Short v Crawley (No 42)

[2009] NSWSC 1110

CITATION:	Short v Crawley (No. 42) [2009] NSWSC 1110
HEARING DATE(S):	1 and 2 October 2009
JUDGMENT DATE :	2 October 2009
JURISDICTION:	Equity
JUDGMENT OF:	White J
EX TEMPORE JUDGMENT DATE:	2 October 2009
DECISION:	Refer to paras 85 and 86 of judgment.
CATCHWORDS:	Practice and Procedure - application to vary consent orders providing for a stay of execution of orders until the conclusion of any and all appeals and for the provision of security - subsequent withdrawal of many grounds of appeal - whether jurisdiction to vary consent orders to permit execution of judgments no longer challenged and to allow plaintiffs to reduce their bank guarantee – whether jurisdiction should be exercised
LEGISLATION CITED:	Civil Procedure Act 2005 (NSW) Interpretation Act 1987 (NSW) Supreme Court Act 1970 (NSW)
CATEGORY:	Procedural and other rulings
CASES CITED:	Short v Crawley (No. 30) [2007] NSWSC 1322 Short v Crawley (No. 38) [2008] NSWSC 917 Short v Crawley (No. 39) [2008] NSWSC 1353 Short v Crawley (No. 33), 28 March 2008 R D Werner & Co Inc. v Bailey Aluminium Products Pty Ltd (1988) 18 FCR 389 Harvey v Phillips (1956) 95 CLR 235 Wilkshire v The Commonwealth (1976) 9 ALR 325 Adam P Brown Male Fashions Pty Limited v Philip Morris Inc (1981) 148 CLR 170 Morgan v 45 Flers Avenue Pty Ltd (1987) 11 NSWLR 573 FAI General Insurance Co Ltd v Southern Cross Exploration NL (1988) 165 CLR 268 Paino v Hofbauer (1988) 13 NSWLR 193 Fylas Pty Ltd v Vynal Pty Ltd [1992] 2 QdR 593 Alford v Ebbage [2002] QCA 194; [2003] 1 QdR 343 Dwyer v National Companies & Securities Commission (No. 2) (1988) 15 NSWLR 285 Hancock v Arnold [2009] NSWCA 19 Saul v Lin [2007] NSWSC 782 Brimaud v Honeysett Instant Print Pty Ltd (1988) 217 ALR 44
PARTIES:	Roslyn Short as executrix of the estate of the late Warwick Gordon Short & Anor v Christopher Crawley & 9 Ors
FILE NUMBER(S):	SC 2824/98
COUNSEL:	Plaintiffs: J T Gleeson SC with T M Thawley Defendants: W G Muddle SC
SOLICITORS:	Plaintiffs: Freehills Defendants: Bruce Stewart Dimarco Lawyers

IN THE SUPREME COURT
OF NEW SOUTH WALES
EQUITY DIVISION

WHITE J

Friday, 2 October 2009

2824/98 Roslyn Short as executrix of the estate of the late Warwick Gordon Short & Anor v Christopher Crawley & 9 Ors (No. 42)

JUDGMENT

1 HIS HONOUR: By a notice of motion filed on 14 September 2009, the plaintiffs seek to vary orders made on 26 November 2008. They seek to vary the terms on which certain of the orders of 19 December 2007 have been stayed, to permit Nabatu and the receiver of the Australian Youth Hotel partnership to have recourse to bank guarantees which secure payment of certain of the judgment debts. They also seek to vary an order requiring Nabatu to furnish a bank guarantee to secure the repayment of any sum which it might be found on appeal should be repaid by Nabatu to Mr Crawley.

2 The orders in question were made by consent. They are expressed to operate until the conclusion of any and all appeals. When the orders were made, substantially all of the orders of 19 December 2007 giving effect to my reasons in Short v Crawley (No. 30) [2007] NSWSC 1322, that were adverse to Mr Crawley or the other defendants, were the subject of appeal. Subsequently, all of the defendants’ grounds of appeal in respect of that judgment have been withdrawn and one ground has been added. The result is that only two of the orders of 19 December 2007, (being orders for the entry of judgment against Aldonet in favour of J & J O'Brien and Marsico) are now challenged by the defendants.

3 The plaintiffs say that this is such a material change of circumstances that they should be entitled to enforce the judgments which are no longer challenged. They say that even if the defendants wholly succeed in their remaining grounds of appeal, namely, the grounds concerning the judgment against Aldonet, the grounds concerning the valuation judgment, (Short v Crawley (No. 38) [2008] NSWSC 917) and the grounds concerning the judgment dealing with interest on interest, (Short v Crawley (No. 39) [2008] NSWSC 1353), the maximum extent by which it could be found that the price payable for Nabatu’s shares in J & J O'Brien and Marsico should be reduced is $4,200,254. The plaintiffs say that the maximum extent by which the judgments in favour of Nabatu and the receiver of the Australian Youth Hotel partnership could be reduced is $470,733.35. Those judgments are the subject of guarantees provided by the defendants. The plaintiffs say they should be entitled to enforce those judgments for the difference.

4 The price paid by Mr Crawley to acquire Nabatu shares in accordance with the Court's orders was $11,540,453.42. Nabatu has furnished a bank guarantee in that amount to secure repayment of any amount it might be ordered to repay Mr Crawley following the conclusion of any and all appeals in respect of the amount paid by him to Nabatu on the purchase of the shares. Hence the plaintiffs contend they should be permitted to replace the existing bank guarantee with a guarantee of $4,200,254 or thereabouts.

5 The defendants submit that the orders of 26 November 2008 were the result of a negotiation and embodied a contract between the parties. They submit that the court has no power to change the contract the parties have made. Alternatively the defendants say that if there is such a power, it should not be exercised. If, contrary to those submissions, the orders are to be varied, the defendants submit that nonetheless security should remain in place for a sum of $8,374,244 plus interest from 30 September 2009.

Background

6 In Short v Crawley (No. 30) I found at [791] that a receiver should be appointed to the assets of the Australian Youth Hotel partnership and Marsico should pay the receiver $1,242,762 plus interest from 4 July 1997. I found at [834] and [1322] that Marsico should be ordered to pay Nabatu $1,321,533 together with interest, in respect of the profits from the sale of the Racecourse Hotel. I found that Mr Crawley, Vensel, Gladewood and Aldonet were liable to pay moneys to Marsico and J & J O'Brien on various causes of action, and that Nabatu was entitled to an order that Mr Crawley purchase its share in J & J O'Brien and its share in Marsico at a value of one third of the net assets of those companies, such net assets to reflect the judgments to be entered in favour of and against those companies.

7 On 19 December 2007 I made 43 declarations and orders to give effect to my reasons in Short v Crawley (No. 30). These included judgments in favour of the receiver of the Australian Youth Hotel partnership and in favour of Nabatu in relation to its half share in the Racecourse Hotel partnership. One of the orders, namely order 34, concerned a claim which had been conceded during the hearing that Marsico account to Nabatu for half the profits derived from trading the Racehorse Hotel under licence (Short v Crawley (No. 30) at [85], [817], [835]).

8 The orders of 19 December 2007 provided for a stay of enforcement of the orders in favour of Marsico, J & J O'Brien and Trudale against the other defendants.

9 The defendants appealed from the orders of 19 December 2007. On 28 March 2008 I dealt with an application by the defendants for the stay of the orders requiring Marsico, Vensel and Mr Crawley to pay moneys to Nabatu and to the receiver of the Australian Youth Hotel. At that date Nabatu was entitled to receive directly, or indirectly through its one-third share of the Australian Youth Hotel partnership, a little in excess of $3,829,000.

10 I ordered a stay except in respect of order 34 (Short v Crawley (No. 33), 28 March 2008). Order 34 was for an amount of $94,694.32 as at 19 December 2007, to be paid by Marsico to Nabatu.

11 There followed a further hearing to determine the value of the shares in Marsico and J & J O'Brien which Mr Crawley was ordered to purchase.

12 In my judgment of 5 September 2008 (Short v Crawley (No. 38)), I determined that as at 1 August 2008 Nabatu's share in Marsico should be valued at $5,068,362 and its share in J & J O'Brien at $6,374,772.

13 On 12 September 2008 I ordered that by 5 December 2008, Mr Crawley pay Nabatu those sums with interest and that Nabatu provide Mr Crawley with duly executed share transfers. On the same day I gave directions to deal with any application that the plaintiffs might wish to make for further orders in respect of the stay of 28 March 2008. I also gave directions for any application the defendants might wish to make for the stay of the orders of 12 September 2008 requiring completion of the share purchases.

14 Any issues concerning the lifting of the stay ordered on 28 March 2008, or imposing a stay of the orders of 12 September 2008, were resolved by consent.

15 On 26 November 2008 by consent I made the orders which are the subject of the present application. The orders I made on 26 November 2008 by consent are as follows (after a correction made on 12 December 2008 by the removal and insertion of an incorrectly placed bracket):

“ By consent, the Court orders:
1. On or before 5 December 2008, at a time agreed between the parties, Mr Crawley pay to Nabatu by bank cheque the sum of $11,443,134.00 (being the amount payable by Mr Crawley to Nabatu pursuant to Order 1(a) of the orders dated 12 September 2008 (‘ the 12 September 2008 Orders ’)) plus interest calculated pursuant to the rates provided for in Order 1(a) of the 12 September 2008 Orders from 1 August 2008 up to the date of payment (‘ the Crawley Share Payment ’).
2. At the same time as Mr Crawley complies with order 1 above, Nabatu provide to Mr Crawley:
a. the share transfers referred to in Order 1(b) of the 12 September 2008 Orders; and
b. an irrevocable bank guarantee in favour of the Principal Registrar of the Supreme Court of New South Wales in the amount of the Crawley Share Payment, which can be called upon by the Principal Registrar to repay to Mr Crawley any part of the Crawley Share Payment ordered to be repaid by Nabatu to Mr Crawley following the conclusion of any and all appeals (‘ the Plaintiff Bank Guarantee ’).
3. Within 72-hours of receipt of the Plaintiff Bank Guarantee, Mr Crawley lodge the Plaintiff Bank Guarantee with the Principal Registrar of the Supreme Court of New South Wales.
4. At the same time as Mr Crawley complies with order 1 above, Mr Crawley provide to Nabatu an irrevocable bank guarantee in favour of the Principal Registrar of the Supreme Court of New South Wales to secure the payment by Marsico and Mr Crawley to Christopher John Palmer as receiver of the Australian Youth Hotel Partnership (‘ the Receiver ’) of the amounts ordered to be paid pursuant to Order 16(c) and Order 31 of the orders dated 19 December 2007 (being the sum of $2,638,379.01 plus interest at rates prescribed under Schedule 5 of the Uniform Civil Procedure Rules 2005 (NSW) (‘ the UCPR ’) from 19 December 2007 up to the date of payment (‘ the Receiver Bank Guarantee ’)), which guarantee can be called upon by the Principal Registrar to pay any amounts which Marsico and Mr Crawley are ordered to pay the Receiver at the conclusion of any and all appeals.
5. Within 72-hours of receipt of the Receiver Bank Guarantee, Nabatu lodge the Receiver Bank Guarantee with the Principal Registrar of the Supreme Court of New South Wales.
6. At the same time as Mr Crawley complies with order 1 above, Mr Crawley provide to Nabatu an irrevocable bank guarantee in favour of the Principal Registrar of the Supreme Court of New South Wales in the sum of $2,949,552.62 to secure the payment by Mr Crawley, Vensel and Marsico to Nabatu of the amounts ordered to be paid pursuant to Orders 16(d), 17(c), 18 (in relation to 17(c)), 19(c), 21 (in relation to 19(c)), 33 and 34 of the orders dated 19 December 2007 plus interest at rates prescribed in Schedule 5 of the UCPR from 19 December 2008 up to the date of payment (‘ the Nabatu Bank Guarantee ’), which can be called upon by the Principal Registrar to pay to Nabatu the amounts which Mr Crawley, Vensel and Marsico are ordered to pay Nabatu at the conclusion of any and all appeals.
7. Within 72-hours of receipt of the Nabatu Bank Guarantee, Nabatu lodge the Nabatu Bank Guarantee with the Principal Registrar of the Supreme Court of New South Wales.
8. The order made on 28 March 2008 staying orders 16(c), 16(d), 17(c), 18 (in relation to 17(c)), 19(c), 21 (in relation to 19(c)), 31, 33 and 34 made on 19 December 2007 until further order of the Court be varied as follows:
‘Orders 16(c), 16(d), 17(c), 18 (in relation to 17(c)), 19(c), 21 (in relation to 19(c)), 31, 33 and 34 made on 19 December 2007 be stayed until the conclusion of any and all appeals .’
9. Within 14 days of the conclusion of any and all appeals and after all necessary adjustments, if any, have been made and satisfied the Principal Registrar shall return for cancellation the:
a. Plaintiff Bank Guarantee;
b. Receiver Bank Guarantee; and
c. Nabatu Bank Guarantee,
to the relevant banking institution/s that has/have provided those bank guarantees.
In these orders (and the orders made on 28 March 2008 as varied by these orders) ‘the conclusion of any and all appeals’ refers to the time:
a. when it is not possible for further appeals (nor any applications for special leave) to be lodged; or
b. when no appeal has been lodged within the prescribed time frame for the lodging of such an appeal. ”

16 There was a mistake in order 8 of 26 November 2008 which I did not pick up at the time, and which I assume none of the parties picked up at the time. The mistake was in the description of the order made on 28 March 2008. That order had not stayed order 34 made on 19 December 2007.

17 Hence the regime to which the parties agreed on 26 November 2008 provided for a stay of all of the orders requiring payment, except the order requiring payment for the shares. That stay was on the basis that bank guarantees to secure the payments would be provided. The plaintiffs agreed to an order that Nabatu provide a bank guarantee to secure repayment of any amounts that might need to be repaid to Mr Crawley for the shares.

18 The guarantees could be called upon only at the conclusion of "any and all appeals." The orders defined that time as the time when it was not possible for further appeal, nor for any applications for special leave, to be lodged, or when no appeal had been lodged within the prescribed time for the lodging of an appeal.

19 The orders included a stay of an order which had not previously been stayed, and which had been conceded at the hearing.

20 A question arose as to the calculation of the amounts for which the Receiver Bank Guarantee and the Nabatu Bank Guarantee should be provided.

21 On 12 December 2008 I dealt with an application by the defendants for a declaration that the orders of 26 November 2008 do not authorise the giving of interest on that part of a judgment which includes a component of pre-judgment interest. I refused to make such a declaration (Short v Crawley (No. 39)).

22 The purchase by Mr Crawley of Nabatu shares in Marsico and J & J O'Brien was effected on 15 December 2008. Mr Crawley paid Nabatu $11,540,453.32.

23 On 17 December 2008 Nabatu provided Mr Crawley with a bank guarantee from Westpac in that amount. On the same day Mr Crawley provided Nabatu with a bank guarantee in the amount of $3,242,891.61 pursuant to order 6. He also provided Nabatu with a bank guarantee of $2,00,771.72 in accordance with order 4, that is, the Receiver Bank Guarantee. All the bank guarantees were in favour of the Principal Registrar.

24 On 27 April 2009 the defendants filed an amended notice of appeal (the Second Further Amended Notice of Appeal). It withdrew a number of grounds of appeal in relation to the "liability judgment", Short v Crawley (No. 30). On 7 August 2009, a Third Further Amended Notice of Appeal was filed. As further amended following an order of the Court of Appeal on 4 September 2009, the grounds of appeal in relation to that judgment are confined to the claim concerning Aldonet.

25 The plaintiffs have filed a cross-appeal in relation to findings in the defendants’ favour in sections of the liability judgment, Short v Crawley (No. 30), concerned with the Elizabeth Street Centre Development (section 2), and the Springsley Share purchase and Aldonet loan (section 9).

26 In relation to the Elizabeth Street Centre Development, one of the plaintiffs’ grounds of cross-appeal involves a challenge to my conclusion that all shareholders had acquiesced in Mr Crawley’s acting for an improper purpose by exposing Marsico and J & J O’Brien to potential losses on their guarantees of Trudale, when he intended to assert a beneficial interest to 80 percent of the shares in Trudale if the Elizabeth Street Centre Development were profitable.

27 The defendants contend that if the plaintiffs succeed on at least this ground of appeal in relation to the Elizabeth Street Centre Development, Mr Crawley would be entitled to contribution from the estate of Mr Short of 50 per cent of any amount which Mr Crawley was found liable to pay to Marsico and J & J O'Brien.

28 Because Nabatu has a one-third shareholding in Marsico and J & J O'Brien, the consequence of the plaintiffs succeeding on at least that ground of cross-appeal, and of Mr Crawley also succeeding in his claim for 50 percent contribution, would be that the economic burden of one-sixth of the total amount of compensation would be borne by the plaintiffs' interests, assuming that the plaintiffs fail in their further cross-appeal concerning the percentage shareholding upon which the purchase price should be calculated.

29 The defendants calculate that with interest the total amount of the Elizabeth Street development losses is in the order of $20,000,000. If both Mr Crawley and the estate of Mr Short are required to contribute $10,000,000 to the companies, and Nabatu is entitled to a one third share of that amount, then the moneys payable to Nabatu will increase by approximately $6.7 million, but the plaintiffs, considered as a group, will be out-of-pocket to the extent of about $3.3 million. The defendants say that if any adjustment is to be made to the orders of 26 November 2008 to reflect the changes in the grounds of appeal, then the adjustment should take account of their claim for that amount plus interest.

Issues

30 The principal issues on this application are first, whether the orders of 26 November 2008 merely express the consent of the parties to those orders, or whether the orders embody and give effect to an underlying binding contract between the parties (see R D Werner & Co Inc. v Bailey Aluminium Products Pty Ltd (1988) 18 FCR 389 at 390-391).

31 Secondly, if the orders embody a contract, whether as properly construed, the stay in order 8 continues until the conclusion of any appeal at all in the proceeding, whether or not the appeal concerns the orders the subject of order 8. Similarly, there is a question as to whether the Receiver Bank Guarantee and the Nabatu Bank Guarantee can be called on only when every appeal has been concluded, or whether those guarantees can be called on at the conclusion of any appeal concerning the orders to secure the performance of which the guarantees were provided.

32 The third question, which arises if the orders embody and give effect to a contract, is whether the Court has power to vary the order. If there is power to vary the order there is no question, but that the parties' agreement is relevant to the exercise of the discretion whether or not to do so.

33 The fourth question is what matters have to be satisfied before such a discretion should properly be exercised, and whether the withdrawal of almost all of the defendants' grounds of appeal is a sufficient basis for exercising such a power, if it exists.

34 If those questions are answered favourably to the plaintiffs, there is a question as to how Mr Crawley's potential claim for contribution should affect the exercise of the power.

Consent Orders Embody a Contract

35 As might be expected, the orders of 26 November 2008 were the result of negotiations between the solicitors for the parties. Those negotiations occurred from about 24 September 2008. The result of the negotiations was that security was provided to Nabatu and to the receiver of the Australian Youth Hotel Partnership and to Mr Crawley. Whilst the court could have ordered a stay, or could have refused a stay, on conditions, including a condition for the provision of security, it is at least highly doubtful that the court could have ordered the parties to procure the bank guarantees which they agreed to provide.

36 The negotiated nature of the arrangement also appears from the fact that the plaintiffs agreed to a stay of Order 34, which was not the subject of an existing stay, and related to an amount which was not in dispute from the time it was conceded at the hearing.

37 The terms of the orders ultimately made on 26 November 2008 were substantially settled by 30 October 2008 in a counter-offer from the plaintiffs' solicitors. On 3 November 2008, the defendants' solicitors advised that the defendants consented to the terms of the plaintiffs' counter-offer, and asked for draft consent orders.

38 In these circumstances I think it is clear that the consent orders do give effect to a contract between the parties (see R D Werner Co Inc v Bailey Aluminium Products at 391-392).

Construction of the Orders

39 It was submitted for the plaintiffs that properly construed the Principal Registrar is entitled to call upon the Receiver Bank Guarantee and the Nabatu Bank Guarantee and the stay in relation to the orders the subject of those guarantees has ceased. Essentially it was submitted that the expression "until the conclusion of any and all appeals" where it appears in paragraphs 4, 6 and 8, means the conclusion of any and all appeals in relation to the orders the subject of each paragraph.

40 The same construction would be given to the same phrase in order 2, but it is clear in relation to order 2 that there has been no conclusion of any or all appeals in relation to the orders the subject of that paragraph. However, there is no longer on foot any appeal in relation to the orders of 19 December 2007 concerning the Receiver Bank Guarantee and the Nabatu Bank Guarantee.

41 I do not agree with this submission. It involves the implication of words in each of the relevant paragraphs which are not there. The words "and all" in the phrase "until the conclusion of any and all appeals" appears to be added for emphasis. The "conclusion" of any and all appeals would not arise until the time for applying for special leave to appeal to the High Court had expired, or, if an application for special leave were made, until that application was decided, and, if special leave were given, until the appeal to the High Court was decided. As was submitted for the defendants, it is highly unlikely that the parties would have expected that the High Court would entertain an appeal on any but a few selected issues of principle.

42 It is also of some relevance that whilst the notice of appeal as filed on 26 November 2008 sought to set aside orders 8 to 35 made on 19 December 2007, including Order 34, there was no ground of appeal, and there could not have been any ground of appeal, in relation to that order.

43 It is also relevant to determining the parties' intention, as objectively ascertained in the agreement embodied in the consent orders, that the stay, which until then had been a stay until further order, was expressed to be a stay to operate until the conclusion of any and all appeals, and not until further order.

44 I am of the view that the agreement between the parties was that the guarantees could not be called upon until the conclusion of any appeal, whether an appeal in relation to the particular orders dealt with in paragraphs 4, 6 and 8, or not.

Power to Vary Consent Orders

45 At that time the parties did not anticipate coming back to the court for Nabatu to be able to enforce any of the orders the subject of paragraph 8.

46 The question then is whether the court has power to vary the orders notwithstanding that they were made by consent, after a negotiation involving the provision of security that could not have been obtained by a court order, except as a condition of a stay or refusal of a stay.

47 Where parties agree to final orders to settle their dispute the compromise embodied in such consent orders cannot be set aside except on a ground upon which a simple contract can be set aside (Harvey v Phillips (1956) 95 CLR 235 at 243-244).

48 A different rule applies to interlocutory orders. In Wilkshire v The Commonwealth (1976) 9 ALR 325 at 330 and 332, Muirhead J held that the court (there the Supreme Court of the Northern Territory), has inherent power to regulate its own practice and procedures, which includes the power to review and set aside consent orders, provided that the court does not thereby interfere with substantive, as distinct from procedural, rights already conferred on a party.

49 In Adam P Brown Male Fashions Pty Limited v Philip Morris Inc (1981) 148 CLR 170, Gibbs CJ, Aickin, Wilson and Brennan JJ, said (at 177-178):

" Considerable argument was directed to the question whether a court has power, otherwise than in the case of mistake operative at the time of giving it to release a party from an undertaking, at least in the absence of the consent of the other party. But in our opinion a court undoubtedly has such a power. Just as an interlocutory injunction continues ‘until further order’, so must an interlocutory order based on an undertaking. A court must remain in control of its interlocutory orders. A further order will be appropriate whenever, inter alia, new facts come into existence or are discovered which render its enforcement unjust. ” (Citation of authorities omitted.)

In that case the undertaking was expressly given until the determination of the action or further order (see at 171.)

50 In Morgan v 45 Flers Avenue Pty Ltd (1987) 11 NSWLR 573, Kirby P, with whom Hope and Priestley JJA agreed, held that there was power to set aside an order dismissing an appeal, which order had been made pursuant to self-executing orders made by consent for the dismissal of the appeal if money were not paid into court within seven days to procure the printing of the appeal books. Kirby P held that the parties' agreement was relevant to the Court's exercise of its discretion under the rules, but could not exclude a jurisdiction conferred by the rules including, in that case, jurisdiction to abridge or extend any time fixed by an order, whether the application was made before or after the time expired. The same power is now found in rule 1.12 of the Uniform Civil Procedure Rules. His Honour also observed (at 579) that to the extent an order is made pursuant to a contract, the contract might impliedly incorporate the power under the rules to vary the order as the justice of the case might require.

51 That there is power under r 1.12 to extend or abridge time, irrespective of an agreement of the parties to the contrary, is firmly settled (FAI General Insurance Co Ltd v Southern Cross Exploration NL (1988) 165 CLR 268; Paino v Hofbauer (1988) 13 NSWLR 193). Whether the power should be exercised is a different question.

52 Similarly, in R D Werner v Bailey Aluminium Products the Full Court of the Federal Court held that notwithstanding that the consent order there in question gave effect to an underlying contract between the parties, the Court had power to override the terms of the contract by altering a time limit (in that case time for the provision of security for costs), and could do so even though the time had passed.

53 In Werner, Jenkinson J (at 399-400) observed that the agreement there in question did not contain an implied term that a party could not invoke the court's power to vary the consent orders. His Honour observed that such a term would be implied in a compromise of a cause, but not in the agreement with which the Court was there concerned dealing with the provision of security for costs and the consequences of non-compliance.

54 The defendants rely on the judgment of McPherson SPJ (as his Honour then was) in Fylas Pty Ltd v Vynal Pty Ltd [1992] 2 Qd R 593. In that case McPherson SPJ held that the court had no power to relieve a party of an undertaking given pending the final hearing of the proceedings, but not expressed to be given until further order, where the undertaking gave effect to a contract. His Honour distinguished Adam P Brown Male Fashions Pty Ltd v Philip Morris Inc partly on the ground that the undertaking before him was not expressed to be until further order, and primarily on the ground that the undertaking before him was the result of, and formed the terms of, an agreement between the parties; and their agreement was unlimited as to duration (at 601).

55 Fylas Pty Ltd v Vynal Pty Ltd certainly supports the defendants' submission of the absence of power to make the orders sought. In that case, McPherson SPJ did not refer to, and may not have been referred to, Werner v Bailey Aluminium Products. His Honour thus did not consider whether it could be said that because the parties’ agreement was for the making of interlocutory orders which are inherently susceptible to variation, that in the absence of an indication to the contrary from either the words used or the subject matter of the agreement, the parties are presumed not to have intended to displace the court's power to set aside or vary the interlocutory orders.

was not followed by the majority of the Queensland Court of Appeal in Alford v Ebbage [2002] QCA 194; [2003] 1 Qd R 343. Fryberg J quoted from the reasons of McPherson SPJ in Fylas Pty Ltd v Vynal Pty Ltd (at 601) that:

" It may fairly be assumed and implied that the undertakings are intended to subsist only until trial or determination of the action. Apart from that, it cannot be assumed or implied that they were intended to be limited only until further order of the Court. The absence of any such express limitation of the duration of the undertakings means that the Court is without power to discharge or vary the undertakings except in circumstances in which, independently of the order of the Court, the undertakings, or the agreement that gave rise to them, would be discharged or varied without the consent of both parties. "

Fryberg J said of this paragraph:

“ [61] In my judgment, it is not correct to approach the dictum of McPherson S.P.J. quoted above in a literal sense. In Philip Morris , the High Court held that a Court has power to relieve against an interlocutory undertaking. There is no suggestion in the reasoning that the existence of this power is dependent upon or even affected by whether the undertaking was given pursuant to a contract. The nature and terms of any such contract may well affect how the discretion to grant relief is exercised, but they cannot control the existence of the power. Parties cannot deprive the Court of its jurisdiction by contract. ”

57 Likewise Wilson J said (at [69]-[70]):

“ [69] The undertaking being interlocutory in nature, the Court had inherent power to release the appellants from it. As the majority of the High Court said in Adam P. Brown Male Fashions Pty Ltd v. Philip Morris Inc .

‘Considerable argument was directed to the question whether a court has power, otherwise than in the case of mistake operative at the time of giving it to release a party from an undertaking, at least in the absence of the consent of the other party. But in our opinion a court undoubtedly has such a power. Just as an interlocutory injunction continues ‘until further order’, so must an interlocutory order based on an undertaking. A court must remain in control of its interlocutory orders. A further order will be appropriate whenever, inter alia, new facts come into existence or are discovered which render its enforcement unjust: cf. Woods v. Sheriff of Queensland ; Hutchinson v. Nominal Defendant ; Chanel Ltd v. F. W. Woolworth& Co. Ltd . Of course, the changed circumstances must be established by evidence: Cutler v. Wandsworth Stadium Ltd . ’
[70] In my view the principle so expressed in Adam P. Brown applies even where an undertaking records an antecedent agreement, or an aspect of it, as happened in this case. Insofar as Fylas may be authority for the contrary view, I respectfully disagree. The question whether to release the appellants from their interlocutory undertaking required the exercise of a judicial discretion. ”

58 There was a dispute as to whether the orders of 26 November 2008 should properly be characterised as interlocutory.

59 I think it is clear that if the court ordered a stay of execution of a judgment, on condition that the defendant provide security, or refused to order a stay of execution of a judgment on condition that the plaintiff provide security against the event of his being required to repay a judgment sum after appeal, such an order for a conditional stay, or conditional refusal of a stay, would be interlocutory, and would be liable to be varied in the event of a change of circumstances. Such orders do not determine the substantive rights or liabilities of parties. They only determine how and when such rights and liabilities as have been determined by the court at first instance, or may be determined by a court on appeal, will be enforced.

60 In this case the parties agreed, in effect, to orders both imposing and refusing a stay on conditions, and agreed to the performance of such conditions. That does not appear to me to change the essential nature of the orders. It remains the case that the orders do not determine the substantive rights or liabilities of the parties. In my view the orders are properly characterised as interlocutory orders. That characterisation is not affected by the fact that the orders are to remain in place after the determination of the appeal to the Court of Appeal, until the determination of any application for special leave to appeal to the High Court and any appeal to it. They remain interlocutory orders protective of the jurisdiction of the court and the necessity to prevent injustice in respect of matters coming within the court's cognisance (Dwyer v National Companies & Securities Commission (No. 2) (1988) 15 NSWLR 285).

61 In my view the court has power to vary the consent orders of 26 November 2008 on the following bases. First, as to all of the orders, on the basis of the court's inherent jurisdiction to vary or set aside interlocutory orders to regulate its procedures to do justice between the parties. Secondly, as to orders 4, 6 and 8, it has power to vary the orders by abridging time pursuant to UCPR r 1.12. Thirdly, I am of the view that it has power to set aside or vary the order pursuant to UCPR r 36.16(3).

62 That rule provides:

“ 36.16 Further power to set aside or vary 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. ”

63 It was submitted for the defendants that r 36.16(3)(a) precludes the Court from setting aside or varying the orders. That was so, it was submitted, because the orders determined a "claim for relief" or a question arising on a "claim for relief" as that expression is defined in the Civil Procedure Act 2005 (NSW).

64 Section 3 of the Civil Procedure Act provides that “claim for relief”

“ includes:
...
(e) a claim for the determination of any question or matter that may be determined by the court; and
(f) any other claim (whether legal, equitable or otherwise) that is justiciable in the court. "

65 A claim to stay or to enforce a judgment is a question or matter that may be determined by the court, and it is a claim which is justiciable. The same can be said of virtually any interlocutory order.

66 The definition of "claim for relief" applies to the construction of rule 36.16(3) except insofar as the context or subject matter otherwise indicates or requires (Interpretation Act 1987 (NSW) s 6). The expression “claim for relief” is used in a wide variety of contexts in the Civil Procedure Act and the Rules. For example, under rule 5. 3, the court may order preliminary discovery against a prospective defendant if it is established, amongst other things, that the prospective defendant may have a document that can assist in determining whether or not the applicant is entitled to make a “claim for relief” against that person. The same expression, “claim for relief” is used in the context of rules concerning a judicial officer acting as an examiner. If expenses are not paid the Court can make an order staying the proceedings so far as they concern any “claim for relief” by that party (r 24.4). The expression is used in rules concerning the trial of separate questions (Pt 29), and in applications for summary judgment or summary dismissal. These examples of the different contexts in which the expression is found are not exhaustive.

67 In my view, the context of r 36.16 indicates a contrary intention to the phrase having the full width of the defined expression. Thus in Hancock vArnold [2009] NSWCA 19, the Court of Appeal (Ipp, McColl and Basten JJA) said of r 36.16(3) (at [10]) that:

" Given its context, it is more likely that the distinction intended to be drawn is between substantive relief, to which the power does not extend, and ancillary or consequential relief, to which it does extend. "

68 In Saul v Lin [2007] NSWSC 782, Hamilton J held (at [13]) that orders for costs do not fall within the classes of order that are excepted from the power conferred on the court by r 16.

69 In my view, the reference in the exception to the rule to the determination of any claim for relief, or any question arising on any claim for relief, is to the determination of substantive rights.

70 The power in r 36.16 has a long history. It was formerly in Pt 40, r 9(4) of the Supreme Court Act rules. The Supreme Court Act 1970 (NSW) had a definition of the expression "claim for relief" which included the same paragraphs as are now paragraphs (e) and (f) in that definition in s 3 of the Civil Procedure Act. But as far as I know, it has never been suggested that the effect of the rule was to preclude the court from setting aside or varying interlocutory orders. The practice of the court has always been to the contrary.

71 For these reasons I conclude the court does have power to vary the orders.

Principles for Exercising Power

72 Prima facie, it is to be inferred from the fact that the parties embodied their agreement in the form of consent orders, that they intended they should be able to invoke the Court's power to vary or set aside the orders. There are no express words indicating a contrary intention. There is nothing in the subject matter of the agreement inconsistent with that intention.

73 It is true that at the time the parties intended that the orders would operate until the conclusion of any and all appeals, as I have construed that expression. Consistently with that, they did not provide for the orders to operate until further order. But it does not follow that they intended to exclude whatever jurisdiction the court has to modify interlocutory orders.

74 The case is not one in which the court is asked to vary or set aside an order based on a contract when to do so will place the applicant in breach of contract. Nor is the court asked to set aside or vary the underlying contract. In such circumstances, in my view, exceptional circumstances are not required for the order to be varied or set aside (cp Paino v Hofbauer at 198 and 200-201). For the same reasons, it is not necessary for the plaintiffs to make out a case for setting aside the contract.

75 The ordinary rule of practice is that an application to vary an interlocutory order should be founded on a material change of circumstances, or the discovery of new material not reasonably available to a party at the time the order was made (Brimaud v Honeysett Instant Print Pty Ltd (1988) 217 ALR 44 at 46).

Variation of Orders

76 The withdrawal of almost all the defendants' grounds of appeal in respect of the liability judgment, such that there is no longer an appeal on foot in respect of the orders the subject of orders 4, 6 and 8, save in respect of the component of interest on interest, and there no longer being a prospect of Nabatu’s being required to refund to Mr Crawley more than $4,200,254 plus interest, is a material change of circumstances warranting intervention.

77 The power to vary the orders is to be exercised in accordance with s 56 of the Civil Procedure Act to facilitate the "just, quick and cheap resolution of the real issues in the proceedings."

78 It does not seem to me to be just that Nabatu not be able to enforce the judgments about which there is no longer a dispute, and not be permitted to call upon security for those judgments. Given that interest continues to run, and that the orders provide that the Receiver Bank Guarantee and the Nabatu Bank Guarantee provide security for interest up to the date of payment, it is hard to see what legitimate reason there could be, apart from possibly preserving a negotiating position, for refusing to allow the plaintiffs to enforce those judgments.

79 Likewise it is hard to see what legitimate reason there could be, other than perhaps preserving a negotiating position, for insisting on the continuance of the Plaintiff Bank Guarantee for a sum vastly in excess of any amount which the plaintiffs could be required to repay to Mr Crawley.

80 I do not accept that before the jurisdiction to vary the orders can be exercised it must be shown that the change of circumstances was unforeseeable. Perhaps anything in litigation is foreseeable. But when the orders were made there was no reason for the parties to expect that there would be such a wholesale withdrawal of grounds of appeal.

81 As I have said, Mr Crawley has a potential claim for contribution from the estate of Mr Short if the plaintiffs succeed on their ground of cross-appeal challenging my conclusion that all of the shareholders acquiesced in Mr Crawley’s acting for an improper purpose by exposing Marsico and J & J O'Brien to potential loss on their guarantees of Trudale, when he intended to assert a beneficial interest in 80 percent of the Trudale shares if the Elizabeth Street development was profitable.

82 I am told that the claim for contribution is not embodied in a notice of appeal or other formal process, but is raised in the defendants' submissions on appeal. It was not suggested that the claim was not reasonably arguable.

83 However, such a right of contribution would not affect the quantum of the Crawley Share Payment which Nabatu might have to refund. The plaintiffs have no security for the further sums to which they will be entitled if their cross-appeal succeeds. It does not appear to me that justice requires that Mr Crawley have security for a contribution claim against Mr Short's estate, which only arises if Nabatu's cross-appeal succeeds.

84 In my view the amount by which the bank guarantee provided by the plaintiffs should be reduced does not need to reflect the potential claim for contribution.

85 Because of the hour, and because senior counsel for the defendants said that he would need to obtain instructions in relation to the time from which the stay should be lifted, I propose to set out the orders I consider appropriate and will give the parties’ legal representatives the opportunity to consider those orders. I propose the following orders.

1. That upon Nabatu providing to Mr Crawley an irrevocable bank guarantee in favour of the Principal Registrar in the sum of $4,578,027 (being $4,200,254 plus 12 months’ interest at the rate currently prescribed by Schedule 5 to the Uniform Civil Procedure Rules) which guarantee can be called upon by the Principal Registrar to repay to Mr Crawley any part of the Crawley Share Payment as defined in order 1 of the orders of 26 November 2008 ordered to be repaid by Nabatu to Mr Crawley following the conclusion of any and all appeals, ("the Plaintiffs' Revised Bank Guarantee") the Principal Registrar is to return the Plaintiffs' Bank Guarantee to Westpac Banking Corporation for cancellation.

2. The time provided by orders 4 and 6 by which the Principal Registrar can call upon the Receiver Bank Guarantee and the Nabatu Bank Guarantee be abridged to 23 October 2009.

3. Order 8 of 26 November 2008 be discharged.

4. Order 16(c) and 31 dated 19 December 2007, as to the amount of $214,914.35 only, be stayed until the conclusion of any and all appeals.

5. Order 16(d), 17(c), 18 (in relation to 17(c)), 19(c), 21, (in relation to 19(c)), 33 and 34 dated 19 December 2007, as to the amount of $255,799.02 only, be stayed until the conclusion of any and all appeals.

[The parties’ legal representatives addressed. Orders were made as above but substituting 27 October 2009 for 23 October 2009 in order 2.]

86 I order that the defendants pay the plaintiff's costs of the Notice of Motion. The exhibits may be returned after 28 days.

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