurisdiction to make such an order. Section 8 of the District Court Act[3], subject only to certain limited and quite specific exceptions, provides that the District Court has the same civil jurisdiction (both at law and in equity) as the Supreme Court at first instance. In Cavanagh-Lang v O’Callaghan and Others (supra) at paragraph 38, Olsson J observed :
“Like the learned Judge now appealed from, I incline to the view that the effect of this provision (which is intended to constitute the District Court the primary trials Court in this State) is to confer upon that Court all of the jurisdictions and powers vested in the Supreme Court in its civil jurisdiction (including all relevant inherent powers), save for the aspects expressly accepted.”
His Honour observed that it was unnecessary for him to finally decide that question. In my view, the District Court has the power to determine its own inherent jurisdiction in the same manner as the Supreme Court and the inherent jurisdiction of the District Court to grant injunctions is not thereby constrained by any provisions of the Rules or section 31 of the District Court Act (see Harris v Harris [1947] VLR 44). In my view, the inherent jurisdiction of the Court may be exercised in any given case in addition to any powers conferred by the Rules of Court and the two are not mutually exclusive (see IH Jacob; “The Inherent Jurisdiction of the Court” [1970] CLP 23 at 25). I conclude that the Court has an inherent jurisdiction to make orders of an injunctive nature, in addition to those orders that the Court is empowered to make pursuant to the District Court Act and the Rules.
[3] DISTRICT COURT ACT 1991 - SECT 8
Mr Munt for the defendant submitted that I should vary the order of Judge Kelly and he sought an order in the following terms :
“Until payment of the defendant’s costs of action as taxed or agreed or otherwise until further Court order, the plaintiff and its solicitor, Mr Tom Doman, be restrained from transferring or causing or permitting to be transferred and from otherwise dealing with the sum of $4,000 which is currently in Mr Doman’s trust account (being part of the $23,000 paid by or on behalf of the plaintiff into Mr Doman’s trust account as referred to in Mr Doman’s letter to Lynch Meyer dated 12 June 2002), which amount is to be reserved for payment of, or towards, the defendant’s costs of action in this matter.”
In support of his submission, Mr Munt argued that the only asset that the plaintiff has within the jurisdiction is the monies currently held in Mr Doman’s trust account, and that if the order of Judge Kelly is discharged and no order made, the plaintiff will remove those funds from the jurisdiction. It follows, he submitted, that there will be no funds within the jurisdiction from which the defendant will be able to recover its costs, thereby rendering the judgment on account of costs nugatory. Mr Munt submitted that the plaintiff will not be unduly prejudiced if the order is granted in the terms sought, as the asset is in the form of a relatively small amount of cash. Further, he argued that the defendant will be put to unnecessary and great expense if he were required to attempt to enforce the costs judgment out of the jurisdiction. He submitted that a mareva injunction can be made against a plaintiff in support of a costs order prior to taxation of costs (see Jet West Ltd and Another v Haddican and Others [1992] 2 All ER 545).
Ms Freeman conceded that the only asset within the jurisdiction of the plaintiff was the funds deposited in Mr Doman’s trust account. Further, she had no instructions to proffer an undertaking that the funds will not be removed from the jurisdiction if there were no order securing the funds within the jurisdiction.
The plaintiff issued proceedings and the plaintiff has chosen not to prosecute the proceedings. The plaintiff has not appealed the judgment nor does the plaintiff take issue with the order for costs. Therefore the defendant is entitled to recover his costs.
As the plaintiff is a foreign company registered in the Seychelle Islands, and it is clear that if the funds are not subject to a restraining order they will be dissipated and no longer available to meet the costs order, I conclude that the defendant would be left with a judgment which it would have to attempt to enforce overseas. It is not clear whether the plaintiff has assets in the Seychelle Islands, or for that matter, anywhere else in the world, and there is a real risk that if the defendant were not secured for its costs then the defendant would have great difficulty in enforcing the judgment.
I consider that it would be inherently offensive to the Court to permit the removal of the monies, thereby defeating the effect of the Court’s order with respect to costs, with the resultant unfairness to the defendant. In my view, such a result would have the effect of bringing the administration of justice into disrepute. I consider that any Court of justice has the power to protect both the effectiveness and the integrity of its processes, which includes the power to defend the utility of its orders. The Court has an inherent power to prevent abuses of its own process (see Devlin v Collins (1984) 37 SASR 98 at 107). If a Court were to permit misuse of its procedure in a manner that would result in manifest unfairness to a party to litigation, that would bring the administration of justice into disrepute (see Hunter v Chief Constable of West Midlands and Another [1981] 3 All ER 727 at 729).
If an order were not made protecting the defendant in this case, then there is a grave risk that the result would be manifestly unfair to the defendant in that he would not be able to enforce the order for costs. In Jet West Ltd and Another v Haddican and Others (supra), the Court of Appeal considered whether the Court possessed jurisdiction to make an order in the nature of the order sought in this case. At page 547, Lord Donaldson, on behalf of the Court, said :
“In terms of a principle that the Mareva injunction was introduced in the 1970’s because the courts held that they must necessarily have jurisdiction and did have jurisdiction to prevent parties to actions frustrating their orders by moving assets out of the jurisdiction, or dissipating assets in one way or another, with a view to making themselves proof against a future judgment. Where you have someone who is already subject to a money judgment, including an order for costs, the same principle applies, namely that the Courts will not allow people to set their orders at nought simply by removing assets from the jurisdiction.”
If I were to discharge Judge Kelly’s order and refuse the defendant’s application, the result would be that the Court’s order that the plaintiff pay the costs of the defendant is likely to be frustrated. In my view, such a result not only would be unjust to the defendant, but bring the administration of justice into disrepute.
I consider that an order should be made securing the defendant in respect of any order for costs. I vary the order of Judge Kelly and order in the following terms :
“Until payment of the defendant’s costs of action as taxed or agreed or otherwise until further Court order, the plaintiff and its solicitor, Mr Tom Doman, be restrained from transferring or causing or permitting to be transferred and from otherwise dealing with the sum of $4,000 which is currently in Mr Doman’s trust account, which amount is to be reserved for payment of, or towards the defendant’s costs of action in this matter, on behalf of the plaintiff.”

106.01 (1) A Master shall have power, authority and jurisdiction to exercise the jurisdiction of the Court to pronounce and make any judgment or order by consent.

(2) A Master may do and transact all such business and exercise all such authority and jurisdiction in respect thereof as by virtue of any Statute, custom, Rule or practice of the court may be done, transacted or exercised in an action or a minor civil action review by a Judge in chambers except in respect of the following proceedings and matters:

(a)injunctions and restraining orders;

(b)reviewing taxations of costs;

(c)any proceedings or matter where a Judge has ordered that this rule is not to apply; or

(d)any other proceeding or matter which is excluded from the jurisdiction of a Supreme Court Master under Supreme Court Rule 106.01(3).

[DC subr (2) subst Amendment 33: Gaz of 23 August 2001 r 4]

(3) Where:

(a)a party has judgment for damages to be assessed; and

(b)the assessment can be conveniently conducted in chambers rather than by a trial in open court,

a Master may assess the damages in chambers.

[DC subr (3) insrt Amendment 37: Gaz of 25 July 2002 r 4]

84.12 The Court may vary or set aside a judgment or order at any time if the justice of the case so requires.

DIVISION 3 JURISDICTION OF THE COURT Civil Jurisdiction

(1)The Court has the same civil jurisdiction (both at law and in equity) as the Supreme Court at first instance subject, however to the following qualifications:

“(a)” the Court has no jurisdiction in probate or admiralty;

“(b)”the Court has no supervisory jurisdiction except as expressly conferred by statute with respect to inferior courts or tribunals, or with respect to administrative acts, and has no jurisdiction to grant relief in the nature of a prerogative writ.

(2) The Court, in its Criminal Injuries Division, has the jurisdiction conferred on it by the “Criminal Injuries Compensation Act 1978”.

(3) The Court, in its Administrative and Disciplinary Division, has the jurisdiction conferred by statute.

(4) The Court has any other civil jurisdiction conferred by statute.

[2003] SADC 39

7 March 2003