General Homes v Jonathon B & Leanne A Caelli trading as JC Electrical

General Homes v Jonathon B & Leanne A Caelli trading as JC Electrical - [2007] NSWSC 463 - NSWSC 2007 case summary — Zoe

[10]

55094/05 GENERAL HOMES PTY LIMITED V JONATHON B & LEANNE A CAELLI T/AS JC ELECTRICAL JUDGMENT 1 The plaintiff, General Homes Pty Limited, commenced proceedings by the filing of a Summons on 16 November 2005 seeking a declaration that the Determinations purportedly made by an adjudicator pursuant to the Building and Construction Industry Security of Payment Act 1999 (the Act) are void. The plaintiff also sought an order that Jonathon B & Leanne A Caelli t/as JC Electrical (the defendant), be restrained from taking any steps to enter or to enforce judgment in respect of the Determinations. The plaintiff also sought an order in the nature of certiorari quashing the Determinations and an order staying those Determinations. Procedural background 2 The defendant registered the Adjudication Certificate as a judgment in the Bankstown Local Court on about 11 November 2005 and Garnishee Orders were made consequent upon that judgment. On 2 December 2005 Einstein J made consent orders that particulars be requested by the defendant and answered by the plaintiff by 20 January 2006; that the defendant file points of defence by 10 February 2006; that the plaintiff file and serve its evidence by 30 March 2006; that the defendant file and serve its evidence by 24 March 2006; and re-listed the matter on 24 March 2006. 3 On 17 January 2006 the Bankstown Local Court granted a "stay of proceedings" on the plaintiff's ex-parte application and listed the Motion for a stay on 21 February 2006 at Burwood Local Court. On 21 February 2006 that Motion was marked "not reached". 4 On 9 March 2006 the defendant's solicitors wrote to this Court requesting the matter be re-listed in the Technology & Construction List on 10 March 2006 because the plaintiff had failed to respond to the defendant's request for particulars. That letter also claimed that the defendant's position was being prejudiced and that no monies had been paid into Court "as is a requirement of section 25(4)(b)" of the Act. Notice of Motion 5 On 10 March 2006 I granted leave to the defendant to file a Notice of Motion to strike out the plaintiff's claim for failing to prosecute it with due despatch. I directed that the defendant file and serve that Motion by 17 March 2006 together with any affidavits in support; that the plaintiff file any evidence in response by 23 March 2006; and that the Motion be listed for hearing on 24 March 2006. 6 On 15 March 2006 the defendant filed a Notice of Motion in which the following orders were sought: 1. These proceedings be struck out.

[41]

CLAIMS EXTINGUISHED Upon the Company making all payments, if any, by way of clear funds, to the Deed Administrators as required under Clause 4 of this Deed, then all debts, claims, or liabilities to Creditors arising as a result of anything done, or omitted to be done, by or on behalf of the Company before the date referred to in Item 3 of the Schedule are forever extinguished , expecting for the claims of Subordinated Creditors. Further correspondence 22 Correspondence apparently ensued between August and October 2006 between the Administrators' solicitors and the defendant's solicitors. The defendant's solicitors claimed that the plaintiff was in contempt of order 3 made on 22 June 2006. In October 2006 the Administrators' solicitors wrote to the defendant's solicitors in terms that included the following: We disagree with your implication that our client is in contempt of orders made by her Honour Justice Bergin on 22 June 2006 ("the orders"). The obligation to pay funds into Court under order 3 continued until " the proceedings were determined" . Order 1 dismissed the proceedings, thereby determining those proceedings. We fail to see how our client can be in contempt of an order that no longer imposes any obligation on the relevant party. Since the date of the orders the Company has entered into a Deed of Company Arrangement. Section 444E of the Corporations Act 2001 prevents your client from commencing or continuing any proceedings against the Company or taking any steps to enforce any judgments or orders against the Company without leave of the Court. The leave granted by her Honour Bergin J related only to the hearing of your client's Notice of Motion and did not extend to the enforcement of the Orders. Nor did it extend to taking any steps to enforce the judgment awarded by the Local Court against the Company in favour of your client. In any event, as you have previously been advised, the financial circumstances of the Company mean that any payment made into Court and distributed to your client (or another creditor) may be considered a preference. 23 The letter went on to reiterate that the Administrators could not be in contempt of any order and claimed that the defendant was an unsecured creditor of the Company and would be dealt with in the same manner as all other creditors in accordance with the terms of the Deed. The solicitors then concluded by claiming that they trusted that this resolved the matter.

[51]

Consideration 28 Although leave was granted on 10 March 2006 to file a Motion "to strike out the plaintiff's claim for failing to prosecute the claim with due despatch" the basis of the defendant's application was the plaintiff's failure to comply with the orders made by Einstein J for the provision of particulars. The Amended Motion that was dealt with on 22 June 2006 sought an order that the "proceedings be struck out". The order that was made on 22 June 2006 was: I make the orders in paragraphs 1 to 4 of the first defendant's Amended Notice of motion filed on 31 March 2006. No formal order has been entered or taken out. 29 Part 12 rule 12.7 of the Uniform Civil procedure Rules 2005 provides relevantly: 12.7 (1) If a plaintiff does not prosecute the proceedings with due despatch, the court may order that the proceedings be dismissed or make such other order as the court thinks fit. 30 The defendant did not seek an order that the proceedings be dismissed. It sought an order that the proceedings be struck out. 31 Section 61 of the Civil Procedure Act 2005 provides relevantly: (3) If a party to whom such a direction has been given fails to comply with the direction, the court may, by order, do any one or more of the following: (a) it may dismiss the proceedings, whether generally, in relation to a particular cause of action or in relation to the whole or part of a particular claim, (b) it may strike out or limit any claim made by a plaintiff, (c) it may strike out any defence filed by a defendant, and give judgment accordingly, (d) it may strike out or amend any document filed by the party, either in whole or in part, (e) it may strike out, disallow or reject any evidence that the party has adduced or seeks to adduce, (f) it may direct the party to pay the whole or part of the costs of another party, (g) it may make such other order or give such other direction as it considers appropriate. (4) Subsection (3) does not limit any other power the court may have to take action of the kind referred to in that subsection or to take any other action that the court is empowered to take in relation to a failure to comply with a direction given by the court.

[52]

32 There is in s 61(a) and (b) the distinction between dismissal of proceedings and the strike out of claims. In Samuels v Linzi Dresses Ltd [1981] 1 QB 115 the English Court of Appeal reviewed the authorities in relation to what was described as an "unless" order, being in the nature of a self-executing order. At 125 Roskill LJ said: … There are many decisions of this Court and of course there is the decision of the House of Lords in Birkett v James [1978] A.C. 297, as to the principles which should be applied in striking out claims for want of prosecution. One principle now clearly established is that the Court will not, generally speaking, strike out a claim for want of prosecution where a plaintiff is free to issue a fresh writ. In the instant case the defendants would be free, if their counter claim was struck out, to issue a fresh writ covering the matters as raised by the counter claim. There would be no issue of estoppel or res judicata. 33 At 127 Lawton LJ referred to Whistler v Hancock and Wallis v Hepburn which referred to matters being "defunct" or "dead" respectively and continued: The concept of the action being dead is one which does not fit in, as Roskill L.J. has pointed out, with the modern approach to striking out for want of prosecution. Further the illogicality of the purported application of this concept to this case is shown by the order which is under consideration of this appeal. Because on the face of that order it is clear that the litigation is not dead; it is very much alive. 34 In Torrac Nominees Pty Ltd v Karabay; UWS Macarthur Sports & Recreation Association Inc v Karabay [2007] NSWCA 96 the Court of Appeal was dealing with, inter alia, the meaning of the expression "begun" in the context in which litigation was not only begun but also completed before a relevant date. Young CJ in Equity reviewed the authorities in relation to the question of whether an action "had a scintilla of life in it" notwithstanding that the record had been endorsed that it had been "completed" after a preliminary dismissal order under the District Court Rules had been made. The Chief Judge referred to what Lawton LJ said in Samuels v Linzi, and after reviewing relevant passages of the authorities at pars [54] to [64], including Bailey v Marinoff (1971) 125 CLR 529 (per Gibbs J at 544-545) FAI General Insurance Co Ltd v Southern Cross Exploration NL (1988) 165 CLR 268 (per Gaudron J at 289) and Harding v Bourke (2000) 48 NSWLR 598, said: 65 I cannot really say that this review has thrown much light on the situation. The reason why it was undertaken is that it seemed to me that if there was a scintilla of life left in the action it might be said that it had been begun but not completed.

[54]

35 In Baines v State Bank of New South Wales (1985) 2 NSWLR 729 Powell J was considering an order for dismissal of proceedings pursuant to a self-executing order for discovery. An order had been made that in default of compliance with the order for the provision of the list of documents the Statement of Claim would be "struck out". The plaintiffs sought an extension of time for the filing of the list of documents and the setting aside of the order that the Statement of Claim be struck out. Although his Honour was not persuaded that the plaintiff had established a case for an extension of time, he observed at 735, "that unless a formal order has been taken out, or judgment entered, it is open to the Court to review its order and to extend the time for doing the relevant act even after the time originally appointed has expired". His Honour went on to say that even if a formal order had been taken out "it would seem still to be open to the Court to do so". 36 In National Benzole Co Ltd v Gooch [1961] 1 WLR 1489 the plaintiffs were granted leave to sign final judgment against the defendant. The defendant appealed and the appeal was dismissed in Chambers. The defendant then gave notice of the appeal from that decision and the appeal was set down for hearing. Subsequently the defendant's solicitors drew up a document in which it was stated that they requested that the appeal "be dismissed and struck out of the list". The solicitors for the plaintiff endorsed that document with the words, "We consent". The President of the Court of Appeal subsequently initialled that document. The appeal was struck out and removed from the List, however the order was not drawn up. 37 The defendant moved the Court for an order that "no order or orders be drawn up or entered in this appeal until further order of the Court of Appeal". The defendant also sought leave to proceed with the appeal notwithstanding a request for the dismissal. Although the motion was dismissed on discretionary grounds, Upjohn LJ in dealing with the question of whether the appeal was still on foot or had come to an end, said at 1492:

[55]

I am of the opinion that the appeal remains on foot until a formal order is drawn up and entered. It is clear that this is so in the High Court: the action remains on foot and the court can entertain applications therein even after judgment and until an order is perfected in accordance with R.S.C., Ord.41, r. 1. For example, a judgment or order can be recalled: see In re Harrison's Share under a Settlement [[1995] Ch. 260, C.A.; [1954] 3 W.L.R. 156]. In my judgment, the position is the same in this court. That seems to me plain from the cases to which we were referred: In re Samuel [[1945] Ch. 364] and James Lamont & Co. Ltd. v. Hyland Ltd [1950] 1 K.B. 585]. As the relevant passage in the judgment of Tucker L.J. in the latter case has been read by my Lord I will refrain from repeating it. We remain the masters of this appeal and can still entertain applications on it. In my judgment, the fact that the rather unusual words "and "struck out of the list" appear at the end of the document does not add anything. In my view, striking out the list, whether it be in the High Court or in the Court of Appeal, does not thereby bring an action or an appeal to an and: an order is required. Accordingly, in my judgment, we can entertain this application. 38 In the present case the Administrators did not oppose the making of Order 3 on 22 June 2006. However on 30 March 2007 Mr Finanne submitted that there was no liability on the Administrator to comply with Order 3 because the order only required the payment into Court "pending the determination of the proceedings" and the proceedings had been "determined" by Order 1 striking out the proceedings. 39 Section 25(4)(b) of the Act provides: (4) If the respondent commences proceedings to have the judgment set aside, the respondent: … (b) is required to pay into the court as security the unpaid portion of the adjudicated amount pending the final determination of those proceedings. 40 As I have already said there was no relief sought in the Summons setting aside the judgment in the Local Court, however a successful challenge to the Determinations would have had the consequence of the judgment being set aside. "Determine" means to "bring to an end": The New Oxford Dictionary of English; The Macquarie Dictionary Federation Edition. Although the expression "final determination" was not used in paragraph 3 of the Amended Notice of Motion, I am satisfied that the word "determination" in Order 3 made on 22 June 2006 means when the proceedings are brought to an end. The strike out of the proceedings is an interlocutory order: Hunt v Allied Bakeries Ltd [1956] 3 All ER 513 per Lord Evershed at 515; Little v Victoria [1998] 4 VR 596. A "dismissal" for want of prosecution has also been considered to be interlocutory in nature; National Mutual Life Association of Australasia Ltd v Grosvenor Hill (Qld) (2001) 183 ALR 700 at [8]-[9]. The orders made on 22 June 2006 did not bring the proceedings to an end. 41 The intention of s 25(4) of the Act is that the money is to remain in Court, "as security" until the application to set aside the judgment, or the application to have the Determinations declared void (depending on the circumstances of the particular case), has come to an end. The present proceedings have not yet been "determined" and the order made for the payment into Court, as I said in my ex tempore reasons on 30 March 2007, "still stands". The Administrators did not submit that there was no power to make Order 3 or that it was a nullity by reason of Order 1 having preceded it. It seems to me that there was jurisdiction to make the order: Jackson v Sterling Industries Limited (1987) 162 CLR 612 per Mason CJ at 616 and Deane J at 627.

[57]

44 The Administrators now claim that the Deed of Company Arrangement binds the defendant as a creditor and it must accept its entitlement pursuant to clause 14 of the Deed. The defendant submitted that Order 3 was made after the specified day in the Deed, 24 May 2006, and clause 14 does not preclude it from seeking to enforce that order. On the view that I reached on 30 March 2007, and reiterated in this judgment, Order 3 is extant until the proceedings are finally determined and the Administrators have an obligation to pay the money into Court. If that money had been paid into Court and the Administrator had then, as it has now, sought to have an order dismissing its proceedings an application could have been made by the defendant to have the money paid out to it. 45 The defendant received a Determination in its favour and proceeded appropriately to obtain judgment against the plaintiff. The plaintiff's successful ex parte application for a stay of that judgment and the subsequent vagaries of the Local Court listing practice resulting in the matter not being reached, deprived the defendant of the benefit of the judgment and garnishee orders that it had obtained. The challenge to the Determinations combined with the stay in the Local Court kept the defendant out of its money and the voluntary administration two days before the date for hearing of the Notice of Motion caused further delay and difficulties for the defendant in seeking to recover the amounts awarded to it under the Determinations. 46 The Administrators did not oppose Order 3 on 22 June 2006. The attempt to then suggest that there was no obligation to comply with Order 3 led to further debate and delay. I took that delay into account in relation to the application for a declaration and it is a matter that I have taken into account in respect of these applications. All that was said on behalf of the Administrators on 22 June 2006 was that there was no money to be paid into Court, not that there was no utility in making such an order. Indeed it is obvious from the Deed of Company Arrangement that a fund of money became available. The plaintiff has taken advantage of the situation without raising the matter with the Court, notwithstanding that the solicitors for the Administrators suggested on 23 June 2006 that the parties return to Court. 47 It is true that the amount determined in the defendant's favour was a debt as at the date of the entry of judgment in the Local Court but the plaintiff successfully stayed that judgment. Although Order 2 was made on 22 June 2006 lifting that stay that order was not perfected by the formal entry of the order and thus the stay remained in force. The order for the payment of security postdates the specified date in the Deed, notwithstanding that the Determinations and the judgment predated such date. The Administrators submitted that the judgment debt was the underlying debt warranting the order for security made on 22 June 2006 and that it has "gone in lieu of the Deed of Company Arrangement". As at 22 June 2006 that judgement debt was stayed as a result of the plaintiff's application and the proceedings challenging the Determinations were on foot. The order for the payment of security postdates the specified date in the Deed and I am not satisfied that the defendant is precluded by clause 14 of the Deed to seek to enforce Order 3. 48 I am satisfied that justice dictates that the application for an order dismissing the proceedings should not be made until after the defendant has had the opportunity to enforce Order 3 made on 22 June 2006.

At a glance

Court

Decision date

Before

Source

Judgment (60 paragraphs)

Parties

Legislation Cited (2)

Cases Cited (7)