On 21 June 2024, the Court made an order pursuant to Uniform Civil Procedure Rules 2005 (NSW) ('UCPR') r 41.3 that the sum of $80,000 be paid to the first defendant from funds paid into Court in accordance with the previous orders of Russell SC DCJ on 3 May 2023.
By notice of motion filed 28 June 2024, the defendants seek an order varying the previous order, the effect of which is to release to the defendants the balance of the funds paid into Court plus interest pursuant to UCPR r 36.16(1) and r 36.16(3A). The application is opposed.
The proceedings have an extraordinary and unfortunate procedural history. The costs incurred to date are likely to be significant in circumstances where the amount in issue is approximately $150,000. The conduct of the litigation to date does not reflect well on either party. The proceedings are listed for hearing in a matter of weeks (4 September 2024) with an estimate of three days. Directions have been made for the filing and serving of affidavit evidence prior to the substantive hearing.
In support of the application, the defendants read the affidavit of Michael Mazzone sworn 28 June 2024. The plaintiff read the affidavit of Eliasson Sayed Yamine sworn 26 July 2024 on the question of costs.
[2]
The procedural history
The procedural history of the proceedings prior to the setting aside of a default judgment are recorded in Barel v Barel [2023] NSWDC 135.
The plaintiff is the brother of the second defendant, the late Raphael Barrel, and the brother-in-law of the first defendant Linda Barrel. Linda and Raphael Barrel were husband and wife.
On 5 August 2022, the plaintiff filed a statement of claim, in short seeking the repayment of monies allegedly advanced to the defendants which had not been repaid. An initial application for default judgment filed by the plaintiff was rejected following which he filed a motion seeking a review of that decision.
In October 2022, an order for substituted service was made. On 6 January 2023, the plaintiff filed a further application seeking default judgment. Two days later (8 January 2023), the plaintiff's brother, one of the then named defendants, died. The following day (9 January 2023), the Court ordered default judgment against the defendants (including the now deceased Raphael Barel). On 10 January 2023, the plaintiff swore an affidavit in support of a motion for a garnishee order against the name defendants (including his now deceased brother).
On 11 January 2023, the plaintiff attended the funeral of his late brother. On the same day he filed a notice of motion seeking a garnishee order against the bank of the defendants, being payment of the judgment sum of $173,669.29 plus interest. On the same day a further application was filed seeking a garnishee order against another bank.
On 19 January 2023, the surviving defendant, being the plaintiff's sister-in-law, became aware of the judgment sum having been withdrawn from one of the bank accounts in accordance with the garnishee order. Shortly thereafter she became aware of the statement of claim for the first time.
A contested application to set aside the default judgment was heard by Russell SC DCJ on 14 April 2023. The notice of motion filed by the defendants included the following prayer for relief:-
"Restitution of garnished amount
5. That pursuant to section 30 of the Local Court Act 2007 (NSW), the plaintiff pay to the first defendant the sum of $173,669.29."
Ms Scott was unable to explain the relevance of this section, particularly given that at all times the proceedings were being conducted in the District Court. Self-evidently it was an error.
On 3 May 2023, his Honour appointed the first defendant to represent the estate of the late Raphael Barel (the second defendant) and set aside the default judgment entered on 9 January 2023.
In the published judgment his Honour meticulously identified the relevant provisions applicable to the notice of motion, including reference to the correct provision relating to the repayment of monies paid under a garnishee order: s 124A of the Civil Procedure Act 2005 (NSW) ('the CPA').
As to the application for restitution his Honour made the following findings: -
1. If the Defence succeeds, then monies should never have been garnished from the joint bank account: 56.
2. The garnishee order should be set aside: [61].
3. The plaintiff should not be able to retain the judgment monies pending determination of the issues in the proposed defence: [61].
4. Prima facie those monies should be returned to the first defendant, as the default judgment would be set aside: 56.
5. However, to return the monies to the first defendant, could result in them being dissipated, and unavailable to the plaintiff if he succeeds on his claim: 56; [61].
6. There was no evidence to suggest that the first defendant desperately needs the monies returned to her: 56.
It is apparent that his Honour declined to make an order for restitution, instead making the following further order: -
"(4) Order pursuant to s 16 of the Civil Procedure Act 2005 (NSW) that the plaintiff 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 these proceedings and to be dealt with in accordance with Part 41 of the Uniform Civil Procedure Rules 2005 (NSW)."
The defendants did not:
1. Make any application to vary or set aside the order under UCPR r 36.16(1) and (3A) or otherwise;
2. Appeal the decision as to the application for restitution; and/or
3. Appeal the orders requiring payment of the funds into Court.
The plaintiff failed to comply with his Honour's order for payment of the sum into Court. This resulted in the filing of a further application seeking the plaintiff's compliance with that order. The application was heard in August 2023 resulting in a further order that the plaintiff comply with the original order of Judge Russell. The Court later made further orders extending the time for compliance with the original order. Due to non-compliance, in March 2024, the defendants filed a notice of motion seeking an order referring the matter to the Supreme Court to determine whether the plaintiff was guilty of contempt. Further orders were made extending the time to comply with the original order.
It was not until 1 May 2024, almost 12 months after the original order was made, that the plaintiff paid the sum of $191,164.83 into Court, reflecting the principal sum and interest which had accrued in the intervening period.
On 17 May 2024, the defendants filed an application seeking an order pursuant to UCPR r 41.3 that the whole of the funds paid into Court, "or such other amount as the Court considers fit" be paid to the first defendant. That application was the subject of a contested hearing, following which the Court delivered an ex-tempore judgment, making orders in accordance with [1] above.
[3]
Issues to be determined
UCPR rr 36.16(1) and (3A) provides as follows:
"36.16 Further power to set aside or vary judgment or order
(1) The court may set aside or vary a judgment or order if notice of motion for the setting aside or variation is filed before entry of the judgment or order.
(2) ….
(3) …
(3A) If notice of motion for the setting aside or variation of a judgment or order is filed within 14 days after the judgment or order is entered, the court may determine the matter, and (if appropriate) set aside or vary the judgment or order under subrule (1), as if the judgment or order had not been entered.
…"
The Court of Appeal (Bell CJ; Mitchelmore JA; Adamson JA) in Ranclose Investments Pty Ltd v Leda Management Services Pty Ltd (No 2) [2024] NSWCA 13 recently summarised the relevant principles applicable to such an application at [5] :
"(1) The power conferred by UCPR, r 36.16 is to be exercised "sparingly and with caution" having regard to the importance of the finality of litigation, and "does not give a licence to disgruntled litigants to re-agitate, in the hope of obtaining a more favourable outcome, issues that have been determined against them": Majak v Rose (No 5) [2017] NSWCA 238 at [12]-[13] (Leeming and Simpson JJA, Emmett AJA), quoted in Hollingsworth at [17].
(2) In order to enliven the exercise of the jurisdiction, what must emerge "is that the Court has apparently proceeded according to some misapprehension of the facts or the relevant law and that this misapprehension cannot be attributed solely to the neglect or default of the party seeking the rehearing": Autodesk v Dyason (No 2) (1993) 176 CLR 300 at 302-303 (Mason CJ); [1993] HCA 6, quoted in Hollingsworth at [18].
(3) The reference to misapprehension in this context "is concerned with matters of oversight and inadvertence, and not with deliberate decisions which are said to be incorrect": Hollingsworth at [20], citing Dickson v Commissioner of the Australian Federal Police (No 2) [2023] NSWCA 111 at [4] (Meagher and Brereton JJA)."
The defendants contend that when determining the application on 21 June 2024 the Court proceeded on a misapprehension of the law, and that the misapprehension could not be attributed solely to the neglect or default of the defendants. The relevant misapprehension was that the defendants were entitled to restitution of the entire amount recovered by the plaintiff in accordance with the garnishee order, the original judgment having been set aside, in accordance with authorities identified in submissions. There is no issue that the authorities now relied upon by the defendants were not brought to the Court's attention on the application.
The plaintiff contends that there has been no misapprehension of the law, and in the alternative, in the exercise of its discretion, the Court would not grant the defendants' application.
The issues requiring determination are as follows: -
1. Did the Court proceed on a misapprehension as to the relevant law?
2. If the answer to (i) is in the affirmative, was the misapprehension attributable solely to the neglect or default of the defendants?
3. If the Court did proceed on a misapprehension of the relevant law, not solely attributable to the neglect order fault of the defendants, should the Court exercise its discretion in granting the application?
[4]
Did the Court proceed on a misapprehension as to the relevant law?
I am not satisfied that the Court, when hearing the defendants' application on 21 June 2024, proceeded on a misapprehension of the relevant law, given the application that was before the Court on that day.
The defendants contend that there is a "line of appellate authority which has held that where a Court quashes or reverses a judgment and monies are being paid pursuant to that judgment the Court must order restitution of the monies" (emphasis as stated). This unqualified submission that the Court "must order restitution" (as stated) was repeated in written submissions in reply. In those submissions it was further contended that the submission the Court retained a discretion was "simply wrong".
In oral submissions, Ms Scott, in my view quite properly, stepped back from this submission, conceding that a determination as to whether restitution should be ordered was a discretionary one, albeit one that should, in accordance with the authorities not previously identified, have been exercised in favour of the defendants.
The plaintiff contends that the authorities upon which the defendants rely do not support this proposition.
The authorities upon which the defendants rely relate to applications for restitution of monies paid in satisfaction of a judgment in circumstances where the judgment is set aside, whether on appeal, following judicial review or the setting aside of default judgment. As these authorities demonstrate, the application for restitution is made either at the time the judgment is set aside or shortly thereafter.
The defendants did precisely this. As previously noted, at the time of the application to set aside the default judgment, the defendants sought consequential relief in the form of a restitution of the garnished monies, albeit relying upon the incorrect provision. The defendants' application for restitution was before Judge Russell for determination given it was one of the orders sought by the defendants by way of consequential relief in the notice of motion filed 16 February 2023. A plain reading of the judgment reveals that his Honour determined the defendants' application for restitution.
The notice of motion upon which the defendants moved on 21 June 2024 was to the following effect: -
"Pursuant to Uniform Procedure Rules 2005 (NSW) r 41.3 an order that the whole of the funds paid into Court by the plaintiff on or about 1 May 2024 pursuant to order (4) of the orders made by Russell DCJ on 3 May 2023 (as varied), or such other amount as the Court considers fit, be paid to the first defendant."
The defendants' application determined on 21 June 2024 was not an application for restitution of the funds the subject of the garnishee order. Indeed, such an application could not have been made given this issue had already been determined by Judge Russell.
In the circumstances, given the application before the Court on 21 June 2024 was not an application for restitution, the authorities upon which the defendants rely were inapplicable. Rather, those authorities were relevant to the application for restitution heard by Judge Russell. To the extent the defendants allege that no consideration was given to the authorities upon which the defendants now rely, and that there was a misapprehension of the relevant law as to the restitution of monies paid in accordance with a judgment that had been set aside, such an application ought to have been made to Judge Russell. No such application was made. Indeed, the application before the Court on 21 June 2024 proceeded on the premise that the orders of Judge Russell were validly made, given the defendants were seeking an order that either the whole of the funds, or part thereof, paid into Court pursuant to his Honour's orders.
The fact that the application was made pursuant to UCPR r 41.3, and sought an order, in the alternative, that such other amount be paid to the first defendant, further demonstrates that the application was not one for restitution.
In all the circumstances, given the authorities upon which the defendants rely are authorities relating to an application for restitution, and that was not the application before the Court on 21 June 2024, I am not satisfied that the Court proceeded on any misapprehension as to the law.
[5]
The discretion to grant the relief
The defendants concede that, given the terms of UCPR r 36.16, the determination of the Court involves an exercise of discretion. Even if I accepted the defendants' contention that the Court proceeded on a misapprehension as to the relevant law, which I do not, the application should be refused on discretionary grounds. This requires a consideration of the principles contained in s 56 of the CPA.
Section 56 provides that the Court must give effect to the overriding purpose of facilitating the just, quick and cheap resolution of real issues in the proceedings when exercising any power under the CPA or UCPR.
As previously observed, the Court's exercise of the power to set aside a judgment or order provided in UCPR r 36.16 must be exercised "sparingly and with caution" and with due regard to the finality of litigation: Majak v Rose (No 5) [2017] NSWCA 238 at [12] - [13] (Leeming and Simpson JJA, Emmett AJA); State of New South Wales v Hollingsworth (No 2) [2023] NSWCA 283 at [17] (Mitchelmore and Stern JJA, Basten AJA).
The Court is mindful of the fact that the rule contemplates the correction of inadvertent errors without the complication and expense of an appeal: Majak at [12].
However, in the exercise of the Court's discretion, the application should be refused in any event for the following reasons: -
1. The defendants, when seeking to have the default judgment set aside, made an application for the immediate restitution of the funds secured by reason of the original garnishee order. The present application is an attempt to reagitate the issue determined by Judge Russell.
2. The defendants have not sought to challenge the findings of Judge Russell and made no application to vary his Honour's orders.
3. The second defendant's application for release of the funds paid into Court was made pursuant to UCPR 41.3 and included an alternative order that a lesser amount than the full funds be paid to the first defendant. The Court ordered a lesser amount be paid.
4. To the extent the defendants require access to the funds, pursuant to the earlier order of the Court, the defendants have been paid the sum of $80,000.
5. The procedural history of the litigation to date and the consequential costs incurred.
6. The proceedings are listed for hearing in a matter of weeks. Accordingly, any prejudice to the defendants from being deprived of the balance of the funds is limited. Further, the litigation will be determined to finality at that time which will relevantly require consequential orders as to the balance of the funds presently held by the Court.
[6]
Costs
The defendants have been unsuccessful in their application. There is no reason why costs should not follow the event. I decline the plaintiff's application that the costs be assessed and/or payable forthwith.
[7]
Orders
I make the following orders: -
1. The defendants' notice of motion filed 28 June 2024 is dismissed.
2. The defendants are to pay the plaintiff's costs of the motion.
[8]
Amendments
09 August 2024 - Typographical error
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Decision last updated: 09 August 2024
Parties
Applicant/Plaintiff:
Barel
Respondent/Defendant:
Barel
Legislation Cited (4)
"Pursuant to Uniform Procedure Rules 2005(NSW)r 41.3