CAI v ZHENG [2009] NSWCA 317 | Case summary

6 October 2009 Deju CAI v Tian Zhen ZHENG (NO 2) Judgment 1 GILES JA: The appellant's notice of motion, filed in the circumstances described by Basten JA, applied for leave to amend the notice of appeal by adding a restitutionary order to the orders sought on appeal and for judgment for $52,559.09 by way of restitution plus interest at Schedule 5 rates. 2 I prefer not to decide whether a single judge of the Court could make these orders. They can be seen as not involving the determination or decision of the appeal, the appeal being concerned with the challenge to the assessment of the respondent's loss and any restitutionary order being consequential upon its determination or decision. The parties did not address submissions to the matter, but were agreed that a single judge could make the orders. 3 As it happens, the Court as originally constituted has dealt with the notice of motion. That is appropriate in order to make clear that the failure to seek a restitutionary order in the notice of appeal, as required by r 51.19, is not a bar to making an order. It may, however, call for modification of the order which would otherwise have been made. 4 For the reasons given by Basten JA, a restitutionary order should be made, including interest but modified as to the interest; but repayment should be deferred until after the judgment of the High Court. 5 I agree with the orders proposed by Basten JA. 6 BASTEN JA: On 11 May 2000 Ms Zheng suffered injuries in a motor vehicle accident. She was a passenger in a vehicle driven by the appellant, Mr Cai. 7 At trial in the District Court, she was awarded damages in the sum of $300,681. Judgment was delivered on 21 August 2007. 8 Mr Cai brought an appeal to this Court challenging the assessment of the respondent's loss in a number of respects. On commencing proceedings in this Court, the appellant sought a stay of the judgment of the District Court pending determination of the appeal. On 8 October 2007 the Registrar ordered a stay conditional upon the appellant paying the respondent the sum of $70,000 within 21 days. It appears that the payment was received on or shortly prior to 12 November 2007. 9 On 25 February 2009 this Court delivered its reasons for setting aside the judgment of the lower Court and substituting a judgment in the sum of $17,447.91: Cai v Zheng [2009] NSWCA 13. However, the appellant did not seek, either in its notice of appeal, or in written submissions, or in the course of oral argument, an order for reimbursement of all or any part of the amount paid as a condition of the stay. Indeed, neither the stay nor the payment made as a condition of the stay, were referred to in the course of the appeal. 10 Following the delivery of judgment and within 14 days of the entry of orders, the appellant filed a notice of motion seeking a variation of the orders. That course was available to it pursuant to the Uniform Civil Procedure Rules 2005 (NSW) ("UCPR"), r 36.16(3A). He sought an order for judgment in his favour in an amount being the excess of the payment over the debt due, namely $52,552.09. The notice of motion also sought "interest calculated at the rates set out in Schedule 5 of the UCPR". Acknowledging that the need for the motion and the variation in the orders were entirely due to an oversight on the part of his lawyers, Mr Cai agreed to pay the costs of the application. 11 An element of procedural confusion remained. In submissions for Ms Zheng filed on 23 March 2009, reference was made to an affidavit sworn by Ms Zheng three days earlier. However, it was not filed with the written submissions and by submissions in reply dated 31 March 2009, the appellant noted that he had not been served with the affidavit and objected to it. Later on the same day, the appellant acknowledged that a copy of the affidavit had been forwarded by facsimile on 27 March and withdrew his objection. Nevertheless, no copy of the affidavit was filed in Court. 12 These materials remained in the registry for five months after the filing of the last submission on 31 March 2009. They were then referred to the Court as originally constituted, for determination. Both parties accepted that it would be open to a judge of the Court to make the orders sought. Jurisdiction of a single judge 13 The power of a single judge to deal with the motion was said to derive from s 46 of the Supreme Court Act 1970 (NSW). What part of that section was relied upon was not specified, but reference was made in the submissions to the decision of Kirby P in Government Insurance Office of New South Wales v Healey [No 2] (1991) 22 NSWLR 380. Reliance was also placed upon the judgment of Bell JA in New South Wales v Fahy [2008] NSWCA 34. 14 It is clear that in Healey the power of a single judge to deal with the matter (which was very similar to the present case) was not in dispute. Kirby P stated at 382: "The motion came before me, exercising the powers of the Court of Appeal under s 46 of the Supreme Court Act 1970 . No application was made by any party that the proceedings be referred to the Court as constituted when the appeal was determined or otherwise. Both sides in the contest dealt with the matter upon the basis that the issue was appropriate for the determination of a single judge. I am prepared to assume that had the issue now before me been raised during the hearing of the appeal, it would have been dealt with by the Court and provided for in the Court's orders. So far at least as the 'repayment' was concerned, the opponent did not contest this. Disposing of the motion does not involve the determination of the appeal for that has already occurred. The issue raised is incidental to the primary function of the Court of Appeal in this appeal. It is thus appropriate to be dealt with by me pursuant to s 46(2)(b) of the Supreme Court Act ." 15 Section 46(2) provides: " 46 Powers of Judge of appeal … (2) A Judge of Appeal may exercise the powers of the Court of Appeal - (a) to make an order or give any direction concerning the institution of an appeal or other proceedings in the Court of Appeal, or (b) to make any order or give any direction in any appeal or other proceedings, but not an order or direction involving the determination or decision of the appeal or other proceedings." 16 If, as his Honour noted, the appeal had already been determined, it is not clear why the order sought would properly have been described as an order "in any appeal". Further, his Honour was not prepared to deal with the matter under the "slip rule" noting that "any such correction would have to be made by the Court as constituted when the orders said to have been in error were made": at 383B. However, if a judge of appeal had no power to vary an order under the slip rule (now UCPR, r 36.17) it would be surprising if a single judge could make an order inconsistent with the orders made by the Court constituted by three judges. Further, his Honour was dealing with a situation where the orders had not been entered (see 385A-B) and by way of making further orders which were not "inconsistent with" the orders already made: ibid. 17 The correct approach needs to be reconsidered in the light of the significant changes in rules effected by the UCPR. However, it is clear that no such consideration was given in the course of the application heard by Bell JA in Fahy: see [2008] NSWCA 34 at [22], where her Honour relied upon Healey. Her Honour noted that "[n]either of the parties submitted that the application should be referred to the Court as constituted on the hearing of the appeal or otherwise": at [23]. Further, that case was complicated by the fact that the relevant order for restitution only arose as the result of an appeal to the High Court. Finally, the only issue ultimately in dispute was an entitlement to interest on two amounts. 18 There is an additional matter. In part, the discussion in Fahy appears to have turned upon whether or not an order for restitution should have been sought in the appeal. No doubt, until the result was known, the entitlement to such an order would be speculative. However, the purpose of UCPR r 51.19, requiring such an order to be included in the notice of appeal, together with any claim for interest at a rate other than the rate set out in Schedule 5, was designed to avoid the difficulties raised by the need for further consideration of appropriate order after judgment is delivered, a need which has become acute now that (from their commencement in August 2005) the UCPR provide that judgment be entered automatically on delivery of the orders. 19 The question of power thus raised may be compared with the question of power in respect of costs. There is no novelty in the proposition that an appellant which seeks an order for costs should identify that as part of its relief in the notice of appeal, although its ultimate entitlement and the terms of the order, may well depend upon the outcome of the appeal. The fact that a single judge is expressly given the power to deal with costs only by reference to specified judgments identified in s 46(1)(a)-(c) and to deal with "other matters incidental to" those matters, speaks against there being any general power in a single judge to deal with issues of costs, or indeed other "matters incidental to", judgments given after a disputed hearing. 20 Finally, there is an issue as to the appropriate form of the orders sought. In proposed short minutes of order filed with the appellant's submissions, he asked for additional orders to those made by the Court on 25 February, in the following terms: "6. Judgment in favour of the appellant in the sum of $52,552.09 by way of restitution. 7. Declare that the respondent is obliged to pay interest calculated in accordance with the rates prescribed by Schedule 5 of the Uniform Civil Procedure Rules from 12 November 2007 when the respondent received the sum of $70,000 ordered to be paid to her by the appellant by Registrar Schell on 8 October 2007." 21 Order (2) made by the Court on 25 February 2009 set aside the order made by the trial judge and stated that in substitution "judgment is entered for the respondent in the sum of $17,447.91". Giving a further order in the form of proposed order (6) would be apt to confuse; a payment by way of restitution should be more clearly distinguished from the underlying judgment. In any event, it is not appropriate for a single judge to formulate orders in a manner which could constitute a variation of the orders given by the Court. Not only is a single judge not empowered in express terms to give orders "incidental to" such orders but it is clear that it is the Court which may discharge or vary a judgment given by a judge of appeal, rather than the other way around: s 46(4). 22 The matter having been given appropriate consideration, pursuant to the rules currently in force, the proper conclusion is that the orders now sought should be made by the Court as originally constituted, and not by a single judge. (This conclusion is not intended to deal with circumstances in which two judges may appropriately sit, nor with circumstances in which it may be necessary to reconstitute the original Court.) Order for restitution 23 Putting to one side questions of the time from when the order should operate, the respondent resisted payment on two bases. The first was the failure to comply with r 51.19 and seek relief in the notice of appeal, as filed prior to judgment. The second ground of resistance was that any repayment depended upon the proper understanding of the rules relating to unjust enrichment, reference being made to Roxborough v Rothmans of Pall Mall Australia Ltd [2001] HCA 68; 208 CLR 516. 24 It is convenient to deal first with the substantive objection. To do so it is not necessary to identify the circumstances in which, either at law or in equity, orders for restitution are appropriate. In the present case the sole basis upon which the payment was received was in part payment of a judgment which has now been overturned. The entitlement to keep the payment disappeared with that judgment. The payment made was pursuant to a Court order which was intended to be a temporary resolution of competing interests pending determination of an appeal and was solely referable to the judgment below. As explained by Handley JA (Mahoney and Priestley JJA agreeing) in Production Spray Painting & Panel Beating Pty Ltd v Newnham [No 2] (1992) 27 NSWLR 659 at 662F, "an order for restitution follows as of course from the quashing of the orders [below] and the Court has no discretion to withhold such relief". As is clear from his Honour's reasoning, no different principle applies in relation to an order set aside on appeal: see TCN Channel 9 Pty Ltd v Antoniadis [No 2] [1999] NSWCA 104; 48 NSWLR 381 at [3]-[4] (Handley, Beazley and Stein JJA). 25 The respondent referred to those authorities in relation to the procedural requirement of r 51.19, but not in relation to the objection in substance to the right to recover payment of the amount paid as a condition of the stay. Rather, the respondent sought to argue that it would not be unjust for her to retain the benefit of the payment, because she was not entitled to recover damages under other heads and had merely received the benefit of money paid by the Church when she had no other means of support. These matters, however, do not address the sole legal issue which is that the basis of her entitlement depended upon the judgment below and, to the extent that that judgment has been set aside, has been removed. The principles applied in the long standing line of authorities which include Newnham [No 2] and Antoniadis [No 2] operate and entitle the appellant, subject to the procedural difficulty, to an order for repayment of so much of the amount paid as a condition of the stay as exceeds the amount of the judgment. 26 The source of the power for an order by way of restitution and its appropriateness were identified in Ambulance Service of New South Wales v Worley (No 2) [2006] NSWCA 236; 67 NSWLR 719 at [29]-[30]. The reference in Worley at [29], to Part 51, r 26 of the Supreme Court Rules, should be replaced with a reference to UCPR r 51.54. Minor variations in the language have not affected the substance of the power. Procedural objection 27 The respondent objects that to grant the appellant relief in the terms sought, where the appropriate order had not been sought in the notice of appeal, or the submissions on the appeal, is to set at nought the mandatory terms of r 51.19. 28 That submission must be rejected. The power to waive compliance with the rules, either in whole or in part and to grant relief which is appropriate in the circumstances of a case, without procedural unfairness to the other party, is the guiding principle by which the Court operates in all circumstances. It is the principle expressed in s 56 of the Civil Procedure Act 2005 (NSW). 29 The application for additional orders, although made after the judgment was entered, was within the time specified by UCPR, r 36.16. The power of the Court was thus engaged. The respondent should have had no expectation that she would be entitled to retain the amount of the judgment in the event that the appeal was upheld and the order below set aside, in whole or in part. She has, however, suffered prejudice as a result of the late application for such an order. That prejudice may be addressed in three ways. First, as conceded by the appellant, she should have her costs of the application in any event. 30 Secondly, it would be open to the Court to limit the interest recoverable by the appellant in circumstances where, at no stage prior to judgment, had he indicated that he intended to seek an order for repayment with interest. 31 Thirdly, there is an issue raised by the outstanding application for special leave to appeal to the High Court, which was referred by a bench of two to the Full Court, for hearing as on an appeal, on 4 September 2009: see Zheng v Cai [2009] HCA Trans 218 at p 9 (Gummow and Bell JJ). Interest 32 In Heydon v NRMA Ltd (No 2) [2001] NSWCA 445; 53 NSWLR 600 at [32] Mason P (with whom Beazley JA and Ipp AJA agreed) stated that it was the practice of the Court "to award restitutionary interest at the rates payable on judgments unless special circumstances exist". That statement was made in considering how interest was to be calculated. It is open to the Court to deny an appellant interest in appropriate circumstances. There is always a danger in seeking to identify guiding principles, to which a court will usually adhere, by stating a practice subject to an exception arising in "special circumstances". Rather, the question is whether, in all the circumstances of a particular case, it is appropriate to award interest on an order for repayment of an amount of a judgment, paid in part as a condition of a stay. 33 In the present case, a significant consideration is the failure of the appellant to seek an order for repayment of the money or, if that were to be implied as sought in the usual course, an order for interest on the amount outstanding. Such an order, sought in the notice of appeal, might have placed the respondent on notice as to what might be required of her if the appeal were successful. Accepting that, properly advised, she should have been alert to the fact that repayment might be required, it is not so clear that she would have been advised that an order for repayment would necessarily attract a requirement to pay interest when none was claimed. The circumstances of the present case are satisfied by ordering that interest be paid on the amount outstanding from the date of the notice of motion seeking to amend the notice of appeal to include the claim for interest, namely 27 February 2009. Stay pending High Court application 34 In his submissions in reply of 31 March 2009 the appellant complained that a stay was sought pending the outcome of an application for special leave to appeal, in circumstances where no such application had been served, let alone a summary of argument which would enable the appellant to gauge the strength of the application. 35 Due in part to the unfortunate delay in the matter being referred to the Court for determination, it is now known that the High Court has assessed the application for leave to appeal to be sufficiently meritorious to warrant referral to a Full Court for hearing as on an appeal. Furthermore, the delay has meant that there has been a de facto stay of the order for repayment for a significant part of the period required to determine the outstanding application. 36 The appellant's objection to a stay was also based upon the proposition that the Court should assume that an authorised insurer stands behind the appellant and, if the money were repaid, the appellant would be good for payment of any amount together with interest which might be awarded by the High Court. 37 That assumption should be made; nevertheless, it may also be assumed that an order for payment of an amount in excess of $50,000 could cause hardship to the respondent and, were the High Court to uphold her appeal, such hardship would have been unwarranted, as she would recover the amount of the repayment. 38 So far as the appellant is concerned, it may further be assumed that any additional delay may diminish the chances of him recovering the amount in full, especially as the amount is increasing as interest continues to accrue. On the other hand, his legal entitlement would now be protected by an order that interest will run until repayment is made. 39 In the circumstances of this particular case, the balance of convenience favours a delay in the requirement for repayment. Conclusions 40 It is appropriate that the appellant obtain an order for repayment in the terms sought but delayed to await the determination of the application in the High Court. It is not necessary for this purpose to amend the notice of appeal in proceedings in this Court which are now concluded. The following orders should be made:

CAI v ZHENG

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