Fluer de Lys Ltd v Kevin Jarrett
[2003] NSWLC 12
•09/05/2003
Local Court of New South Wales
CITATION: Fluer de Lys Ltd v Kevin Jarrett [2003] NSWLC 12 JURISDICTION: Civil PARTIES: Fluer de Lys Pty Ltd t/a Multiform Furniture Plaintiff/Judgment creditor
Kevin Jarrett Defendant/Judgment debtorFILE NUMBER: 1936 of 1993 PLACE OF HEARING: Downing Centre Local Court DATE OF DECISION:
09/05/2003MAGISTRATE: Magistrate H Dillon CATCHWORDS: Practice - Stay of Proceddings - Unpaid costs - Security for costs - Final or interlocutory orders - Estoppel by conduct - Setting aside orders for irregularity - illegality or bad faith - Fabrication of evidence LEGISLATION CITED: Corporations Law 1989 s 1335
Local Court (Civil Claims) Act 1970 ss 11 (1) (b) ; 11 (1A);69
Local Court (Civil Claims) Rules 1988 Pt 21 r7;Pt 26 r3;Pt 31A r11.
Supreme Court Rules 51A.8CASES CITED: Asia Strategic Investment Alliances Ltd v HIH Casualty & General Insurance Ltd [1999] NSWSC (31/05/99 Bergin J)
Bowen v Hickey (1961 78 WN (NSW) 820
Bozson v Altrincham Urban District Council [1903] 1 KB 547
Coles v Burke (1987) 10 NSWLR 429
Cooper v Williams [1963] 2 QB 567
Graham v Sutton, Carden & Co [1897] Ch.D 367
Hall v The Nominal Defendant (1966) 117 CLR 423
Hind v Marquis of Huntington (1890) 6 TLR 267
Hoskins v Van Den- Braak [1998] NSWSC 80 (03/04/98 CA)
Jones v Insole (1891) 64 LT 703
KP Cable Investments Pty Ltd v Meltglow Pty Ltd (1995) 56 FCR 189
Pacific Acceptance Corporation v Forsyth (No 2) [1967] 2 NSWR 402
Rice v Henley (1915) 32 WN (NSW) 54
Standard Discount Co v La Grange (1877) 3 CPD 67REPRESENTATION: Mr Vine for the Plaintiff/Judgment creditor
Mr Chippindall for the Defendant/Judgment debtorORDERS: 1. First motion (of the Judgment debtor) dismissed with costs; 2. Second motion (of Judgment debtor) dismissed with costs; 3. Third motion (of Judgment creditor) granted. Order that execution of the Judgment be permanently stayed set aside; 4. Respondent Judgment debtor to pay the applicant Judgment creditor's costs of disposal of each motion on the indemnity basis.
JUDGMENT
1. In this judgment I deal with three motions which were before the Court. Although it was conceded by the parties that if the first, a motion dated 4 August 2003, by the judgment debtor, was successful it would be unnecessary to determine the remaining motions, one by the judgment debtor dated 30 May 2003 and one by the judgment creditor dated 22 April 2003, for the sake of convenience I heard evidence and argument in respect of all three.
2. In the first motion, the applicant judgment debtor moves the Court for orders that the current proceedings between the parties be stayed until the costs awarded against the judgment creditor in the proceedings previously are paid (and the consequential order that costs of disposal of the motion be awarded against the judgment creditor on the indemnity basis). The motion is opposed by the judgment creditor.
3. In the second motion, the judgment debtor seeks orders that the judgment creditor’s application (of 22 April 2003) be struck out; that the judgment creditor give security for costs and that the proceedings be stayed until such security is given; and that the Court make incidental orders as to costs of disposal of the motion.
4. In the judgment creditor’s motion, it applies, pursuant to Pt 26 rule 3 of the Local Court Rules, for orders setting aside the orders made by this Court in this action on 28 November 2002 and seeking costs of the disposal of its motion.
Background of the proceedings
5. The court record in this matter shows that in 1993 judgment was entered by consent for the judgment creditor in the sum of $23,000. The terms of settlement were that judgment would be entered for that amount but that if the judgment debtor paid instalments to a total of $15,000 by 30 October 1993 the judgment creditor would abandon its rights to enforce the balance of the judgment. Difficulties arose and the judgment creditor sought to enforce the judgment. In May 1994 the judgment debtor sought to have enforcement stayed and, again, a settlement was ultimately reached. On 9 February 1996 the judgment debtor’s application to stay enforcement was settled on condition that he pay the judgment creditor a sum of $2950 on or before 19 February 1996.
6. On 5 March 1996, the judgment creditor filed an affidavit alleging that the judgment debtor had failed to pay the sum of $2950. As a consequence the stay of the enforcement was lifted and an Examination Summons was issued against the judgment debtor. After the judgment debtor failed to answer the summons, he was arrested and examined by an Acting Registrar on 5 August 1996. In answer to a question asked of him by the Acting Registrar, Mr Jarrett admitted the outstanding debt.
7. On 17 September 2002, the judgment debtor applied to the Local Court at the Downing Centre to have the judgment against him set aside. On 16 October 2002, the judgment debtor tendered the judgment creditor a cheque in the amount of $2950 which the judgment creditor ultimately presented to its bank. On 28 November 2002, when the matter came before me in the Downing Centre Local Court Motions List, the judgment debtor read his affidavit dated 17 October 2002.
8. In that affidavit, Mr Jarrett swore that he recalled the proceedings having been stayed in February 1996 on condition that he pay the sum of $2950 within 10 days of the making of the orders and that he had complied with that condition of the Court’s orders by sending a cheque to the judgment creditor’s solicitors. His gave further evidence that in mid-1996 he had discussed the question with a Sheriff’s officer and had told that officer that he had paid the outstanding debt. He said in his affidavit that, after he had been served with a bankruptcy notice on 28 August 2002, he had begun to search for evidence of having made the payment in 1996. He said that on 17 September 2002, his secretary, Ms Annabel Taylor, had located a copy of a letter sent by him to Fleur de Lys care of its solicitors, Le Compte Davey. He annexed a copy of the letter to his affidavit.
9. On 28 November 2002, I declined to set aside the judgment entered in 1996 but permanently stayed enforcement. In summary, my reasons for doing so were that there was evidence of a consent agreement that the proceedings would be permanently stayed on condition that payment was made within a certain time and that “a genuine attempt” had been made by the judgment debtor to comply with his obligations under the terms of settlement. I took the view that there was cogent evidence that Mr Jarrett had sent a cheque on 9 February 1996 to the judgment creditor’s solicitors and that the relevant condition of the consent orders, as far as it was practicable for the judgment debtor to do so, had therefore been complied with by the judgment debtor.
10. Rather than appealing against my decision, the judgment creditor sought to take the matter further by bringing a motion before Magistrate Huber on 13 February and 28 March 2003 by to remove the permanent stay on enforcement which I had ordered on 28 November 2002. On each occasion, Mr Colin Chapman was refused leave to appear on behalf of the judgment creditor by the learned Magistrate, after objection had been taken by counsel for the judgment debtor. On 28 March 2003, Magistrate Huber struck out the plaintiff’s motion and ordered that the judgment creditor pay the judgment debtor’s costs of both days. Those costs, not yet assessed, are claimed by the judgment debtor to be in the order of $18,000 and have not yet been paid by the judgment creditor.
The first Motion
11. The judgment debtor relies on Part 21 r7 of the Local Court Civil Claims Rules which provides that where the Court dismisses an action or strikes out proceedings, and a party is consequently ordered to pay the costs of another party, and “before payment of the costs, the party brings against that other party further proceedings on the same, or substantially the same, cause of action as that on which the action was, or proceedings were, brought” the Court may stay further proceedings until the costs are paid.
12. The defendant argues that “where a plaintiff has failed in an action and seeks to bring a second action based on the same facts against the same defendant, the general rule is that the court will stay proceedings in the second action until the costs of the first action are paid.” (See Graham v Sutton, Carden & Co [1897] Ch.D 367; Rice v Henley (1915) 32 WN (NSW)54; Bowen v Hickey (1961) 78 WN (NSW) 820.) The defendant submits that I should stay the current proceedings because Magistrate Huber’s costs order has not yet been complied with and the “general rule” should apply.
13. The respondent judgment creditor’s reply is twofold. First, it argues that there are special circumstances here in that the Motion before Magistrate Huber was not dealt with on its merits but was struck out on technical grounds, namely that Mr Chapman, who purported to appear for the judgment creditor on the motion, had no standing to appear. A supplementary submission to this is that between the dates of the appearances by Mr Chapman before Magistrate Huber, he complied with what he believed that he had been told by the magistrate were the relevant provisions of the Local Court (Civil Claims) Act 1970.
14. Section 11(1)(b) of the Act provides that a party may appear by an employee authorized in writing by the party to do so. Section 11(1A) provides that “an employee includes, where party is a body corporate or other body that may by law sue or be sued…, a reference to an officer (including a director or any person having… powers of management, direction or control of that body) of that body authorized in writing by that body to appear on its behalf for the purposes of this Act.”
15. On 13 February 2003, over the objection of counsel for the judgment debtor, Mr Chapman had sought to tender documents apparently purporting to authorize him to appear for the judgment creditor company. Magistrate Huber, having considered s.11(1A), concluded that Mr Chapman had not proven that he fell within the criterion established in s.11(1)(b). She, however, adjourned the matter (with costs) to enable Mr Chapman to prove that he was authorised to appear. In the course of her remarks, refusing him leave to appear that day, she stated that it was for Mr Chapman to prove that he was an officer of the company. She then stated that he was not a director or secretary of the company and nor was he a receiver or administrator. Summing up, she concluded that he had not proven that he was “a person who makes or participates in making decisions that affect the whole or substantial part of the business of the corporation.”
16. When the matter returned before Magistrate Huber on 28 March, Mr Chapman sought to appear on the basis that he had been appointed the secretary of the judgment creditor company. Again, counsel for the defendant objected to his appearance on the basis that a company secretary has administrative but not managerial functions within a corporation. She concluded that Mr Chapman did not fall within the criterion laid down by s.11(1)(b), which she interpreted as having been narrowed by s.11(1A), because he had not proven to her satisfaction that he had a management position within the company. On that basis she concluded that there had been no appearance on behalf of the company and struck out the judgment creditor’s Notice of Motion, with costs.
17. The second leg of the judgment creditor’s submissions on this motion is that leave to appeal against Magistrate Huber’s orders has been sought from the Supreme Court pursuant to R51A of the Supreme Court Rules. (There was some dispute between the parties as to whether the leave application had been filed within time, but I consider that immaterial because, even if the application was made out of time, the Supreme Court might well exercise its discretion to extend the time for filing.) It was submitted by the judgment creditor that R51A operated to stay Magistrate Huber’s orders pending the determination of the leave application and appeal.
18. Rule 51A.8, however, states the reverse: “An appeal to the [Supreme] Court shall not -- (a) operate as a stay of proceedings under the decision of the tribunal below; (b) invalidate any intermediate act or proceedings, except so far as the [Supreme] Court may direct or, subject to any direction of the [Supreme] Court, as the tribunal below may direct.” It is clear, therefore, that the judgment creditor is simply incorrect on this point.
19. True it is that the “general rule” is that actions brought on substantially the same grounds as a previous action unsuccessfully mounted will be stayed until costs ordered in the first action are paid. The rationale for this is that, prima facie, unless the costs are paid the second action is to be regarded as vexatious. In Bowen v Hickey (at 822) the Full Court of the Supreme Court approved the following statement of the law by Harvey J in Rice v Henley: “In my opinion the second action is vexatious and oppressive and the plaintiff must show some special circumstances which will justify the second action being allowed to proceed before the costs of the first are paid.” (1915) 32 WN (NSW) at 55.
20. In my opinion, there are special circumstances here which distinguish this case from the “general rule”. The first of these is that, whether or not Magistrate Huber was correct in her interpretation of ss.11(1)(b) and 11(1A), it is apparent from the transcripts that on 13 February, counsel for the defendant submitted, and Magistrate Huber accepted, that a company secretary was an officer of a company as defined in the Corporations Law. At p6 of the transcript Mr Chippendale submitted: “Unless Mr Chapman can bring himself within the definition of officer as defined by the Corporation Law, which is a director or secretary… he doesn’t fall within the meaning of officer and the whole purpose of the section in my respectful submission is to confine the right of audience in actions against incorporated bodies to officers.” Magistrate Huber, in the remarks I have cited above, by referring to company secretaries as “officers”, appeared to have adopted the defendant’s submission.
21. It was, in my opinion, reasonable for Mr Chapman to have concluded from what was said by counsel for the defendant, and by the Magistrate, that the defendant conceded, and the Magistrate had determined, that for him to appear for the judgment creditor it was sufficient for him to prove on the next appearance that he was the judgment creditor’s company secretary. This he duly attempted to do. By this time, however, counsel for the defendant had armed himself with further authorities with which he persuaded Magistrate Huber that a mere company secretary was insufficiently engaged in the management of the corporation to appear on its behalf. It is obvious from a reading of the transcript of 28 March that Mr Chapman felt that he had been ambushed or, to change metaphors, had had the bar substantially raised against him. Although I in no way criticise, or am to be interpreted as criticising, the reasoning or conclusions reached by Magistrate Huber, it appears to me that there are good prospects that the answer to the question of law which the judgment creditor company seeks to ventilate on appeal in the Supreme Court will be decided in the plaintiff’s favour.
22. On neither day was Mr Chapman allowed to present to the Court the material which the judgment creditor company relied on to support its motion to have the permanent stay on judgment set aside because he was defeated on a technical basis. In Bowen v Hickey it was held that special circumstances do not exist where the first action terminated in favour of the defendant by judgment of nonsuit against which no appeal was instituted. The court in that case drew no distinction between a case in which a verdict had been returned for the defendant and one in which a judgment of nonsuit had been entered against the plaintiff. (1961) 78 WN (NSW) 820 at 822.
23. Here the judgment creditor argues that the fact that there has been no hearing on the merits creates special circumstances. I do not agree with that proposition. There is, however, a real distinction to be made here from the general rule because the judgment creditor has sought leave to appeal. That is more than a technical gambit. In Bowen v Hickey the plaintiff did not appeal against the primary judge’s decision to nonsuit him, he merely brought a fresh (and, no doubt, better prepared) action based on the same facts. Here the judgment creditor , by appealing, seeks to place the original dispute before a court for resolution.
24. The second special feature of the circumstances in this matter is that the substance of the dispute now between the parties is that judgment creditor alleges that the defendant acted fraudulently in obtaining the orders I made on 28 November 2002. In this particular case, it is artificial to treat the motions separately because, lurking behind the first two motions, is the judgment creditor’s allegation. The judgment creditor’s position is that, but for the fraud it claims the judgment debtor perpetrated upon it and the Court in November 2002, there would have been no further proceedings brought by it, those being the proceedings the defendant now seeks to have stayed by the Court. Let alone any other aspect of the case, that, in itself, creates an exceptional state of affairs.
25. Moreover, given the extraordinary flavour and seriousness of the allegations against the defendant, it strikes me as inappropriate to stay the judgment creditor’s proceedings because to do so may well leave those allegations unresolved. While I do not doubt that the costs ordered to be paid by the judgment creditor come to a substantial sum, if it were demonstrated that the costs orders made in the defendant’s favour had been procured, directly or indirectly, from fraudulent conduct on the part of the judgment debtor on 28 November 2002, it is difficult to see how those orders could be allowed by the Court to stand. (If, on the other hand, the judgment creditor were ultimately unable to make out its allegations against the judgment debtor, the judgment debtor would have an irresistible claim to indemnity costs.) In my opinion, it is by no means clear, even at a prima facie level, that the judgment creditor’s proceedings – effectively an attempt to re-open the proceedings dealt with on 28 November 2002 – are vexatious or an abuse of process and it follows that it would not be an appropriate exercise of the Court’s discretion to stay the proceedings brought by the judgment creditor pursuant to Pt 21 r7.
26. The judgment debtor’s motion of 4 August 2003 is therefore dismissed, with costs.
The second motion
27. In the second motion, the judgment debtor seeks orders that the judgment creditor’s application (of 22 April 2003) be struck out; alternatively, he seeks orders that the judgment creditor give security for costs and that the proceedings be stayed until such security is given; and that the Court make incidental orders as to costs of disposal of the motion.
28. In relation to the question of security for costs, the judgment debtor principally relies on s.1335 of the Corporations Law rather than on the Local Court Rules or common law principles in moving for orders that the judgment creditor provide security for costs. Section 1335 provides:
Where a corporation is the plaintiff in any action or other legal proceeding, the court having jurisdiction in the matter may, if it appears by credible testimony that there is reason to believe that the corporation will be unable to pay the costs of the defendant if successful in his, her or its defence, require sufficient security to be given for those costs and stay all proceedings until the security is given.
29. In this case there is evidence that if the judgment creditor company is required to pay the judgment debtor’s costs it will have great difficulty doing so and is likely to go into liquidation. This much was frankly admitted by the judgment creditor . In addition, balance sheets were tendered for the 1999 and 2000 financial years. While those records are now probably out of date, they indicate that the company was then struggling financially and that situation does not, on the judgment creditor’s own admission, appear to have altered for the better. Thus the threshold issue for an order under s.1335 is satisfied.
30. It is trite law that an indigent plaintiff ought not be deprived of a remedy merely on grounds of impoverishment. That general rule does not apply to corporations, many of which are, to use the vernacular, “$2 companies”. The public policy behind s.1335, as I apprehend it, is to prevent such corporations being used as redoubts from which plaintiffs can sally forth to launch unmeritorious actions against defendants, and to equalise the status of parties in relation to costs. See, for example, Pacific Acceptance Corporation v Forsyth (No2) [1967] 2 NSWR 402.
31. Part 31A r11 of the Local Court Rules provides that the Court, where it has reason to believe that the plaintiff unlikely to be unsuccessful in its cause, and that that plaintiff will not be able to meet a costs order, may order security for costs. Under s.1335, the Court does not have to have reason to believe that the plaintiff is unlikely to be successful to make an order for security for costs.
32. The judgment creditor here submits that it is more appropriate in the circumstances to apply the tests laid down in the Rules and the common law.
33. In KP Cable Investments Pty Ltd v Meltglow Pty Ltd (1995) 56 FCR 189. See also Asia Strategic Investment Alliances Ltd v HIH Casualty & General Insurance Ltd [1999] NSWSC 601 (Bergin J, 31/5/99)., Beazley J (then a Judge of the Federal Court) discussed and summarised the general principles and considerations to be taken into account when determining whether or not to make an order of the type sought by the defendant in this motion. While that case did not represent any startling development in the law in relation to security for costs, the judgement neatly encapsulates most of the important factors to be taken into account. As her Honour listed them, they were:
a. whether the application for security for costs has been brought promptly;
b. the strength and bona fides of the plaintiff’s case;
c. whether the plaintiff’s impecuniosity was caused by the defendant’s conduct the subject of the claim;
d. whether the defendant’s application for security is oppressive in the sense that it is being used merely to deny an impecunious applicant the right to litigate;
e. whether there are persons standing behind the company who are likely to benefit from the litigation and who are willing to provide the necessary security;
f. whether persons standing behind the company have offered any personal undertaking to be liable for the costs and, if so, the form of any such undertaking;
g. whether the applicant for security is in substance a defendant or the proceedings are defensive in nature.
34. Given the nature of the proceedings, and the underlying purpose of them, in my opinion the relevant principles are those set out in the Rules and the common law. This is not a case in which a judgment creditor seeks to shelter behind a body corporate. In this case, a judgment was entered for the judgment creditor almost a decade ago in a sum considerably more than was ultimately paid to it by the defendant. From that point of view, the judgment creditor has already been successful. Secondly, the judgment creditor asserts that it is the victim of a wrong perpetrated with male fides by the judgment debtor who thereby irregularly and unjustly obtained a judgment of the Court which not only prejudiced the judgment creditor but which deprived the judgment creditor of the just compensation which the Court had awarded to it. That is a completely different kind of case from the usual negligence or breach of contract cases in which it is ordinarily appropriate to apply s.1335.
35. Turning to the factors outlined by Beazley J in KP Cable, I observe that the application for security for costs was brought in May this year. This was not exceptionally promptly but neither was there an outrageous delay. The strength and bona fides of the applicant’s case is obviously the critical factor. There is evidence brought before the Court from the judgment creditor on the third motion which goes to the heart of the question. As I heard all three motions seriatim, I think that it is appropriate that the evidence on the third motion be considered in relation to this question and that it would be entirely artificial to do otherwise. In my opinion, there is powerful evidence indicating that Mr Jarrett gave false evidence in his affidavit of 17 October 2002 to the effect that (a) he had sent a letter to the plaintiff’s solicitors in February 1996 with a cheque for $2950 and (b) that his personal assistant, Ms Taylor, had located a copy of the letter in his archives. In my opinion, the judgment creditor therefore has a very strong case and I will deal with that more fully below.
36. There is no evidence before me that the judgment creditor’s impecuniosity was caused by the defendant’s conduct but it appears to me to be reasonable, in all the circumstances, to infer that the defendant’s application for security is oppressive in the sense that it is being used merely to deny an impecunious applicant the right to litigate. In my view, the application for security for costs is entirely tactical in nature and that it would therefore be wrong to grant the defendant’s motion for security for costs.
37. The principal argument mounted by the defendant in the second motion, however, is that the orders made by me in November 2002 were final orders pursuant to s.69 of the Local Court (Civil Claims) Act 1970 (“the Act”) and that the only recourse open to the judgment creditor was to appeal against that decision. The judgment creditor asserts, to the contrary, that it is open to this Court, sufficient cause being shown, and it being demonstrated that an order or judgment had been made “irregularly, illegally or against good faith”, to apply Pt 26 r3 to set aside the order or judgment.
38. Were the orders made by me in November 2002 final? If so, (or if they purported to be so) does Pt 26 r3 have any work to do?
39. Section 69(1) of the Act provides that “all judgments and orders of a court exercising jurisdiction under this Act shall be final and conclusive.” Section 69, however, is dealing with appeals to the Supreme Court and, read baldly, has the capacity to mislead. It is a statement of the obvious that not all orders made by magistrates in civil proceedings are final orders. Some will be final and others will be interlocutory. Whether or not an order is appealable does not determine the issue because, in certain instances, interlocutory decisions may be appealable. In Hoskins v Van Den-Braak [1998] NSWSC 80 (3 April 1998)., Mason P, discussing s.69, said (at p9), “Its purpose is to limit the scope of prerogative and appellate review. It does not purport to convert an interlocutory judgment or order into a final one.”
40. In Hall v the Nominal Defendant (1966) 117 CLR 423., Taylor J (at 439)considered the distinction between interlocutory and final orders. He cited with approval the test laid down by Lord Alverstone CJ in Bozson v Altrincham Urban District Council [1903] 1 KB 547 at 548-549. who said:
It seems to me that the real test for determining this question ought to be: does the judgment or order, as made, finally dispose of the rights of the parties? If it does, then I think that it ought to be treated as a final order; but if it does not, it is then, in my opinion, an interlocutory order.
41. Taylor J then (at 440) went on to consider various types of orders and to categorise them as either final or interlocutory in character. He said, for example, that an order staying proceedings against one of a number of defendants on the basis that they were vexatious and an abuse of process had been found to be an interlocutory order. See Hind v Marquis of Hartington (1890) 6 TLR 267. (In Cooper v Williams [1963] 2 QB 567 per Lord Denning at 580, Danckwerts LJ at 582-583 and Davies LJ at 583., the English Court of Appeal also held that a stay of proceedings was not equivalent to a judgment for a party to the proceedings.) Similarly, he said that an order striking out a plaintiff’s statement of claim on the ground that it disclosed no cause of action had been held in England to be an interlocutory order. See Jones v Insole (1891) 64 LT 703.
42. In Hall, Windeyer J (at 443) cited the dictum of Brett LJ in Standard Discount Co v La Grange (1877) 3 CPD 67 at 72. who proposed the test that “no order will be found to be final unless a decision upon the application out of which it arises, but given in favour of the other party to the action, would have determined the matter in dispute.” Windeyer J thought that this test had limited merit “ because an order in favour of one party to an application may finally determine the dispute between whereas an order to the opposite effect would not.” At 443. He then proposed the example of an order setting aside a judgment and ordering a new trial – clearly an interlocutory decision whereas the opposite order, the refusal of a new trial, is final. He suggested that “it may be correct to say that the question is resolved by looking not at the decision… but at the consequences of that decision upon the judgment to be entered in the action.” At 443.
43. In this case, counsel for the judgment debtor contends that judgment had been entered after a contested hearing before an arbitrator and there was nothing the Court could do about that except either to stay or refuse to stay execution of the judgment. The Court was not in a position to rehear the matter or to review the arbitrator’s decision. He argues that the order I made was, therefore, final.
44. Mr Chippindall further argues that, unlike the Supreme Court, the Local Court has no inherent power to set aside judgments or orders. Nevertheless, he concedes that, like the District Court, the Local Court has a power set out in, and circumscribed by, its legislation and Rules to set aside a judgment entered or order made “irregularly, illegally or against good faith.” See Coles v Burke (1987) 10 NSWLR 429 In Coles v Burke, Kirby P (as he then was) said (at 437), “The genus which is involved in the phrase ‘irregularly, illegally or against good faith’ appears to me to be misconduct or dishonourable conduct of the person who procured the judgment which it is suggested undermines the authority of that judgment warranting the exceptional course for which [the District Court equivalent of Pt 26 r3] provides.” He says that, absent evidence of such misconduct or dishonourable conduct, therefore, there is no basis upon which this Court can set aside its order of 28 November 2002 because of the statutory limitations upon the Court’s powers to set aside its own judgments.
45. The judgment creditor company submits that Coles v Burke was distinguished on its own facts by the Court of Appeal in Hoskins v Van Den-Braak [1998] NSWSC 80 (3 April 1998).. In that case, Mason P said (at p7), “In my view Coles does not stand for the categorical proposition that the Local Court has no inherent powers outside its Act and Rules.” He went on to say (at p9):
[T]he power to relieve against the type of injustice suffered by [the appellant] resides in the Local Court as an incident of its function as a court of justice; that the duty to set aside and/or relieve against the consequences of a default order or judgment exists ex debito justitiae “From an obligation to do justice”. (ie not as a matter of discretion, or subject to terms). Nothing in the language of s.75A(1) detracts from the common law right to relief ex debito justitiae against a denial of natural justice of the present type.
46. If that is correct -- and, of course, the Court is bound by the decision -- it seems to follow that nothing in the Act or Rules derogates from the common law right of relief ex debito justitiae against any abuse of the Court’s process. Of course, absent evidence of such misconduct, neither Pr 26 r3 nor the common law right of relief ex debito justitiae can become operative, but in this case that is precisely the basis of the plaintiff’s motion and its argument against the defendant’s application. In my opinion, whether or not the order made on 28 November 2002 was final, the judgment creditor is entitled to rely on either Pt 26 r3 or common law relief to have that order set aside if it can provide sufficient proof that the judgment debtor acted irregularly, illegally or against good faith, or otherwise abused the process of the court, in obtaining the order. As I have said above, I believe that there is strong evidence suggesting that the judgment debtor misled the Court by placing false evidence before it in November last year and that, therefore, it would be inappropriate to deny it relief, all other things being equal.
47. The judgment debtor’s last argument on this motion is that the judgment creditor is estopped from proceeding because it accepted the judgment debtor’s cheque. The judgment creditor argues that nothing can be concluded from this because its solicitors of the time specifically denied that the cheque was accepted in full satisfaction of the judgment debt claimed by the judgment creditor . On the evidence before me it is plain that there was no acceptance by the judgment creditor of the money except as part payment towards the judgment sum. Moreover, I note that in my remarks on 28 November 2002, I told Ms McLean, who appeared that day for the judgment creditor and who strongly opposed a permanent stay of execution of the judgment that, notwithstanding her arguments, I was staying execution and said, “If you want to present the cheque you have now, that’s a matter for you.” If the cheque was presented it clearly was not because the judgment creditor or its solicitors accepted that it was the appropriate amount to conclude the dispute between the parties. The judgment creditor is therefore not estopped from proceeding to have the order of 28 November 2002 set aside.
48. In my opinion, the judgment debtor fails in relation to each of its arguments on this motion which is therefore dismissed, with costs.
The final motion
49. The judgment creditor has adduced powerful and persuasive evidence that judgment debtor gave false evidence to the Court in his affidavit in support of his motion on 28 November 2002. The first piece of evidence upon which the judgment creditor relies is that the copy of the letter purportedly dated 9 February 1996 was addressed to Le Compte Davey, Solicitors. The judgment creditor adduced evidence from Mr Alex Roth that Le Compte Davey has no records of any retainer agreement with, or any file being opened for, the judgment creditor until April 1997, 14 months after the cheque was allegedly sent to the judgment creditor’s solicitors. Mr Aladdin Fareed gave evidence that his company had retained four solicitors over the period it had been taking proceedings against the judgment debtor. Le Compte Davey had been the third firm retained.
50. The second piece of evidence is that it was admitted on 28 November 2002 that the judgment debtor was unable to produce any bank records which showed that the cheque in question had ever been presented. (The judgment creditor claimed that it had never been received.)
51. The third piece of evidence was that Mr Jarrett stated in his affidavit read in court on 28 November 2002 that his personal assistant, Ms Taylor, had located the letter in archives. She, on the other hand, gave oral evidence in court that the first time she had seen the letter was when Mr Jarrett gave it to her and requested her to fax it to the plaintiff’s solicitors. She was unaware who had created the letter.
52. The final piece of evidence is that Mr Jarrett admitted the debt to the Acting Registrar when examined approximately six months after he had purported to clear the debt.
53. Mr Jarrett did not give evidence in reply to the judgment creditor’s evidence either orally or by way of affidavit.
54. Absent any explanation from Mr Jarrett about how the letter came into being, and absent any documentary records from an independent source such as the bank at which the defendant’s cheque account was operated, the inference must inevitably be drawn that truthful evidence from Mr Jarrett would not have assisted his cause.
55. In my opinion, there is an overwhelming inference to be drawn that Mr Jarrett gave false evidence in his affidavit concerning the search for the copy of the letter which purportedly had enclosed a cheque for the judgment creditor and that he created himself, or caused to be created, the document which purported to be a letter dated 9 February 1996 at some time after he was served with the bankruptcy notice from the plaintiff’s then solicitors, Sally Nash & Co, most probably in September 2002. He then falsely swore that this letter had been sent to the judgment creditor’s solicitors, Le Compte Davey, in February 1996. This simply cannot have happened as that firm did not receive a retainer from the judgment creditor until 14 months later. It would appear from the court’s records that the judgment creditor’s solicitors as at February 1996 were Simon Beverley & Co of Parramatta.
Conclusions
56. In my opinion, it is overwhelming demonstrated that the order I made on 28 November 2002 was procured as a result of false evidence given by Mr Jarrett and accepted at that time by me. The order was obtained irregularly, illegally and against good faith by fraud. The judgment creditor’s motion ought therefore be granted pursuant to Pt 26 r3 or, to adopt the approach of Mason P in Hoskins, the judgment creditor ought be granted relief ex debito justitiae. Whichever approach is taken, the order made by me on 28 November 2002 must be set aside. I will also direct that the papers be sent to the Director of Public Prosecutions for consideration.
57. The judgment debtor is also ordered to pay the judgment creditor’s costs of the disposal of each motion on the indemnity basis. Those costs are to be in a sum agreed by the parties within 28 days or as assessed.
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