Rothwells Ltd (In Liq) v Entity Group Ltd

[1990] FCA 669

NOT FOR DISTRIBUTION JUDGMENT No. bb.9.l .. SQ. ..

IN THE FEDERAL COURT OF AUSTRALIA )	1
AUSTRALIAN CAPITAL TERRITORY	i
1 No. ACT G 62 of 1990
DISTRICT REGISTRY	)
1
GENERAL DIVISION	)

BETWEEN: ROTHWELLS LIMITED (IN

LIOUIDATIONl

Applicant

AND: ENTITY GROUP LIMITED

First Respondent

GARRY ALAN CARTER

Second Respondent

BOMILFIELD PTY LIMITED

Third Respondent

CLANGROVE PTY LIMITED

Fourth Respondent

PINUTE OF ORDER

JUDGE MAKING ORDER :	Neaves J.	RECEIVED
2 9 NOV 1990
U T E OF ORDE8	I	27 November 1990

W R A L COURT OF

WERE MADE : Canberra PRINCIPAL REQlsTRY

Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.

m COURT 0 RDERS m I

1.  The application for leave to appeal from the judgment of the Supreme Court of the Australian ~ capital Territory given on 12 October 1990 be dismissed.

2.   The applicant pay the respondent's costs of the application.

IN THE FEDERAL COURT OF AUSTRALIA )

1

AUSTRALIAN CAPITAL TERRITORY	)
1 NO. ACT G 62 of 1990
DISTRICT REGISTRY	i
1

GENERAL DIVISION 1

BETWEEN: ROTHWELLS LIMITED (IN

LIOUIDATIONL

Applicant

AND: ENTITY GROUP LIMITED

First Respondent

GARRY ALAN CARTER

Second Respondent

BOMILFIELD PTY LIMITED

Third Respondent

CLANGROVE PTY LIMITED

Fourth Respondent

C O N : Neaves J.

m: 27 November 1990

REASONS FOR JUDGMENT

Rothwells Limited (In Liquidation) ("the applicant") has applied to the Court, pursuant to ss.24(l)(b) and 24(1A) of the Federal Court of Australia Act 1976 (Cth), for leave to appeal from an interlocutory judgment of the Supreme Court of the Australian Capital Territory (Higgins J. ) given on 12

October 1990. By that judgment, Higgins J. varied an order made by the Master on 6 September 1990 whereby the respondents were given leave to defend, on the basis of a defence which had been placed before the Master, an action, No. S.C. 401 of 1990, brought against them as defendants by the applicant as plaintiff. Paragraphs 3 and 4 of the order made by the Master were in the following terms:

"3. Leave is conditional upon the defendants, on or before 28 September 1990, either paying into Court the sum of $5 million, or providing security for the sum of $5 million in such form as the parties may agree, or in default of their agreement, as may be determined by the Registrar of the Court.

4.  If that condition is not complied with, leave be granted to the plaintiff to sign judgment against the defendants for the sums claimed in paragraph 25 of the Statement of Claim as amended."

Higgins J. set aside those paragraphs of the Master's order but otherwise dismissed the appeal.

The action in the Supreme Court was commenced by writ of summons issued on 9 July 1990, that writ being accompanied by a statement of claim in accordance with Order 4, rule 5 of the Rules of the Supreme Court of the Australian Capital Territory ("the Supreme Court Rules"). In that action the applicant claims, as against Entity Group Limited ("the

respondent") and Bomilfield Pty Limited ("the third	first respondent"), Garry Alan Carter ("the second
respondent"), judgment in the sum of $12,881,572.25 plus interest accruing from 9 July 1990 until the date of judgment and, as against Clangrove Pty Limited ("the fourth respondent"), a declaration that it is entitled to exercise all or any of its rights, powers and remedies under an agreement dated 31 January 1989 and referred to in the statement of claim as "the Clangrove Charge".
Relief is sought against the second respondent on the basis of an agreement dated 12 August 1988 as varied by an agreement dated 31 January 1989 ("the Varied Cash Advance Facility") whereby, it is alleged, the second respondent
agreed -

(a) to repay to the applicant the sum of $10,954,293 by the following instalments -

(i)      Slm on 31 January 1989;

(ii)      a further $lm on 28 February 1989;

(iii)      a further $2.5m on 28 April 1989;

(iv)      a further $2m on 31 October 1989; and

the balance of $4,454,293 on 31 December
1989;

to pay interest on the sum referred to in par.(a) above; and

(V)

(b)

(c) that the amount outstanding was to become immediately payable in the event of default in the payment of any one instalment.

It is alleged that the second respondent failed to pay any of the moneys owing to the applicant under the agreement as

varied other than the sum of $lm which became due on 31
January 1989.

Relief is sought against the first and third respondents on the basis of agreements dated 31 January 1989 whereby those respondents guaranteed to the applicant the due and punctual payment by the second respondent of the moneys payable by him to the applicant.

The respondents appeared to the writ on 16 July Pursuant to Order 15, rule 1 of the Supreme Court Rules, the applicant applied by summons dated 2 August 1990 for liberty to enter judgment against each of the respondents for the relief claimed in the statement of claim. That rule, so far as material, provides: 1990.

"1. (1) Where a defendant appears to a writ of summons specially indorsed with or accompanied by a statement of claim under Order 4, rule 5, the plaintiff may whether or not a defence has been delivered, on affidavit made by himself or by any other person who can swear positively to the facts, verifying the cause of action and the amount claimed (if any liquidated sum is claimed), and stating that in his belief there is no defence to the action except as to the amount of damages claimed (if any), apply to the Judge for liberty to enter judgment for such remedy or relief as upon the statement of claim the plaintiff is entitled to.

(2) The Judge may thereupon, unless the defendant satisfies him that he has a good defence to the action on the merits, or discloses such facts as are deemed sufficient to entitle him to defend the action generally, make an order empowering the plaintiff to enter such

remedy or relief claimed. judgment as is just, having regard to the nature of the Order 15, rule 6 of the Supreme Court Rules

provides :

"6. Leave to defend may be given unconditionally or

subject to such terms as to giving security or time or
mode of trial or otherwise, as the Judge thinks fit."

Pursuant to Order 15, rule 3, the respondents showed cause against the application for leave to enter judgment, relying for that purpose upon, inter U, an affidavit sworn by the second respondent on 29 August 1990. By that af fidavit the second respondent deposed to negotiations which he alleged took place towards the end of 1989 and which, he said, resulted in an agreement evidenced by certain correspondence between the parties dated 14, 15 and 19 December 1989 by which the Varied Cash Advance Facility was further varied. Those variations were said to include provisions whereby the Varied Cash Advance Facility was to be extended to 31 December 1990, all past due accrued interest and future interest was to be rebated in full provided the principal sum of $9,954,000 was repaid to the applicant by 31 December 1990 and the first respondent was to procure, on or before 30 June 1990, custodial arrangements satisfactory to the applicant in respect of $5 million worth of cash or other assets. The defence on which the respondents propose to rely alleges that a further variation was subsequently agreed whereby a floating

charge over the assets referred to was to be granted to the	applicant by the first respondent. The proposed defence
further alleges that in May 1990 the applicant informed the respondents that it no longer wished to proceed with the December 1989 agreement, that it would no longer accept any performance thereof, that it would not honour the obligations which were thereby created and that it would not accept performance by the respondents or any one or more of them under the terms of the December 1989 agreement. The respondents assert in the defence that they remain ready willing and able to perform the obligations respectively resting upon them pursuant to the terms of the December 1989 agreement. The respondents also plead a counter-claim against the applicant but it is unnecessary for present purposes to refer to the basis of that claim.
Some reference should be made to the position of the Master and his powers and the provisions relating to appeals from his judgments.
Section 30 of the Australian Ca~ital Territory Suvreme Court Act 1933 (Cth) provides that there be a Master
of the Court. Section 8 of that Act provides:

"8. (1) Subject to subsection (2) and sections 8AAA, 8AAB, 8AA and 8AB, the jurisdiction of the Supreme Court is exercisable by one Judge, sitting in Court, or, as provided by this Act, sitting in Chambers.

(2) Provision may be made by Rules of Court for the

jurisdiction of the Court that is exercisable in
accordance with subsection (1) to be exercisable:

(a)	in such cases, and subject to such conditions, as are specified in the Rules of Court, by the Master; and
(b)	in such cases, and subject to such conditions, as are specified in the Rules of Court, by the Registrar.

(3) In this section, 'Registrar' does not include a Deputy Registrar."

By Order 61A, rule 1.01 of the Supreme Court Rules, the jurisdiction of the Supreme Court that is exercisable in accordance with sub-s.8(1) of that Act may be exercised by the Master in the hearing and determination of applications under Order 15 of those Rules.

Sections EAAB, 8AA and 8AB of the Australian Capital Territory Supreme Court Act are not relevant for present purposes. Section 8AAA provides:

"8AAA. (1) For the purposes of the exercise of jurisdiction conferred on the Master by Rules of Court, this Act has effect, subject to this section, as if the court consisted of the Judges and the Master.

(2) A person who is dissatisfied with a judgment of the Master made in the exercise of jurisdiction conferred by Rules of Court may appeal, as prescribed by the Rules of Court:

(a)	in the case of an interlocutory judgment - to the Court constituted by one Judge; and
(b)	in the case of any other judgment - to the Court constituted by not less than 3 Judges.

(3) On an appeal under subsection (2), the Court:

(a)	shall have regard to the evidence given in the proceedings out of which the appeal arose; and
(b)	has power:  (i) to draw inferences of fact; and

(ii)in its discretion, to receive further evidence, which evidence may be taken:

(A) on affidavit;

(B) by oral examination before the

Court or a Judge; or

(C) otherwise under section 41.

(4) On an appeal under subsection (2), the Court may affirm, vary or set aside the judgment of the Master and may make such order as in all the circumstances it considers just."

In his reasons for judgment, Higgins J. first considered the nature of the appeal from the Master to a Judge of the Court. His Honour concluded that the appeal was neither an appeal strict0 sensu nor an appeal by way of hearing & m but a rehearing on the evidence before the Master regard being had to the findings and reasons of the Master, and with a discretion in the Judge to receive further evidence. It followed, so his Honour said, that House v. The

m (1936) 55 C.L.R. 499; v. Bartram [l9371 A.C. 473;

paterson v. paterson (1953) 89 C.L.R. 212; Gronow v. Gronow

(1979) 144 C.L.R. 513 and Do Carmo v. Ford Excavations Ptv Ltd [l9811 1 N.S.W.L.R. 409 had no application and that the

approach approved in Warren v. Coombes (1979) 142 C.L.R. 531

in respect of appeals by way of rehearing was appropriate.

His Honour proceeded to consider whether the
condition imposed by the Master was appropriate. He examined

the issues between the parties as they appeared from the

amended statement of claim and the proposed defence of the respondents and said:

"Clearly enough, on the refusal of the plaintiff to honour the December 1989 agreement, the defendants had the right to affirm that agreement or terminate it. (See Saraent v. PSL Develo~ments Ltd (1974) 131 C.L.R. 634.) If, as is here alleged, the wronged party affirms the agreement, that party remains bound by it but has a right to damages occasioned by the breach. The guilty party retains the right, of course, to insist on performance by the affirming parties notwithstanding its breach but subject to any waiver or estoppel that may be created thereby.

There are two aspects to that performance. There is the substantive obligation to pay the principal of $9,954,000.00 and the provision of security for the performance of that obligation. The other aspect is the time within which the obligations undertaken were to be performed. So long as the allegedly guilty party refuses to affirm its obligations, the defendants (the wronged parties) cannot perform theirs. In effect, the plaintiff is estopped from insisting on performance by the due dates, though it could reinstate the performance of those substantive obligations by giving due notice (see, e.g.

plaintiff. The plaintiff would be confined to such	although he would, of course, be indebted to the
recourse as it had under the previous agreement.
Accordingly, there is nothing in the nature of the claim or the defence to make it just and equitable that $5,000,000.00 security be provided.
Of course, if the defence was, in substance, very doubtful, security might be demanded, not by way of performance of the alleged mutual obligations but as a matter of 'good faith'. It could go to secure costs or
the claim or both. (See Fieldrank Ltd v. Stein [l9611 3
ptv Ltd [l9831 2 Qd R. 138.) The latter cases also demonstrate that, if the defence appears bona fide, leave to defend the claim which the defence would meet should be unconditional.
All E.R. 681; Phillivs v. Mineral Resources Develo~ments imposed the condition on the grant of leave to defend which he did. Accordingly, I set aside the orders of the Master making instead the orders which he made deleting orders 3 and 4."

v. combovuro Investments Ptv Ltd (1976) 136 C.L.R.

444-458). This has particular application to the obligation to perform by a certain date. (See also Bacon v. purcell (1916) 22 C.L.R. 307.) It has impliedly waived its right to insist on performance by the due dates. It has not, to date, sought to reinstate that obligation. The defendants do not have to prove that they could have performed when required but for the

breach by the plaintiff.	(See Foran v. Wiaht (1989) 168
C.L.R. 385; 64 A.L.J.R. 1.)

The requirement that the defendant Carter provides security now as a condition of the defendants being let in to defend accordingly, specifically performs the agreement the plaintiff expressly repudiates. It imposes an obligation the plaintiff could, on reasonable notice, reinstate on terms that it accept the remaining obligations under the December 1989 Agreement, but which it still refuses to do.

Of course, ultimately, the plaintiff may show an entitlement to repudiate that alleged agreement or demonstrate that it was not a binding arrangement. It could show it is entitled to insist on the previous agreement, the December 1989 apparently discharged, being performed. If that was the position there was never any obligation on Carter to provide $5,000,000.00 security

It may be noted that his Honour, referring to the variations in the terms of the agreement between the parties which the respondents alleged had been negotiated in December 1989 and May 1990, said it was the second respondent who was to provide security in cash or otherwise in the sum of $5,000,000 by 30 June 1990. An examination of the relevant documents, however, shows that, according to the respondents, it was the first respondent that was obliged to provide the security, not the second respondent.

The applicant has placed before this Court a draft notice of appeal indicating that, if leave to appeal is granted, the applicant will rely on the following grounds of appeal, identified in the notice of appeal by the numbers 3 to

8 inclusive -

"(3) His Honour misdirected himself in law as to the

principles to be applied upon the hearing of an
appeal from a Master to a Judge.

(4) His Honour erred in law in holding that authorities such as House v. The Kinq (1936) 55 C.L.R. 499, Gronow v. Gronow (1979) 144 C.L.R. 513 and Do Carmo v. Ford Excavations Ptv Ltd [l9811 1 N.S.W.L.R. 409 did not apply to such an appeal.

(5) His Honour erred in law in holding that such an appeal was regulated by authorities such as Tidswell v. Tidswell lNo.21 [l9581 V.R. 601 and Warren v. Coombes (1979) 142 C.L.R. 531.

(6) His Honour erred and/or misdirected himself in law as to the basis upon which, in the hearing of such an appeal, it was open to him to disturb the Master's exercise of discretion.

( 7 ) His Honour erred in holding that the Master should not have imposed as a condition of granting leave to defend to the respondents a condition that the respondents furnish security in the sum of $5,000,000.

( 8 ) His Honour erred and/or misdirected himself in law as to the principles to be applied in determining whether or not such a condition could or should be imposed on such a grant of leave to defend."

Counsel for the applicant said that, so far as he was aware, this was the first case in which an appeal had been taken from the Master to a Judge of the Supreme Court pursuant to s.8AAA of the relevant statute. He submitted that leave to appeal should be granted in order that a Full Court of this Court might determine the true nature of such an appeal.

In my opinion no sufficient ground has been made out
warranting the granting of leave to appeal against the order

made by Higgins J. It may be accepted that, in a case which

necessarily raised for determination the true nature of the
appeal from the Master to the Supreme Court constituted by one

Judge for which s.8AAA of the Australian Capital Territory Supreme Court Act provides, a strong case could be made for the granting of leave to appeal notwithstanding that a decision as to the true nature of such an appeal is a decision pertaining to the practice and procedure of the Supreme Court.

A careful reading of the reasons given by Higgins J. for his decision shows that his Honour did not consider it sufficient to warrant his varying the order made by the Master that, had the summons issued on behalf of the applicant for liberty to enter judgment against the respondents come before him in the first instance, he would have granted the respondents unconditional leave to defend the proceedings. His Honour considered the question whether error had been made by the Master in exercising the discretion vested in him and concluded, for the reasons which his Honour formulated, that "there is nothing in the nature of the claim or the defence to make it just or equitable that $5,000,000.00 security be provided". It is clear that his Honour took the view that the exercise by the Master of his discretion had miscarried.

It follows, therefore, that this is not a case in which the true nature of the appeal from the Master under s.8AAA will necessarily fall for decision if leave to appeal is granted. Further, the likely consequence of granting leave

substantive issues arising between the parties.	to appeal would simply be to delay the final hearing of the
I am also not satisfied that the actual decision which his Honour reached, namely that the respondents should have unconditional leave to defend the proceedings, is attended with sufficient doubt as to require its being reconsidered by a Full Court of this Court.
The application for leave to appeal is dismissed. The applicant must pay the respondents' costs of the application.

I certify that this and the preceding 12 pages are a true copy of the Reasons for Judgment herein of the Honourable Mr Justice Neaves .

fbk; -J Associate

Dated: 27 November 1990

Counsel for the applicant : Mr V. Bruce, Q.C.

and Mr G. Brzostowski

Solicitors for the applicant	: Minter Ellison
Counsel for the respondents	: Mr T. Johnstone

Solicitors for the respondents : Snedden Hall & Gallop

Date of hearing	: 9 November 1990
Date of judgment	: 27 November 1990