(6) In this section, debt means any liquidated claim."
67 ETPW says the debt owed by it on the costs certificate, and the debt owed to it for goods sold and delivered are mutual debts which can be set off under this section. However, there is no question of ABD suing for its debt for costs. It has a certificate which, subject to any stay of enforcement, it can file as a judgment. There is no claim to which ETPW can assert the debt owed to it as a defence. However, I would prefer not to express a concluded view on this question. This is because the case falls to be decided under a different principle.
68 Notwithstanding ABD's submissions to the contrary, set-off of judgments for costs in different actions and in different courts has long been allowed, as has the set-off of judgments for costs against judgments for debt or damages. Such set-offs do not depend upon the statutes of set-off, or the general equitable jurisdiction, but on the control a court exercises over its own proceedings. The jurisdiction is explained in many cases dealing with claims by solicitors to assert a lien over a judgment for costs in favour of their client where the opposite party has obtained judgment against their client in the same or in other proceedings (Edwards v Hope (1885) 14 QBD 922 at 926-927; Reid v Cupper [1915] 2 KB 147; Puddephatt v Leith (No 2) [1916] 2 Ch 168 especially at 173-174; Re a Debtor No 21 of 1950 [1951] 1 Ch 612 at 617-618).
69 This jurisdiction is accurately described in R Derham, The Law of Set-Off, 3 ed, 2003, at paras 2.71-2.83. Although in Edwards v Hope, Brett MR and Bowen LJ (at 926 and 927) described the jurisdiction as an equitable jurisdiction, in truth, it was not a creature of the Court of Chancery, but was applied by all courts. Indeed, it was applied more liberally in the Courts of law than in the Court of Chancery owing to Lord Eldon's care that solicitors should not be deprived of liens for their costs (Puddephatt v Leith (No 2) at 174-179).
70 Dr Derham says at para 2.80 that: "The basis of the set-off is the general jurisdiction of the Court over the suitors in it", citing Mitchell v Oldfield (1791) 4 Term Rep 123; 100 ER 929. There, in a case where each party had recovered judgment against the other for separate debts in separate actions, Lord Kenyon CJ stated that the case did not depend on the statutes of set-off, but the general jurisdiction of the Court over the suitors in it.
71 Although there may be a set-off of the judgments for costs, this would still leave a substantial balance owing to ABD for costs. I accept that ABD was a creditor for that amount when its claim was filed. Nonetheless, it was then a defendant in proceedings in which ETPW seeks to restrain enforcement of the order for costs. If such an order is made, ABD will cease to be entitled to a debt presently payable. Either in its inherent jurisdiction or pursuant to subs 135(1) of the Civil Procedure Act, the Court may restrain further proceedings on the costs order.
72 The vice of ABD's winding-up application against ETPW is that even though, in my view, its current status as a creditor is not disputed on substantial grounds, its entitlement to retain that status is disputed on substantial grounds. Filing winding-up proceedings where the creditor's right to retain its status as a creditor, other than as a prospective or contingent creditor, is disputed on substantial grounds, is as much an abuse of process as where the existence of the debt is so disputed. As McLelland J said in L & D Audio Acoustics Pty Ltd v Pioneer Electronics Australia Pty Ltd (at 183), an abuse of process will arise, inter alia:
"if issues will arise in the winding up proceedings of a kind inappropriate for determination in such proceedings by a substantial contest as to the existence or enforceability of a debt relied on by the applicant, which should properly be resolved in separate proceedings brought for that purpose" (emphasis added).
73 When the proceedings were filed there was a substantial dispute arising from proceedings 2760/06 as to the enforceability of the debt for costs. Filing winding-up proceedings in those circumstances on the basis of such a debt was an abuse of process. That abuse is exacerbated in this case where, for the reasons previously given, the subjective intentions of ABD, as shown by its press release, were either to deter ETPW from proceeding with its claim to stay enforcement of the costs order, or to persuade a liquidator not to pursue such a claim, or to retaliate against the claim having been brought.
74 Further, for reasons previously given, I conclude from Mr James' oral evidence that he sought to use the winding-up jurisdiction to recover the disputed claim to damages. Neither Mr Brooks, nor Mr James was a director of ABD. The director of ABD is a Mr John James. He did not give evidence. Both Mr Brooks and Mr David James claimed to have caused the proceedings to be instituted. The intentions of each of them should be attributed to the company. Accordingly, I conclude that the purpose for which the proceedings against ETPW were instituted rendered the proceedings an abuse of process.
75 The premature publication of the proceedings is an additional ground.
76 It follows that the winding-up proceedings against each defendant should be dismissed. For reasons to be given shortly, I am of the view that the enforcement of the costs order should be stayed until the determination of the District Court proceedings or further order. It follows that ABD would not be entitled to file fresh winding-up proceedings without leave. In the circumstances of this case, having regard to its conduct to date, I think that there are reasonable grounds to apprehend that it may do so. I will, therefore, grant the injunctive relief sought by the defendants in proceedings 2876/06 in relation to any future application to wind up either defendant.
ETPW's Application to Stay Enforcement of the Costs Order
77 I turn then to proceedings 2760/06. The Court has jurisdiction to stay its own proceedings wherever the requirements of justice so demand. The jurisdiction is one to be exercised with caution. This jurisdiction extends to staying execution of judgments and orders. The jurisdiction is an inherent one and is, in any event, specified in wide terms in subs 135(1) of the Civil Procedure Act. The stay of execution of a judgment to give effect to a set-off between two judgment debts is but an instance of the control which the Court exercises over its own proceedings.
78 In this case, justice requires that not only should the two certificates for costs be set off against each other, but that ABD not be entitled to enforce its judgment for costs until it has paid the debt owed to ETPW, or until the District Court proceedings have been determined. The reasons for this appear from the earlier part of these reasons.
79 On the materials before me, ABD owes more to ETPW than ETPW owes to it. Even though that is not sufficient to give rise to a set-off in equity, and even though a stay of execution is tantamount to allowing a set-off, the jurisdiction to stay execution of the order for costs does not depend on satisfaction of the requirements for establishing an equitable set-off. There is no reason to think that it should, as an equitable set-off extinguishes or reduces the debt, whereas a stay merely precludes enforcement of the debt for so long as the stay operates.
80 In the present circumstances, no good ground has been demonstrated as to why ABD has not paid the money it owes ETPW. I have considered the plea in ABD's statement of claim in the District Court of an oral agreement, and I have considered the documents relating to that claim for a credit for unsold goods as referred to in the decision of Master Macready in Australian Beverage Distributors Pty Limited v Cranswick Premium Wines Pty Limited [2004] NSWSC 877. There is nothing in the statement of claim filed in the District Court which makes ABD's claim more plausible than it appeared to Master Macready or the Court of Appeal. As I have said, no further evidence was led about that claim before me.
81 I am of the view that justice requires that further proceedings to execute the orders for costs in proceedings 6444/04 (the winding-up proceedings), and the orders for costs in proceedings 2021/04 (the proceedings to set aside the statutory demand), and on appeal in proceedings CA 40762/04, be stayed until the final determination of proceedings in the District Court at Newcastle (No. 7/2005), or further order. In proceedings 2760/06, I direct that counsel for the plaintiff bring in short minutes of order accordingly. I order that the defendant pay the plaintiff's costs of those proceedings.