James v Australia and New Zealand Banking Group Ltd

[2020] NSWCA 101

Court of Appeal

Supreme Court

New South Wales

Medium Neutral Citation:

James v Australia and New Zealand Banking Group Ltd [2020] NSWCA 101

Hearing dates:

3 March 2020

Date of orders:

01 June 2020

Decision date:

01 June 2020

Before:

Basten JA at [1];
Emmett AJA at [50];
Simpson AJA at [53]

Decision:

(1)   Dismiss the summons filed on 3 October 2019 seeking leave to appeal from the order of Ball J dismissing an application to set aside the judgment entered on 16 May 2014.

 (2)   Order that the applicant pay the respondent’s costs in this Court.

Catchwords:

JUDGMENTS AND ORDERS – setting aside – consent judgment – general power to set aside judgment or order – challenge to validity of agreement – whether judgment based on agreement – Uniform Civil Procedure Rules 2005 (NSW), r 36.15(1)

 

JUDGMENTS AND ORDERS – amending, varying and setting aside – consent judgement – orders entered – finality of entered orders

 

CONTRACTS – grounds for setting aside – misleading or deceptive conduct – non-disclosure of information – relevance of actual or constructive knowledge of silent party as to complainant’s beliefs – relevance of undisclosed beliefs of complainant

  CIVIL PROCEDURE – Court of Appeal – leave to appeal – dismissal – lack of issue of principle, question of general public important or an injustice to the applicant going beyond merely arguable

Legislation Cited:

Crimes (Sentencing Procedure) Act 1999 (NSW), s 43
Trade Practices Act 1974 (Cth), ss 52, 82

District Court Rules 1973 (NSW), Pt 31, r 12A
Uniform Civil Procedure Rules 2005 (NSW), r 36.15

Cases Cited:

Achurch v The Queen (2014) 253 CLR 141; [2014] HCA 10
Bailey v Marinoff (1971) 125 CLR 529; [1971] HCA 49
Burrell v The Queen (2008) 238 CLR 218; [2008] HCA 34
Cameron v Cole (1944) 68 CLR 571; [1944] HCA 5
Coles v Burke (1987) 10 NSWLR 429
Demagogue Pty Ltd v Ramensky (1992) 39 FCR 31
DJL v The Central Authority (2000) 201 CLR 226; [2000] HCA 17
Gamser v Nominal Defendant (1977) 136 CLR 145 [1977] HCA 7
Harvey v Phillips (1956) 95 CLR 235; [1956] HCA 27
Inderby Pty Ltd v Qinert (1995) ATPR (Digest) 46-141
James v Australian and New Zealand Banking Group Ltd (2018) 97 NSWLR 663
Kendell v Carnegie (2006) 68 NSWLR 193; [2006] NSWCA 302
Kimberley NZI Finance Ltd v Torero Pty Ltd [1989] ATPR 53-193
Logwon Pty Ltd v Warringah Shire Council (1993) 33 NSWLR 13
Miller & Associates Insurance Broking Pty Ltd v BMW Australia Finance Ltd (2010) 241 CLR 357; [2010] HCA 31
Secretary, Department of Family and Community Services v Smith (2017) 95 NSWLR 597; [2017] NSWCA 206
Taylor v Taylor (1979) 143 CLR 1; [1979] HCA 38
Williams v Frayne (1937) 58 CLR 710

Texts Cited:

M Leeming Authority to Decide – The Law of Jurisdiction in Australia (2nd ed, 2020, The Federation Press)

Category:

Principal judgment

Parties:

David Anthony James (Applicant)
Australia and New Zealand Banking Group Ltd (Respondent)

Representation:

Counsel:
Mr D Pritchard SC / Mr N Condylis (Applicant)
Mr R M Foreman SC / Ms K E Boyd (Respondent)

  Solicitors:
Allsop Glover Lawyers (Applicant)
Allens Lawyers (Respondent)

File Number(s):

2019/239443

 Decision under appeal 

Court or tribunal:

Supreme Court

Jurisdiction:

Equity

Citation:

[2019] NSWSC 832

Date of Decision:

5 July 2019

Before:

Ball J

File Number(s):

2013/306563

headnote

[This headnote is not to be read as part of the judgment]

The applicant, David Anthony James, controlled a number of companies. Between August 2005 and April 2010 Mr James entered into guarantees in favour of the Australia and New Zealand Banking Group Ltd (“ANZ”) as security for loans made to the companies. By 2013 the companies had outstanding liabilities to ANZ in excess of $14 million and were in default under the various financial agreements.

In April 2013 ANZ appointed PricewaterhouseCoopers (PwC) to report on the assets and liabilities of the companies. PwC provided a report to ANZ in May 2013. Mr James received a redacted version of a draft of the report, which had identified inventory in excess of $10.7m. In August 2013 notices of demand were served on the primary debtors. On 19 August 2013 ANZ had PwC appointed as receivers and administrators. On 30 August 2013 a notice of demand was served on Mr James.

On 11 October 2013 ANZ commenced proceedings against Mr James claiming $14,133,818.66 due under the guarantees. On 16 May 2014 a motion for summary judgment was listed before Hammerschlag J. Mr James consented to judgment in an amount of $13,928,818.66 together with interest. Three distributions were made to ANZ between June and November 2014, being a total recovery of $2,177,211.93.

On 19 September 2017 Mr James filed a motion seeking to set aside the consent judgment on the ground of misleading and deceptive conduct by ANZ, causing him to agree to judgment by consent on a false understanding of the financial circumstances of the companies. On 5 July 2019 Ball J dismissed the motion. On 3 October 2013 Mr James filed a summons seeking leave to appeal.

On appeal, the following issues arose:

(a)   whether the primary judge could reopen orders which had been entered;

(b)   whether the orders could have been set aside due to misleading or deceptive conduct on the part of ANZ;

(c)   whether the primary judge erred in finding that ANZ, by its non-disclosure of the financial state of the companies, did not engage in misleading or deceptive conduct (ground 1); and

(d)   whether the primary judge erred in finding that Mr James did not rely on ANZ’s non-disclosure of the financial state of the companies (ground 2).

The Court dismissed the appeal and held:

by Basten JA (Emmett AJA agreeing at [52]):

1. Where a consent judgment is challenged on a basis which seeks to avoid the underlying agreement, there must be an underlying enforceable contractual agreement between the parties upon which the judgment is based: [16]. The primary judgment was a summary judgment, but it was not a “consent” judgment except in the sense that Mr James capitulated: [16]. The orders did not depend upon the existence of a contractual agreement, and could not have been set aside on the basis of misleading or deceptive conduct on the part of ANZ, not amounting to fraud or lack of good faith: [27]. ANZ did not rely upon this fundamental flaw and therefore it could not form the basis of a refusal of leave to appeal: [17].

by Simpson AJA:

2. The orders were consent orders and the judgment was a consent judgment. The judgment commenced with “by consent as between the plaintiff and the defendant”; the terms of the judgment followed negotiations by the parties; and the application was presented to the primary judge as a claim “setting aside a judgment obtained… by consent”: [54]-[57].

by Basten JA (Emmett AJA and Simpson AJA agreeing at [52], [53]):

3. The ground of acting “against good faith” in Uniform Civil Procedure Rules 2005 (NSW) r 36.15(1) is entirely general and is not in terms limited to consent judgments or summary judgments: [19]. The primary judge was correct in holding that Mr James’ case depended upon establishing misleading or deceptive conduct, and if that claim failed, there was no basis upon which to allege that the same conduct was “against good faith”: [21].

Coles v Burke (1987) 10 NSWLR 429; Kendell v Carnegie (2006) 68 NSWLR 193; [2006] NSWCA 302; Cameron v Cole (1944) 68 CLR 571; [1944] HCA 5, discussed.

4. The inability of a court to reopen orders which have been entered, otherwise than pursuant to statutory authority, reflects the importance of the value of finality as an element of the rule of law. An attempt to have a trial court reopen its orders after the time for appeal has expired, without recourse to that procedure, is to undermine the statutory constraints imposed on appeals: [32]. Leave was not refused on this basis as the parties did not address these issues, but the application should have been dismissed without consideration of the factual assertions: [36].

Bailey v Marinoff (1971) 125 CLR 529; [1971] HCA 49; DJL v The Central Authority (2000) 201 CLR 226; [2000] HCA 17; Kendell v Carnegie (2006) 68 NSWLR 193; [2006] NSWCA 302; Logwon Pty Ltd v Warringah Shire Council (1993) 33 NSWLR 13; Cameron v Cole (1944) 68 CLR 571; [1944] HCA 5; Achurch v The Queen (2014) 253 CLR 141; [2014] HCA 10, discussed.

Harvey v Phillips (1956) 95 CLR 235; [1956] HCA 27; Taylor v Taylor (1979) 143 CLR 1 at 16; [1979] HCA 38, discussed and distinguished.

5. The exercise of determining whether non-disclosure can constitute misleading or deceptive conduct is an exercise in fact-finding. The exercise is an objective one and does not turn on the subjective beliefs or expectations of the party claiming to have been misled or deceived. The evidence given by Mr James as to his knowledge, beliefs and expectations was of limited, if any, relevance: [40]-[41]. Therefore, there was no basis to review the trial judge’s factual findings relating to Mr James’ subjective beliefs: [47].

Miller & Associates Insurance Broking Pty Ltd v BMW Australia Finance Ltd (2010) 241 CLR 357; [2010] HCA 31; Demagogue Pty Ltd v Ramensky (1992) 39 FCR 31; Kimberley NZI Finance Ltd v Torero Pty Ltd [1989] ATPR 53-193, discussed.

6. The putative basis for setting aside the consent judgment could only have been that it deprived Mr James of the opportunity to exercise his rights as guarantor to reduce his liability: [46]. Once judgment was entered, Mr James lost the status of guarantor and became a judgment debtor without rights to reduce his liability: [43].

7. There was no statement in Mr James’ commercial list response which ANZ knew to be based upon a false premise which could have given rise to an obligation to correct the premise: [42]. The law imposed no obligation on ANZ to disclose information the relevance of which was not known to, and should not reasonably have been appreciated by, ANZ: [44].

Williams v Frayne (1937) 58 CLR 710, applied.

8. An applicant for leave to appeal must satisfy the Court that there is an issue of principle, a question of general public importance, or an injustice to the applicant which is reasonably clear, in the sense of going beyond what is merely arguable. The issues of principle raised by this case were not relied on by Mr James and the matters raised did not provide an adequate basis to doubt the correctness of the orders made: [48].

Secretary, Department of Family and Community Services v Smith (2017) 95 NSWLR 597; [2017] NSWCA 206, applied.

Judgment

1. BASTEN JA: Between August 2005 and April 2010 David Anthony James (the applicant) entered into guarantees in favour of the Australia and New Zealand Banking Group Ltd (“ANZ”) as security for loans made to a number of companies he controlled. By 2013 the companies had outstanding liabilities to ANZ in excess of $14 million and were in default of the terms of the various financial agreements, triggering repayment liabilities under each. On 11 October 2013 ANZ commenced proceedings against Mr James claiming an amount of $14,133,818.66 under the guarantees. On 16 May 2014 Mr James consented to judgment in an amount of $13,928,818.66 together with interest from 19 August 2013 to 16 May 2014.

2. On 19 September 2017 the applicant filed a motion seeking to set aside the consent judgment on the ground of misleading and deceptive conduct by ANZ, causing him to enter into the agreement to consent on a false understanding of the financial circumstances of the companies. Due to other court proceedings involving the same parties, the motion was not heard until June 2019, judgment dismissing the motion being delivered by Ball J on 5 July 2019. [1]

   1. Australia and New Zealand Banking Group Ltd v James (No 3) [2019] NSWSC 832 (Ball J).

3. Being an interlocutory judgment, the applicant needed leave to appeal, which was sought by way of summons filed on 3 October 2019. ANZ accepted that it was convenient that there be a concurrent hearing of the application for leave and the proposed appeal, but submitted that leave should be refused. It submitted that, although the applicant’s liability under the consent judgment was substantial, the usual grounds which might warrant the grant of leave were not present. While Mr James did not dispute the statement of legal principles by Ball J, he challenged two aspects of the judge’s findings with respect to the circumstances relied upon to support the application. Accordingly, it is necessary to set out briefly the essential factual background to the present application.

Factual and procedural background

4. The debtor companies controlled by the applicant carried on business as wholesalers of alcoholic and non-alcoholic beverages. In April 2013 ANZ had appointed PricewaterhouseCoopers (PwC) to carry out an investigation as to the assets and liabilities of the companies. That investigation relied, at least in part, on information provided by the applicant. On 31 May 2013 a report was sent to ANZ. In late June and early July 2013 a stocktake was undertaken at the primary warehouse operated by the companies at Homebush Bay in Sydney. On 1 and 8 August 2013 notices of demand were served on the three primary debtors in the group. On 19 August 2013 ANZ appointed PwC as receivers and took possession of the companies’ inventory. On the same date, administrators were appointed to each of the five corporate entities involved in the group.

5. On 30 August 2013 a notice of demand was served on the applicant seeking payment of the amount outstanding under the four guarantees. Shortly thereafter, on 11 September 2013, the administrators provided a report to creditors (the creditors’ report) noting that they were currently conducting a sale of the business and assets. They anticipated a “significant shortfall” with respect to the secured creditor (ANZ), leaving the return to unsecured creditors as “remote.”[2]

   2. Judgment at [29].

6. On 19 March 2014 the receivers filed accounts with the Australian Securities and Investments Commission (ASIC) for the period 19 August 2013 to 18 February 2014. The total receipts for the two major companies totalled a little under $4 million, of which approximately half resulted from the sale of stock and a large part of the balance from recovery of receivables.

7. The four companies which were party to loan agreements or other forms of financial accommodation provided by ANZ (together with the abbreviations used in the judgment) were as follows:

TLT Nominees Pty Ltd (TLT);

Newcastle Liquor Wholesalers Pty Ltd (NLW);

James Australia Group Pty Ltd (JAG), and

Print National Nominees Pty Ltd (PNN).

8. On 16 May 2014 a motion for summary judgment was listed before Hammerschlag J. In his response to ANZ’s commercial list statement, the applicant had admitted liability under the guarantees, but filed a cross-claim against several parties, including ANZ. However, he then withdrew the cross-claim against ANZ, which sought summary judgment on the basis of the admissions. In support of its notice of motion seeking summary judgment, ANZ relied upon two affidavits, being (i) an affidavit of John Symons, dated 19 December 2013, identifying the amounts outstanding on the accounts of each of the four companies, and (ii) an affidavit of David Michael Popkin, a solicitor with Allens who acted for ANZ, filed on 23 April 2014, noting that summary judgment was sought on the basis that the applicant had offered no defence to ANZ’s motion. The applicant attended the hearing on 16 May 2013, with senior counsel, and sought to be credited with an amount of $205,000 which had been held as a cash deposit in a separate facility. [3] ANZ accepted that he was entitled to a credit of that amount and the judgment sought was reduced accordingly.

   3. Judgment at [45].

9. It had become clear to ANZ prior to 16 May 2014 that it was likely to obtain less than one-third of the outstanding debts as a result of the receivers realising the assets of the companies. The judge stated:

“[44]   It is common ground that prior to 16 May 2014 the receivers had informed ANZ that their investigations had caused them to believe that:

(a)   The total of all stock at the Homebush Bay warehouse as at 19 August 2013 was approximately $4.2 million;

(b)   The total of all TLT stock at the Homebush Bay warehouse as at 19 August 2013 was approximately $1.46 million;

(c)   There was no stock of either LN or WN at the Homebush Bay warehouse as at 19 August 2013; and

(d)   Levels of TLT stock at the Homebush Bay warehouse as at 19 August 2013 were very different from the levels of TLT stock at that warehouse the subject of the PwC report in May 2013.”

10. Prior to 16 May 2014, the applicant did not have access to that assessment, nor to the final report provided by PwC to ANZ on 31 May 2013, with which the comparison was made. The applicant had, however, been provided with a draft redacted version of the draft report on 23 May 2013 which had identified inventory at four locations, totalling in excess of $10.7 million. It had also identified $9.1 million in receivables, excluding intra-company receivables, bad and doubtful debts, and inter-company balances.

11. An affidavit of David Paul Merryweather of ANZ, dated 3 June 2016, established that between 25 September 2013 and 28 January 2014:

(a)   TLT stock had been sold for $742,000, of which $612,000 was realised by receivers;

(b)   NLW stock had been sold for $403,000, of which $344,000 was realised by receivers, and

(c)   approximately $1.3 million of books debts had been recovered.

No amount had been paid to ANZ by 16 May 2014. Three distributions were made, the first on 6 June 2014 ($400,000), and two further amounts on 13 October 2014 and 13 November 2014 (totalling $1,777,211.93), being a total recovery of $2,177,211.93. [4]

4. Judgment at [52].

Issues on appeal

12. In these circumstances, the applicant complained as to two matters, expressed in counsel’s outline of submissions in this Court in the following terms:

“It was Mr James’ case below that ANZ engaged in misleading or deceptive conduct by failing to disclose the realisations made by the appointed receivers, [PwC], over assets of the principal debtors whose indebtedness Mr James had guaranteed.

Had ANZ disclosed the fact that the realisations were well below the total amounts of the principal debtors’ liabilities, Mr James would not have entered into the consent judgment. This was in the context where a draft report from the receivers, based on information verified by Mr James, had indicated that the value of the realisations was sufficient to recover the secured debt.”

13. Counsel’s submissions continued:

“Mr James now appeals on the basis that the primary judge erred in making findings that were not available on the evidence. Two grounds of appeal are advanced. The first ground is that the primary judge erred in finding that ANZ, by its non-disclosure of the realisations by PwC, did not engage in misleading or deceptive conduct. The second ground is that the primary judge erred in finding that Mr James did not rely on ANZ’s non-disclosure of the realisations by the receivers.”

14. In order to succeed on his appeal, the applicant recognised that he needed to overturn the two principal dispositive findings of fact reached by the primary judge. (The judge held, favourably to the applicant, that there was no separate discretionary ground for declining relief if it were otherwise available.)

15. ANZ submitted that there is no issue of principle or question of public importance involved in the application for leave, and that no injustice has been occasioned by reason of any error on the part of the primary judge. The applicant’s submissions challenging findings of primary fact as being “unavailable” are said to be without substance. Accordingly, leave to appeal should be refused.

16. There is one matter which ANZ did not challenge, either before the primary judge or in this Court: rather it accepted that it was open to the Court to set aside the summary judgment if it could be shown that ANZ had engaged in misleading or deceptive conduct which would warrant the setting aside of the underlying agreement upon which the judgment was based. On one view, that underlying premise was flawed. The judgment was indeed a summary judgment; it was not a “consent” judgment except in the sense that the applicant capitulated. He did so on the basis of his own admissions which left no room for defending the proceedings. Where a consent judgment is challenged on a basis which seeks to avoid the underlying agreement, there must be an underlying enforceable contractual agreement between the parties upon which the judgment is based. Mere non-resistance does not give rise to a contract.

14. Because this fundamental flaw was not relied upon by ANZ, it cannot form the basis of a refusal of leave to appeal. However, as will be explained below, the absence of a relevant agreement results in an artificial exercise in seeking to apply legal principles which only operate with respect to the validity of such an agreement. It does, however, affect the manner in which this Court is able to address the submissions relied on by the applicant.

Legal principles

(a)   grounds for setting aside judgment

(i)   grounds relied on at trial

18. It is convenient to commence by identifying the relevant legal principles relied upon to set aside the consent judgment. The principles were identified by the primary judge, in a passage to which no objection was taken in this Court:

“[64]   There are two bases on which the Court may set aside a consent judgment.

[65]   First, the Court has an inherent power to set aside a judgment entered by agreement between the parties on any basis on which the agreement on which it was based could be set aside. As the High Court explained in Harvey v Phillips (1956) 95 CLR 235 at 243-4:

‘The question whether the compromise is to be set aside depends upon the existence of a ground which would suffice to render a simple contract void or voidable or to entitle the party to equitable relief against it, grounds for example such as illegality, misrepresentation, non-disclosure of a material fact where disclosure is required, duress, mistake, undue influence, abuse of confidence or the like.’

Although all the examples given by the High Court were examples of where a court may set [aside] an agreement at common law, there is no reason to think, and it was not suggested that, some different principle applied where the right is said to be statutory.

[66]   Secondly, a judgment may be set aside under Uniform Civil Procedure Rules 2005 (NSW) (UCPR) r 36.15(1), which provides:

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.

[67]   There is no suggestion in this case that the consent judgment was obtained irregularly or illegally. The question is whether it was obtained “against good faith”. In Coles v Burke (1987) 10 NSWLR 429, Kirby P (with whom Samuels and McHugh JJA agreed) 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.’

See also Kendell v Carnegie (2006) 68 NSWLR 193; [2006] NSWCA 302 at [60] per Bryson JA (with whom Hodgson and McColl JJA agreed).”

The judge summarised the case presented by the applicant as follows:

“[69]   In the present case, it is said that the judgment obtained by ANZ is liable to be set aside because the agreement on which it was based was induced by the misleading and deceptive conduct of ANZ. Those same facts are said to establish that the judgment was obtained against good faith.”

(ii)   “against good faith”

19. The written submissions for the applicant confirmed that reliance was placed upon the acting “against good faith” ground in Uniform Civil Procedure Rules 2005 (NSW) (UCPR), r 36.15(1). Accordingly, it is necessary to address that ground for setting aside a judgment; it is not in terms limited to consent judgments, or summary judgments. The rule is entirely general and reads as follows:

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.

20. The principle identified in Coles v Burke,[5] cited by the primary judge, was made with respect to the District Court Rules as then in force, but the language of the rule is relevantly identical to r 36.15(1) of the UCPR. [6] The reasoning in Coles v Burke was approved in Kendell v Carnegie. [7] There is much to be said for the proposition that there is a single “genus” created by the three terms used in the rule and that little is achieved by seeking to break it into separate species. Nor is it clear that the rule expands or varies the grounds for setting aside a consent judgment under the general law; indeed it may cover only a subset of the common law grounds. The rule may be seen as reflecting the language used in Cameron v Cole,[8] a bankruptcy case concerning a challenge to a judgment debt obtained without serving the supposed debtor. Rich J described the ground as involving a fundamental “irregularity”, [9] and giving rise to a judgment obtained by “fraudulent abuse of the process of a court” and incapable of supporting a “bona fide” claim. [10]

    5. (1987) 10 NSWLR 429 at 437.

    6. District Court Rules 1973 (NSW), Pt 31, r 12A.

    7. (2006) 68 NSWLR 193; [2006] NSWCA 302 at [53] (Bryson JA, Hodgson and McColl JJA agreeing).

    8. (1944) 68 CLR 571; [1944] HCA 5.

    9.    Cameron at 591.

    10.    Cameron at 592.

21. The primary judge stated that the applicant’s case depended on establishing misleading or deceptive conduct “of a type that would be amenable to relief under the Australian Consumer Law.” If that claim failed, there was no basis upon which to allege that the same conduct was “against good faith.”[11] That proposition was not challenged in this Court and was correct. Indeed, it is important to note that the language of r 36.15(1) applies to cases where orders have been entered following a trial and as to which there would usually be no basis to challenge the orders otherwise than by appeal, or by establishing fraud. This scope of the rule is not to be expanded so that it has some broader operation with respect to summary judgments or consent judgments. The case presented by the applicant did not purport to engage the criteria relevant under r 36.15(1).

    11. Judgment at [70].

(iii)   misleading or deceptive conduct

22. The applicant submitted that the appropriate course was to identify a ground which would allow the underlying agreement to be set aside, in accordance with the principle stated in Harvey v Phillips,[12] set out in the passage quoted by the trial judge at [65]. He relied upon the allegation that ANZ had engaged in misleading or deceptive conduct in obtaining his consent to the orders sought. As noted above, the availability of such a ground was not in dispute; nevertheless, its application in the present case requires consideration.

    12. (1956) 95 CLR 235; [1956] HCA 27.

(iv)   availability of challenge – existence of agreement

23. The principle identified in Harvey v Phillips must be understood by reference to the context in which it arose. The underlying case was a claim in damages for medical negligence. Before the trial commenced, there was discussion of settlement. Early offers were rejected, but under some duress, the plaintiff accepted an offer made after the jury had been empanelled. The High Court identified the manner in which settlement was reached: [13]

“From the foregoing facts it seems clear enough that in spite of her determination not to settle the action she was temporarily overborne by the extreme pressure exerted upon her by her counsel supported by her solicitor and perhaps others and was induced … to express what proved a short-lived consent to accept £4,000 by way of compromise. … But so far as the counsel and solicitors of the defendants knew, the plaintiff's counsel had his client's considered and definitive authority to accept the settlement. They were, of course, quite aware that for a long time the plaintiff had refused her consent to compromise the action and that the plaintiff's counsel was endeavouring to obtain her authority and was experiencing difficulty in doing so. It therefore does not seem a case in which reliance was placed upon the apparent or implied authority of counsel to compromise proceedings in court.”

13.    Harvey v Phillips at 241.

24. Terms of settlement were drawn up and presented to the trial judge. The contents read:

“By consent:— 1. Jury to be discharged. 2. Verdict for Plaintiff of £4,000. 3. Terms not to be disclosed.” [14]

14.    Harvey v Phillips at 241.

25. The judgment stated: [15]

“The learned judge authorized the entry of judgment in accordance with the terms of settlement drawn up. Judgment has not in fact been signed or entered, so we were informed. Had judgment been signed it may be doubted whether it was open to the plaintiff to attack it by making an application to the Full Court in the action to set aside the judgment and compromise.”

15.    Harvey v Phillips at 242.

26. This context explains what was meant by the Court in referring to the terms on which the “compromise is to be set aside”, that being said to depend upon “the existence of a ground which would suffice to render a simple contract void or voidable or to entitle the party to equitable relief against it”. Judgment depended upon the terms of a valid agreement, pursuant to which the defendant was required to pay a sum of money, in consideration for which the plaintiff agreed to forego a trial. By contrast, the present case involved the plaintiff (ANZ) obtaining the judgment which it sought, subject to accepting that credit should be given for a particular allowance. There was no compromise; there was no contract. Judgment was entered in the terms proposed by ANZ.

27. For these reasons, it may very much be doubted that (i) this was a case in which the orders depended upon the existence of a contractual agreement, and (ii) the orders could be set aside even had there been some misleading or deceptive conduct on the part of ANZ, not amounting to fraud or lack of good faith.

(v)   availability of challenge to entered judgment

28. Furthermore, this was a case in which judgment had been entered. The observation of the High Court that “it may be doubted whether it was open to the plaintiff” to challenge a judgment once signed or entered, is not to be dismissed as immaterial dicta. The observation reflected a well understood view as to the finality of orders, once entered. [16] In DJL v The Central Authority [17] the plurality (Gleeson CJ, Gaudron, McHugh, Gummow and Hayne JJ) reaffirmed the statement made by Barwick CJ in Bailey v Marinoff, noting that there remained an equitable jurisdiction with respect to the impeachment of judgments for fraud, preferably by instituting a separate proceeding. [18] No broader power to reopen judgments once entered was found with respect to the Family Court of Australia.

    16. See, for example, Bailey v Marinoff (1971) 125 CLR 529; [1971] HCA 49.

    17. (2000) 201 CLR 226; [2000] HCA 17.

    18. DJL at [37], [38]; as to fraud, see also Gamser v Nominal Defendant (1977) 136 CLR 145 at 154 (Aickin J; Barwick CJ, Gibbs, and Stephen JJ agreeing; Murphy J at 150-151 to similar effect); [1977] HCA 7.

29. Judgment was entered in the present case in accordance with the UCPR. Apart from r 36.15, which will include the fraud exception, and no doubt other considerations, [19] it is doubtful that there is any other basis other than those provided under r 36.16 (which is not and cannot be invoked in the present case) for setting aside a judgment once entered. [20] There are indications in the judgment of this Court in Logwon that the Land and Environment Court may have a broader power to relieve against the effects of judgments “obtained by fraud or by compromise the result of mistake.” [21] Harvey v Phillips was relied upon by Sheller JA in the reasons in Logwon,[22] but without express reference to the doubts expressed in that case as to whether the powers to reopen would apply had the orders been entered.

    19. Kendell v Carnegie (2006) 68 NSWLR 193; [2006] NSWCA 302 at [52]-[53], [60] (Bryson JA, Hodgson and McColl JJA agreeing).

    20. Cf Logwon Pty Ltd v Warringah Shire Council (1993) 33 NSWLR 13.

    21.    Logwon at p 30C.

    22.    Logwon at p 29O-E.

30. To similar effect, observations of Mason J in Taylor v Taylor [23] were relied upon for the proposition that “a jurisdiction to set aside its orders is inherent in every court unless displaced by statute”. However, that unqualified proposition was drawn from the reasoning in Cameron v Cole, discussed above, and was followed by the next sentence which qualified the scope of what had just been stated:

“In my opinion the jurisdiction extends not only to the setting aside of judgments which have been obtained without service or notice to a party … but to the setting aside of a default or ex parte judgment obtained when the absence of the party is due to no fault on his part.”

23. (1979) 143 CLR 1 at 16; [1979] HCA 38.

31. Taylor was a case in which orders had been made in the absence of a party; it provided no basis for the broader proposition than that enunciated in Cameron v Cole which, it is suggested above, is encapsulated in the present r 36.15.

32. The inability of a court to reopen orders which have been entered, otherwise than pursuant to statutory authority (including rules made under statutory authority), reflects the importance of the value of finality as an element of the rule of law. “[T]he principal qualification to the general principle of finality is provided by the appellate system.”[24] An attempt to have a trial court reopen its orders after the time for appeal has expired, without recourse to that procedure, is to undermine the statutory constraints imposed on appeals. A power to reopen would not likely be construed to allow such a course.

    24. Burrell v The Queen (2008) 238 CLR 218; [2008] HCA 34 at [15]. See, generally, M Leeming Authority to Decide – The Law of Jurisdiction in Australia (2nd ed, 2020, The Federation Press) at pp 271-273 and, with respect to the statutory basis for an appeal, authorities in fn 21.

33. In Achurch v The Queen,[25] French CJ, Crennan, Kiefel and Bell JJ stated:

    25. (2014) 253 CLR 141; [2014] HCA 10.

“[14]   Absent specific statutory authority, the power of courts to reopen their proceedings and to vary their orders is constrained by the principle of finality. That principle was stated succinctly in D'Orta-Ekenaike v Victoria Legal Aid [26]  and re-stated by the plurality in Burrell v The Queen:[27]

26. (2005) 223 CLR 1 at 17 [34].

27. (2008) 238 CLR 218 at 223 [15].

‘A central and pervading tenet of the judicial system is that controversies, once resolved, are not to be reopened except in a few, narrowly defined, circumstances.’

[15]   As was said in Burrell, the principal qualification to the general tenet of finality is the appellate system. [28] Relevant to the position of the Court of Criminal Appeal of New South Wales, their Honours said:[29]

28. (2008) 238 CLR 218 at 223 [15].

29. (2008) 238 CLR 218 at 223 [15].

‘But in courts other than the court of final resort, the tenet also finds reflection in the restrictions upon reopening of final orders after they have been formally recorded.’

The principle protects parties to litigation from attempts to re-agitate what has been decided and serves as ‘the sharpest spur to all participants in the judicial process, judges, parties and lawyers alike, to get it right the first time’. [30]

30. (2008) 238 CLR 218 at 223 [16].

[16] The principle of finality forms part of the common law background against which any statutory provision conferring power upon a court to reopen concluded proceedings is to be considered. It is a principle which may inform the construction of the provision. In the present case, it is a principle which informs the limit of the purpose for which s 43 and its precursors were enacted, that limit being that the section was not to provide a substitute for the appellate system. In so far as s 43 applies to courts of first instance exercising original jurisdiction, the limit also maintains the well-established distinction between appellate and original jurisdiction. A statute conferring original jurisdiction is not lightly to be construed as undermining that distinction. [31]

31. Lacey v Attorney-General (Qld) (2011) 242 CLR 573 at 594 [51].

[17]   Consistently with the principle of finality, courts may correct their errors before their orders are formally recorded. As was said in the joint judgment in Smith v NSW Bar Association:[32]

32. (1992) 176 CLR 256 at 265 per Brennan, Dawson, Toohey and Gaudron JJ.

‘It has long been the common law that a court may review, correct or alter its judgment at any time until its order has been perfected … The power is discretionary and, although it exists up until the entry of judgment, it is one that is exercised having regard to the public interest in maintaining the finality of litigation.’

(Footnotes omitted.) The power is inherent in superior courts. Similar powers may be implied in statutory courts, including inferior courts, and may be reflected or extended by express statutory provisions or rules of court. [33] Subject to express provision to the contrary, the power subsists up to but not beyond the point at which judgment is entered. As Barwick CJ observed in Bailey v Marinoff:[34]

‘Once an order disposing of a proceeding has been perfected by being drawn up as the record of a court, that proceeding apart from any specific and relevant statutory provision is at an end in that court and is in its substance … beyond recall by that court.’

The rationale for the limiting requirement, that the order to be corrected has not been perfected, is that it provides ‘a readily ascertainable and easily applied criterion’. [35] It also ‘marks the end of the litigation in that court, and provides conclusive certainty about what was the end result in that court.’[36] ”

33. Generally as to implied powers see Grassby v The Queen (1989) 168 CLR 1 at 15-17 per Dawson J; Pelechowski v Registrar, Court of Appeal (NSW) (1999) 198 CLR 435 at 450-452 [47]-[54] per Gaudron, Gummow and Callinan JJ; DJL v Central Authority (2000) 201 CLR 226 at 240-241 [25] per Gleeson CJ, Gaudron, McHugh, Gummow and Hayne JJ.

34. (1971) 125 CLR 529 at 530.

35. Burrell v The Queen (2008) 238 CLR 218 at 224 [20].

36. Burrell v The Queen (2008) 238 CLR 218 at 224 [20].

34. Achurch was concerned with a power to correct a sentence that is “contrary to law”, pursuant to s 43 of the Crimes (Sentencing Procedure) Act 1999 (NSW), a power which the court read narrowly in accordance with the principles set out above. It is clear from the reliance on the civil cases noted above, and in particular at [17] in Bailey v Marinoff, that the Court was not restricting its consideration to matters in criminal jurisdiction; indeed the refusal to correct an acknowledged error of law on the part of the sentencer should apply a fortiori to a power to reopen a civil order.

35. As was acknowledged by Gageler J in Achurch, such an approach may involve reading an implied limitation into the statutory conferral of jurisdiction on a superior court. Nevertheless Gageler J accepted such a qualification, stating:

“[42]   A provision conferring power on courts is not to be read down by making an implication or imposing a limitation which is not found in its express words. [37] Yet a ‘central and pervading tenet of the judicial system is that controversies, once resolved, are not to be reopened except in a few, narrowly defined, circumstances’. [38] Words conferring a power to reopen ought not to be read widely.”

37. Owners of Shin Kobe Maru v Empire Shipping Co Inc (1994) 181 CLR 404 at 421.

38. Burrell v The Queen (2008) 238 CLR 218 at 223 [15], quoting D'Orta-Ekenaike v Victoria Legal Aid (2005) 223 CLR 1 at 17 [34].

36. As the parties did not address these issues, leave should not be refused on that legal basis. However, because leave should be refused for other reasons noted below, it should not be thought that the exercise undertaken before the primary judge complied with legal principle. In short the case was determined on a basis which was too favourable to the applicant; arguably, it should have been dismissed without consideration of the factual assertions.

(b)   when non-disclosure is misleading or deceptive

37. Miller & Associates Insurance Broking Pty Ltd v BMW Australia Finance Ltd [39] involved a claim for damages resulting from misleading or deceptive conduct in contravention of s 52 (and s 82) of the Trade Practices Act 1974 (Cth). The insurance broker (Miller) failed to disclose an important fact, namely that the insurance policy proffered was neither assignable nor cancellable and therefore of little use as security for the loan intended to be covered. [40] The joint reasons of French CJ and Kiefel J dealt specifically with the issue of “non-disclosure as a species or element of misleading or deceptive conduct”. [41] After noting the limitations in the general law as to claims involving mere silence as to a material fact where there is no legal obligation to divulge the information, the joint reasons noted that in Demagogue Pty Ltd v Ramensky [42] the Federal Court had held that the statutory provision was not to be read as limited by common law constraints on what might constitute misleading or deceptive conduct. Black CJ had observed: [43]

“Silence is to be assessed as a circumstance like any other. To say this is certainly not to impose any general duty of disclosure; the question is simply whether, having regard to all the relevant circumstances, there has been conduct that is misleading or deceptive or that is likely to mislead or deceive. To speak of ‘mere silence’ or of a duty of disclosure can divert attention from that primary question. Although ‘mere silence’ is a convenient way of describing some fact situations, there is in truth no such thing as ‘mere silence’ because the significance of silence always falls to be considered in the context in which it occurs. That context may or may not include facts giving rise to a reasonable expectation, in the circumstances of the case, that if particular matters exist they will be disclosed.”

39. (2010) 241 CLR 357; [2010] HCA 31.

40. Miller at [2].

41. Miller at [4].

42. (1992) 39 FCR 31 (Gummow J; Black CJ and Cooper J agreeing).

43.    Demagogue at 32.

38. In similar language, in a passage approved by Gummow J in Demagogue at 41, French J had stated in Kimberley NZI Finance Ltd v Torero Pty Ltd:[44]

“If in a particular case silence would, as a matter of fact, constitute misleading or deceptive conduct, s 52 by virtue of its prohibition of such conduct imposes its own statutory duty to make disclosure.

The cases in which silence may be so characterised are no doubt many and various and it would be dangerous to essay any principle by which they might be exhaustively defined. However, unless the circumstances are such as to give rise to the reasonable expectation that if some relevant fact exists it would be disclosed, it is difficult to see how mere silence could support the inference that the fact does not exist.”

44. [1989] ATPR 53-193 at 53-195.

39. As further noted by French CJ and Kiefel J in Miller,[45] “[t]he language of reasonable expectation is not statutory”. Their reasoning continued:

“[21]   To invoke the existence of a reasonable expectation that if a fact exists it will be disclosed is to do no more than direct attention to the effect or likely effect of non-disclosure unmediated by antecedent erroneous assumptions or beliefs or high moral expectations held by one person of another which exceed the requirements of the general law and the prohibition imposed by the statute. … It may lead to the imposition of a requirement to volunteer information which travels beyond the statutory duty ‘to act in a way which does not mislead or deceive’. [46]

[22] However, as a general proposition, s 52 does not require a party to commercial negotiations to volunteer information which will be of assistance to the decision-making of the other party. A fortiori it does not impose on a party an obligation to volunteer information in order to avoid the consequences of the careless disregard, for its own interests, of another party of equal bargaining power and competence. Yet that appears to have been, in practical effect, the character of the obligation said to have rested upon Miller in this case.”

45. Miller at [19].

46. Inderby Pty Ltd v Qinert (1995) ATPR (Digest) 46-141 at 53,115.

40. The exercise of determining whether non-disclosure can constitute misleading or deceptive conduct is an exercise in fact-finding. While the phrase “reasonable expectation” is not contained in the statute, its use indicates that the exercise is an objective one and does not turn on the subjective beliefs or expectations of the party claiming to have been misled or deceived. A similar inference can be drawn from the use of the statutory phrase, “likely to mislead or deceive”.

41. None of these principles appeared to be in dispute, but at the trial before Ball J significant weight was placed on the evidence given by the applicant as to his knowledge, beliefs and expectations, submissions which were repeated in this Court. His evidence was of limited, if any, relevance.

Application of principles

42. In the present case, the elements entitling ANZ to a summary judgment were admissions made by the applicant in his commercial list response filed on 13 March 2014. Had there been a statement in that response which ANZ knew to be based upon a false premise there could have been an obligation in some circumstances to correct the premise; whether such an obligation would arise must depend upon the circumstances in question. There was, in fact, no statement made by the applicant which demonstrated any reliance upon the ability of the receivers to recover the whole or substantially the whole of the liabilities of the four companies from realisations of their assets and collection of receivables. Nor was there any basis for ANZ to expect any assumption in that regard on the applicant’s part.

43. The only remaining consideration, being that now relied upon, is that if assets had been realised at a value which bespoke negligence (or worse) on the part of the receivers, the applicant, as guarantor, might have sought to demonstrate the failure and so to reduce his own liability by the amount foregone. [47] Once judgment was entered, the applicant lost the status of guarantor and became a judgment debtor without rights to reduce his liability according to that principle. No doubt for this reason, he sought to set aside the consent judgment when other avenues of resistance to payment were closed.

    47. Williams v Frayne (1937) 58 CLR 710 at 738 (Dixon J); [1937] HCA 16; James v Australian and New Zealand Banking Group Ltd (2018) 97 NSWLR 663 at [22] (Macfarlan JA), [68] (Leeming JA and Sackville AJA).

44. An unstated premise of the application before Ball J was that disclosure of the amounts recovered by realising stock would itself have demonstrated that sales by the receivers had been made at less than market value. The applicant’s case did not address or seek to justify that assumption. Furthermore, since the only relevance of the amounts obtained by realising assets was to demonstrate that the assets had been sold below value, it was necessary to demonstrate that ANZ had, or should have had, some basis for believing that they had been sold at less than market value. The law imposed no obligation on ANZ to disclose information the relevance of which was not known to, and should not reasonably have been appreciated by, ANZ. Again this issue was not addressed by the applicant. Had it been, it would have been necessary to confront the fact that ANZ was told that the stock on hand when the receivers were appointed was not the stock on hand when the valuation was undertaken in April 2013. On the other hand, ANZ was told that the receivers did not have the co-operation of the applicant. These statements, which were not challenged, provided a ready explanation as to why the sum realised was well below that expected on the basis of the April 2013 report. They demonstrate the absence of anything more than a weakly arguable basis imposing a disclosure obligation on ANZ.

45. Otherwise, objectively there is no basis in the evidence to infer that the receivers did not take reasonable care to obtain market value for the stock in circumstances where the amount being recovered did not reflect the earlier assessment of their own firm, and was not nearly sufficient to satisfy the liabilities of the companies to the secured creditor which had appointed them. Plausible claims of undervalue sales generally arise where the assets are expected to realise more than the liability to the secured creditor, which has no immediate interest in recovering the extra value. This was not such a case.

46. There was ambivalence in the submissions for the applicant as to whether the material fact which was not disclosed was either (i) that the assets of the companies were likely to fall well short of the amount of their liabilities to ANZ, or (ii) the assets were being realised at less than their market value. Point (i) was that articulated in identifying the relevant issues, as set out at [12] above. However, (i) alone could not provide a basis for setting aside the consent judgment; the putative basis for setting aside the consent judgment could only be that it deprived the applicant of the opportunity to exercise his rights as guarantor (not available to a judgment debtor) to reduce his liability. No doubt (i) could, in some circumstances, provide evidence in support of (ii). It has been dealt with on that basis above; the evidence did not support such an inference. It followed that ANZ was not required to disclose that fact to the applicant before seeking his agreement to judgment on the guarantees.

Challenge to findings of fact

47. The trial judge engaged in a comprehensive review of the various factors relied upon by the parties in addressing what the applicant knew as to the activities of the receivers and what his subjective intentions may have been. For reasons noted above, there is no basis to review those factual findings; the applicant’s case failed at the more basic level of principle addressed above and must be dismissed for that reason. The applicant’s subjective beliefs were immaterial on that issue.

Orders

48. An applicant for leave to appeal must satisfy the Court that there is an issue of principle, a question of general public importance, or an injustice to the applicant which is reasonably clear, in the sense of going beyond what is merely arguable. [48] There are issues of principle raised by this case, of potential importance beyond the particular interests of the applicant, but they were not relied on by the applicant and their resolution would not assist his case; they might well destroy it. Otherwise, the matters raised do not provide an adequate basis to doubt the correctness of the orders made in the Division.

    48. Secretary, Department of Family and Community Services v Smith (2017) 95 NSWLR 597; [2017] NSWCA 206 at [28] (Macfarlan, Gleeson and Payne JJA).

49. The Court should make the following orders:

1. Dismiss the summons filed on 3 October 2019 seeking leave to appeal from the order of Ball J dismissing an application to set aside the judgment entered on 16 May 2014.

2. Order that the applicant pay the respondent’s costs in this Court.

50. EMMETT AJA: The applicant, Mr David James, seeks leave to appeal from an order made by a judge of the Equity Division declining to set aside a summary judgment entered against Mr James in favour of the respondent, Australia and New Zealand Banking Group Ltd (ANZ). The basis upon which the applicant sought to have the judgment set aside was a claim that he was induced to withdraw opposition to the entry of summary judgment because of misleading and deceptive conduct on the part of ANZ.

51. The claim by ANZ against the applicant was under guarantees given by him in respect of the indebtedness to ANZ of companies controlled by him. He alleged that, at the time of the judgment, he believed that the companies still had sufficient unrealised assets to discharge the greater part of their indebtedness to ANZ and that it was misleading and deceptive for ANZ to fail to disclose to him that the level of recovery of the guaranteed debts from the companies would result in a substantial shortfall.

52. I have the advantage of reading in draft form the proposed reasons of Basten JA. I agree with Basten JA that the principle of finality of judgments would have been a basis for declining to set aside the judgment. In any event, there was no error on the part of the primary judge in concluding that there was no misleading or deceptive conduct established on the part of ANZ and in concluding that the applicant was not induced to act to his detriment by reason of any misapprehension on his part. I agree that the summons seeking leave to appeal should be dismissed with costs.

53. SIMPSON AJA: I have read in draft the judgment of Basten JA. I agree that, on the application of the legal principles stated in [18] – [41], no error has been shown in the conclusions of the primary judge.

54. I do not share the view that the judgment the applicant sought to have set aside was not a consent judgment, but a summary judgment. The record of the judgment commences:

“By consent as between the plaintiff and the defendant, I make the orders in the document entitled Short Minutes of Order which I have initialled, dated today’s date and placed with the papers, which brings to an end the proceedings between those parties.” (emphasis added)

Five orders then follow. The first gives judgment for the plaintiff (ANZ) against the applicant in a stated amount; by the second order, the applicant is ordered to pay ANZ’s costs and expenses (including legal fees on a full indemnity basis); by the third, a cross-summons is dismissed; by the fourth, enforcement of the first and second orders is stayed on a temporary basis; and by the fifth, the right of the applicant to pursue a claim for $205,000 against ANZ is preserved.

55. The terms of the judgment followed negotiations by the parties, in which the applicant was represented by senior counsel; as a result of those negotiations ANZ reduced, by $205,000, the amount it claimed.

56. The application was presented to the primary judge as a claim for an order:

“…setting aside a judgment obtained against [the applicant] by consent by [ANZ]…” (primary judgment at [1])

The application for leave to appeal was presented to this Court on the same basis.

57. I see no reason to doubt that the orders were consent orders and the judgment was a consent judgment. The primary judge proceeded on that basis, as did the argument in this Court.

58. I agree with the orders proposed by Basten JA.

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Endnotes

Decision last updated: 01 June 2020