IceTV v Duncan Ross & Ors

Judgment (ex tempore) 1HIS HONOUR: On 18 September 2009, Rein J gave judgment for the plaintiff IceTV Pty Ltd against the defendants Mr Duncan Ross, Dr Peter Vogel and their company Vogel Ross Pty Ltd ('Vogel Ross'), for an amount of $35,000 principal and $8,488 interest, and for the cross-defendant on the first cross-claim [ IceTV Pty Ltd v Ross [2009] NSWSC 980]. An order was also made that the defendants pay the plaintiff's costs. Evidence has been filed which indicates that those costs may be in excess of $200,000, but it would seem that no assessment has taken place and there is not yet any quantified enforceable costs order. 2By notice of motion filed 27 September 2011, the defendants seek an order that the judgment be paid by instalments of a total of $2,130 per month, the first payment to be made on 1 November 2011. I say a total of that amount, because the motion specifies Mr Ross to pay $150 per month, Dr Vogel to pay $150 per month, and Vogel Ross to pay $1,830 per month. However, as I indicated in the course of argument, it is far from clear to me that either (NSW) Civil Procedure Act, 2005, or (NSW) Uniform Civil Procedure Rules, 2005, authorise the apportionment of the judgment debt in that way and, if I make an instalment order, I will make one in respect of the judgment against all three defendants, rather than one apportioned between them. 3Civil Procedure Act, s 107(1)(b), provides that a court in which judgment has been entered may, subject to and in accordance with the uniform rules, make an order allowing for payment of the judgment debt by instalments, payable in such amounts and at such times as are specified in the order. The procedure by which such an application is to be made is specified in UCPR, Part 37. Essentially UCPR, r 37.2, authorises an application for an instalment order which must be supported by an affidavit of financial circumstances, and then provides for approved forms for an individual or corporate debtor, being forms 46 and 47 respectively. The rule provides that, except where the application is made during a hearing before the Court, it is to be dealt with by a registrar. UCPR, r 37.3, provides that the registrar is to deal with the application ex parte by making an instalment order or refusing to make such an order; following which either party may then file an objection to the registrar's decision within 14 days, in which case the matter is then heard de novo by the Court on the objection, in accordance with UCPR, r 37.4. However, if an application is made during a hearing before the Court, it can be dealt with by the Court under UCPR r 37.4. It is under that rule that the present application has been dealt with. UCPR, r 37.4(3), provides that the Court may determine an application for an instalment order by making an instalment order or by dismissing the application. 4Historically, powers to make instalment orders in respect of judgment debts have for many decades resided in the Local Court and its predecessors, and the District Court and its predecessors, but the Supreme Court never had any specific power to that effect, although the general power to stay execution of a judgment could, in an appropriate case, be used to impose terms to similar effect. However, it was historically thought significant that no general power to make instalment orders had been conferred on the Supreme Court, and indeed it was not unknown for creditors to commence proceedings in the Supreme Court, notwithstanding that they were within the jurisdictional limit of the District Court, for the specific purpose of avoiding the potential that the judgment debtor might obtain an instalment order. However, the provisions of the Civil Procedure Act and the UCPR, to which I have referred, have extended the power to make an instalment order to the Supreme Court. 5The power to make an instalment order is not accompanied by any list of relevant factors or considerations to be taken into account. It is certainly not attended by any legislative prescription that there must be special circumstances before it is exercised. Certainly, in the ordinary practice in the District Court and the Local Court, no special circumstances have been required before an order is made, indeed, to the contrary, orders tended to be made routinely in those jurisdictions. 6It seems to me that the policy that informs Civil Procedure Act, s 107, is to avoid undue hardship to judgment debtors - including, in particular, the potential for bankruptcy and its consequences - when there is a realistic prospect that they may be able to pay the judgment debt by instalments, within a reasonable time, and particularly where such a course may afford better prospects of ultimately satisfying the judgment than by immediate resort to bankruptcy. 7The cases have revealed a number of relevant considerations, although they tend to be more negative than positive, in the sense that they indicate circumstances in which an instalment order ought not be made. These were summarised in the judgment of McDougall J in Hellier Capital Pty Ltd v Albarran [2009] NSWSC 403 (at [8]-[11]) and include: first, that an instalment order ought not be made if the judgment debtor's means are sufficient to enable him or her or it to pay the judgment debt in full immediately [ Leondaris v KGB Design & Construction Pty Ltd [1998] FCA 1354]; secondly, such an order ought not be made if it is obvious that to make it would be futile because the judgment debtor could not meet his or her or its obligations under it [ Cahill v Howe [1986] VR 630]; thirdly, the time for payment must be reasonable, in the sense that the judgment creditor ought not be required to wait unduly or unreasonably long for payment (that said, it is notable that in Hellier Capital a period of four years was allowed to pay a debt of $1.6 million); and fourthly, an instalment order ought not be made if it would not result in some net reduction in the amount of the judgment debt. That is to say, bearing in mind that interest accrues on judgment debts, an instalment order that does no more than meet the interest that accrues would not result in payment of the debt and ought not, at least ordinarily, be made. 8The defendants produced documents relevant to their financial circumstances and were cross-examined on them. Although it was submitted that they had in some way manipulated their financial affairs to give an impression that their hardship was greater than it in fact was, I am unconvinced that that is so. The material they provided to the Court was that required to be provided by the rules of the Court in the approved form, and while they are more sophisticated and experienced than many self represented litigants who appear before the Court, I do not think they can be criticised for providing the information in the form and to the extent that the approved form requires. 9It is true that they, or at least one of them, appears from time to time over the last ten months to have received some loan repayments, estimated to average a few hundred dollars per month. It is unclear to me that those repayments are not included in Mr Ross' "all other income" of $700 per month. Nor is it clear that they had to be included there, as loan repayments of principal are not income, but in any event their quantum is not such as to have a significant impact on the outcome. 10The judgment debt, with interest accrued from the date on which it was entered until now, amounts to about $48,000. Mr Ross discloses net income after tax of about $2,485 per week, and outgoings of $2,930 per week; although his wife contributes $750 per week to the household. He has assets of about $1 million and liabilities of about $981,000, including the judgment debt. 11Mr Vogel has a net income of about $2,025 per week and expenses of $2,749 per week, to which his wife contributes about $1,000 per week. He has assets totalling about $838,000 and liabilities (including the judgment debt) of $1,219,000. Vogel Ross has assets of just under $5,000 and liabilities, not including the present judgment debt, of $54,000. Its gross annual income is about $85,000, although it has fluctuated between higher and lower amounts in the last two years, and its average annual expenses are estimated at $38,000, although they have been higher than that in recent years. 12It emerged in the course of cross-examination that Mr Ross had, shortly after the judgment of the High Court of Australia dismissing the defendants' application for special leave to appeal, transferred an interest in a farm property on the north coast, which he had held in tenancy in common with his wife, to a son. There is some evidence that the subject property is worth between $1 million and $1.1 million. Mr Ross explained that the property had been purchased in his name with funds bequeathed by his wife's father, because his children were not old enough to hold property, and that he did not have a beneficial interest in it. While the timing of the transaction no doubt raises a question as to its motive, it was explained by Mr Ross on the basis that it was done to endeavour to ensure that the property did not become caught up in any claim against his assets. That is equally consistent with it being a bona fide transaction to keep out of contention something in which he had no beneficial interest, as it is with a transaction to defeat a creditor's claim. 13To my mind, the more telling evidence is that the transfer is expressed to be for no consideration and was stamped "no duty payable". It is, I think, notorious, that in a transfer between persons with the same surname, for no consideration, it is the practice of the Stamp Duties office to require evidence showing why duty is not payable, and the circumstance that it has been assessed "no duty payable" is some evidence that the Commissioner was satisfied that no beneficial interest passed under the transfer. I am therefore unpersuaded that this was a transaction to defeat the judgment creditor's claim [see (NSW) Conveyancing Act, 1919, s 37A]. 14The plaintiff objected that no endeavour has been made to pay the judgment to date. That submission needs to be viewed in the circumstance that the application for special leave to appeal was dismissed in August of this year. Since then, there have been before me applications by the defendants for stays pending the hearing of their second cross-claim, and then a further application for a stay pending the hearing of an appeal against my refusal of that stay. In other words, until the date on which the present motion was set down for hearing today, there were other stay applications on foot. As a result of the setting down of the matter today, it was agreed that the interim stay I granted to preserve a right of appeal, would be extended to permit this motion to be heard today. In those circumstances, I do not think much can be inferred from the absence of an endeavour to make a payment up to this point. 15There is, as the defendants points out, a legitimate public interest in having trained, qualified and capable people who perform socially useful work - as the first two defendants do - remaining available to perform that work. There would be a loss to the community and a significant loss to their families if they were bankrupted and unable to pursue their livings, which are dependent upon the directorships that they hold in their companies. 16While, no doubt, regard is to be afforded to a judgment creditor's rights to enforce its judgment, the untrammelled discretion conferred by s 107 indicates that that is but one consideration, and does not override all countervailing ones. It seems to me that the evidence does establish that the means of the judgment debtors are not sufficient to permit immediate payment in full of the judgment debt. It is far from apparent that an instalment order would be futile. There is reason to believe that the defendants would be able to pay reasonable instalments in the order of those they propose, or even a little more. The instalments they propose would result in payment over a period of 27 months. While that is a relatively long time for a debt of $50,000, it is, in the context that there is practically no evidence of hardship to the judgment creditor, not unreasonable. The order I propose to make would result in the debt being paid little, although not much, sooner. The order would clearly result in an ongoing net reduction in the judgment debt. Accordingly, none of the considerations which might tell against making an instalment order apply here. In my judgment, an order ought to be made that the defendants pay the judgment debt by instalments of $2,400 per month. Notice to produce 17By notice of motion filed 20 October 2011, the plaintiff moves, pursuant to UCPR, r 21.11, to have a notice to produce issued by the defendants on 7 October 2011 set aside. The defendants submit that the notice was issued in order to obtain relevant evidence to resist the plaintiff's application to have their cross-claim struck out or summarily dismissed. In particular, they support the motion on the basis that it seeks documents intended to be used to show, in substance, that the two companies, IceTV Pty Limited and IceTV Holdings Pty Limited "are effectively one and the same", and that there is some prospect of their obtaining a monetary award against the plaintiff judgment creditor. 18These arguments proceed on two misconceptions. The first is that the application for strike out and summary dismissal, as I understand the plaintiff's submissions in connection with it, is based not on the factual weakness of the second cross-claim but on its supposed legal deficiencies. On such an application, the court takes the pleading at its highest and assumes that the matters of fact asserted in it can be proved, the question being whether, assuming that the factual allegations in the cross-claim can be proved, it discloses a viable cause of action. On that basis, it is irrelevant to adduce evidence showing that the allegations or some of them can be proved since, insofar as matters of fact are concerned, that will be assumed in any event. 19As to the second, I do not doubt there are circumstances (for example, the early oppression suit of Scottish Co-Operative Wholesale Society Ltd v Meyer and Another [1958] 3 All ER 66), in which oppressive conduct of one company in a group may amount to an oppression of a shareholder in another company in the group. But, accepting for present purposes that to be so, it is just not legally possible to prove that two companies, albeit that they are holding company and subsidiary, are "effectively one and the same". It is a legal impossibility that they are effectively one and the same, and any endeavour to prove that they were would be doomed to fail. That is not to say that it is impossible to argue that by reason of the way in which the affairs of a subsidiary have been conducted, the shareholders in the holding company may have been oppressed, but that does not make an attempt to prove that the two companies are the same is permissible. The notice to produce should therefore be set aside. 20My orders are as follows: