Emibarb Pty Limited v Schipp

[2001] NSWSC 761

CITATION:	Emibarb Pty Limited v Schipp [2001] NSWSC 761
FILE NUMBER(S):	SC 3534/01
HEARING DATE(S):	17 August 2001
JUDGMENT DATE:	17 August 2001
PARTIES :	Emibarb Pty Limited (Plaintiff) Delice Joan Schipp (Defendant)
JUDGMENT OF:	Master McLaughlin

COUNSEL :	J.K. Chippindall (Plaintiff) J.M. Hennessy (Defendant)
SOLICITORS:	Blake Dawson Waldron (Plaintiff) Dibbs Barker Gosling, Lawyers (Defendant)
LEGISLATION CITED:	Corporations Act
CASES CITED:	Barclays Australia Finance Limited v Mike Gaffikin Marine Pty Limited (1996) 21 ACSR 235 Charles Bright & Co v Sellar [1904] 1 KB 6 Eumina Investments Pty Limited v Westpac Banking Corporation (1998) 84 FCR 454 First State Computing Pty Limited v Kyling (1995) 13 ACLC 939 Jonesco v Beard [1930] AC 298 McDonald v McDonald (1965) 113 CLR 529 Munro Schneider Associates (Inc) v No 1 Raberem Pty Limited (1992) 37 FCR 234 Olympic Holdings Pty Limited v Interwest Investments Pty Limited (1998) 16 ACLC 242 Orr v Holmes (1948) 76 CLR 640 Spies v Commonwealth Bank of Australia (1991) 24 NSWLR 691 Wentworth v Rogers (No 5) (1986) 6 NSWLR 534 Wentworth v Rogers (No 6) (1987) 8 NSWLR 388 Wollongong Corporation v Cowan (1955) 93 CLR 435
DECISION:	See paragraph 32.

SUPREME COURT OF

NEW SOUTH WALES

EQUITY DIVISION

MASTER McLAUGHLIN

Friday, 17 August 2001

JUDGMENT

1    MASTER: By originating process filed on 12 July 2001 the plaintiff, Emibarb Pty Limited, claims an order pursuant to section 459G of the Corporations Law [now the Corporations Act] that the statutory demand dated 18 June 2001 and served upon the plaintiff on 21 June 2001 on behalf of the defendant, Delice Joan Schipp, be set aside.

2    A copy of that demand is annexed to the originating process. By that statutory demand the defendant claims payment to her by the plaintiff of the amount of $687,662.23, being the amount of the debt described in the schedule. The schedule is in the following form under the heading "Description of the debt”,

Judgment in favour of the creditor against the company of the Supreme Court of New South Wales Sydney Registry, Equity Division No. 6425 of 1991 ordered on 14 September 1998 and entered on 21 September 1998.

(a) In the amount of $230,880.04 by way of equitable compensation

(b) The amount of $394,526.81 by way of compound interest
being the sums referred to in Annexure A hereto.
Plus interest calculated pursuant to Section 95 of the Supreme Court Act 1970 (see Annexure “B” hereto)
Total amount $687,662.23."

3    Annexure A is a copy of the order of the Court in proceedings 6425/91, which was ordered on 14 September 1998 and was entered on 21 September 1998 and bears the seal of the Court. Annexure B sets forth the interest calculation.

4 The plaintiff makes its claim pursuant to the provisions of Division 3 of Part 5.4 of the Corporations Act. The proceedings were instituted within the period of the twenty-one days after service of the demand as required by subsection (2) of section 459G of the Corporations Act. It should be noted, however, that the proceedings were instituted only on the last day of that period.

5    The plaintiff asserts its entitlement to have the statutory demand set aside upon the grounds set forth in sections 459H and 459J.

6    In respect to section 459H the plaintiff asserts that there is a genuine dispute about the existence of the debt to which the demand relates. In respect to section 459J the plaintiff asserts that there is "some other reason" of the nature contemplated by subsection (1)(b) of that section why the demand should be set aside.

7    It is relevant to the present claim of the plaintiff upon each of the grounds upon which the plaintiff relies that it should be recorded that the judgment which is the basis of that the statutory demand was ordered and entered in consequence firstly of a contested hearing of what has been described to me as a considerably protracted nature, occupying in excess of thirty hearing days before Justice Einstein who, at the conclusion of that hearing, delivered his reasons for judgment extending over more than four hundred pages.

8    This, it should be observed was not a case of a default judgment or a judgment given in consequence of an ex parte hearing. Further, it should be recorded that there was an appeal from the decision of Justice Einstein brought by the present plaintiff, Emibarb Pty Limited, and George Andrew Harrison, one of the other defendants in the proceedings before Justice Einstein. That appeal was heard by the Court of Appeal of New South Wales over three hearing days in May 2000. The judgment of the Court of Appeal was delivered on 20 February 2001. Apart from a variation of the costs order made by Justice Einstein (the Court of Appeal altering the basis of the costs awarded by his Honour from the indemnity basis to the party and party basis), the Court of Appeal dismissed the appeal.

9    In consequence of that dismissal the decision of Justice Einstein and the judgment given by him stands as a conclusive and final judgment of the Supreme Court of New South Wales. No attempt has been made by the present plaintiff to seek a stay of execution upon that judgment. No attempt has been made by the present plaintiff, or by any other party to the proceedings before Justice Einstein or in the Court of Appeal, to seek special leave to appeal to the High Court of Australia.

10    What the present plaintiff and Mr Harrison have done (and what is relied upon by the plaintiff in the present proceedings) is that on 12 July 2001 - that is, on the same date as the originating process which initiated the proceedings presently before the Court, and which I have been hearing this day - those parties filed in the Registry of the Court a statement of claim in the Equity Division, being in proceedings 3533/2001.

11    The defendant named in that statement of claim is Delice Joan Schipp, the defendant in the present proceedings. That statement of claim addresses itself essentially to the factual circumstances which gave rise to the dispute which was the subject of the proceedings before Justice Einstein and the subject of the appeal therefrom to the Court of Appeal. The statement of claim pleaded the effect of the decision of Justice Einstein and of the Court of Appeal (paragraphs 2, 3, 4, 5 and 6). It then proceeded to various matters which constituted, either expressly or implicitly, parts of the judgments of Justice Einstein at first instance and of their Honours, Justices Handley, Giles and Fitzgerald, Judges of Appeal (paragraphs 7, 8, 9, 10 and 11).

12    The statement of claim continued by setting forth various impressions, understandings and comments of the pleader concerning the evidence of the present defendant Mrs Schipp and concerning the conclusions of Justice Einstein based upon and in respect to that evidence (paragraphs 12 to 29).

13    Under the heading "Fresh facts" in the statement of claim that pleading asserted that there are various facts which the plaintiffs Emibarb and Mr Harrison did not discover, and could not by the exercise of reasonable diligence in the circumstances have discovered, until after Justice Einstein made his orders and until after the Court of Appeal made its orders.

14    Paragraph 32 asserted that the fresh facts are of such probitive value and significance that, taken with the evidence already given at the trial, they will in all probability be decisive of the issues between the parties in a sense opposite that of the verdict.

15    Paragraph 35 set forth the pleader’s opinion as to the effect of what is described as the fresh facts and referred to the effect in the pleader’s view of those fresh facts upon evidence given by not only Mrs Schipp, but by one of the other witnesses at the trial before Justice Einstein, and asserted that those fresh facts will establish that those two witnesses were not reliable witnesses and that Mrs Schipp was not an honest witness.

16    Paragraph 36 asserted that the evidence of Mrs Schipp and the other witness tainted the findings of Justice Einstein, the orders made by his Honour against Mr Harrison and Emibarb and the orders made against those parties by the Court of Appeal.

17    By the statement of claim the plaintiffs therein seek relief by way of orders setting aside the orders of Justice Einstein and of the Court of Appeal, and seek an order that there be a new trial.

18    It is submitted on behalf of the plaintiff in the present proceedings that there is a genuine dispute as to the existence of the debt, in that there has been made but not yet determined an application by way of proceedings 3533/2001 in the Equity Division for the setting aside of the orders and judgment upon which the statutory demand is based.

19    It is further submitted by the plaintiff that, within the factual and procedural context which I have just outlined, there is quite separately from the existence of such a genuine dispute as to the existence of the debt some other reason why the statutory demand should be set aside, that other reason being that the setting aside of the demand is essential to do justice in the particular case, and that without the setting aside of the demand justice will not be done.

20    I would at the outset express (as I have already done during the course of submissions) my very considerable doubt as to whether the procedure embarked upon by the plaintiff and his co-party, Mr Harrison, in the proceedings 3533/2001 is an appropriate procedure. I have the greatest doubt that a single judge of the Equity Division who would normally try a case of the nature instituted by a statement of claim filed in the Equity Division, would have the power, or the jurisdiction, to grant the relief sought in that statement of claim - that is, to set aside the final and conclusive order of the Court which has been perfected by its having been entered, and which is the result of a contested hearing before a judge himself sitting in the Equity Division, and to set aside a decision of the Court of Appeal dismissing an appeal from the decision at first instance.

21    The plaintiff relies upon the undoubted existence of a cause of action arising in consequence of fraud which is discovered to have tainted an earlier decision.

22    In Meagher, Gummow and Lehane, Equity Doctrines and Remedies, 3ed. (1992) the learned authors at paragraph 1229 deal with judgments fraudulently obtained. They quote a statement made by the Lord Chancellor, Lord Buckmaster in Jonesco v Beard [1930] AC 298 at 301, where his Lordship described fraud as "an insidious disease", which if used to deceive the Court, "spreads to and infects the whole body of the judgment".

23    The learned authors continue:-

"The suit in Equity to impeach a judgment, whether given at law or in equity, is a separate proceeding; it takes on none of the characteristics of the proceedings which give rise to the judgment under impeachment, but, rather, there is a personal obligation to give up the fruits of unconscionable conduct. The authorities are collected and discussed in Wentworth v Rogers ( No 5) (1986) 6 NSWLR 534. The distinction may be of practical importance. Fresh evidence is brought forward and the litigation is new and not appellate in character: Charles Bright & Co Limited v Sellar [1904] 1 KB 6 at 12. Nor is it an equivalent proceeding to that involved in the introduction of fresh evidence on an appeal: McCann v Parsons (1954) 93 CLR 418 at 425-8. It is not to the point that the Equity Court would not have had jurisdiction to try the first case: Hillman v Hillman [ 1977] 2 NSWLR 739."

24    In Wentworth v Rogers (No 5), Kirby P, at 537f described the cause of action which arises in cases where a decision of the Court has subsequently been found to have been obtained by fraud. That there exist such an independent cause of action is undoubted. But it is undoubted only in the case of fraud, and the gist of the cause of action is that the result of the earlier proceedings has been infected by the fraud and that the party successful in those earlier proceedings has achieved a success which justice requires that that party must give up.

25    In the instant case no allegation of fraud is made by the plaintiff against any other party or witness involved in the proceedings before Justice Einstein. During the course of the present hearing before me Counsel for the plaintiff expressly stated and I had it noted that no allegation of fraud is being made by the plaintiff.

26    It was, however, submitted on behalf of the plaintiff that there exists an independent cause of action grounded upon the discovery of fresh evidence. In that regard the plaintiff relied upon the decision of the High Court of Australia in McDonald v McDonald (1965) 113 CLR 529, in particular the judgment of Menzies J at 540 and 542-543. It will be appreciated that the case of McDonald v McDonald was an appeal from the Full Court of the Supreme Court of Queensland to the High Court of Australia and that the aggrieved party who was appealing to the High Court of Australia and was alleging the existence of fraud, was seeking relief upon appeal in the course of the appellate process, that relief being an application to the High Court of Australia that a new trial of the original proceedings should be ordered. MenziesJ did not, as I read his judgment, hold that there existed a separate cause of action resulting from the discovery of fresh evidence, being a separate cause of action of a similar nature to the separate cause of action where fraud has been established after the making of the earlier order in the separate proceedings.

27    There are a number of decisions both in England and Australia which are relevant to the question of the existence of such a separate cause of action as that asserted by the present plaintiff. Those decisions include Re Barrell Enterprises [1972] 3 AER 631, a decision of the English Court of Appeal, where their Honours considered the jurisdiction of the old Courts of Common Law at Westminster and the Court of Chancery before the enactment of the Judicature Acts in the early 1870s, and the question of whether after the Judicature Acts came into force in 1875, the Supreme Court of Judicature had the power of the former Courts to set aside a judgment of a court of co-ordinate jurisdiction. At page 639 Russell LJ, presiding over the Court of Appeal, having reviewed some of the earlier authorities and the earlier procedures, continued:-

"In none of the cases brought to our notice has an action to set aside a judgment upon the ground of fresh evidence succeeded. Indeed there is nothing to show that in the last 100 years any such action has even been brought, although in Falcke’s case in 1887 [57 LT 39] there was an unsuccessful attempt to bring one. Insofar as any of the dicta tended to show that an action will lie they are obiter. The reason which Sir George Jessel MR gave in re St Nazaire Co [(1879) 12 Ch D 88] for the review that the jurisdiction to order a rehearing was vested by the Judicature Act in the Court of Appeal and not in the High Court is of equal weight in relation to fresh evidence as to the type of case with which he was dealing. Even if, technically, the High Court was at first clothed with this jurisdiction we are of opinion that this cause of action has long since lapsed because applications for rehearing on the ground of fresh evidence have for generations been made only to the Court of Appeal."

28    In Munro Schneider Associates (Inc) v No 1 Raberem Pty Limited (1992) 37 FCR 234 the Full Court of the Federal Court of Australia reviewed the history of the power of the Court to set aside a judgment and in particular to set aside a judgment on the ground of fraud. In their joint judgment, Spender, Gummow and Lee JJ said at page 238:-

“The jurisdiction invoked in an original action to impeach the earlier judgment for fraud, is, as was pointed out in Wentworth v Rogers (No 5) (1986) 6 NSWLR 534 at 538, “equitable in origin and nature”.

29    Their Honours continued:-

"Once judgment has been entered after trial before a jury, the Common Law Courts entertained no fresh action to set aside the judgment. But entry of judgment was delayed until the term after the trial. In the meantime, the disaffected party might present a motion for a new trial."

30    Their Honours then considered the various grounds that could be relied upon and referred in particular to the case of fraud. In MacDonald v MacDonald (supra) at 532 Barwick CJ indicated that a separate proceeding was the preferable course, as did Handley JA in Spies v Commonwealth Bank of Australia (1991) 24 NSWLR 691 at 699, which was a case involving a consent order. The Full Court of the Federal Court then considered the procedure in Chancery by way of review for a re-hearing and referred to the judgment of Couzens-Hardy LJ in Charles Bright & Co v Sellar [1904] 1 KB 6 at 10-11, in respect to new material evidence where fraud is not alleged. In Re Barrell Enterprises Russell LJ pointed out that there were no examples of such an action to set aside a judgment on the ground of fresh evidence having succeeded in England since the introduction of the Judicature system and the creation of the modern appellate structure.

31    Their Honours in the Federal Court then considered the situation both in England and in Australia and a number of other relevant authorities and expressed the final conclusion that the evidence before them lacked the necessary hallmark of materiality in respect of the probable reversal of the judgment, and that their Honours were, therefore, not persuaded to make the order.

32    It is quite clear from my reading of their Honours' judgment that, except in the case of fraud, their Honours did not consider that any separate cause of action existed, certainly in Australia, and that probably no such cause of action now existed in England.

33    In Barclays Australia Finance Limited v Mike Gaffikin Marine Pty Limited (1996) 21 ACSR 235, McLelland CJ in Eq was dealing with an application to set aside a statutory demand that was grounded upon a costs order made against the party to whom the statutory demand was addressed. His Honour held that the costs order, unless and until set aside on appeal, operated as res judicata determining the matter of the liability of the party against whom the order was made, and that the mere fact that an appeal had been instituted against that costs order did not constitute a genuine dispute as to the liability of the party which was the subject of the costs order at first instance.

34    In Eumina Investments Pty Limited v Westpac Banking Corporation (1998) 84 FCR 454, Emett J in dealing with an application to set aside a statutory demand, held that the effect of a judgment in the Supreme Court was that there was a conclusive determination of a superior court, that the applicant had no claim against the respondent and the doctrine of res judicata prevented the applicant from contending otherwise. The only bona fide claim which the applicant in that case had against the respondent was its claim for special leave to appeal to the High Court of Australia.

35    In the instant case I have already referred to my grave and considerable doubt that the existence of fresh evidence of the nature asserted by the plaintiff, even if established, would give rise to a separate cause of action of the nature of that which the plaintiff and Mr Harrison assert in the proceedings which they have now instituted.

36    But, in any event, even if I am wrong in entertaining that doubt, the mere fact that such a suit has now been instituted does not have the faintest effect upon the final, conclusive and binding nature of the order of this Court, the highest Court in New South Wales, which has been given by Justice Einstein and has been confirmed by the Court of Appeal. I do not regard the existence of proceedings 3533/2001 as constituting any dispute, let alone a genuine dispute, as to the existence of the debt.

37    But even if I am wrong in that conclusion, and if the existence of the proceedings can in some way be regarded as going to, or being relevant to, the existence of a genuine dispute as to the indebtedness which arises from the order of this Court, it is still appropriate that one should look to what is asserted in the statement of claim in proceedings 3533/2001 as constituting fresh evidence. None of the material asserted in that statement of claim in any way fulfils the criteria set forth by the High Court of Australia in the locus classicus in respect to relief grounded upon the coming to light of fresh evidence, being the decision in Wollongong Corporation v Cowan (1955) 93 CLR 435, in particular the judgment of Dixon CJ at 444, where his Honour said:-

"If cases are put aside where a trial has miscarried through misdirection, misconception of evidence, wrongful rejection of evidence or other error and if cases of surprise, malpractice or fraud are put on one side it is essential to give effect to the rule that the verdict, regularly obtained, must not be disturbed without some insistent demand of justice. The discovery of fresh evidence in such circumstances could rarely, if ever, be ground for a new trial unless certain well-known conditions are fulfilled. It must be reasonably clear that if the evidence had been available at the first trial and had been adduced, an opposite result would have been produced or, if not reasonably clear that it would have been produced, it must have been so highly likely as to make it unreasonable to suppose the contrary. Again, reasonable diligence must have been exercised to procure the evidence which the defeated party failed to adduce at the first trial."

38    His Honour then refers to the decision in Orr v Holmes (1948) 76 CLR 640 and 642. In the instant case all the alleged fresh facts were indeed available to the plaintiff at the hearing, and the evidence that is complained about was evidence which was given at the hearing. Further, there is no indication from the plaintiff, either in the recently filed statement of claim or in any correspondence between solicitors concerning that pleading, as to when these alleged fresh facts were discovered or how they have now been discovered and how it is that they could not with reasonable diligence have been discovered by the plaintiff at the time of the original hearing.

39    I am not satisfied that any of the material which is asserted by the plaintiff to constitute such fresh facts are indeed fresh facts or, indeed, even if (contrary to that view which I have just expressed) they were fresh facts, that they could not with reasonable diligence have been discovered by the plaintiff at the trial.

40    Although it is not necessary for me, for the purposes of the present proceedings, to express a concluded view in this regard, I consider that there is much substance in the submission made by Counsel for the defendant that the Court should not be satisfied that the present application is brought bona fide. In support of that submission Counsel observed that the application was made on the very last day of the twenty-one day period, that no application for a stay of execution upon the judgment had ever been made, although the appeal from that judgment had been disposed of on 20 February 2001, some six months ago, and that no application has ever been made for special leave to appeal to the High Court of Australia.

41    The grounds relied upon by the plaintiff for setting aside the statutory demand pursuant to section 459J, that there is "some other reason why the demand should be set aside" are in my view totally without substance. Whilst there is very little judicial authority as to the effect of that provision in section 459J (1)(b), it is apparent from such decisions as First State Computing Pty Limited v Kyling (1995) 13 ACLC 939 (a decision of Santow J) and Olympic Holdings Pty Limited v Interwest Investments Pty Limited (1998) 16 ACLC 242 (a decision of Master Sanderson in the Supreme Court of Western Australia) that that provision of the Corporations Act gives to the Court a broad discretion to set aside a statutory demand when it is satisfied that a defect in the demand renders it proper to do so. In other words the Court is given a discretion to do justice in a particular case.

42    In the instant case the disinclination of the plaintiff to meet the judgment given against it by Justice Einstein and confirmed by the Court of Appeal does not constitute a genuine dispute as to the liability of the plaintiff to be bound by that judgment. The proceedings which the plaintiff and Mr Harrison have chosen to institute do not even upon the assertions contained therein appear to disclose any fresh evidence. I have considerable doubt as to the bona fides of the institution of those proceedings and of the institution of the present application. The attitude of the plaintiff as manifested in the present proceedings and as manifested in proceedings 3533/2001 appears to fall into the same category as that which the President of the Court of Appeal, Kirby P used to describe the appellant in Wentworth v Rogers (No 9) (1987) 8 NSWLR 388, that that appellant "would not appear to find congenial the principle of finality in litigation".

43    The plaintiff has not established any ground upon which the statutory demand should be set aside. I propose, therefore, to dismiss the originating process.

44    I make the following orders:-

(1) I order that the originating process be dismissed.

(2) I order that the plaintiff pay the costs of the defendant.

45    The Exhibits may be returned.

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Last Modified: 01/18/2002