Banicic v Beach & Ors [2008] VSCA 35

Court of Appeal (Vic)|2008-02-27|Before: REDLICH JA and COGHLAN AJA

Practice - Summons for final judgment - Leave to defend granted on condition defendant provide security for sum claimed - Whether first order dismissing application for summary judgment precluded imposition of a condition - Whether r 22.06(1)(b) and (c) mutually exclusive and alternate dispositions of application - Intent in making first order - Power of County Court judge to vary terms of order before order entered into the record - Whether cause of action sufficiently verified - Whether requirements of r 22.03(1) met - Whether sufficient basis disclosed to justify the imposition of condition of financial security - Onus upon defendant to demonstrate substantial injustice if condition imposed - Graywinter Properties v Rodway [1998] VSC 177, [12] (Warren J) approved.

2 On 10 October 2005, Law Aid and the applicant entered into an agreement that the respondent would provide assistance by way of payments to the applicant's solicitors to be used for the purpose of paying disbursements incurred in contemplation of, or in the conduct of litigation against a hospital in a medical negligence claim. The agreement stated that 5.5% of the quantum of any judgment in settlement of the litigation was to be paid to the respondent Law Aid. The defendant settled the litigation by accepting an Offer of Compromise of $2 million plus costs.

3 The respondents commenced proceedings against the applicant in the County Court by writ filed on 14 August 2007. The respondents claim to have provided $20,668.87 to the applicant to pay disbursements of the claim and seek the full sum claimed plus interest in return pursuant to the above mentioned agreement.

4 On 28 September 2007 the respondents filed an application for summary judgment. That application was heard on 29 November 2007 by Judge Holt. The applicant sought the dismissal of the application on the grounds the respondents**

had not verified the cause of action and had failed to prove the identity of the body which entered the agreement with the parties suing.

5 His Honour made the following orders at the conclusion of argument:

1. The plaintiff's application for summary judgment is dismissed.
2. The question of whether the defendant has leave to defend on conditions, and if so, what conditions, is adjourned for hearing on 4 December 2007 before Judge Hold in Court 1.4 at 10.30 a.m.
3. The defendant and her attorney Tania Rajher are restrained until the hearing and determination of the question identified in paragraph 2, whether by themselves, their servants or agents or howsoever, removing from the jurisdiction of the court or otherwise transferring, dealing with or disposing of any asset of the defendant otherwise than in meeting the defendant's usual day-to-day living expenses and her legal costs of this proceeding.
Costs reserved.

6 A note of the reasons for decision is included in the material, although the provenance of that note has not been made clear. It reads:

In relation to the application for summary judgment, Judge Holt said that on the material the real question of fact and law should be determined in the usual way and dismissed the application for summary judgment. In relation to the application under rule 22.06, Judge Holt said that the bar above which the plaintiff has to demonstrate summary judgment is high, however, the bar regarding leave to defend is lower.

**7 On 4 December 2007, the primary judge ordered that, if the defendant paid into court the sum sought by the respondents or provided the plaintiffs with an unconditional bank guarantee for that sum, or on terms otherwise acceptable to the respondents paid that sum into the trust account of the applicant's solicitors or otherwise gave security in that amount in a form acceptable to the respondents by 4 p.m. on 19 December 2007, then the applicant was at liberty to defend the proceeding as to the whole of the respondents' claim. His Honour further ordered that if the applicant did not provide security by one of the means prescribed by the stipulated time, the respondents would be at liberty to enter judgment for the said sum. Under 'Other Matters' his Honour also noted that the solicitor for the applicant undertook that if the applicant paid the said sum into the trust account of her solicitors, then until further order of the Court that sum would remain in the trust account of her solicitors or an interest-bearing account under their sole control.

8 As the applicant did not offer security for the said sum by any of the means prescribed on or before 19 December, the respondents obtained a judgment in default of the condition of leave to defend on 2 January 2008. On 18 December the applicant had by summons now before this Court sought an order having leave to appeal from the order made by Judge Holt on 4 December. She did not seek a stay of the order. On 31 January 2008, Judge Anderson set aside the default judgment of 2 January 2008 because of irregularities which are irrelevant for present purposes and extended the time for the applicant to provide security as a condition of being at liberty to defend the proceedings, as I have said, to 7 February 2008. His Honour further ordered that in the event the applicant failed to provide security by that date, the respondents be at liberty to enter judgment for the said sum. The applicant having failed to provide security by 7 February and having failed by her solicitors to seek a stay of the order of 31 January, judgment in default of compliance with the condition was entered in the County Court on 11 February. Consequently, the applicant now seeks to have that judgment set aside and, in the event that leave to appeal is granted, seeks a stay of the order of 31 January. In the event that leave is refused, the applicant has foreshadowed that she will seek a variation of the order of 31 January for a further extension of the time for compliance with the condition.

9 Counsel for the applicant contends that the order made on 4 December is wrong, as a dismissal of 'a summary judgment application' and the 'grant of conditional leave to defend' are mutually exclusive, alternative dispositions of an application under r 22.06(1). The rule contains a broad range of powers, and the provisions of sub-paragraphs (b) and (c) expressly contemplate that orders may be made under more than one provision, as judgment may be entered for part of the claim and leave to proceed granted on other parts of the claim. Each sub-paragraph of the rule is not to be viewed as a mutually exclusive means of disposing of such applications. But, even if it were so, it is plain from the learned judge's orders and the note of his reasons that his Honour intended in the making of the orders of 29 November to make two orders, the first of which under r 22.06(b), was to refuse to give summary judgment to the respondents, while the second order, under r 22.06(c), left open the question whether leave to defend should be granted on conditions. The primary judge did not in my view intend by the first order to dismiss the summons, that is to say, he refused the relief under r 22.06(b) but adjourned the question of relief under (c). In my view the first order pronounced on 29 November should be understood in accordance with the plain intention of the primary judge. His Honour rightly rejected a submission made at the time the orders were pronounced that he had no power to make the second order.

10 If I were wrong in that conclusion and the first order was to be regarded as an order dismissing the summons, rather than the application under r 22.06(b), the judge in any event had power to vary the terms of his order between the time it was pronounced and the time it was formally entered into the record.[1] The County Court, being a court of record,[2] has power to vary orders that have been pronounced so as to give effect to the meaning intended,[3] at least before it is entered into the record.

11 Accordingly, if the first order at the time of its pronouncement did constitute a dismissal of the respondents' summons, his Honour had power to make the second order adjourning the further hearing of the summons as to the question whether the applicant should have leave to defend on conditions, and thereby varying the effect of the first order before the complete order was entered.

12 On the resumed hearing on 4 December, his Honour concluded that leave to defend should only be granted on the condition that the applicant provide security for the amount the subject of the claim.

13 Counsel for the applicant contends that an application for summary judgment must be dismissed if the plaintiff does not by affidavit establish a good cause of action. That argument was predicated on the assumption that the evidence was insufficient to establish that the respondents are or were at the relevant time the trustees of the Law Aid Trust, that there was inadequate evidence of the identity of the person who purported to enter into the fund fee agreement on behalf of the trustees, and that there was no evidence that the applicant executed the fund fee agreement.

14 There is in my view no substance in any of these submissions. Firstly, the alleged deficiencies were not raised in the affidavit material before his Honour, and the primary judge was entitled to act upon the prima facie evidence of the documents placed before him and the assertions made in the affidavit material which was filed in support of the application. All of that material, in my view, sufficiently addressed each of the matters now raised by the applicant and was sufficient to meet the requirements of rule 22.03(1). The argument of the applicant is in any event based upon the misconception that, if summary judgment were not granted because of the lack of verification of the type alleged, no conditional leave to defend could be imposed under rule 22.06(c).[4]

15 His Honour apparently concluded that the respondents had shown a prima facie claim against the applicant for the said sum. The facts recited by his Honour in the note of his Honour's reasons suggest that his Honour reached that conclusion.

16 The amended defence and counterclaim filed on 29 November raised grounds upon which the respondents' claim would be resisted and which went beyond the bare denial defence which had until then been relied on. The proceedings of 4 December were, as was conceded in oral argument before us, solely directed to the question whether leave to defend should be granted on conditions, which in turn rested upon the quality of the defences pleaded. The lengthy argument that ensued on 4 December was concerned only with whether or not the defences raised, were such that a condition should be imposed. The defences raised in the amended defence and counter claim were said to be belated, dubious, and were designed to delay the payment of the sum due to the respondents.**

**17 Where a defendant satisfies the court on a summary judgment application that there is an issue to be tried, but the nature of the case made out by the plaintiff when considered in conjunction with the defences raised, leaves the court with a serious concern about the substance or bona fides of the defence, the court may impose a condition in granting leave to defend. It will then be for the defendant to satisfy the court that a financial condition should not be imposed.[5]

18 There were a number of factors which bore upon the exercise of his Honour's discretion to impose a condition upon the grant of leave to defend. The affidavits and exhibits enabled the primary judge to assess the possible defences and to reach the conclusion, as it appears he did, that in order to be permitted to defend the proceedings, an appropriate condition should be imposed.

19 The genesis for the imposition of that condition was the fact that the applicant and her former solicitors had not complied with the terms of the agreement with Law Aid. The settlement funds had been disbursed to either the applicant or her new solicitors. The affidavit material supported the submission that the applicant and her former solicitors had acted in plain breach of a number of the provisions of the agreement in disbursing the funds without making provision for the amount to be paid to the respondents. The applicant's recalcitrance in responding to the enquiries of the solicitors for the respondents left open as an appreciable risk that the amount that might be due to the respondents would be put beyond their reach. Thus the respondents' solicitors had been instructed to urgently establish the whereabouts of those settlement funds, they having been dealt with without apparent due regard to the contractual entitlements of Law Aid. Letters sent by Law Aid to the applicant's newly appointed solicitors had met with no response. Eventually a representative of the respondent was able to make telephone contact with the solicitors now representing the applicant, who informed him that they had disbursed the settlement moneys but that they anticipated receiving instructions that would enable them to hold sufficient of the settlement moneys in his trust account until the issue was resolved with Law Aid. The solicitors for the respondents thereafter unsuccessfully sought advice from the applicant's solicitors that an appropriate sum had been placed in the applicant's solicitors' trust account and would not be disbursed without agreement or by an order of the court. As no response was forthcoming from the applicant's solicitors as to those matters, the respondents' solicitors commenced proceedings in the County Court to recover the said sum. Thereafter, the solicitors for the respondents wrote to the solicitors for the applicant seeking, inter alia, any indication of the basis upon which the applicant sought to avoid her apparent obligations under the agreement. No explanation was forthcoming. As a consequence, the deponent to the affidavit in support of the summons for final judgment deposed as to his belief that the applicant did not have a valid bona fide defence to the claim and had filed an appearance solely for the purpose of delay. In opposition to the summons, an affidavit was filed by the solicitors for the applicant which said only that it was believed that no default notice allowing the applicant any period to remedy the default had been served on her prior to the issue of any proceedings.

20 At the conclusion of argument in which written submissions and oral argument was advanced as to the adequacy of the defences pleaded, the primary judge, evidently believed that the defences that had been raised were lacking in merit and that the serious step was justified of requiring the applicant to provide security for the amount claimed.**

**21 In M V Yorke Motors v Edwards,[6] Lord Diplock observed that if the sum imposed as a condition of leave to defend is beyond the defendant, then the imposition of a condition would be a wrongful exercise of the discretion, because it would be tantamount to giving judgment for the plaintiff notwithstanding there was an issue to be tried. But as Yorke and decisions which have followed it make plain, the applicant bears an onus of establishing, on evidence placed before the court, that no, or a limited, financial condition should be imposed.

22 I agree with the view expressed by Warren J, as she then was, in Graywinter Properties v Rodway that -**

If a discretion to grant leave to defend is exercised, but made subject to the imposition of a condition of financial security, a court should have flexibility to preserve the position of a plaintiff but at the same time ensure that a defendant is not placed in a position where the financial condition renders the defence impossible ..... Where a defendant submits that no condition should be imposed at all, it is appropriate that the defendant satisfy the court on the basis of cogent evidence that the imposition of the condition will render the defence impossible.[7]

**23 No material was filed on the applicant's behalf suggesting that the condition imposed was productive of any substantial injustice. The applicant having received the moneys in dispute, it was incumbent upon her to show that the making of an order requiring the said sum to be paid into court or otherwise secured was so onerous as to prevent the applicant from having a real opportunity to present any defence.

24 In my view, the order made is not attended by sufficient doubt to warrant the granting of leave to appeal.

25 I agree with the reasons stated by the learned presiding judge.**

26 In our view, as no material has been furnished on the applicant's behalf at any point in the proceeding suggesting that the applicant would have financial difficulty in complying with the condition imposed on the leave to defend, we are not disposed to grant the applicant a further stay of one month. We will grant the applicant 21 days; that is, we would vary the order of Judge Anderson extending the time for compliance to a date 21 days from this date, which will be 19 March.

27 The Court will order that the judgment in default of the condition for leave to defend entered in the County Court on 11 February be set aside. The order of Judge Anderson made 31 January will be varied to extend the time for compliance with the condition imposed on leave to defend, to 19 March 2008. The Court will further order that the applicant pay the respondents' costs thrown away by the entry of default judgment on 11 February 2008.**

1. The application for leave to appeal is refused.

2. The applicant pay the respondents costs of this application.

The judgment in default of the condition of leave to defend entered in the County Court on 11 February 2008 be set aside.
The applicant pay the respondents' costs thrown away by the entry of the default judgment in the County Court on 11 February 2008.
The order of Judge Anderson made 31 January 2008 be varied to extend the terms for compliance with the condition imposed on leave to defend to 19 March 2008.

[1] Victoria Legal Aid v The County Court of Victoria [2004] VSCA 113 [12]-[15]; Carroll v Price [1960] VicRp 101; [1960] VR 651, 657-660; R v His Honour Judge Rapke Ex Parte Curtis [1975] VicRp 62; [1975] VR 641, 645-6, and generally Cavanagh v Bank of New Zealand (1990) 22 FCR 124, 125-7.

[2] The County Court is a court of record - s 35(2) County Court Act 1958.

[3] Bailey v Marinoff [1971] HCA 49; (1971) 125 CLR 529, 539 (Gibbs J); Commissioner of Taxes v British Australian Wool Realisation Association Ltd [1932] VLR 109.

[4] Fieldrank Ltd v Stein [1961] 1 WLR 1287, 1288-9; Ionian Bank Ltd v Couvreur [1969] 1 WLR 781; Graywinter Properties Pty Ltd v Rodway [1998] VSC 177 [8]-[12].

[5] See Graywinter Properties Pty Ltd v Rodway [1998] VSC 177 (Warren J).

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