Mansour v Jiang

[2019] FCCA 1813

FEDERAL CIRCUIT COURT OF AUSTRALIA

MANSOUR v JIANG & ANOR

[2019] FCCA 1813

Catchwords:

PRACTICE AND PROCEDURE – Application for summary dismissal of application in a case brought by judgment debtors seeking orders to set aside judgment made by consent – whether the judgment debtors do not have reasonable prospects of setting aside judgment on the ground of fraud – whether the judgment debtors do not have reasonable prospects of amending judgment under the slip rule – application for summary dismissal granted.

Legislation:

Federal Circuit Court of Australia Act 1999 (Cth), ss.8(3), 17A(2), 43(2)(b)

Federal Circuit Court Rules 2001 (Cth), rr.1.05(2), 16.05(2)(b)\

Federal Court Rules 2011 (Cth), r.39.05(h)

Cases cited:

Clone Pty Ltd v Players Pty Ltd (In Liq) [2018] HCA 12

Flint v Richard Busuttil & Co Pty Limited [2013] FCAFC 13

Harris v Caladine [1991] HCA 9

Heywood v Sharpe [2014] FCCA 2999

Jonesco v Beard [1930] AC 298

L Shaddock & Associates Pty Ltd v The Council of the City of Parramatta (No 2) (1982) 151 CLR 590

Applicant:

JOSEPH MANSOUR

First Respondent:

YONG JIANG

Second Respondent:

SUI TONG NIU

File Number:

SYG 2249 of 2016

Judgment of:

Judge Manousaridis

Hearing date:

28 May 2019

Date of Last Submission:

24 June 2019

Delivered at:

Sydney

Delivered on:

28 June 2019

REPRESENTATION

Counsel for the Applicant:

Mr J Raftery

Solicitors for the Applicant:

Mars Legal

Solicitors for the Respondents:

Mr W Kozlowski of Lou Baker and Associates

ORDERS

(1) Pursuant to s.17A(2) of the Federal Circuit Court of Australia Act 1999 (Cth) the application in a case filed by the respondents on 16 May 2019 is dismissed.

(2)     The respondents pay the applicant’s costs of the application in a case.

1. FEDERAL CIRCUIT COURT

OF AUSTRALIA

AT Sydney

SYG 2249 of 2016

Joseph Mansour

Applicant

And

Yong Jiang

First Respondent

Sui Tong Niu

Second Respondent

REASONS FOR JUDGMENT

Introduction

1.      On 21 November 2017 I made an order by consent that there be judgment against the respondents in the sum of $258,461.86 inclusive of interest and costs (Order).

2.      On 16 May 2019 the respondents filed an application in a case for an order that the Order be set aside. The application was made after the applicant, Mr Mansour, served on the respondents a bankruptcy notice demanding the payment of the amount referred to in the Order, and after the respondents had filed a separate application in the Court for an order to set aside the bankruptcy notice.

3.      The application in a case came before me on 28 May 2019. Mr Mansour appeared by counsel, and the respondents appeared by their solicitor, Mr Kozlowski. Counsel for Mr Mansour submitted I should summarily dismiss the application in a case. After some discussion I made orders permitting the parties to file additional affidavits, and directed them to file written submissions. I also ordered, with the consent of the parties’ representatives, that as from 24 June 2019 I would be at liberty to give judgment on the application for summary dismissal of the application in a case without further hearing.

4.      In these reasons for judgment, I consider whether the application in a case should be summarily dismissed.

Power to summarily dismiss

5. When counsel for Mr Mansour submitted I should summarily dismiss the application in a case, he did not identify the source of the power pursuant to which I could summarily dismiss the application in a case. This does not present any difficulty because the Court has such power under s.17A(2) of the Federal Circuit Court of Australia Act 1999 (Cth) (FCC Act) which provides:

The Federal Circuit Court of Australia may give judgment for one party against another in relation to the whole or any part of a proceeding if:

(a)         the first party is defending the proceeding or that part of the proceeding; and

(b)         the Court is satisfied that the other party has no reasonable prospect of successfully prosecuting the proceeding or that part of the proceeding.

6.      “Proceeding” is defined in s.5 of the FCC Act to mean “a proceeding in a court, whether between parties or not, and includes an incidental proceeding in the course of or in connection with a proceeding, and also includes an appeal”. There is no question that an application in a case for an order to set aside a final order made in a proceeding is “an incidental proceeding . . . in connection with [the] proceeding”. I therefore have power to consider whether I should dismiss the application in a case to set aside the Order on the ground that I am satisfied the respondents have no reasonable prospect of successfully prosecuting that application.

Grounds on which respondents apply to set aside Order

7.      The principal ground on which the respondents apply to set aside the Order is what they allege is fraudulent conduct by Mr Mansour in inducing the first respondent, Mr Jiang, to consent to my making the Order. In particular, the respondents allege as follows:

a)        Mr Jiang, to the knowledge of Mr Mansour, has a limited understanding of English.

b)        On 23 October 2017 Mr Mansour and Mr Jiang signed a document recording settlement terms.

c)        On 14 November 2017 Mr Mansour, relying on Mr Jiang’s limited understanding of English, induced Mr Jiang to sign a document that contained terms different from those recorded in the document Mr Jiang signed on 23 October 2017.

8.      In the alternative, the respondents seek to set aside the judgment or order on the basis that there was a slip or error.

9.      Before I consider the respondents’ application in a case further, it will be necessary to refer to some principles that apply to setting aside judgments for fraud.

Principles for setting aside judgment obtained by fraud

10.    The starting point is the principle that a judgment or order, when entered or made by consent, is binding until it is set aside;

Consent orders finally disposing of the issues between parties to proceedings in a court have always been regarded as a judicial determination of those issues and nonetheless so because they are made in accordance with a contract between the parties . . . Moreover, as a judicial order of a superior court affords protection to a person executing it . . . , the very purpose of procuring the making of orders by consent is to ensure that the terms agreed are susceptible of enforcement as a curial order.

11. Courts of equity and the superior courts of the common law had the power to set aside perfected decrees and judgments that were obtained by fraud. This Court, too, has the power to set aside a judgment or order on the ground of fraud. The source of the power is r.16.05(2)(b) of the Federal Circuit Court Rules 2001 (Cth) (FCC Rules) (which provides that the Court may set aside a judgment after it has been entered if “it was obtained by fraud”) together with s.8(3) of the FCC Act (which provides that this Court is a court of law and equity).

12.    There are well established principles of practice that regulate the means by which an application can be made to set aside a judgment or order on the ground that it was obtained by fraud. These were identified by Lord Buckmaster in Jonesco v Beard:

It has long been the settled practice of the Court that the proper method of impeaching a completed judgment on the ground of fraud is by action in which, as in any other action based on fraud, the particulars of the fraud must be exactly given and the allegation established by the strict proof such a charge requires. . . . That, however, there is jurisdiction in special cases to set aside a judgment for fraud on a motion for a new trial may be accepted. . . . If, however, for any special reason departure from the established practice is permitted, the necessity for stating the particulars of the fraud and the burden of proof are no whit abated and all the strict rules of evidence apply.

13.    These principles were recently affirmed by the High Court in Clone Pty Ltd v Players Pty Ltd (In Liq). In that case two applications to set aside a perfected judgment had been made, one in the proceeding that had been the subject of the perfected judgment, and the second in a new proceeding. The High Court said (footnotes omitted):

The second application was the appropriate way to proceed.  Even where the separate procedure of a motion for a new trial might be concurrently available, if fraud is alleged then a fresh action will generally be the appropriate application relying upon the power to set aside a perfected judgment of any court for fraud.  Independent proceedings, even where the application is to set aside an appellate court's decision, can permit “the whole issue [to] be properly defined, fought out, and determined”.

14.    The High Court further said that before a court could exercise its power to set aside a judgment on the ground of fraud there must be “a pleading, and proof, of actual fraud”; and that “[f]raud needs to be clearly pleaded and proved”.

Consequence of principles

15.    Although the respondents rely on fraud to set aside the Order, they have not done so by commencing a fresh action. More significantly, they have not filed any pleading in which they allege the fraud on which they rely. The allegation of fraud is made in the respondents’ written submissions. That, however, is incapable of substituting for a pleading in which fraud is distinctly alleged and particularised. For these reasons alone, it will be necessary to dismiss the application in a case to the extent it relies on fraud. That would not preclude the respondents from commencing a fresh proceeding to set aside the Order on the ground of fraud provided, of course, any allegations of fraud on which the respondents rely are properly pleaded and particularised.

Setting aside Order under slip rule

16.    As I have said elsewhere, the “slip rule” is the name commonly given to a rule that is contained in most rules of court that empowers the court to vary or set aside a judgment or order that has been entered where, because of an accidental slip or omission, there is an error in the judgment or order. The FCC Rules do not contain any such rule. The Federal Court Rules 2011 (Cth) (FC Rules), however, do. The rule is contained in r.39.05(h) of those rules. Because of s.43(2)(b) of the FCC Act, and r.1.05(2) of the FCC Rules, r.39.05(h) of the FC Rules applies to judgments and orders that have been made and entered by this Court. That rule provides that the “Court may vary or set aside a judgment or order after it has been entered if . . . there is an error arising in a judgment or order from an accidental slip or omission”.

17.    As I have also said elsewhere, the slip rule has been applied to an increasingly broad range of errors. In addition to clerical errors of judges or court staff who are involved in the drafting and entering of orders and judgments, the slip rule has been applied to errors made by litigants and their legal representatives. This was confirmed by the High Court in L Shaddock & Associates Pty Ltd v The Council of the City of Parramatta (No 2). In that case, the successful appellant (plaintiff), through inadvertence, did not apply to the High Court for an order that the respondent (defendant) pay interest on the amount the trial judge assessed would be payable by the respondent if the appellant had succeeded in its claim for damages against the respondent. The Court held it was “competent for this Court, pursuant to the slip rule, to amend the Court's previous order to make provision for interest upon the damages, to which the applicants have been held to be entitled”.

18.    Whatever its breadth, for the slip to operate there must be present an error that appears in a judgment, and that error must have arisen because of an “accidental slip or omission”. In his written submissions, Mr Kozlowski submits that the accidental slip arose from a failure by the respondents “to understand the true effect of the consent given in the proposed orders of 14 November 2017, signed after the agreement struck by the parties in a written agreement dated 23 October 2017”.

The evidence

19.    The evidence on which the respondents rely is contained in two affidavits made by the first respondent, Mr Jiang, one made on 25 April 2019, and the second made on 11 June 2019. In his first affidavit Mr Jiang deposes as follows:

a)        On 5 June 2015 Mr Mansour commenced proceedings in the District Court of New South Wales against the respondents. On 3 June 2016 the proceedings were dismissed and Mr Mansour was ordered to pay the respondents’ costs on an indemnity basis.

b)        By letter dated 11 July 2016 the respondents’ lawyer demanded that Mr Mansour pay the respondents’ costs of the District Court proceedings in the amount of $41,621; and on 18 July 2017 the respondents commenced proceedings in the Local Court to recover these costs.

c)        In the meantime, on 14 July 2016, Mr Mansour commenced this proceeding in the Federal Court of Australia. The proceeding was subsequently transferred to this Court.

d)        On 23 October 2017 Mr Mansour telephoned Mr Jiang, said he wanted to “stop this”, and suggested he and Mr Jiang meet. The two met and had lunch. Mr Mansour produced a document, and words to the following effect were spoken:

JM:     “If you copy this then sign it we can finish it.”

Me:     “OK”

JM:     “you walk away and I walk away and nobody pays money to the other. I don’t pay the Local Court statement of claim you sent me,”

Me:     “OK”

e)        Mr Jiang copied the document Mr Mansour had produced and then he and Mr Mansour signed it. The document is as follows:

As discussed with Mr Yong Jiang, we all agreed discontinued to proceeding the Court matter. As agreed by the mutual agreement by both parties. Signed and sealed by Mars legal

23/10/2017

f)        Mr Jiang “believed this to be the end of the matter between Joe and me and my wife”; and that by signing the document Mr Jiang believed Mr Mansour and he had agreed “to walk away from the Court case and neither of us would pay the other money”. At that time, all the evidence in this proceeding had been filed, and the matter had been set down for hearing on 28 November 2017.

g)        About two weeks later Mr Mansour telephoned Mr Jiang and he told him that they had to go to court soon, he will ring Mr Jiang, but Mr Jiang should not call his solicitor, Mr Kozlowski. Mr Mansour told Mr Jiang: “When we go to Court you just say yes to wanting to finish the court case. Just trust me. . . . Remember, just say ‘yes’ to what you are asked about ending the court case”.

h)        Before “the Court day”, Mr Mansour went to Mr Jiang’s house and gave him a piece of paper. Mr Mansour said: “We have to sign another paper for the Court. You and Shelly sign it two times”. Mr Jiang and the second respondent, Ms Niu, signed the document. The document was headed “Consent Judgment” and was in the prescribed “Form 1” provided by the FCC Rules. It was as follows:

Terms of Judgment made by the Court by consent:

1.  Judgment for the applicant against the defendant in the sum of $360,998.27 $258,461.86 inclusive of interest and costs.

2.  All previous costs orders are vacated.

3.  Vacate the hearing listed to commence on 28 November 2017.

4.  No order as to costs

i)         Mr Jiang says that when he signed this document “I did not realise that I had changed the agreement of 23 October 2017”.

20.    In his second affidavit Mr Jiang says that on 23 October 2017, being the “night that Joe and I signed the settlement exhibited at page 74 of my first affidavit”, Mr Jiang told Mr Mansour he would pay him $100,000 “to settle the argument”. Mr Jiang also deposes to matters relating to the assessment of a bill of costs issued by Ms Kozlowski. He annexes a statutory declaration by Mr Mansour stating that he would act on behalf of the respondents in “Federal Circuit Court case no. SYG2531/2018”. Mr Jiang further says:

When we settled the proceeding for $100,000 I gave up my right to sue Joe Mansour for the costs in the District Court Proceeding Judgment

Was there a slip or omission?

21.    As Mr Jiang’s evidence stands, it does not raise any arguable case that the Order was made as a result of any accidental slip or omission. Although Mr Jiang refers to signing a document which provided for the making of the Order by consent, Mr Jiang says nothing about the orders I made on 21 November 2017. He says nothing about whether he was aware I made any orders on that day or, if he was so aware, whether he had an understanding of the orders I had made and, if he had any understanding, what was his understanding. It might be that Mr Jiang is relying on the Court drawing an inference that Mr Jiang was aware this Court did make an order disposing of the proceeding and that the order that was made reflected the agreement he claims he made with Mr Mansour. There is no reasonable prospect, however, that the Court would draw such inference given that I made the Order in open Court in the presence of Mr Jiang and Ms Niu.

22. A further difficulty with the respondents relying on that r.39.05(h) of the FC Rules is that it is not possible to identify the error the respondents claim is contained in the Order. Does the error consist of the inclusion in the Order of words that ought not to have been included or the omission of words that ought to have been included or both? That question has not been posed let alone answered by the applicants. And the difficulty is compounded by Mr Jiang having given two different accounts of what he says he believed he and Mr Mansour agreed on 23 October 2017. In his first affidavit Mr Jiang says he believed he and Ms Niu would walk away from the court case with neither of them having to pay money, whereas in his second affidavit Mr Jiang says he agreed to pay Mr Mansour $100,000.

23.    What I say in the previous two paragraphs only addresses Mr Jiang’s affidavits. There is, however, other evidence. First, there is evidence that does not appear to be disputed that the respondents and Mr Mansour entered into a deed of settlement dated 9 November 2017. A copy of the deed is annexed to an affidavit made by Mr Mansour. The deed provides for the payment by the respondents to Mr Mansour of amounts totalling $258,461.86 in twelve months. It also provided for the parties consenting to judgment in terms of the Order. Mr Jiang says nothing in his affidavits about this deed, or the circumstances in which he signed the deed.

24.    A second class of evidence relates to the circumstances in which I made the Order. On 14 November 2017 there was filed with the Registry the signed consent orders which, as docket judge, were provided to me. At my direction my associate sent an email to the lawyers on the record inquiring about an aspect of the consent orders – it referred to judgment against “the defendant” when there were two respondents. Mr Kozlowski responded on the same day by email expressing surprise by the proposed orders “because they run contrary to our client’s instructions”. Mr Kozlowski continued as follows:

Neither the writer nor this firm had knowledge of the proposed orders or that they were being signed and filed until receiving your email.

Note that the first and second respondents are Chinese with limited understanding of written English. We would not be surprised to be instructed by the Respondents that they did not understand that by signing the proposed orders, they were admitting the alleged debt.

We shall seek instructions as to the background of events leading to the signing of the Orders.

25.    At 8:54 pm on 14 November 2017 Mr Jiang and Ms Niu sent an email to my associate, to Mr Mansour, his lawyer, and to Mr Kozlowski as follows:

We told Mr Kozlowski to stop working for us 2 weeks ago.

The consent judgment we have signed is agreed between us and Mr Mansour.

We have signed fixed consent orders tonight which mr [sic] Mansour will take again to court tomorrow.

Orders should have said ‘respondent’.

Sorry for the confusion caused.

26.    This correspondence was drawn to my attention and I directed my associate to relist the matter before me on 21 November 2017. As I have already noted, Mr Jiang and Ms Niu appeared. I informed them I had listed the matter so that I could satisfy myself that Mr Jiang and Ms Niu understood what they signed. I satisfied myself that they understood what they had signed and the significance of my making orders in terms of the document they have signed. Neither Mr Jiang nor Ms Niu has given evidence to suggest they did not understand what I said to them at the hearing of 21 November 2917 before I made the Order.

27.    Thus, in addition my being satisfied that the evidence on which the respondents rely do not arguably support the contention that the Order was made because of a slip or omission on the part of the respondents, this evidence suggests that the respondents were aware of the nature and effect of the Order, and that it was not made through any omission or slip on their part.

Conclusion and disposition

28. I am satisfied the respondents do not have any reasonable prospects of setting aside the Order on the ground of fraud, or of the Court making an order under that r.39.05(h) of the FC Rules to amend the Order. I propose, therefore, to order that, pursuant to s.17A(2) of the FCC Act, the application in a case filed on 16 May 2019 be dismissed. There is no reason why costs should not follow the event. I propose, therefore, to also order that the respondents pay Mr Mansour’s costs.

I certify that the preceding twenty-eight (28) paragraphs are a true copy of the reasons for judgment of Judge Manousaridis

Date: 28 June 2019