HIS HONOUR: On 3 February 2015, Ball J delivered a judgment, Greenhills Securities Pty Limited v Loire Consultants Pty Limited [2015] NSWSC 13, following a hearing which had commenced on 15 December 2014 and continued interrupted on 18 and 19 December 2014, of an application by Greenhills for orders setting aside three creditors' statutory demands, the first and second relating to the same debt claimed by the first defendant Loire Consultants Pty Limited, and the third relating to a debt claimed by the second defendant David William Dixon. Order 2 made by his Honour set aside a demand dated 3 February 2014. Order 1, which was not opposed, set aside Loire's demand of 2 September 2014, which was not pressed. Order 3 set aside Mr Dixon's demand of 19 September 2014, and also ordered that the defendants pay the plaintiff's costs of the proceedings.
The present application, to which I shall come, is concerned only with order 2 made by his Honour, in respect of Loire's second statutory demand. That demand claimed a debt of $207,594.27, and was described in the schedule to the demand in the following terms,
On or about 5 March 2014, the creditor advanced $207,594.27 to the Company trading as the trustee of the Anton Holdings Unit Trust for which it was personally liable and repayable upon demand.
The basis on which that demand was set aside was that there was a genuine dispute as to the existence of the debt in question, such dispute being that the creditor was said to be Mr Dixon, not Mr Loire, in circumstances where the advance had been made by Loire in its capacity as trustee of the Lovedale Road Unit Trust ("LRUT") and that Loire had been replaced as such trustee by Mr Dixon. In time, it will be necessary to elaborate on that ground.
By an interlocutory process, since amended, but originally filed on 13 February 2015 - that is to say within 14 days after the orders made by his Honour were entered - the defendants Loire and Mr Dixon sought orders, inter-alia, setting aside the orders made by Ball J. Ultimately, when the matter came on for hearing before me, only Loire and not Mr Dixon appeared, and only order two made by his Honour was the subject of challenge.
The application invoked (NSW) Uniform Civil Procedure Rules 2005, r 36.15 and r 36.16, but was framed as an application to set aside the orders made by his Honour on the basis that they had been obtained by fraud and, alternatively, as an application to reopen after judgment to adduce further evidence.
UCPR, r 36.15(1), provides that an order of the Court in any proceedings may, on sufficient cause being shown, be set aside by order of the Court if the order was made irregularly, illegally or against good faith. Generally speaking that rule, though it encompasses the concept of a judgment entered against good faith, is concerned more with the process and procedural justice pursuant to which an order is made, rather than the substantive merits of the order. Thus, it has been found that a judgment may be against good faith if, being a default judgment, it is signed contrary to the terms of a contract between the parties, or if a plaintiff signs judgment in the absence of notice to the defendant where the plaintiff ought to have known that the matter was contested and the absence was due to some mistake [Cash v Wells (1830) 1 B & Ad 375; 109 BR 826; Roach v B & W Steel Pty Ltd (1991) 23 NSWLR 110, 113]. Similarly, where an admitted claim by a secured creditor was not disclosed in the course of procuring payment out of funds in court, the order was held to have been obtained in good faith [Xenos v National Australia Bank Ltd [2007] NSWSC 973]. In Kendell v Carnegie [2006] NSWCA 302; (2006) 68 NSWLR 193, Hodgson, Bryson and McColl JJA agreed that the phrase "against good faith", while not susceptible of exhaustive definition, related to the circumstances in which the judgment was given, rather than the circumstances in subsequent opposition to the application to set the judgment aside.
At least in the ordinary course, an application to set aside a judgment on the ground that it has been obtained by fraud should be made in separate substantive proceedings claiming that relief [Flower v Lloyd (1877) 6 Ch D 297; Ainsworth v Wilding [1896] 1 Ch 673; Cole v Langford [1898] 2 QB 36; Goldring v National Mutual Life Association of Australasia Limited (1916) 22 CLR 336]. The observations of Barwick CJ in McDonald v McDonald (1965) 113 CLR 529, 533 appear to suggest that that course is not invariably essential, but those observations were in the context of the ability of an appellate court to intervene on appeal, rather than the context of an application before the trial Court to set aside the judgment. However, in Spies v The Commonwealth Bank of Australia (1991) 24 NSWLR 691, Handley JA (with whom Mahoney JA agreed at 693) pointed out (at 696-697) that if an application was made (as it was in that) by motion in the proceedings, then the requirement for separate proceedings could be waived (as indeed it was at first instance in that case, though the Court considered ultimately that separate proceedings should be brought). His Honour referred to Ainsworth v Wilding as indicating that any such objection had to be taken promptly. Thus, while such proceedings ought ordinarily be brought by separate proceedings, it is not necessarily fatal that they be made by application in the proceedings in which the judgment was obtained.
It is also often said that the mere giving of false evidence does not of itself warrant the setting aside of the judgment for fraud. The cases were reviewed by Williams J in Cabassi v Ferrando (1940) 64 CLR 130 at 147. His Honour's observations suggest that there are cases, described by his Honour as exceptional, in which false evidence may warrant the setting aside of the judgment for fraud.
As it seems to me, there can be little clearer case of a judgment obtained by fraud than the judgment procured by the misleading of the Court through deliberately false evidence. Whether, however, that is a matter that will warrant setting aside of the judgment for fraud, will depend on a number of matters. First, the evidence must go to a material matter. Secondly, it would have to be established that the Court acted on the false evidence in giving the judgment. Thirdly, it would be necessary that the falsity of the evidence was not in issue in the original proceedings because had it been in issue then, it would be contrary to principles of finality to reopen the issue retrospectively.
Those, I think, are the types of exceptional circumstances that Williams J had in mind when his Honour, with reference to Charles Bright & Co Ltd v Sellar [1904] 1 KB 6 (at 12), explained that "actions to set aside a judgment on the ground of fraud do not invite the Court to re-hear upon the old materials, but fresh facts are brought forward, and the litigation may well be regarded as new and not appellate in its nature, because not involving any decision contrary to the previous decision…". His Honour was prepared to accept that an allegation in the statement of claim that the false evidence did deceive and fraudulently mislead the Court was an allegation of special circumstances sufficient to invoke the jurisdiction.
Insofar as it is sought to impugn a judgment on the basis that fresh evidence has become available, as distinct from on the basis of fraud, the appropriate course is by way of appeal [Re Barrell Enterprises [1972] 3 All ER 631].
UCPR, r 36.16, provides by subrule (1) that the Court may set aside or vary an order if the notice of motion for the setting aside or variation is filed before entry of the order, and by subrule 3(a) that if a notice of motion for the setting aside or variation of an order is filed within 14 days after the order is entered, the Court may determine the matter and, if appropriate, set aside the order under subrule (1) as if the order had not been entered. This application was made within that time limit and, accordingly, the Court is given the wide discretion contained in subrule (1) to review, correct or alter an order to which it applies [De L v Director-General, Department of Community Services (NSW) (1997) 190 CLR 207, 215; Harvey v Phillips (1956) 95 CLR 235]. However, that relatively wide discretionary power, in the sense that it is not constrained by the limited circumstances in which other powers to set aside or vary an order are subject, is itself subject to the significant limitations imposed by the public interest in finality of litigation, and thus it has been said that the power is to be exercised with great caution where its practical effect would be to enable a significant rehearing [Autodesk Inc v Dyason (1992) 173 CLR 330; Wentworth v Woollahra Municipal Council (1982) 149 CLR 672; Wentworth v Rogers (No 9) (1987) 8 NSWLR 388; Re Barrell Enterprises, 27]. Thus, the power will not generally be exercised to permit a general reopening of the case after final judgment has been delivered [Smith v NSW Bar Association (1992) 176 CLR 256]. Nor would it be usually exercised in favour of a party who has been at fault in failing to raise the matter at an earlier stage [Autodesk Inc v Dyason; Wentworth v Woollahra Municipal Council; Aktas v Westpac Banking Corporation Ltd (No 2) (2010) 241 CLR 570]. Typically, though not exclusively, the power is exercised when there has been some oversight or misapprehension that can be corrected, thus avoiding the necessity of an appeal to do so, and where it does not involve a general reopening of the case.
All those matters are guidelines as to how the discretion is to be exercised, but they do not necessarily preclude its exercise even to permit a general reopening in an appropriate case.
Against that background as to the nature of the power, it is appropriate to turn to the factual circumstances in which they are sought to be invoked. First, it is necessary to understand in a little more detail the basis upon which Ball J came to the conclusion that there was a genuine dispute as to the relevant debt. Greenhills submitted that there was a genuine dispute on two bases: first, that there was a genuine dispute about to whom the debt was owed; and, secondly, that there was a genuine dispute concerning whether the amount claimed had been disbursed in accordance with directions given by Mr Dixon in one capacity or another on behalf of Loire or the trust. Greenhills was precluded from relying on the second basis because it had not sufficiently been raised in its s 459G affidavit, and thus the Graywinter principle foreclosed Greenhills' ability to agitate it. It was on the first basis that the application succeeded. In that respect, his Honour found first, and it does not appear to have been significantly in dispute, that the advance to Greenhills was made by Loire in its capacity as trustee of the LRUT. Secondly, his Honour concluded that there was a real question as to the identity of the present trustee of the LRUT and in particular whether it was Loire or Mr Dixon, and thus a real question as to whether any right to recover the advance belonged to Mr Dixon, rather than to Loire.
To reach that conclusion, his Honour referred to evidence given by Mr Unicomb, the principal of Greenhills, to the effect that Mr Dixon had replaced Loire as trustee of the LRUT on or about 21 September 2010, although in an earlier affidavit he had referred to the date of 1 February 2011. As I understand it, at least from the judgment, no documentary evidence supported that contention, but nor was any attempt made to cross examine Mr Unicomb in respect of it.
His Honour then observed that Mr Dixon did not swear an affidavit in response to Mr Unicomb's evidence, but the current director of Loire, a Mr Mahommed, did so. His Honour extracted from Mr Mahommed's affidavit's evidence that "Between 1 September 2009 and 1 September 2010 and as from 1 February 2010, Loire was trustee of the LRUT." He then observed that Mr Mahommed also said, somewhat inconsistently, that "between 1 September 2010 and 1 February 2011 Mr Dixon was trustee of the LRUT." His Honour observed that Mr Mahommed had no records to corroborate what he testified in that respect. His Honour concluded that "based on this evidence there is real uncertainty whether Loire or Mr Dixon is a trustee of the LRUT".
His Honour's extract of Mr Mahommed's evidence was entirely accurate. Counsel for Greenhills pointed to those parts of Mr Mahommed's evidence, and relied on them as assisting Greenhills' case. But he could find nothing in the record of the proceedings before his Honour to indicate that any submission was made endeavouring to explain what Mr Mohammad had said.
As it seems to me, it seems highly likely that in the first passage extracted from Mr Mohammad's evidence, the reference to 1 February 2010 is a mistake, and should be a reference to 1 February 2011. There would then be no inconsistency between the two passages, and they would make much more sense read that way. As will become apparent, there is at least another reason for thinking that that is what was intended.
As I have said, Mr Unicomb was not cross-examined before his Honour and, at least as best I can ascertain, there was no documentary evidence tendered (save perhaps for a draft unsigned document) to corroborate either version, and his Honour was faced with effectively an untested conclusion expressed by Mr Unicomb and testimony from Mr Mohammad which contained on its face an inconsistency, on one view of which it was unclear who the present trustee was.
The present application propounds, first, a statutory declaration purportedly made by Mr Dixon on 21 September 2010 to the effect that Loire, resigned as trustee and Mr Dixon became the new trustee on that date. The statutory declaration bears a signature that has the appearance of Mr Dixon's signature and is witnessed by Mr Unicomb. There is strong evidence on the present application that Mr Dixon's signature was a forgery, and a strong basis for inferring that Mr Unicomb knew it to be so, as he signed as a purported witness to it. The evidence suggests that the signature was cut and pasted by electronic means from another document.
The evidence on the present application also propounds a caveat lodged in respect of real property of which Mr Dixon is the registered proprietor, on 9 March 2011, by Loire Consultants as caveator, providing an address for service of Unicomb & Associates and claiming an interest "as the newly appointed trustee of the Lovedale Unit Trust pursuant to a deed of retirement and appointment of trustee dated 1 February 2011" between "David William Dixon retiring trustee and Loire Consultants Pty Ltd new trustee". That caveat is significant evidence to the effect that even if - as Mr Unicomb contends, and Mr Dixon does not deny though he does not admit - Mr Dixon replaced Loire as trustee in or about September 2010, the position was reversed with effect from 1 February 2011 by the deed of retirement and appointment of new trustee referred to in that caveat. That then would be entirely consistent with Mr Mohammad's evidence, if read in the way in which I have suggested it might well be read.
Insofar as the application relies on fraud, it is important to recognise that as the case was argued, the fraud was said to be the forgery of Mr Dixon's signature on the statutory declaration. But that statutory declaration was never deployed in the proceedings before Ball J. The circumstance that it may well now be demonstrable that the signature on it was a forgery may well be adverse to Mr Unicomb's credit and may found a suspicion that his evidence was false, but it does not prove that his evidence was false.
There are, aside from that statutory declaration, other indicia that Mr Dixon was appointed trustee of the trust in or about September 2010. The caveat to which I have referred, and the deed of retirement and appointment to which it refers, assume that he had been so appointed. Moreover, a deed of variation of the trust dated 1 December 2010 describes Mr Dixon as the trustee of the trust as at that date. Indeed, as I have observed, Mr Dixon does not deny, though he does not admit, that he was appointed trustee. What he now significantly disputes is that he remained trustee after 1 February 2011.
But the mere circumstance that Mr Unicomb may have been implicated in the forging of Mr Dixon's signature, if that were established, would not demonstrate that Mr Dixon was not appointed trustee in the way in which Mr Unicomb says he was. In other words, it would not demonstrate that the judgment was obtained by fraud, and it would not prove that Mr Unicomb gave false evidence on that topic.
As it seems to me, the much more viable claim that the applicant might have advanced was founded on the caveat and was me arguably a misapprehension of Mr Mohammad's evidence. (If there were such a misapprehension on the part of Ball J, it would be more than understandable in the circumstances, as neither party seems to have adverted to the possibility of the misstatement of the date in his evidence to which I have referred). It seems to me that if the caveat had been before his Honour, and if the explanation of Mr Mohammad's evidence which seems to me the preferable one had been raised, there might well have been a different result in that there then would have been documentary and testimonial evidence, all one way, to the effect that whatever might have happened in 2010, Loire was once again the trustee of the trust and thus a creditor. But it seems to me that that result could not conceivably be reached without cross-examination of Mr Unicomb, and if that material were to be received, it would be necessary to allow Greenhills an opportunity to adduce further evidence as to the status of the trustee after 1 February 2011.
All this illustrates that in reality, this is an attempt by an unsuccessful party to adduce evidence belatedly, after it had suffered adverse judgment, which it could and should have adduced at the hearing. Permitting it would necessitate a general reopening, including cross-examination at least of Mr Unicomb.
The evidence on this application included some slight evidence, albeit unchallenged, that Mr Dixon was ill or was unwell in December last year when the hearing before Ball J took place and unable to participate in it and that the solicitor for Loire was unaware of the contention that the signature on the statutory declaration was a forgery until he read Mr Dixon's affidavit of 9 February 2015. But the circumstance that Mr Dixon was unwell in December, and accepting for present purposes that he was so unwell as to be unable to participate in the hearing before Ball J, does not really explain his non-participation in an application to set aside the statutory demands that was filed on 25 September 2014, three months earlier, in respect of statutory demands, one of which was issued by him personally for a debt said to be due to him personally, albeit that it was signed on his behalf by someone who claimed to be his attorney.
Moreover, while the evidence addresses why Loire's solicitor was not aware of the alleged forgery, it provides no explanation as to why the caveat was not tendered at the hearing. The caveat was lodged by Loire, so presumably Loire had knowledge of it. In any event, it was a registered dealing, and being registered on Mr Dixon's property, presumably Mr Dixon had knowledge of it. While it is a slight inference and does not count for much in the scheme of things, it appears on the face of the caveat that the copy from which the copy that went into evidence originated, was obtained from the Land Titles Office on 4 July 2014. In short, there is no explanation, let alone an adequate explanation, as to why it was not tendered at the hearing. From the circumstances to which I have just referred as to its registration and availability, there is no reason to think that it was not at the least discoverable with the use of reasonable diligence on the part of Loire or someone acting for it.
The misapprehension of Mr Mohammad's evidence, if it be that, was the fault of Loire, on whose behalf the affidavit containing the error was prepared, and so far as I can ascertain, it was never pointed out by anyone who ought to have recognised it, namely on behalf of Loire.
Thus, while I am uncomfortable - because I suspect that had this material been put before the Court, a different result would very probably have ensued - a sufficient basis for permitting Loire to re-open and tender evidence, which it could and should have tendered at an earlier stage, has just not been established.
In reaching that conclusion, my discomfort is somewhat mitigated by two matters. The first is the nature of the proceedings and the effect of the relief sought; that is to say, no final right of the parties is being determined. All that has been held is that there is a genuine dispute in respect of the debt on the ground to which I have referred. It remains possible that even if the evidence were admitted, that after cross-examination of Mr Unicomb and other evidence, the Court might still find that there was a genuine dispute. In any event, Loire can still sue for the debt in the ordinary way.
The other mitigating matter is that applications of this kind are at least in some respects technical, and parties are often shut out of running issues because of the failure to address them at the first opportunity, of which the Graywinter principle is the clearest example and its application in this case an illustration.
For those reasons, the application must be dismissed with costs.
The Court orders that the interlocutory process filed 13 February 2015 as subsequently amended be dismissed with costs.
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Decision last updated: 18 February 2016