Brown v DML Resources

Supreme Court of NSW|2001-10-19|Before: Austin J

CITATION : Brown v DML Resources (No.4) [2001] NSWSC 947 CURRENT JURISDICTION: Eqiuty FILE NUMBER(S) : SC 3830/00 HEARING DATE(S) : 19 October 2001 JUDGMENT DATE : 24 October 2001

Martin Russell Brown and Timothy James Cumming (P & A) DML Resources Pty Limited (In liquidation) (D1) PARTIES : DML Resources (WA) Pty Limited (In liquidation) (D2) BP Australia Holdings Pty Ltd (R1) BP Australia Pty Ltd (R2) JUDGMENT OF : Austin J

COUNSEL : B Rayment QC with C R Newlinds (P & A) B Coles QC with M Ashhurst (R1 & R2) SOLICITORS : Kemp Strang (P & A) Carneys, Lawyers (R1 & R2) CATCHWORDS : PRACTICE AND PROCEDURE - slip rule - whether Court in error in treating person denied natural justice as having a right ex debito justitiae to set aside order - whether s 81 of Supreme Court Act imposes overriding discretion - whether matter falls within the slip rule Corporations Act 2001 (Cth), s 588FF LEGISLATION CITED : Supreme Court Act 1970 (NSW) ss 23, 62, 63 & 81 Supreme Court Rules Pt 1 r 3, Pt 1 r 12, Pt 5 r 9, Pt 8 r 8, Pt 20 r 10 Australian Coastal Shipping Commission v Curtis Cruising Pty Ltd (1989) 17 NSWLR 734 Cameron v Cole (1994) 68 CLR 571 CIC Insurance Ltd v Bankstown Football Club Ltd (1997) 187 CLR 384 Coles v Burke (1987) 10 NSWLR 429 Coppins v Helmers (1969) 72 SR(NSW) 273 Craig v Kanssen [1943] 1 KB 256 Elyard Corporation Pty Ltd v DDB Needham Sydney Pty Ltd (1995) 133 ALR 206 CASES CITED : Harkness v Bell's Asbestos and Engineering Ltd [1967] 2 QB 729 Hoskins v Van Den-Braak (1998) 43 NSWLR 290 MacFoy v United Africa Co Ltd [1962] AC 152 Newcastle City Council v GIO General Ltd (1997) 191 CLR 85 PMT Partners Pty Ltd (In liq) v Australian National Parks and Wildlife Service (1995) 184 CLR 301 Re Pritchard [1963] 1 Ch 502 Storey & Keers Pty Ltd v Johnstone (1987) 9 NSWLR 446 Taylor v Taylor (1979) 143 CLR 1 DECISION : Plaintiffs' application, to set aside orders of 29 August 2001, denied

IN THE SUPREME COURT OF NEW SOUTH WALES EQUITY DIVISION 3830/00 AUSTIN J

WEDNESDAY 24 OCTOBER 2001 MARTIN RUSSELL BROWN & 1 OR V DML RESOURCES PTY LIMITED (IN LIQ) & 1 OR (NO.4)

Judgment (corrected 25 October 2001) 1 His Honour: On 4 September 2000 the plaintiffs, who are the liquidators of the DML companies, applied for an order under s 588FF (3) (b) extending the time within which to bring proceedings to challenge transactions of those companies as unfair and voidable preferences. I made orders ex parte, although I directed that notice of the orders be provided to certain creditors who were affected by them and I granted leave to those creditors to make an application within 28 days to set aside the orders. BP Australia Holdings Ltd exercised the liberty to apply, seeking orders that my ex parte orders under s 588FF (3) (b) be set aside. Subsequently BP Australia Ltd was joined as an additional applicant. 2 In my reasons for judgment delivered on 17 July 2001, I held that by making the orders of 4 September 2000 on the ex parte basis, I had denied natural justice to the BP companies. After further argument, on 29 August 2001, I held that it was appropriate for the Court to make orders setting aside the orders of 4 September 2000 so far as they affected the BP companies, and directing the plaintiffs to pay the costs of the motion brought by the BP companies, and on 10 September 2001 I made orders accordingly. 3 I also held that it would be necessary for the plaintiffs to join the BP companies as parties to the proceeding before any final hearing of their application under s 588FF (3) (b), but that it was too late to do so. This was because s 588FF (3) (b) required that the application for extension of the period during which unfair preference proceedings could be brought must be made within three years after the relation-back day, and the effect of Part 8 rule 11 (3) of the Supreme Court Rules was that the application would be taken to be made only when the BP companies were joined as parties, at a time necessarily outside the three-year period. 4 Having reached those conclusions, I expressed the opinion that it would be futile to make an order for the joinder of the BP companies as parties to the proceeding, and that in the circumstances the correct course was for the proceeding to be dismissed, unless the plaintiffs could satisfy me that there was some point in allowing the proceeding to continue on foot, notwithstanding my conclusions (Reasons for Judgment of 29 August 2001, paragraph 113). I decided to give the plaintiffs "one last opportunity to make submissions" as to why I should not dismiss the proceeding in light of the conclusions I had reached. 5 The plaintiffs have subsequently made three applications. First, they apply under the "slip rule", by notice of motion filed on 7 October 2001, for orders setting aside my orders of 10 September 2001 on the ground of manifest error ("the slip rule application"). Secondly, they invite me to reconsider my reasons for concluding that it is too late for them to join the BP companies as parties, having regard to s 588FF (3) (b) and Part 8 rule 11 (3) ("the reconsideration application"). Thirdly, they seek to invoke s 1322 of the Corporations Act to cure the irregularities in their initial application ("the s 1322 application"). The reconsideration application is part-heard and the s 1322 application has not yet been heard. The present reasons for judgment deal only with the slip rule application.

The slip rule application 6 Part 20 rule 10 of the Supreme Court Rules, commonly known as the "slip rule", allows the Court to correct any judgment, order or certificate, if satisfied that there has been a "clerical mistake, or an error in an order or judgment arising from an accidental slip or omission, causing that judgment or order to be in error". 7 The plaintiffs submit that a fundamental part of my reasons for judgment of 17 July 2001, based upon the submissions made on behalf of the BP companies, was that because the BP companies had been denied natural justice, they were entitled as of right (ex debito justitiae) to have my ex parte orders set aside. That, say the plaintiffs, is contrary to s 81 of the Supreme Court Act 1970 (NSW). The effect of s 81, they submit, is that the Court has a discretion to set aside orders, however entered, and no person has a right to have any orders set aside in the Supreme Court. They submit that I should have applied s 81, therefore regarding myself as having a discretion, and exercising it. My omission to do so was, in their submission, an error falling within the slip rule, which I should correct by setting aside the orders made on 10 September 2001 and then dealing with the application of the BP companies on its merits. 8 It is common ground, I believe, that no one referred to s 81 in submissions prior to my reasons for judgment of 17 July 2001, and I did not refer to it independently of submissions. It is true that in my reasons for judgment of 17 July 2001, I found that the BP companies had been denied natural justice and therefore they were entitled, ex debito justitiae, to have the ex parte orders set aside (see Reasons for Judgment of 17 July 2001, paragraphs 4 and 65). 9 The BP companies submit that s 81 has no application to the present circumstances, and consequently there has been no "slip" to be corrected under the slip rule. Further, they say that if s 81 applies it does not apply clearly and uncontroversially, and that being so, it is not appropriate to invoke the slip rule. I agree with the submissions by the BP companies, and I shall explain my reasons for doing so.

Approaches to statutory interpretation 10 Before I do so, however, I shall deal with some submissions by the plaintiffs as to the proper approach to construction of s 81 and Part 20 rule 10. First, the plaintiffs urged that I should approach the questions of interpretation, raised by their application, in the manner outlined by Brennan CJ, Dawson, Toohey and Gummow JJ in CIC Insurance Ltd v Bankstown Football Club Ltd (1997) 187 CLR 384, 408, where their Honours said (in a passage applied by McHugh J in Newcastle City Council v GIO General Ltd (1997) 191 CLR 85, 112-113): "It is well settled that at common law, apart from any reliance upon s 15AB of the Acts Interpretation Act 1901 (Cth), the court may have regard to reports of law reform bodies to ascertain the mischief which a statute is intended to cure. Moreover, the modern approach to statutory interpretation (a) insists that the context be considered in the first instance, not merely at some later stage when the ambiguity might be thought to arise, and (b) uses 'context' in its widest sense to include such things as the existing state of the law and the mischief which, by legitimate means such as those just mentioned, one may discern the statute was intended to remedy."[references omitted] 11 In the present case the plaintiffs did not rely on any report of a law reform body, but they urged me to look to the context of Part 20 rule 10 and s 81. I accept that I should do so, although in my opinion this approach to statutory interpretation does not produce the conclusion for which the plaintiffs contend. 12 Secondly, the plaintiffs submit that it is a principle of statutory interpretation that provisions dealing with the powers of courts are to be given the widest available construction. As Brennan CJ, Gaudron and McHugh JJ observed in PMT Partners Pty Ltd (in liq) v Australian National Parks and Wildlife Service (1995) 184 CLR 301, 313, "a provision conferring a power to be exercised judicially should be construed as liberally as its terms and context permit". 13 I accept that this is the correct approach to the interpretation of Part 20 rule 10 and s 81, but once again my opinion is that this approach to statutory interpretation does not produce the conclusion for which the plaintiffs contend.

Was there any relevant error in my orders of 10 September 2001? 14 The plaintiffs' contention rests upon their interpretation of the judgment of Rich J in Cameron v Cole (1944) 68 CLR 571, and upon the proper construction of s 81. It is necessary for me to deal with Rich J's judgment is some detail, because it seems to me that the plaintiffs' submission misreads the judgment. 15 In Cameron v Cole a debtor was inadvertently not notified of the date of an adjourned hearing of a creditor's bankruptcy petition. The Federal Court of Bankruptcy made a sequestration order in the absence of the debtor, but subsequently the same court made orders annulling the sequestration order and directing that the petition be re-heard. Upon the re-hearing, a sequestration order was again made. The debtor appealed, arguing that the Bankruptcy Court had no authority, when annulling the first sequestration order, to direct a re-hearing of the petition. 16 The Federal Court of Bankruptcy had a statutory jurisdiction affected by two provisions of the Bankruptcy Act 1924 (Cth). Section 26 provided that the Bankruptcy Court may review, rescind or vary any order made by it in its bankruptcy jurisdiction. Section 124 empowered the Bankruptcy Court, upon application by an interested person, to annul a sequestration order, where in the opinion of the court the order ought not to have been made. The debtor argued that these provisions empowered the Bankruptcy Court to review the decision to annul the sequestration order, but they did not empower the Court to re-hear the creditor's petition. 17 Rich J rejected this argument. He began (at 589) by stating a principle to which I referred in my reasons for judgment dated 17 July 2001: "It is a fundamental principle of natural justice, applicable to all courts whether superior or inferior, that a person against whom a claim or charge is made must be given a reasonable opportunity of appearing and presenting his case. If this principle be not observed, the person affected is entitled, ex debito justitiae, to have any determination which affects him set aside; and a court which finds that it has been led to purport to determine a matter in which there has been a failure to observe the principle has inherent jurisdiction to set its determination aside (Craig v Kanssen [1943] 1 KB, at 262). In such a case there has been no valid trial at all. The setting aside of the invalid determination lays the ghost of the simulacrum of a trial, and leaves the field open for a real trial (Crane v Director of Public Prosecutions [1921] 2 AC at 332, is 333)." 18 His Honour then considered whether ss 26 and 124 of the Bankruptcy Act made any difference to these generally applicable propositions. He found that if a sequestration order was set aside because the hearing of the petition was invalid for some reason which prevented it in law from being regarded as having been heard at all, there was nothing in the statutory provisions to prevent the court from hearing the petition in due course of law (at 589-90). 19 Rich J then dealt with the appellant's submission that, under the statutory provisions, there were only two courses open to the court, namely to review the first order on the merits under s 26 and either confirm or annul it; or else, having annulled it on a point not going to the merits, to review the annulment order on the merits. But, it was submitted, the court could not (as it purported to do) annul the first order and then proceed to a re-hearing. 20 Rich J held that the court's first order was voidable and open to be annulled, but the Court had the power to make provision for hearing the petition when annulling the order. His reasoning was directed to that conclusion. He began by articulating two "well-established" rules (at 590). The first was that a court which, after a real trial, has given a valid decision determinative of right, liability or status, has no jurisdiction to recall it whatever mistakes may have been made in facts or law. He said that the purpose of ss 26 and 124 of the Bankruptcy Act was to exempt courts exercising jurisdiction in bankruptcy from the operation of that rule. 21 The second rule was that if, in the course of a purported trial, a fundamental irregularity has occurred which prevents it from being a real trial at all, the decision of the court is either void or voidable. In the case of a superior court, the decision is at worst voidable, and is valid unless and until it is set aside. In his Honour's view, the Federal Court of Bankruptcy was a superior court. He referred to Lord Greene MR's judgment in Craig v Kanssen, and criticised the Master of the Rolls for inaptly expressing the relevant principles. The Master of the Rolls drew a distinction between an order "which can properly be described as a nullity" ([1943] 1 KB at 262), and proceedings in respect of which "there has been nothing worse than an irregularity" (at 258). As Rich J pointed out, while the distinction between nullities and procedural irregularities is appropriate for an inferior court, in the case of a superior court, "the distinction is between irregularities so fundamental as to create an unconditional right, ex debito justitiae, to have the judgment set aside, and non-fundamental irregularities as to which the Court has a discretion" (68 CLR at 591). He held that nothing in the Bankruptcy Act indicated any intention to interfere with these propositions. Consequently the first sequestration order was voidable rather than void, and it was open to the court, having set that order aside, to make provision for re-hearing. 22 In my opinion, this reasoning is entirely consistent with, and indeed re-asserts, the proposition that a fundamental irregularity in a proceeding leading to a judgment creates an unconditional right to have the judgment set aside, although in the case of a superior court the judgment stands until an order is made to annul it. The passage quoted from page 589 of the judgment makes it clear that a denial of natural justice is a "fundamental irregularity" in this sense. It is a misreading of Rich J's judgment to regard it as authority for the proposition that a superior court should never treat denial of natural justice as giving the affected person an unconditional right, ex debito justitiae, to set the relevant order aside regardless of discretionary considerations. 23 The plaintiffs say that the conclusion that they seek to extract from Rich J's judgment in Cameron v Cole is confirmed by s 81 (1), which is in the following terms: "81 (1) Where, in beginning or purporting to begin any proceedings or at any stage in the course of or in connection with any proceedings, there is, by reason of anything done or left undone, a failure to comply with the requirements of this Act or of the rules whether in respect of time, place, manner, form or content or in any other respect - (a) the failure shall be treated as an irregularity and shall not nullify the proceedings, or any step taken in the proceedings, or any document, judgment or order in the proceedings; and (b) subject to subsections (2) and (3) [which are not relevant here], the Court may, on terms, set aside wholly or in part the proceedings or any step taken in the proceedings or any document, judgment or order in the proceedings or exercise its powers under this Act and the rules to allow amendments and to make orders dealing with the proceedings generally." 24 The question is whether, in the present case, there was "by reason of anything done or left undone, a failure to comply with the requirements of this Act or of the rules". The "thing left undone", according to my findings of 17 July 2001, was the affording to the BP companies of procedural fairness by giving them the opportunity to be heard before orders were made under s 588FF (3) (b). The obligation to do so arose from the common law audi alteram partem rule, as expounded by the High Court of Australia and other courts in the many decisions to which I referred in my reasons for judgment. I did not rely upon or refer to any provision of the Supreme Court Act or in the Supreme Court Rules as a source of the obligation. 25 Nevertheless, counsel for the plaintiffs maintains that the denial of natural justice that I found to have occurred was a failure to comply with several requirements of the Act and the rules. In my opinion this submission cannot be sustained. I accept that a judge of this Court has a fundamental duty to ensure that the Court's decisions are procedurally and substantively just. That fundamental duty is assumed by the Act and rules. The learned editors of Ritchie's Supreme Court Procedure (NSW) observe (at paragraph [1.12.1]), with respect to the dispensing power conferred by Part 1 rule 12, that "the Court's function is to do justice between the parties", and that "the object of the rules is to conduce to that end". But the duty to achieve a procedurally and substantively just outcome, while it is the object of the rules as a whole, is not the subject of any of them, in such a fashion that failure to carry out the fundamental duty is at the same time a failure to comply with the requirements of the Act and the rules. 26 Counsel referred to various provisions of the Act and the rules, which really need only to be stated to demonstrate that they do not set down the fundamental audi alteram partem rule which was at issue in the present case. Thus, s 23 of the Supreme Court Act gives the Court all jurisdiction which may be necessary for the administration of justice in New South Wales, s 62 obliges the Court to give effect to all legal claims and demands existing by the common law or created by custom or statute, and s 63 obliges the court to grant all such remedies as any party may appear to be entitled to in respect of any legal or equitable claim, so that all matters in controversy between the parties may be completely and finally determined. Part 1 rule 3 (1) and (2) states that the overriding purpose of the rules is to facilitate the just, quick and cheap resolution of the real issues in the proceedings, and the Court must seek to give effect to that overriding purpose when it exercises any power given to it by the rules and when interpreting any rule. According to Part 5 rule 9, the Court may proceed with a hearing in the absence of a plaintiff who has had due notice, and a defendant who is in default of appearance or has had due notice of the hearing. Part 8 rule 8 (1) empowers the Court to order that a person be added as a party where that person ought to have been joined as a party, or is a person whose joinder as a party is necessary to ensure that all matters in dispute are effectually and completely determined. (I should note that I did not find that the BP companies ought to have been joined as parties prior to the making of the orders of 4 September 2000, but only that they should have been notified and been given an opportunity to be heard: see my reasons for judgment of 29 August 2001, paragraph 71.) 27 I acknowledge that the relevant words in s 81 should be construed in context, and that they should be given an ample interpretation because they relate to the powers of the Court. However, I cannot construe them so widely as to make them apply in a case where the thing left undone was a failure to comply with a fundamental common law rule rather than anything expressed in or implied from a requirement of the Act or the rules. 28 My conclusions are reinforced by the decision of the Court of Appeal of New South Wales in Hoskins v Van Den-Braak (1998) 43 NSWLR 290. In that case a solicitor purporting to act for Mr Hoskins and a Mr Healy filed a statement of liquidated claim in the Local Court to recover a debt claimed for work done by Mr Healy and Mr Hoskins, as partners, for Mrs Van Den-Braak. She filed a notice of cross-claim, presumably for damages for the cost of rectifying unsatisfactory work, which was served on the plaintiffs' solicitor. Mr Healy withdrew the solicitor's instructions at the beginning of the trial and conducted the case as a litigant in person. Mr Hoskins attended part of the proceedings at Mr Healy's request and gave evidence. But he was unaware that he had been joined as a party. In fact Mr Hoskins was a subcontractor of Mr Healy and there was no partnership. Mr Hoskins became aware that Mrs Van Den-Braak had sued him only when a sheriff's officer arrived to seize his property, after judgment had been entered against him on the cross-claim. He then applied to the Local Court to set aside the judgment against him, failing at first instance and on a case stated to this Court, but succeeding on appeal. At issue was s 75A (1) of the Local Court (Civil Claims) Act 1970 (NSW), which was in substance identical with s 81 of the Supreme Court Act. 29 Mr Hoskins submitted to the Court of Appeal that since neither he nor anyone acting on his behalf had been served with the claim on which judgment was given against him, the proceedings and judgment against him were nullities, and he was entitled ex debito justitiae to have the judgment set aside unconditionally. Mason P (with whom Priestley and the Beazley JJA agreed) agreed with that submission (at 293). He relied (at 294) on the passage from the judgment of Rich J in Cameron v Cole (68 CLR at 589), set out above. He quoted passages from the judgments of Gibbs J and Mason J in Taylor v Taylor (1979) 143 CLR 1, at 6-7 and 16, to the effect that a court, whether superior or inferior, has inherent power to set aside an order made against a person who did not have a reasonable opportunity to appear and present his case. He rejected the proposition, said to be based on Coles v Burke (1987) 10 NSWLR 429, that the power of an inferior court that is a creature of statute must be found within the confines of its legislation and procedural rules (295). 30 The magistrate and the judge at first instance on the stated case had held that the facts of the case fell within s 75A (1), because there had been a failure to comply with the requirements of the Act and rules which permitted a party to appear by an attorney and required the plaintiff's solicitor to sign a statement of claim. They had held that since s 75A (1) applied, the Court was precluded by s 75A (3) from setting aside the judgment and orders, because that subsection precluded such an order where the applicant had taken a "fresh step" after becoming aware of the irregularity, and in the present case Mr Hoskins had done so. 31 Mason P disagreed with this reasoning, saying that the judge at first instance gave too wide a field of potential operation to s 75A (1) (at 298). He continued: "The passages in Cameron v Cole and Taylor v Taylor to which reference has been made, and the other cases discussed above, establish that the power to relieve against the type of injustice suffered by Mr Hoskins resides in the Local Court as an incident of its function as a court of justice; and the duty to set aside and/or relieve against the consequences of a default order or judgment exists ex debito justitiae (that is, not as a matter of discretion, or subject to terms). "Nothing in the language of s 75A (1) detracts from the common law right to relief ex debito justitiae against a denial of natural justice of the present type. I have already referred to cases establishing that relevantly indistinguishable rules do not have this draconian effect: see Craig v Kanssen (especially at 260); MacFoy v United Africa Co Ltd [1962] AC 152 especially at 159; Pritchard (especially at 519). The analysis of s 75A in Coles v Burke is consistent with this, for reasons already given. "Even if one focuses upon the language of s 75A itself, it offers no assistance. [His Honour referred to the provisions of the Act and rules that had been relied upon by the judge at first instance.] Each of these rules applies only to parties, with the consequence that they imposed no 'requirement' with which Mr Hoskins could have failed to comply." 32 Mason P's reasoning supports the propositions that · a person against whom an order has been made by a superior or inferior court in denial of natural justice has the unconditional right ex debito justitiae to have the order set aside; · the denial of natural justice abrogates a fundamental common law right, not dependent upon provisions of the court's constituting statute or rules; · therefore, assuming that neither the constituting statute nor the rules contain any provision incorporating or restating re-stating the common law rule, failure to provide natural justice is not a failure to comply with the constituting statute or rules of the court, for the purposes of the statutory provision (s 81 or s 75A, or like) which provides that a failure to comply with the requirements of the Act or rules is to be treated as an irregularity and is not to nullify the proceedings. 33 The plaintiffs seek to distinguish the Hoskins case, essentially on four grounds. First, they point out that the rules at issue in that case contained no equivalent of Part 1 rule 3 of the Supreme Court Rules. That is true but immaterial. Part 1 rule 3 is an important rule, to be applied both in the interpretation of the rules and in the exercise of discretions under the rules. It declares that part of the purpose of the rules is to facilitate the just resolution of the real issues in proceedings. It does not give any particular guidance, however, as to the content of the word "just". It therefore does not purport to embody the common law principles of natural justice, although a judge seeking to give effect to the purpose of the rules, as declared in Part 1 rule 3, would be required by law (rather than by the rule) to have regard to the principles of natural justice as well as all other relevant legal principles. In short, it cannot be said that Part 1 rule 3 makes the common law principles of natural justice "requirements" of the Supreme Court Rules for the purposes of s 81. 34 Secondly, they point out that in Hoskins, Mr Hoskins had been joined as a party to the cross-claim, although he had not been served and did not know that he was being sued. In the present case, the BP companies have at no stage been parties to the proceedings. Again, this is true but immaterial. The principle adopted by the Court of Appeal, following the observations of Rich J in Cameron v Cole, was that a person denied natural justice is entitled to relief ex debito justitiae, and that principle is equally applicable in the case such as Hoskins itself where a party is denied natural justice, and in a case such as the present where an affected non-party is denied natural justice. 35 Thirdly, they draw attention to the cases to which Mason P referred, in the passage quoted above, and contend that those cases support their view that the present case is within s 81. I disagree. I shall discuss the three cases in contention.

36 The first is Craig v Kanssen [1943] KB 256. In that case, the plaintiff made an application for leave to enforce a judgment under wartime emergency powers legislation, and purported to serve the application by post, but he used the wrong address. Subsequently an order was made granting leave for enforcement, and when the defendant found out about it, he took out of summons asking that the order be set aside. The Master made an order setting aside the order for enforcement, and the plaintiff successfully appealed to a single judge. The defendant's appeal to the Court of Appeal was allowed. 37 The defendant submitted that he was entitled to have the order set aside ex debito justitiae as a nullity. In response, the plaintiff relied on the Rules of the Supreme Court, Order 70, rule 1, which stated that "Non-compliance with any of these rules … shall not render any proceedings void unless the court or a judge shall so direct, but such proceedings may be set aside either wholly or in part as irregular, or amended, or otherwise dealt with in such manner and upon such terms as the court or judge shall think fit". In this case there clearly was a non-compliance with a rule, namely the rule dealing with service by post to the defendant's proper address. 38 Lord Greene MR drew a distinction between proceedings or orders which are nullities and those in respect of which there has been nothing worse than an irregularity (at 258). He referred to the authorities and concluded (at 262) that "a person who is affected by an order which can properly be described as a nullity is entitled ex debito justitiae to have it set aside". He held that failure to serve process, where service of process is required, went to the root of conceptions of proper procedure in litigation, and was a fundamental vice rather than a mere irregularity. The order was therefore a nullity, which must be set aside. 39 As I have mentioned, this reasoning was criticised by Rich J in Cameron v Cole, on the ground that any order of a superior court is not a nullity, but is valid until set aside. It seems to me that, although his reasoning is inaptly expressed for the reasons given by Rich J, Lord Greene may well have had no difficulty with Rich J's proposition. He was concerned to emphasise the unconditional right of the affected person to set the order aside, notwithstanding Order 70 rule 1, and he found it appropriate to make an order to that effect, rather than merely declaring that the Master's order was and had always been a nullity. 40 Properly understood, Craig v Kanssen is a authority for the view that if an order is obtained without proper service on the affected person, and therefore in denial of the requirements of natural justice, the affected person has an unconditional right to an order setting the first order aside. 41 The second case is MacFoy v United Africa Co Ltd [1962] AC 152, a decision of the Privy Council on appeal from the West African Court of Appeal. In that case default judgment was entered against a defendant who later claimed that the judgment should be set aside. He contended that the plaintiff's statement of claim was a nullity because it had been delivered during the Court's long vacation. The Privy Council held that it was a breach of the relevant rules for the statement of claim to have been delivered during the long vacation, in the absence of any direction by a judge. The relevant rule of the Supreme Court of Sierra Leone was substantially identical with Order 70 rule 1, the rule in issue in Craig v Kanssen. The Privy Council accepted that this rule only applied to proceedings that were voidable, and not to proceedings that were a nullity. Their Lordships held, however, that delivery of a statement of claim in the long vacation was only an irregularity rather than a nullity, voidable in the exercise of the Court's discretion under the rule. 42 The plaintiffs rely on a passage from the judgment of their Lordships, delivered by Lord Denning. Having stated that the rule about non-compliance applies to proceedings that are voidable but not to proceedings that are a nullity, he continued (at 160): "The defendant here sought to say, therefore, that the delivery of the statement of claim in the long vacation was a nullity and not a mere irregularity. This is the same as saying that it was void and not merely voidable. The distinction between the two has been repeatedly drawn. I an act is void, then it is in law a nullity. It is not only bad, but incurably bad. There is no need for an order of the court to set it aside. It is automatically null and void without more ado, though it is sometimes convenient to have the court declare it to be so. … But if an act is only voidable, then it is not automatically void. It is only an irregularity which may be waived. It is not to be avoided unless something is done to avoid it. There must be an order of the court setting it aside: and the court has a discretion whether to set it aside or not. It will do so if justice demands it but not otherwise. Meanwhile it remains good and a support for all that has been done under it." 43 These observations support the plaintiffs' case, but in my opinion they are inconsistent with the judgment of Rich J in Cameron v Cole (which in relevant respects is supported by the judgments of the other judges, including Williams J, who dissented) and with the judgment of Mason P in the Hoskins case. While Mason P referred with approval to MacFoy's case, he specified p 159, presumably referring to the passage where Lord Denning says that the rule about non-compliance "only applies to proceedings which are voidable, not to proceedings which are a nullity: for those are automatically void and a person affected by them can apply to have them set aside ex debito justitiae in the inherent jurisdiction of the court without going under the rule". Mason P does not refer to the passage on p 160, set out above. His own observations (43 NSWLR at 298) are inconsistent with Lord Denning's analysis in that passage. 44 In Australian law the distinction between a nullity and an irregularity is not the same as the distinction between a void and a voidable order. Lying between nullities and irregularities are orders made by superior courts which are valid until set aside (that is, voidable rather than void) but open to be set aside as a matter of unconditional right, without the exercise of any relevant discretion. It may be that s 81, and its equivalents in other courts, transfer some cases from the intermediate category (orders voidable as of right) into the category of orders voidable only after the exercise of a discretion - the cases so transferred being cases where the defect in the order flows from non-compliance with the court's constituting statute or its rules. The contrary view is that, where there is a failure to comply with a requirement of the Act or rules which is fundamental, the court has a formal discretion under s 81 but it is obliged to exercise its discretion in a manner that recognises the applicant's unconditional right to set the order aside. However, it is unnecessary for me to decide that point in the present case, since the defect in my orders of 4 September 2000 flowed from failure to observe the common law requirements of natural justice rather than the requirements of the Supreme Court Act and rules. 45 The third case is Re Pritchard [1963] 1 Ch 502. In that case proceedings under inheritance (family provisions) legislation were commenced by originating summons in a district registry, contrary to rules of court that required that the originating summons be filed in the central office. By the time the mistake was discovered, it was too late to start afresh in the central office. The question was whether the proceedings could be removed to the central office, and that in turn depended upon whether the proceedings, being contrary to the rules of court, were a nullity. The plaintiff invoked Order 70 rule 1. 46 The Court of Appeal held, by majority (Upjohn and Danckwerts LJJ, Lord Denning MR dissenting), that the originating summons was a nullity, because there was a fundamental failure to comply with both the rules and provisions of the statute dealing with civil proceedings. The court had no power under Order 70 rule 1, in their Lordships' view, to cure proceedings that were a nullity. 47 In the course of reaching this conclusion, Upjohn LJ referred to Lord Denning's observations in the MacFoy case about the difference between void and voidable orders. In a passage (at 520) reminiscent of Rich J's criticism of Craig v Kanssen (Cameron v Cole, at 591), he said that "with all respect to Lord Greene's judgment", the phrase "ex debito justitiae" is not equivalent to a nullity, but rather means "that the plaintiff is entitled as a matter of right to have it [the defective order] set aside." He added (at 521) that in cases where there is a fundamental defect in procedure, Order 70 rule 1 applies but the applicant is entitled to assert the right to have the order set aside ex debito justitiae. That is, there are cases where there is formally a discretion, but the court is bound to exercise the discretion so as to recognise the applicant's unconditional right. 48 His Lordship observed (at 523) that the court should not readily treat a defect as fundamental and so a nullity, and should be anxious to bring the matter within the umbrella of Order 70 when justice can be done as a matter of discretion, but he observed that the court should bear in mind that many cases must be decided in favour of the party entitled to complain of the defect ex debito justitiae. Those observations are not applicable in the present case, where in my view s 81 does not apply because there is no failure to comply with a requirement of the Act and rules. Once again, the case is consistent with the principles enunciated by Rich J in Cameron v Cole and by Mason P in the Hoskins case. 49 Fourthly, the plaintiffs trace the history of s 81, contending that it was based upon an amended form of rule adopted in England after Pritchard's case, and they say that case law upon the interpretation of the new English rule supports their view. The revised English rule of court, which had become Order 2 rule 1, is a substantially the same as s 81, and was considered in Harkness v Bell's Asbestos and Engineering Ltd [1967] 2 QB 729. In that case, which involved an order being made by a district registrar where the rules required that it be made by a judge in chambers, Lord Denning MR said that the new rule had done away with the old distinction between nullities and irregularities, and that it should be construed widely and generously to give effect to its manifest intentions. In his Lordship's view, every omission or mistake in practice or procedure was thereafter to be regarded as a irregularity which the court could and should rectify so long as it could do so without injustice (at 736). It appears that s 81 was derived from the English rule: Australian Coastal Shipping Commission v Curtis Cruising Pty Ltd (1989) 17 NSWLR 734, 749. 50 Two points are to be made about the Harkness case. First, Lord Denning's observations apply only where, as a matter of construction, Order 2 rule 1 applies, so that the problem can be described as an omission or mistake in practice or procedure in the relevant sense. In the present case, in my view, s 81 does not apply as a matter of construction, for reasons I have given. Secondly, the Harkness case is consistent with the proposition, emerging from Cameron v Cole and Re Pritchard, that there is a category of cases where the defect is so fundamental that, although the court may formally have a discretion, the discretion must be exercised to recognise the applicant's unconditional right to have the order set aside. That unconditional right exists, in my view, in the present case, because there has been a denial of natural justice.

Is the error relied upon by the plaintiffs within the scope of the slip rule? 51 Counsel for the plaintiffs submitted that the courts have progressively widened the slip rule by judicial decision. In Storey & Keers Pty Ltd v Johnstone (1987) 9 NSWLR 446, McHugh JA reviewed the decided cases and found that the scope of the rule had been expanded by judicial decision in one important respect. He held (at 453) that amendments under the slip rule may relate to any matter in issue in the proceedings, or to something incidental to such a matter, and are not confined to subsidiary and consequential matters, notwithstanding some cases indicating a more narrow approach (in particular, Coppins v Helmers (1969) 72 SR (NSW) 273). 52 I do not detect in his Honour's judgment any sense of general expansion of the jurisdiction under the slip rule, or any indication or encouragement to a judge at first instance that further expansion should be undertaken. It appears to me that an important limitation to the slip rule emerges from his Honour's analysis of the cases. In his Honour's view, the slip rule is available to be used only if the need for the variation is the result of an accidental omission or mistake (at 452). An omission or mistake should not be treated as accidental if the proposed amendment requires the exercise of an independent discretion or is a matter upon which a real difference of opinion might exist (at 453). The test of whether a mistake or omission is accidental is this: if the matter had been drawn to the Court's attention would the correction at once have been made? 53 As far as I can see, these propositions have not been qualified by later cases. It is true that since the decision in the Storey & Keers case, courts have adopted an expansive interpretation of the slip rule in other respects. In Elyard Corporation Pty Ltd v DDB Needham Sydney Pty Ltd (1995) 133 ALR 206, 207, Lockhart J regarded it as "well settled" that the application of the slip rule was not confined to giving effect to the intention of the judge at the time when the court's order was made, and extended to the intention which the court would have had, but for the failure that caused the accidental slip or omission. This may be regarded as an "expansionary" view, but nevertheless Lockhart J reiterated the point made by McHugh JA in the Storey & Keers case, without expressly referring to that case. He said (at 210) that "the slip rule applies where the proposed amendment is one upon which no real difference of opinion can exist", and that it did not apply where the amendment was "a matter of controversy". 54 In my opinion, the present case is not an appropriate one for the application of the slip rule. The error contended for by the plaintiffs is one upon which a real difference of opinion might exist, and indeed does exist. Even if my view of the inapplicability of s 81 is incorrect, it is a matter of controversy, at the very least. Given my view that s 81 does not apply to cut down the entitlement of the BP companies, as of right, to have the ex parte orders as set aside, if the potential application of s 81 had been drawn to my attention at the time when I made my orders, I would not have altered them.

Conclusions 55 In my opinion the plaintiffs' contention, that my orders of 10 September 2001 were based upon an error, has not been made out. Further, if there was an error of the kind contended for by the plaintiff, it was not an error appropriate to be corrected under the slip rule. Therefore the plaintiffs' application by notice of motion filed on 11 October 2001 should be denied. I shall hear the parties to the application on the question of costs. * * * * * * * * * *

Last Modified: 11/06/2001 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.

Local Court (Civil Claims) Act 1970(NSW)

Supreme Court Act 1970(NSW)ss 23, 62, 63

At a glance

Court

Decision date

Before

Source

Judgment (13 paragraphs)

Parties

Legislation Cited (5)

Cases Cited (11)

Cited By (5)