Johnston v Morien - [2006] WADC 46

JURISDICTION : DISTRICT COURT OF WESTERN AUSTRALIA
IN CIVIL

LOCATION: PERTH

CITATION: JOHNSTON -v- MORIEN [2006] WADC 46

CORAM: SLEIGHT DCJ

HEARD: 20 FEBRUARY 2006

DELIVERED : 31 MARCH 2006

FILE NO/S: CIV 2028 of 2005

BETWEEN: DERRAN CHARMAINE JOHNSTON
Plaintiff
AND
NEIL EDOUARD MORIEN
First Defendant

Catchwords:

Appeal from Deputy Registrar - Application for summary judgment - Order that first defendant pay sum of money into court as condition of leave to defend

Legislation:

Nil

Result:

Order for conditional leave upheld with variation

Representation:

Counsel:

Plaintiff: Mr A Metaxas
First Defendant : In person

Solicitors:

Plaintiff: A Metaxas & Co
First Defendant : Not applicable

Case(s) referred to in judgment(s):

Georgas v Secretary to the Department of Family & Community Services [2002] AATA 371
Hazart Pty Ltd v Rademaker (1993) 11 WAR 26
M V York Motors (a firm) v Edwards [1982] 1 All ER 1024
Millensted v Grosvenor House (Park Lane) Ltd [1937] 1 All ER 736
Rostirolla v Fiakos (No 2) [2002] FCA 1562
Williams v Nicoski & Anor [2003] WASC 224

Case(s) also cited:

Nil

SLEIGHT DCJ: This is an appeal by the first defendant against an order made by Deputy Registrar Hewitt on 7 December 2005 on an application by the plaintiff for summary judgment.
The order of the Deputy Registrar was that the first defendant have leave to defend the action conditional upon payment of the sum of $75,591.73 into court to the credit of the action within 28 days.
The application for summary judgment filed by the plaintiff sought judgment against the first defendant for $75.591.73 plus interest, or alternatively, the first defendant have leave to defend conditional on paying $75,591.73 into court.
A similar application was made against the second defendant but was dismissed and is not the subject of an appeal.

Nature of appeal

The appeal is pursuant to r 15 of the District Court Rules 2005. Rule 15(6) provides that the appeal is by way of a new hearing of the matter that was before the Registrar.
The grounds of appeal filed by the first defendant are numerous and largely by way of complaint about the procedures adopted by the Deputy Registrar on the hearing of the appeal.
However, because the appeal is by way of a new hearing, the approach I believe that should be followed is that the grounds of appeal should be treated as simply an objection to the order made by the Deputy Registrar that the first defendant be required to pay the sum of $75,591.73 into court.

Nature of the plaintiff's claim against the first defendant

The statement of claim pleads that at all material times the plaintiff was the sole director and shareholder of both the second defendant and the third defendant companies.
The statement of claim further pleads that the plaintiff was the sole beneficiary of the estate of her late father who died in New Zealand on 15 November 2002. His estate was handled by a law firm in New Zealand, Cooney Lees Morgan. The expected value of the estate was NZ$240,000.
It is further pleaded that on or about 20 December 2002 the plaintiff engaged the first defendant to act as the plaintiff's accountant to advise her in respect to the effect of the inheritance on the plaintiff's pension entitlement and liability for taxation, and to act for the plaintiff as necessary in respect to these matters.
It is further pleaded that the plaintiff, on the advice from the first defendant, initially instructed Cooney Lees Morgan to transfer NZ$30,000 (AU$27,289.30) to a business account with the National Australia Bank, Osborne Park branch, in the name of the second defendant. From this account were to be made various payments on instructions from the plaintiff.
A further payment, being the balance of the estate, and being in the sum of AU$183,876.55 was also deposited into the National Australia Bank account in the name of the second defendant ("the NAB account"). This occurred on 4 September 2003.
The plaintiff pleads that various payments made by the first defendant from the NAB account for a computer and renovations to the plaintiff's house (performed by the third defendant) were excessive and not authorised.
Further the plaintiff pleads that other payments made by the first defendant from the NAB account were not authorised.
The plaintiff's application for summary judgment relates to a claim for one such payment from the NAB account which the plaintiff says was not authorised. This was a payment of $85,000 which the plaintiff pleads was to an unknown entity. This payment is pleaded in pars 38 and 39 of the statement of claim as follows:
"38.On 6 September 2003 the second defendant at the first defendant's direction paid $85,000 from the plaintiff's funds in the Account to a person or entity not known to the plaintiff.
39.The payment in par 38 above was made without the plaintiff's knowledge or consent and without any direction or authorisation from the plaintiff."
It is further pleaded (by par 46) that on 18 August 2004 the first defendant provided to the plaintiff an account in respect to expenditure of monies received on behalf of the plaintiff. This account alleged that the plaintiff had overdrawn by the sum of $9,408.20. The plaintiff pleaded that after taking into account the $85,000 which was withdrawn from the NAB account, the second defendant must hold at least $75,591.73 on the plaintiff's behalf.
By par 64 of the statement of claim, the plaintiff pleads that the payment by the second defendant at the direction of the first defendant of $85,000 from the plaintiff's funds was in breach of the first defendant's retainer as follows:
"(a)In breach of an implied term to act with reasonable skill, care and diligence;
(b)Was in breach of an implied term to give advice or warning to a conflict of interest;
(c)It was in breach of an implied term in that it was in excess of the plaintiff's authority."
By par 78 of the statement of claim, the plaintiff further pleads that the payment of $85,000 was in breach of a fiduciary duty owed by the first defendant to the plaintiff in that the payment was made without the informed consent of the plaintiff and in circumstances where the making of the payment involved a conflict of interest between the plaintiff and the first defendant.
The plaintiff in her relief seeks against the first defendant, inter alia, damages for breaches of the retainer and equitable compensation for breach of fiduciary duties.

Nature of defendant's defence

The first defendant pleads that at all times he was employed by the second defendant and acted as its agent and denies he was personally retained by the plaintiff.
In par 27 of the defence the first defendant says that the plaintiff directed or authorised the second defendant to transfer the sum of $85,000 to a person or entity unknown to the plaintiff.
By par 38 of the defence, the first defendant denies he was in breach of any retainer and denies that he was under any fiduciary duties to the plaintiff, or that he was in breach of any such duties.

Principles of application for summary judgment

Order 14 r 1 of the Supreme Court Rules provide as follows:
"Where in an action to which this order applies a statement of claim has been served on a defendant and that defendant has entered an appearance, the plaintiff may, on the ground that the defendant has no defence to a claim included in the writ, or to a particular part of such claim, or has no defence to such a claim or part except as to the amount of any damages claimed within 21 days after appearance or at any later time by leave of the court, applied to the court for judgment against that defendant."
The application in this matter was not filed until 26 October 2005 after the defence was filed. However, by order of the Principal Registrar on 26 October 2005 the plaintiff was given leave to file an application out of time.
The general principles which apply on an application for summary judgment are set out in "Civil Procedure Western Australia" Seaman Vol 1 pars 14.3.1 and 14.3.2. They can be summarised as follows:
1.The applicant for summary judgment assumes the burden of persuading the court that the claim made is a good one, that there is no defence to it, that therefore leave to defend should not be granted, and that judgment should be given for the plaintiff.
2.The party showing cause against the application assumes an evidentiary burden by that process, but the overall legal burden of persuasion remains upon the applicant.
3.The power to order summary judgment should be exercised with great care and should never be exercised unless it is clear that there is no real question to be tried and the court should be astute not to risk stifling the development of the law by summarily disposing of actions in respect of which there is a reasonable possibility that it will be found in development of the law, still embryonic, that a cause of action does lie.
4.The criterion to be applied is that after the matter has been explained to the court there must be a real uncertainty without full argument or further investigation of the facts as to the plaintiff's right to judgment. Even if the facts which are established are inconclusive, if it is not possible to say without doubt on the whole of the material that there is no question to be tried, there should be leave to defend.
5.The procedure is not confined to cases which are immediately plain and obvious and the fact that a transaction is intricate does not disentitle the plaintiff to relief in a clear case and extensive argument may be necessary to demonstrate that there is no question which ought to be tried.
The general rule is that the defendant should have unconditional leave to defend if there is a fair issue to be tried. However, the discretion to impose conditions exists whether the issue to be tried is one of fact or law. If the defence is shadowy or the court doubts the defendant's bona fides the giving of security or the payment of money into court may be ordered as a condition of leave to defend. It is a wrongful exercise of discretion to impose a condition which the defendant would never be able to meet, but it is for the defendant to put sufficient proper evidence of his or her impecuniosity before the court and to make a full and frank disclosure. A defendant cannot complain because a financial condition is difficult for him to fulfil. He can complain only when a financial condition is imposed which it is impossible for him to fulfil and that impossibility was known or should have been known to the court by reason of the evidence placed before it. (See M V York Motors (a firm) v Edwards [1982] 1 All ER 1024 at 1027). There may be circumstances where it is appropriate to order the defendant to pay into court the full amount of the plaintiff's claim (see Hazart Pty Ltd v Rademaker (1993) 11 WAR 26 at 28).

The plaintiff's application for summary judgment

The plaintiff's application for summary judgment relates to a particular part of the plaintiff's claim against the first defendant.
The application seeks the following orders:
1.Pursuant to Order 14 the plaintiff have judgment against the first and second defendants for $75,591.73 and interest thereon at 6 per cent per annum from 1 September 2003 until judgment; and
2.In the alternative to paragraph 1 above, the first and second defendants have leave to defend conditional upon paying $75,591.73 into court;
3.Such orders for costs as the court thinks fit.
The plaintiff's application for summary judgment was supported by three affidavits sworn 13 October 2005, 5 December 2005 and 7 December 2005.
The plaintiff's affidavit of 13 October 2005 contains in exhibit DCJ 4 a statement sent by the second defendant to the plaintiff dated 18 August 2004. This statement indicates that the second defendant received two sums of money from Cooney Lees Morgan on behalf of the plaintiff:
On 4 April 2003 (Aus) $27,289.30
On 4 September 2003 (Aus) $183,876.55
Of the second sum of $183,876.55, the statement records that $85,000 was transferred on 6 September 2003 to the "National Australia Bank Electronic Funds Transfer. Reference No W5849788".
The plaintiff states in her affidavit of 13 October 2005 in par 19 that she did not know to whom the payment of $85,000 was made and did not authorise it.
The statement of 18 August 2004 from the second defendant shows a net amount due by the plaintiff to the second defendant of $9,408.27. This does not take into account the $85,000 transferred out of the account. If this $85,000 is credited back into the account, then the plaintiff says that this leaves a sum of $75,591.73 due to the plaintiff.
The plaintiff's application is that the first defendant is indebted to her for this amount and it is this amount which is the subject of the application for summary judgment.
In an affidavit dated 25 October 2005 the plaintiff expressed the belief that the first defendant had no defence to a claim by her for the sum of $75,591.73.

The defendant's response to the plaintiff's application

The first defendant in response to the plaintiff's claim has filed voluminous material contained in a number of affidavits.
However, the main thrust of the response to the application is contained in three affidavits which reveal what happened to the $85,000 which was transferred out of the funds received by the second defendant.
In an affidavit of the first defendant entitled "Affidavit Of Neil Edouard Morien in opposition to the Application for Summary Judgment" and sworn on 2 December 2005, at par 126, the first defendant deposes that on 23 June 2003 he discussed with the plaintiff what was to happen to the plaintiff's funds to be received from her New Zealand lawyers, and that she stated that they were not to be placed in her personal accounts. He said he took that to mean that they were to be placed in the account of the second defendant as per the instructions he had received on an earlier amount received from the plaintiff's New Zealand solicitors. In par 139 he says that this was confirmed in a verbal conversation on 22 August 2003.
In par 156 of the affidavit of 2 December 2005, the first defendant deposes that the plaintiff executed a power of attorney (exhibit NEM 1065).
In par 161 of the affidavit the first defendant says he met with the plaintiff and he proposed and the plaintiff agreed that the funds be transferred to a National Australia Bank "to offset that company loan account and use the benefit of the loan interest rate for a higher interest rate for Johnston".
In par 162 of the affidavit, the first defendant says that he believes from his recollection of a telephone conversation with the plaintiff that he "did refer to Kauri Holdings being my company with the loan account. …".
In affidavits of the first defendant entitled "Attorney Affidavit" and "Kauri Funds Affidavit" and both sworn on 5 December 2005, the following matters were deposed to:
1.The first defendant is a director of a company Kauri Holding Pty Ltd (par 6 of the Kauri Funds Affidavit);
2.As the plaintiff's attorney, the first defendant was authorised to transfer $85,000 from the second defendant's bank account as a loan to Kauri Holdings Pty Ltd for an initial period of six months (par 19 of the Attorney Affidavit);
3.The first defendant says he was entitled to transfer the funds to Kauri albeit that he had an interest in the company because the power of attorney document specifically authorise him to carry out acts on behalf of the plaintiff even though a conflict of interest existed (par 20 of the Attorney Affidavit);
4.The first defendant states that his primary reason for initially transferring the $85,000 to the account of Kauri Holdings Pty Ltd was to remove the funds from the second defendant's bank account so that the $85,000 would not be available to the plaintiff. He states that from past and continuing instructions he had an obligation to take whatever steps were necessary, in his opinion, to protect the capital of the plaintiff's inheritance for the long term benefit of her son, including ensuring that there were available funds for her son's education, development and generally his welfare (pars 17 and 18 of the Kauri Fund Affidavit);
5.On 6 September 2003, the first defendant authorised a loan to Kauri Holdings Pty Ltd of $85,000 for six months which was repayable on 6 March 2004 (par 25 of the Kauri Fund Affidavit);
6.The first defendant says that he met with the plaintiff on 12 February 2004 and with her knowledge and consent extended the loan period for a further 12 months to 6 March 2005, with the loan period to roll over for a further 12 months in the absence of any call, demand or similar notification for repayment of the loan (par 26 of the Kauri Fund Affidavit).
7.The first defendant further says that on 18 August 2004 at a meeting with the plaintiff, the plaintiff instructed the first defendant to be the trustee and funds manager of a child maintenance trust to be established and instructed the first defendant to proceed to allocate the available funds to the child maintenance trust (par 32 of the Kauri Fund Affidavit);
8.The first defendant believes that the plaintiff's authority and legal capacity in relation to the funds lent to Kauri Holdings Pty Ltd extinguished on 18 August 2004 when she instructed him to deal with the funds to establish a child maintenance trust (par 34 of the Kauri Fund Affidavit);
9.On 8 September 2004 Ian Wilson, solicitor, acting on behalf of the plaintiff wrote to the first defendant revoking the power of attorney (par 29 of the Attorney Affidavit);
10.The first defendant claims that he is the only person who has the legal authority to demand Kauri Holdings Pty Ltd to pay the funds. He says that he holds this authority in his position as trustee of the child maintenance trust (par 36 of Kauri Fund Affidavit).

Objection to plaintiff's affidavit evidence

The first defendant raised an objection to the admissibility of an annexure "DCJ 9" of the affidavit of the plaintiff, sworn 13 October 2005. This objection was made both before the Deputy Registrar and on the appeal.
The annexure consists of a letter from the first defendant's then lawyer, Mr Michael Workman, dated 11 October 2004 addressed to the plaintiff's then lawyer, Mr Ian Wilson. The letter reads as follows:
"Beazley Nemass Pty Ltd and related companies (my client) DC Johnston (your client)
Enclosed is a copy of an email received this morning from N E Morien.
In accordance with my client's instructions, the enclosed email is provided on a without prejudice basis save as to costs.
The contents of the enclosed email are self explanatory".
The enclosed email referred to is an email by the first defendant to Mr Michael Workman. The email sets out various contentions in relation to the residue of funds from the plaintiff's father's estate which had been placed in the account of the second defendant. The email indicates that the first defendant was prepared to arrange a payout of the alleged loan account with Kauri Holdings Pty Ltd subject to the plaintiff ceasing from threatening further legal action. The email concludes "However if a copy of this email is provided to Ian Wilson then as before, it is on a 'without prejudice – save as to costs' basis only".
The plaintiff in the written submissions presented to the Deputy Registrar contended that the annexure was admissible because the offer contained in the email was not in a form that could be accepted by the plaintiff.
The general rule is that communications between parties which are created as a part of a genuine or bona fide effort to negotiate settlement which is unsuccessful are treated as without prejudice communications. The without prejudice rule is a rule governing the admissibility of evidence and it operates as a joint privilege in excluding from evidence all negotiations, whether they be offers of relief, offers of payment, offers of compromise or admissions made for the purposes of settling the dispute. (See "Cross on Evidence", 6^th ed, (JD Heydon, ed, 2000) at p 25350; McNicol "Law of Privilege" (Law Book Co Ltd 1992) at p 435).

The "without prejudice" privilege extends to all communications in the course of negotiations designed to resolve a dispute. This includes all statements made by each party touching upon the merit of each party's position in relation to the dispute (see Williams v Nicoski & Anor [2003] WASC 224 at pars 312‑313).
In my opinion the covering letter by the solicitor then acting for the first defendant, dated 11 October 2004 and also the contents of the email, dated 11 October 2004, were made as a part of an attempt by the first defendant to negotiate a settlement. The email and the letter from Michael Workman both indicated that the statements being made by the first defendant were on a "without prejudice" basis and in my opinion were privileged communications which are inadmissible.
Accordingly, the content of annexure "DCJ 9" to the affidavit of the plaintiff dated 13 October 2005 will not be taken into consideration on the re‑hearing of the matter in this appeal.
In my opinion, the fact that the inadmissible material contained an overture for settlement on the basis that the plaintiff arrange payment of the loan amount does not preclude me from further consideration of the appeal. In such circumstances where a Judge becomes aware of an offer of settlement or an overture for settlement, it is a matter for the Judge to determine whether he thinks it proper or necessary for the due administration of justice that he should refuse to continue to hear the matter. On the other hand, if he is satisfied that no injustice will be done he may allow the matter to proceed. (See Millensted v Grosvenor House (Park Lane) Ltd [1937] 1 All ER 736 at 741).
Further, it is relevant that the appeal in this matter does not challenge the Deputy Registrar's decision to grant leave to defend but only the order making the leave conditional.

Conclusion

The odd thing about the application for summary judgment and the first defendant's response is that the affidavit material appears to go well beyond what is pleaded.
The plaintiff's claim for summary judgment is based upon a claim for a debt, yet in the pleadings the plaintiff's claim against the first defendant is for unspecified damages.
The plaintiff's solicitors have, since the hearing of the appeal, written to my associate indicating that the plaintiff now wishes to amend the statement of claim to claim a debt as a part of the prayer for relief.
Further, the defendant has raised matters of defence in the affidavit material on the basis that he was acting under a power of attorney, that pursuant to the power of attorney the $85,000 was removed from the second defendant's bank account and lent to Kauri Holdings Pty Ltd, that in August 2004 a child maintenance trust was created, and that the funds that had been transferred to Kauri Holdings Pty Ltd are now subject to this trust. Again, these matters are not pleaded in the defence.
I have serious doubts as to the bona fides of the defendant's defence as raised in the affidavit material for the following reasons:
(a)In the defence filed he claims that he was only acting as an employee and agent of the second defendant. However, in the affidavit material it clearly states that the transfer of the funds of $85,000 was in his personal capacity under a power of attorney, and that the funds currently held by Kauri Holdings Pty Ltd is pursuant to a trust of which he is the trustee.
(b)Further, the contention that the plaintiff agreed to a loan to Kauri Holdings Pty Ltd is unsupported by any documentation. At the very least you would expect an Acknowledgement of Debt to have been executed and a copy presented to the Court. Further, no evidence is produced that such a loan was secured in any way.
(c)Further, the suggestion of the first defendant that the funds owed by Kauri Holdings Pty Ltd were converted to a trust for the benefit of the plaintiff's son is unsupported by any documentation. The first defendant sought an adjournment of the appeal to prepare and lodge a further affidavit to present evidence that he had prepared a trust deed on the plaintiff's instructions creating such a trust but this had not been signed by the plaintiff. An adjournment was not granted as the preparation of an unsigned trust deed by the first defendant would not, in my opinion, strengthen the first defendant's position concerning the issues to be decided on the appeal and therefore did not justify an adjournment.
The essential requirements for creating a valid express trust are as follows:
1.The intention of the settlor or declarant to create the trust is certain.
2.The property or right which is the subject of the trust is certain.
3.The objects of the trust are ascertained or ascertainable.
4.The statutory requirements for writing are observed.
5.The trust is not illegal or otherwise contrary to public policy; and
6.The trust is completely constituted.
(See "Laws of Australia", LBC Sydney, Vol 15.3 "Trust"; Georgas v Secretary to the Department of Family & Community Services [2002] AATA 371).
The requirement that a trust be in writing only applies to trusts involving land (see s 34 of the Property Law Act 1969; Rostirolla v Fiakos (No 2) [2002] FCA 1562 at par 88).
For such a trust to exist as contended by the first defendant, the plaintiff must have made a gift to create the trust. It is doubtful whether such a gift has been perfected given that there is no written document confirming the gift and no trust deed exists. Section 20 of the Property Law Act 1969 provides that an assignment of any debt or chose in action can be effected by an assignment in writing. As the statute provides a means of transferring by assignment to effect "a perfect gift", non‑compliance with the statutory requirements render the assignment imperfect (see "Equity and Trusts in Australia" GE Dal Pont and DRC Chalmers, 3^rd ed p 68 par 3.55). In my opinion, the fact that a trust deed remains unsigned suggests the gift was not perfected.
As I have stated above, I have serious doubts about the bona fides of the first defendant in raising the issue of a trust. In my opinion, it reeks of sophistry designed to avoid accounting to the plaintiff for funds belonging to her.
Further, the contention that the funds held in trust have been invested in Kauri Holdings Pty Ltd raises a possible breach of s 19 of the Trustees Act which provides that the trustee has a duty to place invested trust funds in investments that are "not speculative or hazardous". Considering no evidence has been presented that the investment in Kauri Holdings Pty Ltd is confirmed in writing and is secured, the retention of the money in such an investment pursuant to the alleged trust is probably in breach of the duty created by s 19 of the Trustees Act.
In light of my views as to the bona fides of the defendant's defence, I conclude that it was appropriate for the Deputy Registrar, in the circumstances, to make the defendant's leave to defend conditional provided that the order did not make it impossible for the first defendant to comply with the condition and thus, in effect, make it impossible for him to defend that action.
As I have mentioned, the first defendant produced no evidence at the hearing before the Deputy Registrar or the appeal as to his financial position. Even, giving some latitude for the fact that the first defendant is unrepresented, it ought to have been clear to him from the application by the plaintiff that an order might be made that he be required to pay the sum of $75,591.73 into court.
Further, in any event, the first defendant indicated at the hearing of the appeal that he was seeking to file an affidavit to show that he did not have the capacity to pay the amount of $75,500 immediately or in the short term (T90). Significantly, he did not indicate that it was impossible for him to pay it given time. He did not indicate what he meant by immediately or in the short term.
However, beyond the consideration of the first defendant's personal financial position, he does have the capacity to recover the loan from Kauri Holdings Pty Ltd and to pay this amount into court. His only grounds for not doing so is that the money is subject to an alleged trust.
As I have observed, I have serious doubts about the existence of such a trust. But even if such a trust does exist, it does not prevent the first defendant from recovering the loan to Kauri Holdings Pty Ltd and arranging payment from this amount the sum required to be paid into court as a condition of leave to defend. The payment of the money into court would be a far safer position for such funds to be held than under the current arrangement. As I have already indicated, in my view the current arrangements for the funds (if such a trust exists) are likely to be in breach of s 19 of the Trustees Act.
In order to protect the first defendant's position as trustee (in the event that he is a trustee) I will provide liberty to the first defendant to apply to the court to have any funds paid into court sourced from the alleged trust fund to an investment approved by the court pending the outcome of these proceedings.
I raised with counsel acting for the respondent during the hearing of the appeal that if the first defendant failed to meet the condition of the leave to defend, then the plaintiff would only be entitled to apply for judgment on the claim for damages and that damages would have to be assessed. As I have indicated earlier in this decision, the plaintiff now seeks to amend its statement of claim to plead that the first defendant owes a debt to the plaintiff which includes the amount paid out allegedly to Kauri Holdings Pty Ltd without the authority of the plaintiff. I do not believe it would be appropriate that I give leave for the plaintiff to amend her statement of claim without the matter coming back before the court, and accordingly, I propose to simply grant leave for the plaintiff to apply to amend its statement of claim pleading a debt prior, to applying for judgment.
One further issue that arises which was not considered by the Deputy Registrar in making an order for conditional leave to defend was that the application for summary judgment only related to a part of the plaintiff's claim. I will hear submissions from the plaintiff and the first defendant before deciding the terms of the final orders for conditional leave to reflect the fact that the application for summary judgment was for part of the claim only. Subject to further submissions on this issue, I propose the following orders:
1.The first defendant have leave to defend the action subject to par 2 of these orders;
2.Leave to defend that part of the plaintiff's claim which relates to the payment of $85,000 from the bank account of the second defendant to be conditional upon the payment by the first defendant of $75,591.73 into court to the credit of the action within 14 days.
3.There be liberty to apply for an order that the amount paid into court be paid out into an investment approved by the court pending the outcome of the action;
4.In the event that the first defendant does not comply with the conditions set in par 2 of the orders, then the plaintiff be at liberty to apply to amend the statement of claim pleading a debt between the plaintiff and the first defendant prior to applying for judgment;
I will hear the parties as to what cost orders should be made.