Barel v Barel

Court of Appeal (NSW)|2024-10-15|Before: Gleeson JA, McHugh JA, Legislation Amendment J

Background

The underlying proceedings involve a money claim for about $150,000 by the respondent against Ms Barel as the first defendant and her late husband, Mr Raphael Barel, as the second defendant. The respondent is the brother of Raphael Barel. The proceedings have a complicated procedural history. It is sufficient to recount the following matters.
On 9 January 2023 the respondent obtained default judgment against both defendants in the sum of $173,669.29. On 10 January 2024 he swore an affidavit in support of the issue of a garnishee order. On 11 January 2023 he attended the funeral of his late brother, Raphael, who had died on 8 January 2023. Also, on 11 January 2023 the respondent's solicitors filed an application for the issue of a garnishee order against the defendants' joint bank account with ING Bank in the sum of $173,727.29. This amount was garnisheed from that account on about 18 January 2023.

Application to set aside default judgment and for repayment of garnisheed monies

By notice of motion filed 16 February 2023, Ms Barel applied pursuant to UCPR, rr 36.15 and 36.16 to set aside the default judgment and for restitution of the garnisheed monies referring, incorrectly, to s 30 of the Local Court Act 2007 (NSW).
At the hearing of the motion, counsel then appearing for Ms Barel relied on the Court's discretionary power under s 124A of the Civil Procedure Act 2005 (NSW) to order repayment of the garnisheed amount. Section 124A of the Civil Procedure Act was introduced by the Justice Legislation Amendment Act (No 2) 2017 (NSW) and provides: The court may, at any time on the application by a judgment debtor, vary or suspend the making of payments by the judgment debtor under a garnishee order, or order the total amount paid by the judgment debtor under the garnishee order to be repaid, if the court is satisfied that it is appropriate to do so.
Counsel for Ms Barel referred to Manhari Recycling Pty Ltd v Compass Global Holdings Pty Ltd [2021] NSWCA 252, where the Court (Payne JA, Bell P and Beech-Jones CJ at CL agreeing) set aside a default judgment on appeal and made an order in the exercise of the discretion under s 124A of the Civil Procedure Act for the repayment of the garnisheed amount to the appellant, rather than permit the respondent's solicitor to retain the amount on trust pending the determination of the underlying proceedings. That was in circumstances where the Court was not satisfied that the respondent should be afforded an advantage, effectively to hold the garnisheed amount as security for its case: at [42]-[43].
Russell DCJ raised with the parties, if the default judgment was set aside, the possible option of the Court making an order that the garnisheed amount be paid into court "which protects both parties". Counsel for Ms Barel submitted that the money ought to be paid back to Ms Barel, noting that the respondent had not sought a freezing order. Counsel for the respondent accepted that his client could not hold onto the money but embraced his Honour's proposal that the garnisheed monies be paid into court.
Importantly, given the construction argument sought to be advanced on the proposed appeal, no submission was made by counsel for Ms Barel that s 124A of the Civil Procedure Act should be construed in an interlocutory context as a power coupled with a duty to order repayment of a garnisheed amount. Nor did counsel submit that the proposed order for payment into court was inconsistent with a party's right to restitution with respect to monies paid under a judgment later set aside, together with interest: Commonwealth v McCormack (1984) 155 CLR 273 at 276; [1984] HCA 57; Heydon v NRMA Limited (No 2) (2001) 53 NSWLR 600; [2001] NSWCA 445 at [14]; Production Spray Painting & Panel Beating Pty Ltd v Newnham (No 2) (1991) 27 NSWLR 659; Proprietors of Strata Plan 5399 v Feehan (1996) 8 BPR 16,211.
In declining the application for restitution, Russell DCJ made the following findings in his judgment delivered on 3 May 2023: 1. although Linda Barel had been validly served, she had an explanation for her failure to defend the proceedings and had a bona fide defence, and hence the default judgment against her should be set aside pursuant to UCPR, r 36.16: at [40]-[55]; 2. if the defence succeeds, then monies should never have been garnisheed from the joint bank account: at [56(1)]; 3. returning the garnisheed funds to Linda Barel "could result in them being dissipated, and unavailable to the plaintiff if he succeeds in his claim": at [56(3)]; 4. there was no evidence to suggest that Linda Barel desperately needed the monies returned to her: at [56(4)]; 5. the garnishee order should be set aside: at [61]; 6. the plaintiff should not be able to retain the judgment monies pending determination of the issues in the proposed defence: at [61]; 7. prima facie those monies should be returned to the first defendant, as the default judgment would be set aside: at [56(2)]; 8. however, to return the monies to Linda Barel, could result in them being dissipated, and unavailable to the plaintiff if he succeeds on his claim: at [56(3)], [61]; and 9. the best way to deal with any prejudice suffered by both parties would be to order that the funds obtained by the plaintiff under the garnishee order be disgorged by him and paid into court to await the outcome of the hearing: at [57], [62].
Russell DCJ made orders on 3 May 2023: (1) appointing Ms Barel to represent the estate of the late Raphael Barel; (2) that the default judgment be set aside against both defendants; (3) granting leave Ms Barel to file, within 14 days, a defence on behalf of both defendants; (4) pursuant to s 16 of the Civil Procedure Act that Elie Barel pay the sum of $173,727.29 paid to him on 18 January 2023 by force of a garnishee order, together with any interest earned thereon, to the Registrar of the District Court to abide the outcome of the proceedings and to be dealt with in accordance with Pt 41 of UCPR; and (5) that each party pay their own costs of the motion.
On 1 May 2024, after several extensions of time, the respondent paid into court the sum of $191,164.83 representing the principal sum and interest which had accrued thereon.

Application for release of funds in Court

By notice of motion filed on 17 May 2024 the applicant sought an order pursuant to UCPR, r 41.3 that the whole of the funds held in court or such other amount as the court considers fit be paid to Ms Barel.
In written submissions on the motion the applicant referred to the application as being in the nature of variation of Mareva relief. She said that (i) the Court had a general discretion to determine the release of the funds (referring to Thomson v Golden Destiny Investments Pty Ltd (No 2) [2015] NSWSC 1929, which involved an application for payment out of the funds in court arising from the sale of certain property), and (ii) the proposed use of the funds for legal costs and living expenses was legitimate, as she had no other assets from which that expenditure might be paid (referring to Elford v Minty [2017] NSWSC 1455 at [33], which involved an application for payment out of part of the funds in court to pay a party's legal fees).
Following a contested hearing on 21 June 2024, Fitzsimmons DCJ delivered an ex tempore judgment and ordered the release of $80,000 to Ms Barel pursuant to UCPR, r 41.3. (A transcript of that judgment was not available at the time of the hearing before this Court.)

Application to vary the 21 June 2024 orders

By notice of motion filed 28 June 2024, the applicant applied under UCPR, rr 36.16(1) and (3A) to vary the orders made on 21 June 2024, and sought the release to her of the balance of the funds in court plus interest.
In written submissions on the motion, the applicant said that Fitzsimmons DCJ had proceeded on a misapprehension of the facts and relevant law in holding that the Court had a discretion to permit only part of the monies paid into court to be released to her. She said that his Honour erred because he did not have regard to authority which established that on reversal of the judgment the applicant was entitled as of right, to repayment of the monies with interest. Reference was made to the cases referred to at [10] above.
Fitzsimmons DCJ delivered judgment on 9 August 2024 and dismissed the variation motion with costs. His Honour found that Russell DCJ had determined the application for restitution in his 3 May 2023 judgment, that the application for release of funds determined on 21 June 2024 was not an application for restitution of garnisheed funds, and the authorities cited were, in any event, inapplicable.

Subsequent events

Since the filing of the summons seeking leave to appeal on 13 August 2024, the final hearing of the underlying proceedings occurred before Andronos SC DCJ on 4-6 September 2024, the proceedings were listed for oral closing submissions on 17 October 2024 and on that date, as recorded in JusticeLink, judgment was reserved. Also, on 6 September 2024 Andronos DCJ ordered that a further $8,000 be released to the applicant to cover her counsel's costs of preparing closing written and oral submissions.

Draft notice of appeal

It is not necessary to set out the six grounds in the draft notice of appeal. Together they claim that the effect of the three interlocutory decisions is that the applicant has been denied her common law right to restitution of the funds that were garnisheed pursuant to a judgment that has now been set aside. It is said that the principle is correctly summarised by Edmonds J in Windsor v Sydney Medical Service Co-operative Limited (No 3) [2010] FCA 364 at [67]: This general principle applies irrespective of how the order is reversed: whether on appeal (Commonwealth v McCormack at 276); following judicial review (Production Spray Painting & Panel Beating Pty limited v Newnham (No 2) (1991) 27 NSWLR 659 at 661 - 662), or any other way in which an erroneous judgment is overturned (National Australia Bank Ltd v Bond Brewing Holdings Ltd [1991] 1 VR 386 at 593, 597), varied (Lee v Mallam (1910) 10 SR (NSW) 876), or set aside (Mason & Carter's Restitution Law in Australia, K Mason et al, 2008 at [707]).
Counsel for the applicant submitted that the proposed appeal raised "one narrow legal issue", namely: … whether both primary judges wrongly exercised their discretion by failing to order repayment to the first appellant of money which had been obtained by the respondent based on the judgment and garnishee order which had been set aside. My friend's position, as I understand it, is that the primary judges had a residual discretion to order otherwise. My position is that there was no residual discretion and that the primary judges were bound by authorities to order repayment of the funds to the first appellant.

Whether the Court should extend time to challenge the 3 May 2023 order

The four factors of general relevance to an application for an extension of time to appeal are (1) the length of the delay, (2) the reason for the delay, (3) whether the applicant has a fairly arguable case, and (4) the extent of any prejudice suffered by the respondent to the application: Tomko v Palasty (No 2) (2007) 71 NSWLR 61; [2007] NSWCA 369 at [55] (Basten JA).
These factors are equally applicable to an application to extend time for leave to appeal: Nanschild v Pratt [2011] NSWCA 85 at [40]-[41]. Further, in the present context, the reference to the "fairly arguable case" factor concerns the prospect of obtaining leave to appeal if the extension is granted: Nanschild v Pratt at [42].

Delay

The delay of 15 months in seeking leave to appeal from the 3 May 2023 order is inordinate and not explained by evidence. Counsel for the applicant proffered as an explanation that the applicant's solicitors had taken the view "that they would wait until the money was paid into court at least so that there was in fact a fund of money which could be restored". The suggested explanation is unsatisfactory.
The delay in making a timely application for leave to appeal from the 3 May 2023 order is not logically explained by the respondent's subsequent delay in paying the garnisheed amount into court. Indeed, if leave to appeal had been sought some 15 months ago, it can be expected - assuming a successful appeal - that an order would have been made for the respondent to pay the garnisheed amount to the applicant. That would have obviated the need for the applicant to defer taking any action until the amount was paid into court by the respondent. Further, even when the garnisheed amount was paid into court on 1 May 2024 the applicant did not then file a summons seeking leave to appeal from the 3 May 2023 order and an extension of time to do so. Instead, the applicant pursued a different course; she sought the release of the funds held in court, or alternatively part of the funds, under UCPR, r 41.3.
The parties diverged as to whether the delay occasioned prejudice to the respondent. Counsel for the respondent submitted that had the 3 May 2023 order been set aside on an earlier appeal and an order made for repayment of the monies to the applicant, there is a realistic chance that the respondent would have taken different steps in the underlying proceedings to protect his position as to the risk of dissipation of the monies by the applicant pending the determination of the proceedings. Counsel for the applicant submitted that this is not relevant prejudice. I do not agree. The prejudice pointed to by the respondent is the very type of prejudice occasioned by the inordinate delay in challenging the interlocutory decision of Russell DCJ.

Whether fairly arguable case for grant of leave to appeal

The Court will usually only grant leave where the proposed appeal concerns a matter that involves an issue of principle, a question of public importance, or a reasonably clear injustice going beyond what is merely arguable: see, for example, Be Financial Pty Ltd as Trustee for Be Financial Operations Trust v Das [2012] NSWCA 164 at [32]-[38].
Here, the proposed appeal does not raise an issue of principle. The applicant accepted, as was said in Manhari, that s 124A of the Civil Procedure Act confers a discretionary power on the Court to order the repayment of the garnisheed amount.
Insofar as it is said that the proposed appeal involves an issue of public importance, the submission that the decision of Russell DCJ is likely to have broad-reaching effects overstates the nature of that decision. His Honour correctly found that the applicant was prima facie entitled to the garnisheed amount and there is no challenge to his finding that there was a risk of dissipation by the applicant if that amount was repaid to her. The applicant's complaint about the 3 May 2023 order is directed to the exercise of discretion with respect to the order that the garnisheed amount be paid into court which was in the nature of an interim asset preservation order. Whether his Honour erred in making that order does not raise an issue of public importance.
It is also said that the proposed appeal involves an issue of public importance because there is a need to clarify a statement by Young J in Feehan at 16,212, which was referred to by the respondent for the proposition that Russell DCJ had a discretion under s 124A to order repayment of the garnisheed amount. Feehan did not concern s 124A of the Civil Procedure Act which had not then been enacted; nor does Feehan require clarification.
Feehan involved a garnishee order issued against the plaintiff's bank account after entry of a default judgment by a defendant on a cross-claim. As Young J observed at 16,212, the bank "as it was bound to do" honoured the garnishee and monies were paid into the Local Court and an amount was paid out to the defendant. The Magistrate refused to restore the monies to the plaintiff on the basis that the plaintiff was seeking an equitable remedy in restitution and that the Local Court had no equitable restitution. In upholding the appeal from the Local Court decision and giving judgment for the plaintiff for the garnisheed amount plus interest, Young J referred to Production Spray Painting and said at 16,212: Accordingly, the Local Court magistrate should have made an order in May under the undoubted common law powers he had to restore the moneys to the plaintiff, or at the very least had them paid back into court, so they would be kept safe. (Emphasis added.)
Unassisted by the parties who did not refer to relevant rules of the Local Court as at 1996, the emphasised words in the above passage from Feehan are explicable. The circumstances in which Young J said that it would have been appropriate "at the very least" for the Magistrate to order payment of the monies into Local Court were that (i) the plaintiff's bank was "bound" to pay the garnisheed amount into the Local Court, and (ii) the Local Court was the direct source of the monies paid to the defendant. Read in context, the statement does not suggest that a party's right to restitution at common law with respect to monies paid under a judgment later set aside is subject to a residual discretion. However, it is not necessary to express a concluded view on this question. As indicated, Feehan says nothing of the power in s 124A of the Civil Procedure Act.
It is said that the applicant has suffered an injustice because she has been kept out of her monies by the decision of Russell DCJ. But even assuming that the exercise of the discretionary power in s 124A of the Civil Procedure Act miscarried and that his Honour erred in making in effect an interim asset preservation order, there are compelling reasons to refuse the extension of time to seek leave to appeal so as to reopen the interlocutory decision of Russell DCJ.
First, the applicant did not raise before Russell DCJ any argument concerning the proper construction of s 124A of the Civil Procedure Act, let alone arguments of the type referred to at [10] above. As a general rule a party is bound by the conduct of its case: University of Wollongong v Metwally (No 2) [1985] HCA 28; (1985) 59 ALJR 481 at 483 where the joint judgment said of an application to reopen an appeal: It is elementary that a party is bound by the conduct of his case. Except in the most exceptional circumstances, it would be contrary to all principle to allow a party, after a case had been decided against him, to raise a new argument which, whether deliberately or by inadvertence, he failed to put during the hearing when he had an opportunity to do so.
Second, instead of making a timely application for leave to appeal, the applicant waited about a year and then pursued a different course in seeking the release of the whole or part of the funds held in court on the basis that the 3 May 2023 order was correct as it had not been challenged on appeal.
Third, there is little if any utility in what is sought by the proposed appeal against the 3 May 2023 order, or indeed the interlocutory orders of 21 June 2024 and 9 August 2024. The applicant accepted that the proposed appeal would be rendered nugatory if the District Court delivered judgment in the underlying proceedings before this Court delivered judgment on any appeal. As the applicant acknowledged in her supplementary written submissions (par [39]): While the decision of this Court may come too late to assist the appellants in this proceeding there is little doubt that it will assist the parties who face similar factual circumstances going forward.
Fourth, the considerations addressed in ss 56-58 of the Civil Procedure Act are of particular significance in this matter: Be Financial at [35]-[37] (Basten JA). The proposed appeal against an interlocutory decision made over 17 months ago is hardly consistent with the just, quick and cheap resolution of the real issues in the proceedings, especially given that the hearing of the underlying proceedings has now occurred, and judgment is reserved. Nor should the resources of this Court be expended on a proposed appeal involving a relatively small amount (about $103,000) when an appeal would be rendered entirely pointless by the outcome of the underlying proceedings. That is, it is common ground that the judgment below on the substantive claims for relief by the respondent will be determinative of the disposition of the funds held in court.
Accordingly, the extension of time for leave to challenge the 3 May 2023 order should be refused given (i) the applicant's inordinate and unexplained delay, (ii) the prejudice to the respondent occasioned by the delay, (iii) the inference that the applicant made a forensic decision not to make a timely application to appeal from the 3 May 2023 order, (iv) the applicant's inconsistent conduct in seeking the release of funds held in court on 21 June 2024 on the basis that the 3 May 2023 order was correct as it had not been challenged on appeal, and (v) the lack of utility in a grant of leave to appeal when the hearing of the underlying proceeding has occurred, and judgment is reserved.

Whether the Court should extend time to challenge the 21 June 2024 order

The order made by Fitzsimmons DCJ on 21 June 2024 for the release of part of the funds held in court involved the exercise of a discretion under UCPR, r 41.3.
As indicated, the premise of this application was that the 3 May 2023 order was correct as it had not been challenged on appeal. So much was acknowledged by the applicant in her motion filed 17 May 2024 which sought, in terms, in the alternative, the release of "such other amount as the Court considers fit, be paid to [Ms Barel]" and written submissions in support of the motion: see [15] above.
The applicant says that Fitzsimmons DCJ erred in applying the principles in Elford v Minty at [33] and proceeding on the basis that the motion to release funds was in the nature of a variation of a freezing order. It is said that as a consequence, Fitzsimmons DCJ erred in treating the applicant as bearing the burden of showing the legitimacy of the proposed use of the funds and that she had no other assets from which the legitimate expenditure might be met.
The immediate difficulty with this submission is the absence of the ex tempore reasons given by Fitzsimmons DCJ. But let it be assumed that the submission reflects the reasons given by his Honour in his judgment on 21 June 2024. The applicant cannot complain if his Honour dealt with the motion for release of funds in that manner. There is no error, and certainly no error sufficiently arguable to warrant a grant of leave to appeal, in dealing with the motion for release of funds in court on the express basis advanced by the applicant.
It is said that the delay of some 3 weeks in seeking leave to appeal is explained by the fact that Fitzsimmons DCJ was not able to hear the motion filed 28 June 2024 which sought to vary the 21 June 2024 order, until after the 28-day period for filing a summons for leave to appeal. Accepting that to be the case, no purpose would be served in granting the extension of time because the proposed appeal from the 21 June 2024 order does not raise fairly arguable grounds. The extension of time should be refused.

Whether the Court should grant leave to appeal from the 9 August 2024 order

The order made by Fitzsimmons DCJ on 9 August 2024 not to vary the order made on 21 June 2024 for release of $80,000 of the funds in court, involved the exercise of a discretion under UCPR, r 36.16.
The Court may reopen a judgment if it has proceeded on a misapprehension as to the facts or the law, where there is some matter calling for review, or where the interests of justice so require: De L v Director-General, NSW Department of Community Services (No 2) (1997) 190 CLR 207 at 215; [1997] HCA 14. However, a heavy onus is imposed on a party who seeks to reopen a judgment or order: Power v Deputy Commissioner of Taxation (No 2) [2014] NSWCA 77 at [3]. See also: State of New South Wales v Hollingsworth (No 2) [2023] NSWCA 283 at [17]-[22].
The applicant says that Fitzsimmons DCJ erred in two respects in not reopening the judgment given on 21 June 2024. It is said that Fitzsimmons DCJ misapprehend the facts when finding in his 9 August 2024 judgment (at [33]) that the application for release of funds determined by his Honour on 21 June 2024 was not an application for restitution of garnisheed amount. That cannot be accepted.
His Honour's finding that the application determined on 21 June 2024 was for the release of funds held in court under UCPR, r 43.1, accorded with the relief sought by the applicant in her motion and written submissions on that motion (see [41]-[43] above). The applicant's submission to the contrary mischaracterises the nature of the application determined on 21 June 2024.
It is also said that Fitzsimmons DCJ misapprehended the relevant law as to the applicant's entitlement to the monies paid into court (applicant's supplementary submissions, par [30]), and that this misapprehension cannot be attributed solely to the neglect or default of the applicant as the party seeking the rehearing: Autodesk Inc v Dyason (No 2) (1993) 176 CLR 300 at 302-303 (Mason CJ); [1993] HCA 6. Again, that cannot be accepted.
His Honour did not proceed on a misapprehension of the relevant law on the application for release of funds determined on 21 June 2024. His Honour proceeded on the basis that the 3 May 2023 order was correct as it had not been challenged on an appeal. That approach to the 3 May 2023 order was appropriate. Nor is there any basis for thinking that his Honour was in any doubt on 21 June 2024 that the funds in court were the applicant's funds. Indeed, his Honour ordered the payment out of a substantial amount of those funds to the applicant.
There is no error sufficiently arguable to warrant a grant of leave to appeal from the interlocutory decision of Fitzsimmons DCJ of 9 August 2024 refusing to vary his earlier order of 21 June 2024: Secretary, Department of Family and Community Services v Smith (2017) 95 NSWLR 597; [2017] NSWCA 206 at [28]. Leave to appeal should be refused.

Orders

For the above reasons, I propose the following orders: 1. Refuse the extension of time to seek leave to appeal from order (4) made by Russell DCJ on 3 May 2023 and order (1) made by Fitzsimmons DCJ on 21 June 2024. 2. Refuse leave to appeal from the orders made by Fitzsimmons DCJ on 9 August 2024. 3. Summons seeking leave to appeal be dismissed. 4. The first and second applicants to pay the respondent's costs in this Court.
McHUGH JA: I agree with Gleeson JA, and with the additional observations of Basten AJA.
BASTEN AJA: I agree with Gleeson JA. I would add one further consideration in relation to the application to extend time to appeal from the judgment of 3 May 2023. Section 124A of the Civil Procedure Act 2005 (NSW) is curious in that it has two parts. The first relates to varying or suspending payments under what must be a valid garnishee order, if subject to challenge. In that case, the term "may" must surely create a discretionary power. The second limb goes further, permitting an order for repayment "if the court is satisfied that it is appropriate to do so". This very imprecise criterion strongly suggests the conferral of a discretionary power. Further, it would be unusual for "may" to have different meanings in one sentence in relation to two separate functions.
While it is true that the general law may provide that in particular circumstances a payee under a garnishee has a right to repayment, that merely raises a question as to whether s 124A was intended to address such cases. Neither party took the Court to any legislative history which might have explained the reason for the enactment of s 124A, which only came into force on 30 June 2018. This is another powerful reason for not granting an extension of time to permit an application for leave to appeal.

Amendments 31 October 2024 - [23]: the words "for leave" deleted following the words "extension of time". DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated. Decision last updated: 31 October 2024

Solicitors: Diamond Conway Lawyers (Applicants) ESY Lawyers (Respondent) File Number(s): 2024/312752 Decision under appeal Court or tribunal: District Court of New South Wales Jurisdiction: Civil Citation: [2023] NSWDC 135; [2024] NSWDC 330 Date of Decision: 3 May 2023; 21 June 2024; 9 August 2024 Before: Russell SC DCJ; Fitzsimmons SC DCJ File Number(s): 2022/231245

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