Batiste v Gilmour-Latham

COUNSEL : R G McHugh - Appellant T S Murphy - Respondent SOLICITORS : Horowitz & Bilinsky - Appellant Andreones - Respondent CATCHWORDS : JUDGMENT - setting aside on terms - whether can be a term that defendant provide security for amount claimed - whether on facts the amount ordered as security was appropriate. ND CASES CITED: Conners v Acheron Pty Ltd (No 2) (1996) 1 Qd R 243; M V Yorke Motors v Edwards (1982) 1 All ER 1024. DECISION : In relation to the order of Bowden ADCJ leave to appeal is refused; in relation to the orders of Cooper DCJ leave to appeal is granted, but the appeal is dismissed.

IN THE SUPREME COURT OF NEW SOUTH WALES COURT OF APPEAL CA 40458/01 DC 35423/99 GILES JA HEYDON JA HODGSON JA Wednesday 31 October 2001 DONNA BATISTE v SUSAN GILMOUR-LATHAM

Judgment 1 GILES JA: This is an application for leave to appeal against the decisions of Bowden ADCJ given on 30 March 2001 and Cooper DCJ given on 1 June 2001 and 21 June 2001, and in the case of the first of these decisions for an extension of the time within which to seek leave to appeal. The application has been heard as if an appeal, so that if leave be granted a further hearing will be unnecessary, and the submissions have therefore addressed the substance as well as matters relevant to leave to appeal. 2 The claimant properly concentrated on the key issue arising in the application, which I will identify shortly, but some background is necessary. 3 At some time in 1999 the opponent brought proceedings against the claimant to recover money which she said had been lent to the claimant. According to an amended statement of liquidated claim filed in May 1999 the claim was for three amounts of money lent in 1991 and four amounts of money lent in 1996, on various occasions in each of those years. It was alleged that the total amount lent was some $179,000 of which nearly $70,000 had not been repaid, and the claim was to the $70,000 plus interest. I have rounded the figures off and will continue to do so when I refer to figures hereafter. 4 A defence filed by the claimant in March 2000 denied some of the loans, admitted other of the loans and pleaded the statute of limitations in relation to the 1991 loans. 5 A further amended statement of liquidated claim was filed in November 2000 which altered the amounts involved slightly, but not in a way which need be recounted now, and in the manner it was framed at least foreshadowed a reply to the statute of limitations defence by virtue of confirmation; it also added a cause of action which would pick up the 1991 loans, namely that all loans had been consolidated with a new promise to repay at some time in 1996. Perhaps this was in order to seek to overcome the statute of limitations defence. We do not know. 6 Judgment was entered against the claimant on 29 January 2001. The evidence as to that is not in an entirely satisfactory state, but the judgment was entered either as a judgment by default for want of a defence to the further amended statement of liquidated claim or on an application for summary judgment, and was entered when there was no attendance on behalf of the claimant on the occasion on which the order for judgment was sought. Affidavits from the claimant filed in support of her later applications to set aside the judgment included that she was not aware that an order for judgment was being sought against her on 29 January 2001 and suggested a reason why her solicitor, apparently still on the record, did not attend or otherwise act on her behalf in relation to the application for an order for judgment. 7 In early February 2001 the claimant changed her solicitors, and at some time in March 2001 she filed a notice of motion seeking an order that the judgment entered on 29 January 30 March 2001. It was supported, if that be the right word, by a faxed copy of an affidavit sworn by the claimant on 30 March 2001, in which she explained in the manner I have indicated the non-attendance on 29 January 2001 and as to a defence on the merits said only that she wished to defend the proceedings and to file a defence to the further amended statement of liquidated claim and "I say that I have a good defence". Not surprisingly, Bowden ADCJ was unimpressed and declined to set aside the judgment. 8 In April 2001 the claimant filed another notice of motion seeking an order that the judgment be set aside. The notice of motion came before Cooper DCJ on 1 June 2001. It was supported, on this occasion the word being used more respectably, by an affidavit sworn by the claimant on 28 May 2001. The affidavit began with the same explanation for non-attendance on 29 January 2001, and went on to reasonably specifically deny some of the loans, deny any agreement for payment of interest on other of the loans, and state that it was desired to rely on the statute of limitations in relation to the 1991 loans. 9 Cooper DCJ expressed some scepticism about the bona fides of the claimant, given the history of the matter, but concluded that when she had sworn that she had a defence on the merits she was entitled to have it litigated. However, his Honour went on to say that he had power to impose terms. He said that the amount claimed was some $74,000 plus interest and that on a rough calculation the total claim would be something like $100,000 to allow for interest. He ordered that the judgment be set aside on terms that the claimant provide security for $100,000 in a form satisfactory to the Registrar on or before 22 June 2001, and that there be consequential leave to file a defence to the further amended statement of liquidated claim. 10 It was said before us, and was not contested, that in the hearing before his Honour there had not been any discussion of imposition of a term to do with security for the amount claimed by the opponent, and the claimant said that she had been denied procedural fairness in this respect. The claimant then filed a third notice of motion in which she sought an order that the previous order made by Cooper DCJ be vacated so far as his Honour imposed the term concerning the $100,000. 11 The notice of motion came before Cooper DCJ on 21 June 2001. There was a further affidavit from the claimant sworn on 20 June 2001, in which she gave evidence of her asset and income position and that of three companies which it appears she controlled intended to establish that it was not possible for her to provide the security the subject of the term. The essential submission to Cooper DCJ was that unless the term were removed, the order setting aside the judgment would be nugatory and the claimant would be unable to defend the proceedings. 12 Cooper DCJ declined to remove the term. His Honour referred to cases cited on behalf of the claimant in which a court had declined to make an order that security be provided because that would render nugatory the making of a principal order setting a judgment aside and letting a defendant in to defend. He said that the case before him was different, and that he had considered on 1 June 2001 that justice could be done only if the order to set aside the judgment was made subject to security being given, and he concluded - "If I accept the evidence of the defendant as stated in her affidavit sworn yesterday, then it appears she has no assets and no means whereby she can raise a security for the amount of $100,000 in a form acceptable to the Registrar. In some cases that might afford appropriate grounds for deleting the condition, but on the facts of this case it is not sufficient."

13 It will be seen from this history that the application at least in form was directed to overturning the refusal by Bowden ADCJ to set aside the judgment, the later imposition of the term by Cooper DCJ when his Honour did make an order setting aside the judgment, and the later again refusal by Cooper DCJ to remove the term. In submissions before us counsel for the claimant concentrated on the last of these matters. At no time was there any complaint that the judgment entered on 29 January 2001 had been entered irregularly, nor any challenge to the order for entry of that judgment. The refusal by Bowden ADCJ was overtaken by the qualified success before Cooper DCJ on 1 June 2001, and the real issue was whether the qualification to that success was a proper qualification. So far as there had been a denial of procedural fairness on 1 June 2001, there had been an appropriate opportunity to deal with the imposition of the term on 21 June 2001. So in a practical sense, as was with respect correctly accepted by the claimant, attention could be concentrated on the exercise of discretion by Cooper DCJ in that in his combined judgments of 1 June 2001 and 21 June 2001 his Honour considered that the judgment should be set aside only on terms that the security for $100,000 be provided. 14 The claimant's submissions were essentially two. 15 The first submission was that once Cooper DCJ had held that the claimant had an arguable defence, the only kind of term which he could properly impose was one which went to overcome any prejudice suffered by the opponent: that is, that the available terms were limited by the prejudice which the opponent could say she had suffered. It was submitted that the opponent had not put forward any evidence of prejudice and that there was no prejudice, and so that the term of security for $100,000 should not have been ordered. 16 I do not think the submission is soundly based. Power is given to set aside a judgment on terms, and no express fetter is placed on the nature or extent of the terms. It must depend on the circumstances of the particular case. Commonly in cases such as this the plaintiff will suffer because the plaintiff will lose a judgment, will incur more costs, and will be delayed in achieving whatever success in the proceedings will ultimately be achieved. I do not see why that is not prejudice capable of pecuniary remedy by a term. But there is more than that. Default judgments and applications to set aside default judgments are not uncommonly accompanied by doubt about the bona fides of the proffered defence. It may well be proper to let a defendant in to defend notwithstanding some doubt about the bona fides of the defence, but where that is the case in my opinion there is no reason why the terms available to the judge in the exercise of his discretion should not include that the defendant provide security for some or all of the amount at stake. 17 We were referred to the decision of the Court of Appeal in Queensland in Conners v Acheron Pty Limited (No.2) (1996) 1 Qd R 243, particularly at 246-7, but I do not read what the Court there said as precluding the consideration of these matters in the exercise of the discretion. Cooper DCJ did have doubt about the bona fides of the claimant's defence, but nonetheless thought it proper that the claimant should be able to defend the matter on the term in question. Subject to the second submission to which I now come, I consider that it was open to his Honour to take that view. 18 The second submission was that where it is practically impossible for the defendant to meet a condition such as the term that security for $100,000 be provided, it would defeat the rationale of setting aside the judgment to impose the term (or in this case to maintain it), because that would mean that the court would say in one breath that a defence was one which the defendant should be permitted to maintain and in an other breath that the defendant could not maintain it. I do not think the logic is correct, although in a practical sense that may be the result in some cases, nonetheless that is what Lord Diplock had in mind in his Lordship's speech in M.V. Yorke Motors v Edwards (1982) 1 All ER 1024 at 1027. His Lordship's speech was concurred in by the other members of the House, and at the page mentioned he saw no reason to dissent from propositions to the effect that it would be a wrong exercise of discretion to order that a sum be paid as a condition of granting leave to defend which the defendant would never be able to pay, saying that that would be tantamount to giving judgment for the plaintiff notwithstanding the court's opinion that there was an issue or question in dispute which ought to be tried. His Lordship referred also to a condition being imposed which it is impossible for the defendant to fulfil. 19 Here the claimant submitted that, on the evidence in her affidavit sworn on 20 June 2001, there was the impossibility of which his Lordship spoke. It is not clear to me whether Cooper DCJ so concluded. In the passage from his Honour's reasons which I earlier set out he referred to the claimant having no assets and no means whereby she could raise security for the amount of $100,000 in a form acceptable to the Registrar, but he prefaced that by the words "If I accept the evidence of the defendant as stated in her affidavit sworn yesterday … ". On a reading of his Honour's reasons as a whole it seems to me that his Honour was careful not to say that he did accept the evidence of the defendant. 20 The evidence was indeed not satisfactory. 21 The claimant said that she had no assets or income of her own. She was apparently the controller of the three companies. It was asserted in general terms that the companies' assets were mortgaged and that the mortgagee would not provide any more funds and, so far as it was open to it to not agree, would not agree to the assets being mortgaged to someone else. There was, however, no evidence of the value of the assets or the amount of the borrowings against them. There may well have been significant equity to which access could have been had by way of security. There may well have been the ability to sell and after repayment of whatever borrowings may have been secured on the particular property to have money to provide the security. 22 Further, it was said in one paragraph in the affidavit that the income from two of the properties, apparently the income earning properties, was devoted to servicing the mortgages, but in another paragraph it was said that some funds were available from cash flow and it was estimated that about $11,000 would be available in about six weeks to pay what was admittedly due to the opponent. Regrettably there was no cross-examination on this, but it was a far from compelling case that the claimant's position was one of impossibility. 23 To my mind Cooper DCJ saw it in this way, and that is why he said that on the facts of this case he did not consider that it was appropriate to do away with the term which he had earlier imposed. If it be asked whether there was an error in his Honour's exercise of discretion in concluding that the term was an appropriate term, whether originally imposed or maintained, where lies the error? In effect the submission was that the amount was wholly excessive. It was suggested that a term could properly have been imposed for an amount in the order of $25,000, made up of the amount admittedly due plus interest and some costs and perhaps with what was described as some security for the costs of the trial. I am not sure why, on the arguments put by the claimant, security for the costs of the trial ought to have been included, but that does not matter for present purposes. 24 There is a different way of looking at it. The judgment on 29 January 2001 was for about $125,000. There is prima facie a statute of limitations defence to the 1991 loans, although that may of course be affected by questions of confirmation and a later 1996 contract to which I have referred. Beyond that, the defence depends upon the affidavit of the claimant. The 1991 loans alleged were approximately $25,000. It seems to me that if the reasoning apparent in the two judgments of Cooper DCJ be taken up, a term providing for the opponent's claim less the 1991 loans and their applicable interest but plus costs would as an approximation (and no one attempted more than approximations) entirely justify an amount of about $100,000 in the term. This may not exactly been his Honour's reasoning and his Honour does not seem to have had in mind the judgment amount of $125,000. However, it seems to me to be in accord with his Honour's reasoning, and that being so I do not think it can be said that there was an error in that the figure which his Honour imposed was wholly excessive. 25 In these circumstances it seems to me that it cannot properly be said that appealable error has been shown in the combined discretions exercised on 1 June 2001 and 21 June 2001. Accordingly, it seems to me that the application should in substance fail. Leave to appeal should be refused in relation to the order of Bowden ADCJ, and leave to appeal should be granted in relation to the orders of Cooper DCJ but the appeal in relation to the latter orders should be dismissed, and I so propose. 26 HEYDON JA: I agree. 27 HODGSON JA: I also agree. 28 In this case, in my opinion, the claimant needed to lead satisfactory evidence justifying an order setting aside the judgment against her, and in the third application, satisfactory evidence showing that it was impossible for her to comply with the condition imposed. It was not open, in my opinion, for the claimant to rely on absence of cross-examination to complete a case where her own evidence was unsatisfactory. 29 There is some force in the submission that there was no objection taken to the bald statement in the applicant's evidence that she was unable to comply with the condition. However, that evidence was explained by subsequent paragraphs in the affidavit, which did not justify the bald statement, but on the contrary raised very substantial questions as to its accuracy. In my opinion, it is plain that Cooper DCJ referred in his judgment to those unsatisfactory aspects of the affidavit and took account of them, and in so doing was justified in not in the end accepting that the claimant had proved that she did not have the means to satisfy the condition. 30 Mr McHugh, for the claimant, also criticised Cooper DCJ for adverse comment made on the credit of the applicant in the absence of cross-examination. In my opinion, the conduct of the claimant and the contents of here own affidavits supported the reservations expressed by Cooper DCJ on her credibility. There was some force in a criticism about an adverse inference apparently drawn in relation to a letter written on 4 February 2001, but in my opinion that matter did not vitiate the overall view expressed by Cooper DCJ. 31 GILES JA: The order of the Court will be therefore as I have proposed, plus that the claimant pays the respondent's costs of the application. 32 It may be that there should be a new timetable for provision of the security and filing the defence. MCHUGH: Your Honour, the orders below are behind tabs 5 and tab 7 in that regard. HODGSON JA: Well they seem to contemplate three weeks for the security and four weeks for the defence. MCHUGH: It's been pointed out to me by my instructing solicitor in the course of your Honour's judgment that my client's remaining hope is that there'll be something - that when the premises on which the nightclub is conducted are sold on 27 November, which is four weeks from today, that there will be a sufficient net equity that she's ahead and that really is her last hope. In the circumstances I wouldn't normally be asking for more than twenty-eight days, but would five weeks be a possibility as to the provision of the security? HODGSON JA: There may be a six week settlement time. MCHUGH: I suppose perhaps it could be done on this basis that-- HEYDON JA: Why don't you ask for 1 February 2002 and see what happens? MCHUGH: I'd be happy to ask for that, at that point I'll be happy to sit down. I do ask for it. HEYDON JA: Any problem Mr Murphy?

MCHUGH: They're behind tab 5 and then tab 7. Tab 7 were the ones that varied the ones at tab 5. Your Honours probably don't need to go past tab 5.

MURPHY: Your Honour, quite clearly it would be obviously very much in the opponents interests that she get paid and if this is the best possible way of her being paid then she would naturally consent. The only fear that she might have is that the property is sold and the monies are disbursed and then she's told well sorry, we forgot about you. HODGSON JA: But of course it's money going to a company and so if she's going to have problems getting her hands on that money - I mean she may be able to do so, but it won't necessarily be a straight forward exercise.

GILES JA: I don't think there's anything we can do about that fear here and now, nor does it seem to me it's terribly relevant whether the time should be next week or 1 February.

MURPHY: Perhaps it's relevant to this extent that if my client knows at a much earlier date, say in seven weeks time, that she hasn't got any money and she's never going to get any money then she can take whatever steps she might have available to her to execute the judgment. Perhaps February is a little bit too long, that's all I'll say, but I'm in he Court's hands. MCHUGH: The practical difficulty is as has been pointed out by Hodgson J, we'd have to bring it back to your Honours after the auction to work out whether there is anything.

HODGSON JA: Well if it appears that there's something left over, then you'd come back and apply for a further extension of time, presumably to cover whatever time it's going to take to settle.

MCHUGH: Settlement and that might mean reconvening the whole Court. I'm not sure procedurally whether that would be the case, perhaps under s 46 it wouldn't be needed, but in the circumstances I would ask for 1 February 2002.

33 GILES JA: It is necessary that the timing ordered by Cooper on 1 June 2001 and adjusted on 21 June 2001 be further adjusted. We extend the time in the term for provision of security to 5 December 2001 and the time for filing a defence to the further amended statement of liquidated claim to 12 December 2001. We have been told that one of the claimant's properties is to be auctioned on 27 November 2001. It may be that sale from that money will become available. However, it is likely that there will be a settlement period. The normal period in domestic transactions is some six weeks, and probably something of that order will be involved in this sale. Rather than leave the matter until next year, we think it better to arrive at dates shortly after the auction so that what has happened about the sale will be known. If what has happened about the sale so warrants as a matter of common sense, which we trust is not entirely absent in these proceedings, application may be made for further extension of those times: for example, if it is apparent that from the sale there will be money available which the claimant is able to indicate will be devoted to the satisfaction of the requirement for security. 34 We do not think that it will be necessary for any further application to be made to this Court. In the view we take, it will be open to apply to the District Court for any extension of the times, and we make it plain that we do not intend by our orders to preclude the District Court granting more time, if thought appropriate, on application made to that Court. oOo

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