Perpetual Trustees Victoria Ltd v El-Sayed

[2010] NSWSC 783

CITATION:	Perpetual Trustees Victoria Ltd v El-Sayed [2010] NSWSC 783 This decision has been amended. Please see the end of the judgment for a list of the amendments.
HEARING DATE(S):	9 July 2010
JUDGMENT DATE :	16 July 2010
JURISDICTION:	Common Law
JUDGMENT OF:	Simpson J
DECISION:	1. The Notice of Motion is dismissed. 2. The defendants/cross-claimants are to pay the costs of the plaintiff and the cross-defendants.
CATCHWORDS:	PROCEDURE – procedure under rules of court – motions – self-executing orders – failure to comply – UCPR 36.16 – application to set aside orders – history of disregard of and defiance of orders of Court – no basis for setting aside orders – motion dismissed
LEGISLATION CITED:	Civil Procedure Act 2005 Uniform Civil Procedure Rules
CATEGORY:	Procedural and other rulings
PARTIES:	Perpetual Trustees Victoria Ltd (Plaintiff/First Cross-Defendant) Khaled El-Sayed (First Defendant/First Cross-Claimant) Kharyeih El-Sayed (Second Defendant/Second Cross-Claimant) George Karam (Second Cross-Defendant) Byblos Finance Pty Ltd (Third Cross-Defendant) Toufic Thomas Saadeldine Zreika (Fourth Cross-Defendant)
FILE NUMBER(S):	SC 2007/262074
COUNSEL:	P Newton (Plaintiff/First Cross-Defendant) R McKeand (First and Second Defendants/First and Second Cross-Claimants) L Reid (Second and Third Cross-Defendants) J A Rose (Fourth Cross-Defendant)
SOLICITORS:	Kemp Strang (Plaintiff/First Cross-Defendant) Simon Diab & Associates (First and Second Defendants/First and Second Cross-Claimants) Wotton & Kearney (Second and Third Cross-Defendants) Middletons (Fourth Cross-Defendant)

IN THE SUPREME COURT
OF NEW SOUTH WALES
COMMON LAW DIVISION

Simpson J

16 July 2010

2007/262074 Perpetual Trustees Victoria Ltd v Khaled El-Sayed & Ors

JUDGMENT

: By Notice of Motion filed on 4 May 2010 (the date is of some significance), the defendants (cross-claimants) seek orders, in the alternative, that:

(i) orders made by consent on 29 March 2010 be set aside; or

(ii) that the time for compliance with two of those orders be extended.

2 At the commencement of the hearing of the Notice of Motion, senior counsel for the defendants sought, firstly, leave to amend the Notice of Motion by adding to the first order sought “and any other order dismissing the cross-claim or defence” and secondly, an adjournment of the hearing of the Notice of Motion. After hearing extensive argument on the adjournment application, I declined to accede to it. I do not find it necessary to determine the application for amendment: if it were to be made, it would suffer the same fate as the order originally sought.

Background

3 The substantive proceedings were commenced by Statement of Claim filed on behalf of the plaintiff, Perpetual Trustees Victoria Ltd (to whom I will refer as “Perpetual”) on 18 July 2007. Perpetual claimed possession of real estate at Auburn, NSW. Perpetual also sought judgment in a money sum, together with interest, costs and charges, pursuant to an agreement pleaded to have been made on 10 November 2006. The operative initiating process is a Further Amended Statement of Claim (“the FASOC”) filed on 23 November 2009.

4 Perpetual is named as the plaintiff; Khaled and Khayrieh El-Sayed are named as, respectively, the first and second defendants. Except where there is a basis to differentiate between them, I will refer to them as “the El-Sayeds”.

5 Perpetual pleads that, on or about 1 November 2006, the El-Sayeds unconditionally guaranteed the payment of moneys owed to Perpetual by K & K El-Sayed Pty Ltd (“K & K”). The guarantee was secured by mortgage over the Auburn property. The Auburn property, I was told, is the residence of the El-Sayeds.

6 K & K defaulted and, Perpetual pleads, the El-Sayeds became liable to discharge their guarantee.

7 The El-Sayeds have filed a Defence to the FASOC. The Defence merely pleads a denial of the facts asserted in the FASOC (other than the corporate identity of Perpetual), and denies that Perpetual is entitled to the relief it claims.

8 The substance of the El-Sayeds’ response to Perpetual’s claim is set out in an Amended First Cross-Claim filed on 18 August 2009 (to which I will refer as the “Cross-Claim”). The Cross-Claim names Perpetual as first cross-defendant, George Karam as second cross-defendant, Byblos Finance Pty Ltd (“Byblos”) as third cross-defendant, and Toufic Thomas Saadeldine Zreika as fourth cross-defendant.

9 It pleads a defence of non est factum to Perpetual’s claim, asserting, firstly, that the relevant documents (identified as a guarantee and indemnity dated 1 November 2006, and the mortgage dated 10 November 2006) were not executed by the El-Sayeds and do not bind them and, secondly (and inconsistently although not alternatively) claims a declaration that the El-Sayeds signed the documents without knowing their nature and effect, and that they have no obligation to Perpetual.

10 The Cross-Claim further pleads that each of the second, third and fourth cross-defendants was an agent for Perpetual, and that Perpetual is therefore vicariously liable for their conduct.

11 As an alternative strand, the Cross-Claim pleads causes of action under the Australian Securities and Investments Commission Act 2001 and the Fair Trading Act 1987 (NSW) directly against the second, third and fourth cross-defendants.

12 It pleads three separate representations as misleading conduct. Each is alleged to have been made by the fourth cross-defendant, Mr Zreika.

13 The Cross-Claim is unspecific as to the role the El-Sayeds claim was played by Mr Karam and Byblos.

14 Some light is cast upon the El-Sayeds’ claims in an affidavit sworn by Khaled El-Sayed on 6 September 2008. It seems that this affidavit was filed in support of an application to set aside a default judgment which had been entered.

15 Mr El-Sayed outlined a history of property transactions, in the course of which he was introduced to Mr Karam. It seems that Mr Karam, operating through his company, Byblos, was a financial adviser. Mr Zreika was a solicitor.

16 I infer that, on the basis of the affidavit, judgment for possession was set aside, and the El-Sayeds were given leave to defend Perpetual’s claim which they did by filing the Defence to which I have referred, and the Cross-Claim.

17 What followed need not be detailed. The course of proceedings is set out in an affidavit sworn by Charles Thornley on 12 May 2010. Mr Thornley is a solicitor employed by Wotton and Kearney, who represent Mr Karam and Byblos. The affidavit sets out a lengthy history of orders of the Court, pursuant to which the El-Sayeds were required to file and serve documents relevant to their defence and cross-claim. It also reveals a lengthy history of non-compliance with those orders.

18 Middletons, solicitors, represent Mr Zreika. The evidence shows that Middletons have made continued and concerted efforts to obtain information about the El-Sayeds’ case. They have been unsuccessful in doing so.

19 The matter was listed before the Registrar for 29 March 2010. On Friday, 26 March, Wotton and Kearney sent, to Simon Diab and Associates (solicitors representing the El-Sayeds), orders that they proposed seeking from the Registrar. Mr Elee Georges, a solicitor employed by Simon Diab, promptly advised that he consented to the orders and asked Wotton and Kearney to mention the matter on his behalf at the hearing before the Registrar.

20 On 29 March 2010 the matter came before the Registrar. On that date the orders that had been proposed were made by consent. Five substantive orders were made. Two of them imposed obligations upon the El-Sayeds to take certain steps in the preparation of their case by 6 April 2010. By consenting to Order 2, the El-Sayeds committed themselves to provide “future” (sic – plainly “further”) answers to particulars requested on behalf of Mr Zreika on 25 September 2009. By consenting to Order 3, the El-Sayeds committed themselves to providing a verified list of documents and copies of discovered documents. Both were to be done by 6 April.

21 It is Order 5 that gives rise to the present application. It is, in effect, a self-executing order, in the following terms:

“5. Should the cross claimants fail to comply with orders 2 and 3 above, the Amended First Cross Claim filed 18 August 2009 and the Amended Defence is dismissed in its entirety.”

By reason of the computerisation of the Court’s record keeping system, the orders were entered on the day they were made.

22 The particulars were not provided by 6 April 2010. A verified list of documents and copies of discovered documents were not provided to Middletons by 6 April 2010.

23 Accordingly, the effect of Order 5, on its face, is that the Cross-Claim and Amended Defence are dismissed “in [their] entirety”.

24 The orders also provided for liberty to apply. I assume that this liberty was availed of, because the matter came before Johnson J, sitting as Duty Judge, on 23 April 2010. The solicitor appearing for the El-Sayeds made an oral application for extension of the time specified in Orders 2 and 3. He also sought an opportunity to file and serve a Notice of Motion to set aside or vary the 29 March orders, together with supporting evidence.

25 Having heard argument, Johnson J granted the El-Sayeds leave to file any notice of motion to set aside or vary the 29 March orders, together with evidence in support, by 4pm on 30 April 2010. It is for that reason that, at the outset of these reasons, I noted that the date of filing the Notice of Motion is of some significance. It was not filed by 30 April 2010; it was filed on 4 May 2010. That is entirely consistent with the history of the proceedings.

26 The application to set aside the orders is made under UCPR 36.16. That rule has a number of sub-rules, and it was a matter of some debate which one of them is applicable. It is therefore necessary to set out the rule in full:

“ 36.16 Further power to set aside or vary judgment or order
(1) The court may set aside or vary a judgment or order if notice of motion for the setting aside or variation is filed before entry of the judgment or order.
(2) The court may set aside or vary a judgment or order after it has been entered if:
(a) it is a default judgment (other than a default judgment given in open court), or
(b) it has been given or made in the absence of a party, whether or not the absent party had notice of the relevant hearing or of the application for the judgment or order, or
(c) in the case of proceedings for possession of land, it has been given or made in the absence of a person whom the court has ordered to be added as a defendant, whether or not the absent person had notice of the relevant hearing or of the application for the judgment or order.
(3) In addition to its powers under subrules (1) and (2), the court may set aside or vary any judgment or order except so far as it:
(a) determines any claim for relief, or determines any question (whether of fact or law or both) arising on any claim for relief, or
(b) dismisses proceedings, or dismisses proceedings so far as concerns the whole or any part of any claim for relief.
(3A) If notice of motion for the setting aside or variation of a judgment or order is filed within 14 days after the judgment or order is entered, the court may determine the matter, and (if appropriate) set aside or vary the judgment or order under subrule (1) as if the judgment or order had not been entered.
(3B) Within 14 days after a judgment or order is entered, the court may of its own motion set aside or vary the judgment or order as if the judgment or order had not been entered.
(3C) Despite rule 1.12, the court may not extend the time limited by subrule (3A) or (3B).
(4) Nothing in this rule affects any other power of the court to set aside or vary a judgment or order.”

27 Initially, reliance was placed upon sub-r (1). However, even as modified by sub-r (3A), that rule cannot be applicable. The Notice of Motion was not filed, on any view, within 14 days after entry of the orders. It was not suggested that sub-r (2) applied. Reliance was therefore placed upon sub-r (3). That rule confers a general discretion on the court to set aside any judgment or order except so far as it determines any claim for relief, or determines any question arising on any claim for relief or dismisses proceedings, or dismisses proceedings so far as concerns the whole of any part of any claim for relief.

28 That raises a question of the construction of Order 5. It was argued that, since no further step was taken after entry of the 29 March orders, no order for dismissal of the Cross-Claim or of the Defence has been entered. If that were so, then the orders of 29 March did not determine any claim for relief, or dismiss proceedings, and the power conferred by sub-r (3) is available.

29 It may well be that there is some question about the effect of Order 5, particularly in the light of the Court’s relatively new computerised recording system. However, that does not bear upon the question of whether orders made regularly and by consent ought now be set aside. It is the orders of 29 March that are the subject of the present decision.

30 Two affidavits were filed in support of the application, and reliance was placed upon an earlier affidavit, sworn by Mr Georges on 30 April 2010. A further affidavit of Mr Georges sworn 8 July 2010 was filed, as was an affidavit of Simon Diab, sworn the same date, 8 July 2010.

31 In his first (April) affidavit, Mr Georges referred to the 29 March orders and deposed:

“At the time the orders were made I believed that we had already complied with the orders.”

32 He then referred to a letter dated 29 March 2010 from Middletons concerning further replies to requests for particulars and said, again:

“At the time of receiving that letter I believed we had complied with the order to provide particulars with our letter dated 26 March 2010.”

33 In other words, put as plainly as it can be, Mr Georges deposed that, on 29 March 2010, he agreed to orders which required his firm to take steps that had already been taken. This I find to be a somewhat extraordinary proposition.

34 In his second (July) affidavit, Mr Georges deposed:

“On 29 March 2010, my understanding of order 2 made by consent on 29 March 2010 was that I only needed to provide further answers to request for particulars that the fourth cross defendant was entitled to receive. When I reconsidered the matter I believed that the fourth cross defendant was not entitled to further particulars, so I did not provide further particulars by 6 April 2010.”

He went on to depose that for a period from 19 April he was on leave and out of the office. Although his employer solicitor, Mr Diab, was briefed on files that needed work done during his leave, the El-Sayeds’ file was not one of those because Mr Georges believed that there was nothing to be done during that time.

35 He went on to depose that the El-Sayeds had been short of funds, borrowing money to fund legal costs, behind in paying invoices, and in the habit of paying fees “irregularly”.

36 He said that the further particulars sought had been provided by letter dated 8 July 2010 – three months after they were, pursuant to the agreed order, due.

37 The final affidavit was sworn by Simon Diab, the solicitor on the record for the El-Sayeds. He confirmed that Mr Georges had been on leave and said that during that time another employee left the employment. This cast additional burdens upon him with the effect that he had inadequate time to review files, including the El-Sayeds’ file.

38 Leaving aside the question whether the effect of Order 5 is to “determine any claim for relief” or “any question” (UCPR 36.16(3)(a)), relief under the rule is discretionary.

39 One matter advanced in support of the application concerns what was said to be the uncertainty of the meaning of the orders. Two matters were mentioned. One of these concerned that part of the order which provided that, in the event of default by the El-Sayeds, their Amended Defence would be “dismissed in its entirety”.

40 Reference was made to s 61(3) of the Civil Procedure Act 2005 which provides the court with powers to deal with non-compliance with directions. Relevantly, it provides the court with power to “strike out” any defence filed by a defendant, and give judgment accordingly. It does not confer jurisdiction on a court to “dismiss” a defence, and the language is inapposite.

41 That may be so. But these were orders, not formulated by the Court, but formulated by the parties and agreed to on behalf of the El-Sayeds. There is not the slightest doubt that when consent was given on behalf of the El-Sayeds to these orders, it was intended that, in the event of default, the El-Sayeds would not be permitted to pursue the matters raised in their defence. In agreeing to “dismissal”, they must be taken to have agreed to the striking out of the defence if they defaulted. I reject this argument. There is, in this respect, no uncertainty concerning the meaning of the orders.

42 The remaining argument concerns the operation or effect of Order 5: whether, in the circumstances, anything additional had to be done in order to enter an order for dismissal or striking out.

43 That is not a matter raised by the Notice of Motion. It may be, regrettably, that the orders I am about to make do not bring these proceedings to an end.

44 I have come to the firm conclusion that the Notice of Motion should be dismissed. No adequate reason has been given for the El-Sayeds’ non-compliance with the orders. Indeed, the affidavit evidence of Mr Georges is quite unsatisfactory. If he did, indeed, believe that he had complied with the obligations to which he committed the El-Sayeds, it was quite inappropriate for him to agree to orders that he do so by a date in the future.

45 Self-executing orders, whether imposed or consensual, are never made unless there has been a history of non-compliance and default by the party against whom they are made. Despite the fact that they are orders made against a party, they in fact represent a further indulgence afforded to that party after a number of – usually many – such indulgences. That is precisely the case here. Where a self-executing order is consensual, the fact of the consent signifies that the party against whom the order is made recognises and acknowledges the history of default and indulgences.

46 Self-executing orders are not made lightly. They have a purpose. The purpose is to bring home to the party against whom (in reality, in whose favour) they are made that this represents one last opportunity to bring the proceedings into order. They signify that neither the court nor (to the extent that they have a choice) the other parties, will tolerate further defiance of the rules or the court’s orders. The authority of the court is maintained only by enforcement of its orders.

47 It would require very unusual circumstances indeed to set aside self-executing orders. Where those orders are consensual, the circumstances would need to be highly unusual. The circumstances here are unusual only to the extent of the history of non-compliance.

48 This case demonstrates a history of disregard of and defiance of the orders of the Court. There is no basis for setting aside the orders.

49 The Notice of Motion is dismissed. The defendants/cross-claimants are to pay the costs of the plaintiff and the cross-defendants.

**********

16/07/2010 - Typographical error - initials of counsel wrongly listed - Paragraph(s) Cover sheet