John Frederick Hillam v Leduva Pty Limited

Supreme Court of NSW|2011-02-10|Before: Slattery J, Waddell CJ

Judgment 1On 20 December 2010 the plaintiff in these proceedings, John Frederick Hillam was successful against the defendant, Leduva Pty Limited in obtaining a decree for the specific performance of a contract for sale of an apartment in Alexandria: Hillam v Leduva Pty Limited [2010] NSWSC 1360 at [116]. That principal judgment directed the parties to bring in short minutes of order to give effect to its reasons. The parties did not provide short minutes of order to the Court. No orders have been entered. Other events intervened creating further controversy, which is resolved by this judgment. 2The Court found in the principal judgment that Mr Hillam, as purchaser, was ready, willing and able to complete the contract for sale of the Alexandria apartment. That contract was dated 8 January 2008 and had been varied by further agreement in June 2010. Due to events occurring after 20 December 2010, the vendor, Leduva says that this finding is now no longer supportable. Leduva seeks leave to re-open its case to adduce evidence of these events after 20 December 2010, to make good its contention that the finding that Mr Hillam is ready, willing and able, is now without foundation. Alternatively, Leduva seeks that the judgment given on 20 December 2010 be set aside pursuant to Uniform Civil Procedure Rules 2005, Part 36, Rule 16. Leduva seeks this relief by motion dated 21 February 2011. 3The first issue for determination in this judgment is whether the Court should exercise its discretion to grant leave to Leduva to re-open its case. If leave to re-open is granted, the second question for determination is what if any variation can and should the Court make to the relief to be granted under the principal judgment. To determine these questions it is necessary first to examine the Court's relevant findings in the principal judgment and then identify the events which Leduva says have undermined the basis for those findings. This judgment should be read in conjunction with the principal judgment. The same terminology is used for events, things and persons in both judgments.

Relevant Findings in the Principal Judgment 4Despite a strong contest on the issue, the principal judgment found that Mr Hillam had established he was ready, willing and able to complete the contract for sale by the time of giving judgment: Hillam v Leduva Pty Limited [2010] NSWSC 1360 at [108]. The principal judgment pointed out that the evidence about Mr Hillam's ability to fund the purchase of the Alexandria apartment had moved throughout the trial. Paragraphs [109] to [112] inclusive of the principal judgment made the ultimate findings about Mr Hillam's readiness, willingness and ability to complete the contract that Leduva now seeks to re-open:- "109. The evidence about Mr Hillam's ability to fund the purchase has moved throughout the trial. The evidence that his nominee purchaser CFM has the capacity to complete is now strong. It was not so strong where the trial began on 12 November 2010. This may be relevant to later argument on issues of costs. It is sufficient now to state the position as the evidence now stands. 110. The amount paid under the June 2010 agreement was $750,000. On 29 June 2010 $40,000 was paid to Leduva on account of the purchase price leaving a balance of $710,000. This sum is to be funded by a net amount (after deduction of fees and interest) of $501,398.70 sourced from Liberty Financial to CFM the proposed nominee purchaser. The balance of $210,000 is presently held in the Holman Webb's trust account in the name of the proposed nominee purchaser CFM. Holman Webb have given the following undertaking to the Court on behalf of CFM. '5. CFM Media Holdings Pty Ltd undertakes to the Court that until judgment and, if the Court's determination be that contract is on foot and ought be performed, then until completion of the sale CFM Media Holdings Pty Ltd will not direct Holman Webb to apply that money otherwise than to payment of the purchase money.' 111. I can infer from this that those funds will be available at settlement of the proposed purchase. 112. Mr Hillam is ready, willing and able to complete the 8 January 2008 contract as varied by the June 2010 agreement." The Court then found that there was no other discretionary reason why the remedy of specific performance should not be granted. 5Thus, in summary, the findings upon which the Court acted on 20 December 2010 were that: $40,000 of the $750,000 payable under the contract for sale had been paid to Leduva; that a little over $500,000 of that $750,000 was to be sourced from Liberty Financial; and that, the balance of purchase moneys of approximately $210,000 was in Holman Webb's trust account in the name of the proposed nominee purchaser, CFM Media Holdings Pty Limited ("CFM"). Leduva argues that on 20 December 2010, within hours of this Court handing down the principal judgment, the foundation for the last of these findings disappeared. 6The transcript of the proceedings does not record the giving of CFM's undertaking to the Court. The possibility of giving the undertaking was mentioned in submissions to the bench before the Court adjourned reserving consideration of the principal judgment. The CFM undertaking, together with a statement of fact, was communicated in chambers to the Court and to counsel for Leduva by email by counsel for CFM, on 26 November 2010 at 2.44pm in the following terms:- "Hillam v Leduva Pty Ltd I am authorised by Holman Webb to say that:

The $175,000 in the Holman Webb trust account under the Bonython trust ledger is being transferred by authority of Bonython to the CFM Media Holdings P/L trust ledger for the purpose of meeting the balance of the purchase price payable under the plaintiff's purchase from the defendant.
The $35,000 standing in the Holman Webb trust ledger to the name of the plaintiff is being transferred to the CFM Media Holdings P/L trust ledger in the Holman Webb trust account also for the purpose of meeting the balance of the purchase price payable under the plaintiff's purchase from the defendant and on the basis of CFM's undertaking set out below.
The requisite authorities have been received by Holman Webb and the mechanics of the ledger transfers are being executed by Holman Webb.
The statement that I have previously made, that until judgment and, if the Court's determination be that contract is on foot and ought be performed, then until completion of the sale, Holman Webb will assert no lien against the said $210,000 in the trust account, continues to apply notwithstanding its transfer to the CFM Media Holdings Pty Ltd trust ledger. I am authorised by CRM Media Holdings Pty Ltd to say that
CFM Media Holdings Pty Ltd undertakes to the Court that until judgment and, if the Court's determination be that contract is on foot and ought be performed, then until completion of the sale, CFM Media Holdings Pty Ltd will not direct Holman Webb to apply that money otherwise than to payment of the purchase money. As we are a day late with this note, for which we apologise, the plaintiff proposes that the defendant should be given a corresponding extension for its response under par. 7 of the directions of 19 November. Yours faithfully, D. A. SMALLBONE " 7The written formal undertaking was not marked as an exhibit in the proceedings before the giving of the principal judgment. The Court will mark it now as Exhibit P. As the principal judgment shows, the existence of CFM's undertaking was an important basis for the Court to infer that Mr Hillam was ready, willing and able to complete the contract for sale, using those funds.

The Federal Court Proceedings 8On 20 December 2010 Ample Source International Limited ("Ample") commenced proceedings in the Federal Court of Australia against Bonython Metals Group Pty Ltd ("Bonython") and Mr Hillam. CFM was joined as a further defendant two days later on 22 December 2010. Leduva says that the money set aside in Holman Webb's trust account became unavailable to be applied in accordance with CFM's undertaking on the afternoon of 20 December 2010. That afternoon both Mr Hillam and CFM were restrained from paying out $175,000 of the funds in Holman Webb's trust account other than to Bonython Metals Group Pty Ltd in the Federal Court proceedings before the duty judge and then before Foster J on 22 December 2010: Ample Source International Ltd v Bonython Metals Group Pty Ltd ; in the matter of Bonython Metals Group Pty Ltd [2010] FCA 1479. On 10 January 2011 Foster J extended and continued the orders he made on 22 December 2010: Ample Source International Ltd v Bonython Metals Group Pty Ltd ; in the matter of Bonython Metals Group Pty Ltd (No. 2) [2011] FCA 7. On 10 January 2011 Justice Foster also ordered Mr Hillam and CFM to instruct the partners of Holman Webb to pay the sum of $175,035 to an account conducted by Bonython Metals Group Pty Ltd. These events require further explanation. 9CFM's undertaking to this Court concerning the $175,000 held in the trust account of Holman Webb's solicitors was given by Holman Webb on behalf of CFM, not on behalf of Mr Hilam. The Federal Court's orders prevented CFM from dealing with those funds in conformity the only purpose consistent with that undertaking, namely to apply the funds to CFM's purchase of the Alexandria apartment. The effect of the undertaking, which assured this Court that there were funds available to complete the contract for sale, was neutralised. 10Ample is a 26.6 per cent shareholder in the issued capital of Bonython. Mr Hillam is the chief executive officer and a director of Bonython. Together with his wife Mr Hillam owns 68 per cent of the issued capital of Bonython. There is a third shareholder in Bonython owning slightly more than 5 per cent of its issued capital. There are no other shareholders in Bonython. CFM, a company controlled by Mr Hillam, has a service agreement with Bonython in respect of the continuing provision of Mr Hillam's services as chief executive officer to Bonython. 11The sum of $175,000 was first paid to Holman Webb in mid November 2010 by Bonython. Mr Hillam procured that payment from Bonython to Holman Webb. In the Federal Court proceedings Ample first sought to prevent any further dealings with the $175,000 on the basis that the funds had been paid by Bonython into Holman Webb's trust account under the direction of Mr Hillam in breach of the duties he owed to Bonython as its director and chief executive officer. The Federal Court granted an ex parte interlocutory injunction on the afternoon of 20 December 2010 to the effect that Bonython "by its self, its servants and agents do all things necessary to ensure that the partners of Holman Webb do not pay the sum of $175,000, paid into Holman Webb's trust account by [Bonython], to anyone other than [Bonython]". 12The ex parte injunction in the Federal Court proceedings was returnable before Foster J on 22 December 2010. By then it had become clear to Ample that on 16 December 2010 a second payment of $175,035 had been paid by CFM into Holman Webb's trust account. CFM's second payment to Holman Webb was funded by a transfer from Bonython's bank account on 15 December 2010 to CFM's bank account and then, the following day, from CFM's bank account into Holman Webb's trust account. Mr Hillam had arranged both these transfers of funds. Before the proceedings came on before Foster J undertakings had been given that these additional funds would not be disbursed from Holman Webb's trust account. Thus Foster J was dealing with Ample's claim to restrain Bonython, Mr Hillam (and CFM) dealing with a total of $350,035 in Holman Webb's trust account. 13Justice Foster considered on 22 December 2010 a contested application to extend the interlocutory injunctive relief already granted. Counsel for Bonython, Mr Hillam and CFM conceded that there was a serious question to be tried as to whether or not disbursement of Bonython's funds, at Mr Hillam's instigation for his own and CFM's purposes, was in breach of his director's duties to Bonython. Foster J approached the task before him as one in which the grant or refusal of interlocutory relief might well determine the final outcome of the proceeding. His Honour applied the well known statement of principle about such cases made by McLelland J in Kolback Securities Ltd v Epoch Mining NL (1987) 8 NSWLR 533 at 536A-D. In such cases great care needs to be taken by the Court to ensure that no injustice is visited upon a defendant who has been brought to Court with little or no notice; and with due regard to that the Court evaluates the strength of the plaintiff's case for final relief. 14I am not now concerned with the weighing of the evidence that Foster J undertook. Nor is it the task of this Court to re-try the contest before his Honour. The contest now before the Court relates to the existence and withdrawal of CFM's undertaking, recorded in Exhibit P. It does not require me to try issues of whether Mr Hillam was in breach of his duties as a director of Bonython when these monies were paid to Holman Webb. Nor does the present case require me to re-evaluate the course taken by Foster J even though there is further evidence before me. What matters for present purposes is the course of events, including the orders of Foster J made that day and the further orders his Honour made on 10 January 2011, as they affect the undertaking given to this Court and used in the reasoning of the principal judgment. 15Foster J made the following principal orders on 22 December 2010:- "2. ORDERS that, up to and including the final hearing of this proceeding or until further order, the second and third defendants do all things necessary to ensure that the partners of Holman Webb do not pay the sum of $175,000, paid into Holman Webb's trust account by the first defendant in about mid November 2010, and the additional sum of $175,000 paid into that trust account by the third defendant on 16 December 2010, to anyone other than the first defendant. ... 4. ORDERS that the second and third defendants do all things necessary to cause the partners of Holman Webb to forthwith transfer the total sum of $350,000, held in Holman Webb's trust account and paid into that account by the first defendant and the third defendant, to the first defendant's National Australia Bank, Double Bay branch, bank account number [number not published]. 5. ORDERS that, up to and including the final hearing of this proceeding or further order, the first defendant be restrained from paying or transferring any money or asset of the first defendant to any related entity of the second or third defendants other than the payment of the monthly fee payable to the third defendant strictly in accordance with the terms of the Contractor Agreement between the first defendant and the third defendant and any monies due strictly in accordance with the terms of the three Binding Term Sheets dated 15 February 2010 between the first defendant and Wentworth Metal Group Pty Ltd." 16His Honour made other machinery orders including orders for the joinder of CFM and orders for the production of documents and for the monitoring of Bonython's banking practices. 17The defendants before Foster J, Bonython, Mr Hillam and CFM, said that the two payments to Holman Webb were loans to CFM secured by a fixed and floating charge over the whole of the assets and undertaking of CFM; that Bonython had no immediate need for the funds; and that CFM had an entitlement to be paid monthly in advance under a service agreement made between CFM and Bonython and that these payments were advances against that entitlement. His Honour found a prima facie case that the two payments, made at the direction of Mr Hillam, did not benefit Bonython, that Bonython did not consent to them, that Bonython did need these funds and that CFM had no entitlement under the service agreement to be paid such a significant sum such as $175,000 in advance of the provision by it of the services which it had contracted to provide to Bonython. Factual issues such as these and any findings of breach of duty arising out of them will be determined at a final hearing of the proceedings in the Federal Court. 18The hearing before Foster J was brought on urgently on 22 December 2010 because after my principal judgment arrangements had been made by CFM to settle the sale of the Alexandria apartment at 11.30am on Thursday 23 December 2010. No doubt partly as a result of the orders made by Foster J on 22 December 2010, the settlement of the apartment sale scheduled for the next day was postponed and re-scheduled for Wednesday, 12 January 2011. 19Shortly before the postponed settlement date Ample re-listed the Federal Court proceedings before Foster J for further hearing. On 10 January 2011 Foster J examined the Federal Court defendants' compliance with the orders for production of documents. By the time of the 10 January 2011 hearing one amount, an amount of $175,000 had been paid by Holman Webb back to Bonython. This payment had occurred on 24 December 2010. On 10 January 2011 Foster J ordered Mr Hillam and CFM to restore the further amount of $175,035 to Bonython's bank account and to do so by no later than 10am on Thursday, 13 January 2011. CFM repaid these funds in conformity with Foster J's orders. 20But before this order was complied with, CFM seemed to appreciate that, if there had not already been a breach of its undertaking to this Court by virtue of the repayment back on 24 December 2010, that compliance with Foster J's 10 January 2011 orders by 13 January 2011 would be likely to put CFM in breach of that undertaking. In an attempt to relieve itself of the consequences of such a possible breach Mr Hillam applied to the vacation judge, Hall J, for leave for CFM to be released from its undertaking. Mr Hillam sought the following order in his motion:- "1. CFM Media Holdings Pty Limited be released from the following undertaking given by it to this Honour Court on 26 November, 2010: 'CFM Media Holdings Pty Ltd undertakes to the Court that until judgment and, if the Court's determination be that contract is on foot and ought to be performed, then until completion of the sale CFM Media Holdings Pty Ltd will not direct Holman Webb to apply that money otherwise than to payment of the purchase money'." 21On 13 January 2011 Hall J granted the application and released CFM from the undertaking. 22With this background Leduva moved to re-open its case. The matter was mentioned on 10 February 2011 and was heard on 4 March 2011. The motion sought the following orders:- "1. The Defendant have leave to re-open its case. 2. Alternatively, judgment delivered by Slattery J on 20 December 2010 be set aside pursuant to section 91 Supreme Court Act, 1970 and Part 36 rule 15 and 16 Uniform Civil Procedure Rules 2005. 3. That pursuant to section 68 of the Supreme Court Act, 1970, the Plaintiff pay damages to the Defendant. 4. That the Plaintiff pay the Defendant's costs of the proceedings on an indemnity basis."

Procedural Issues 23The course of the hearing of Leduva's motion was narrower than the evidence filed. But the relief considered was wider than the relief sought on the motion. 24The parties agreed that I should disregard part of the evidence filed in support of the motion. This evidence related to attempts that Leduva had made to terminate the contract for sale as a result of Mr Hillam's failure to complete it on 23 December 2010 and on 13 January 2011. To determine such issues would have required a significant expansion of the matters argued prior to the first judgment so as to embrace issues of termination of the contact for sale that were not in contest on the existing pleadings. The scope of issues raised by subsequent termination of the contract threatened, if leave to re-open were granted, delay and an extensive hearing. The Court indicated to the parties during the hearing of Leduva's motion that the Court would not be prepared to determine such issues upon any re-opening. The parties accepted this course. Although some evidence as to termination issues was left in the evidentiary material presented to the Court, it was not relied upon by the parties in their submissions and it was not something to which the Court had regard. Any termination issues will have to be raised in separate proceedings. 25But in another respect the relief sought at the hearing of Leduva's motion was wider than the way the parties first approached the hearing of the motion. The parties on both sides had filed extensive evidence to show what evidence they proposed to adduce, if the Court were to grant Leduva leave to re-open. The Court suggested that provided the matter could be determined upon the written materials without cross-examination, the Court would be prepared to decide not only the question of leave but, if leave were to be granted, the additional question of whether there should be any variation to the judgment as sought by the plaintiff. This issue was really within the terms of Order 2 of Leduva's motion in any event. Mr Hillam's counsel, Mr D. Perrignon, did not propose any cross-examination of Leduva's witnesses. Initially Leduva's counsel, Mr Gruzman, sought to cross-examine Mr Hillam. When presented with the possibility of a final determination of both the leave question and issues arising on the re-opening, Mr Gruzman elected not to cross-examine Mr Hillam. The Court heard all issues. In adjourning the proceedings and reserving judgment the Court summarised this position in the following way:- "So you know what to expect, I will either not grant leave to re-open or if I do I will then decide one way or the other the final question of whether or not on the evidence before me, relief should be given. Everyone will know where they stand." 26As the parties had gone into the hearing contemplating a contest solely on the issue of leave to re-open, the parties were given a further opportunity to put in submissions on the issue of Mr Hillam's present readiness, willingness and ability to complete the contract for sale. They both took up this opportunity. 27The parties adduced the following evidence on the motion. Leduva read the affidavits of Amerr Taouk of 13 January 2011 and 28 February 2011. Mr Taouk's second affidavit exhibited two volumes of material. Some parts of his affidavits were objected to and rejected. Mr Hillam's affidavit of 2 March 2011 with an exhibit was read in support of his case, together with an affidavit of 3 March 2011. 28Thus, on this material the Court was required to first consider: first whether leave should be granted; and, second, if granted whether specific performance should not be decreed on the basis that Mr Hillam was no longer ready, willing and able to complete the contract. I now deal with each of these issues.

Leave to Re-Open - Applicable Legal Principles 29The legal principles that apply to the exercise of discretion on Leduva's motion for leave to re-open were not in contention between the parties. The exercise of the discretion is governed by principles stated by the High Court in Smith v New South Wales Bar Association (No. 2) (1992) 176 CLR 256 at 266-267:- "It is again necessary to distinguish between the considerations which may bear on a decision to re-open and the processes involved in reconsideration once a case has been re-opened. If an application is made to re-open on the basis that new or additional evidence is available, it will be relevant, at that stage, to inquire why the evidence was not called at the hearing. If there was a deliberate decision not to call it, ordinarily that will tell decisively against the application. But assuming that that hurdle is passed, different considerations may apply depending on whether the case is simply one in which the hearing is complete, or one in which reasons for judgment have been delivered. It is difficult to see why, in the former situation, the primary consideration should not be that of embarrassment or prejudice to the other side. In the latter situation the appeal rules relating to fresh evidence may provide a useful guide as to the manner in which the discretion to re- open should be exercised. But those considerations bearing on re-opening are not decisive of the question whether, a matter having been re-opened by reason of error, further evidence can be called. Not every case involving error will invite further evidence: it will depend entirely on the issue that is opened up. If the issue is one that invites further evidence, then, prima facie and subject to the ordinary rules of evidence, that evidence should be allowed. We say prima facie because there may be situations in which the particular evidence involved would cause embarrassment or prejudice such that, in the circumstances, it would be unfair to allow it." 30Leduva does not contest that the present proceedings are ones where "reasons for judgment have been delivered", so that the appeal rules in relation to fresh evidence are a useful guide as to the manner in which the discretion to re-open should be exercised here. 31Apart from the general law position as to the exercise of discretion on re-opening, stated in Smith v New South Wales Bar Association (No. 2) (1992) 176 CLR 256 there is specific legislative provision governing the exercise of the Court's discretion to set aside or vary a judgment between the giving of reasons for decision and the entry of final orders. Uniform Civil Procedure Rules 2005, r 36.16 provides: - "(1) The court may set aside or vary a judgment or order if notice of motion for the setting aside or variation is filed before entry of the judgment or order. (2) The court may set aside or vary a judgment or order after it has been entered if: (a) it is a default judgment (other than a default judgment given in open court), or (b) it has been given or made in the absence of a party, whether or not the absent party had notice of the relevant hearing or of the application for the judgment or order, or (c) in the case of proceedings for possession of land, it has been given or made in the absence of a person whom the court has ordered to be added as a defendant, whether or not the absent person had notice of the relevant hearing or of the application for the judgment or order. (3) In addition to its powers under subrules (1) and (2), the court may set aside or vary any judgment or order except so far as it: (a) determines any claim for relief, or determines any question (whether of fact or law or both) arising on any claim for relief, or (b) dismisses proceedings, or dismisses proceedings so far as concerns the whole or any part of any claim for relief. (3A) If notice of motion for the setting aside or variation of a judgment or order is filed within 14 days after the judgment or order is entered, the court may determine the matter, and (if appropriate) set aside or vary the judgment or order under subrule (1), as if the judgment or order had not been entered. (3B) Within 14 days after a judgment or order is entered, the court may of its own motion set aside or vary the judgment or order as if the judgment or order had not been entered. (3C) Despite rule 1.12, the court may not extend the time limited by subrule (3A) or (3B). (4) Nothing in this rule affects any other power of the court to set aside or vary a judgment or order. " 32Rule 36.16 is an expression of the general law rule that a Court may amend, vary or recall a final judgment before it has been formally entered, but that a Court ordinarily has no power to set aside a final judgment after it has been entered: DJL v Central Authority [2000] HCA 17; (2000) 201 CLR 226 at 245. The power of review provided by this rule is limited by the public interest in maintaining the finality of litigation. As Mr Hillam has rightly pointed out the public interest requires great caution in the exercise of the power, especially where the variation sought would have the practical effect of re-opening the proceedings to enable a significant re-hearing: Autodesk Inc v Dyason (No. 2) (1993) 176 CLR 300; Wentworth v Woollahra Municipal Council (1982) 149 CLR 672 and Re Barrell Enterprises [1973] 1 WLR 19. 33The power will not normally be exercised to permit a general re-opening of the case: Smith v New South Wales Bar Association (No. 2) (1992) 176 CLR 256. The mischief of a general re-opening of Leduva's case was avoided here. The parties efficiently confined themselves to the written evidence that they each adduced on Leduva's motion for leave to re-open. Both parties declined an opportunity to cross-examine the witnesses for the other side. Leduva was seeking a confined re-opening on the issue of Mr Hillam's readiness, willingness and ability to complete the contract. All the evidence that was going to be relied upon by each side upon that issue, were leave to re-open given, was evidence that was available to the Court to review on the application for leave. Here the Court was not faced with a weighty discretionary consideration against the leave application arising from a concern that it would lead to a general re-litigation of matters already decided. Leduva was only seeking to open one of the many issues decided in the first judgment. Nor was Leduva pursuing a contest of fact upon the issue that was re-opened. That being said, the evidence adduced on the motion was extensive. 34Leave to re-open and the exercise of power under Uniform Civil Procedure Rules , r 36.16 will not usually be exercised in favour of an applicant who was at fault in failing to raise the matter in issue at an earlier stage of the proceedings: Wentworth v Woollahra Municipal Council (1982) 149 CLR 672. One of Mr Hillam's arguments against a re-opening by Leduva is that Leduva bore some fault for failing to raise the issues now being relied upon during the hearing in November 2010 before the principal judgment.

Leave to Re-Open 35Leduva argues that the withdrawal of the CFM's undertaking to the Court and the repayment of all the monies held by Holman Webb back to Bonython were events that would satisfy the criteria for the admission of fresh evidence on appeal. In general three conditions need to be met before fresh evidence can be admitted on appeal. These are: (1) it must be shown that the evidence could not have been obtained with reasonable diligence for use of the trial; (2) the evidence must be such that there must be a high degree of probability that there would be a different verdict; and (3) the evidence must be credible: Atkins v National Australia Bank (1994) 34 NSWLR 155 at 160F per Clarke JA. 36Leduva argues that the withdrawal of the undertaking on 13 January 2011 and the repayment of all monies referred to in the undertaking back to Bonython by that date satisfies all three pre-conditions for the admission of fresh evidence. Leduva says that all these events, the litigation before Foster J, the repayment of funds from the Holman Webb trust account to Bonython and the withdrawal of the undertaking all occurred after 20 December 2010 and therefore could not have been obtained with reasonable diligence for use at the trial. Leduva also submits that this additional evidence is such that there is a high degree of probability that there would be a different verdict, because the Court's acceptance of the undertaking was the primary ground upon which the Court was satisfied that Mr Hillam was ready, willing and able to complete the contract for sale. Leduva says that this is demonstrated by paragraphs [108] to [112] of the principal judgment. Finally, Leduva says that there can be no issue about the credibility of the evidence, as all the evidence now sought to be adduced are matters of indisputable fact that do not involve the credit of any witness. 37Leduva's arguments are persuasive. The material advanced does satisfy the pre-conditions for the adducing of fresh evidence on appeal. In his argument in reply Mr Hillam challenged whether indeed these pre-conditions were satisfied. But his challenges do not succeed. 38Mr Hillam says that the evidence now adduced could have been obtained with reasonable diligence before trial. He accepts that the post trial events to which the Court has referred could not themselves have been known before trial. But rather he submits that the insecurity of the funds held in the Holman Webb trust account was in issue at trial before the first judgment and that Leduva had mounted a case that the mere fact that these funds were in Holman Webb's trust account in the name of CFM by the end of the trial did not mean that they would necessarily be available to Mr Hillam to complete the contract. Mr Hillam says that as the trial took place over two days on 12 and 19 November 2010 and Leduva was aware on 12 November 2010 that $175,000 had come from Bonython to Holman Webb there was ample time before 19 November 2010 for Leduva to explore the source of this money and to explore the probability that it might be recalled at the direction of either Bonython or CFM. Indeed, Mr Hillam points to Leduva's supplementary submissions at the main hearing which demonstrate that Leduva suspected that the plaintiff was applying monies that belonged to companies with which he was associated, as his personal funds. 39But Mr Hillam puts it too highly when he submits "all of the evidence that [Leduva] now seeks to rely upon was available to it at the hearing". It can be accepted that Leduva's submissions before the principal judgment show that it had then a degree of suspicion that Mr Hillam might be misapplying Bonython's funds for his own purposes. But Leduva did not have any concrete evidence of this. Leduva was unaware of the depth of Mr Hillam's dispute with Ample and the possibility that the dispute might in the immediate short term lead to the recall the funds from Holman Webb. Moreover, the urgency of the principal proceedings and the Court time available for the exploration of contested issues of fact made it unreasonable to expect that Leduva could have explored allegations of breach of duty to Bonython in the proceedings being heard before me, on the basis of the pleadings as they then stood and on the basis of the issues for trial announced by the parties. 40The advancing of this argument also presented something of a conundrum for Mr Hillam. Mr Perrignon submitted that Leduva could by reasonable diligence have discovered the facts which ultimately lead to Foster J's decision. But the problem with that is that if Leduva could have discovered the facts by reasonable diligence then there is a strong inference that Mr Hillam must have also known the facts as well, as the actor involved in the money transfers. But he did not choose to inform the Court of the potential instability associated with the funds the subject of CFM's undertaking to the Court. I am not making a finding that Mr Hillam has concealed information from the Court on the evidence presently before me. But Mr Hillam's reasonable diligence point is unpersuasive in circumstances where the evidence that he says Leduva could have discovered with reasonable diligence was evidence substantially in his possession. 41Mr Hillam submitted that the Court should still decree specific performance notwithstanding the withdrawal of the undertaking and the repayment of the money to Bonython. In substance this was a submission that the fresh evidence would not lead to a different result. This submission is best dealt with below when the Court considers whether or not there should be a different result. In my view there is a high degree of probability that there would be a different result from the material. That, indeed, is the conclusion which the Court has reached. 42Mr Hillam also made a general point that leave to re-open and to re-consider the judgment should not be given lightly. It is important to distinguish the two processes at work in the present case. The application for leave to re-open is governed by the principles stated in Smith v New South Wales Bar Association (No. 2) , cited above. Once leave to re-open is granted and the new evidentiary material is considered, the Court's review of its judgment is governed by UCPR , r 36.16. It is true that at this second stage when considering a judgment which has not yet resulted in an entered order that the Court should approach its task with great caution: Autodesk Inc v Dyason (No. 2) (1993) 176 CLR 300. But there are many examples in the authorities of the Court's reviewing and modifying orders between the time they are pronounced and the time they are drawn up, passed and entered. The principle is that an order that is pronounced is not perfected until drawn up, passed and entered. The Court of Appeal explained this in Re Harrison's Share under a Settlement v Harrison [1955] Ch 260; [1955] 1 All ER 185 at 188:- "We think that an order pronounced by the judge can always be withdrawn, or altered or modified, by him until it is drawn up, passed and entered. In the meantime it is provisionally effective, and can be treated as a subsisting order in cases where the justice of the case requires it, and the right of withdrawal would not be thereby prevented or prejudiced." 43Examples of re-opening and review arise in the circumstances of: the subsequent overruling of material authorities by the House of Lords, Re Harrison's Share under a Settlement v Harrison [1955] Ch 260; a misunderstanding of a material matter Pittalis v Sherefettin [1986] QB 868; a re-opening where parties fail to advert to applicable legislation, Fox v Commission for Superannuation (No. 2) (1999) 88 FCR 416; and, the possible re-opening where a discretionary defence depends upon findings made in the principal judgment, Suttor v Gundowda Pty Ltd (1950) 81 CLR 418 at 437-8. A number of these cases have resulted in substantial modification to the course which had originally been proposed by the Court: see for example, Fox v Commission for Superannuation (No. 2) (1999) 88 FCR 416. 44In this case the public interest in the finality of litigation also works in favour of re-opening and review before the entry of final orders. Mr Hillam submits that the judgment should not be set aside because of the discovery of fresh evidence and that the appropriate method of challenge is by appeal, not by leave to re-open, citing Re Barrell Enterprises [1973] 1 WLR 19. But here, I have found that the fresh evidence Leduva seeks to adduce does satisfy the conditions necessary to allow such evidence on appeal. If the evidence is not admitted now and a decree for specific performance is made the predictable result would be the generation of an appeal by Leduva and an application on that appeal for the material now sought to be put before this Court, to be adduced before the Court of Appeal. Such a result would not promote the finality of this litigation. I conclude therefore that leave to re-open should be granted and the affidavit evidence identified above and the exhibits thereto may be examined with a view to the Court deciding whether the orders proposed by the Court on 20 December 2010 should be varied under UCPR , r 36.16(1).

UCPR , r 36.16 - The Decree for Specific Performance 45Leduva's argument was that the Court should not now decree specific performance because the existence of CFM's undertaking and the funds in Holman Webb's trust account were essential to the Court's conclusion that the decree should be made. Leduva's arguments are persuasive. The reasons why a decree of specific performance is no longer appropriate are clear from Mr Hillam's present arguments for the decree to be made. Mr Hillam advances three reasons why there should still be a decree despite the withdrawal of the undertaking: first, there is no allegation of impropriety associated with the withdrawal of the undertaking; secondly, even without the CFM undertaking, Mr Hillam is in a position to complete and should be given an opportunity to do so; and thirdly, Foster J's findings are only interlocutory and may not be sustained at a final hearing in the Federal Court. I will deal with each of these arguments in turn.

No Impropriety in the Undertaking 46Mr Hillam points out that Leduva has not articulated any basis on which CFM's undertaking could be impugned as lacking in good faith or being improperly given. In this Mr Hillam is correct. Neither Leduva nor the Court has embarked upon any investigation as to: whether the undertaking should have been given; whether there was any misleading of the Court involved in giving of the undertaking; and indeed, whether the undertaking has been breached. Neither at Leduva's instigation nor the Court's own motion has any such issue yet been addressed. Accordingly, Mr Hillam is entitled to have the present issues determined on the basis that there is no demonstrated impropriety in the giving of the undertaking. In my view as the matter has not been fully ventilated it would be a denial of procedural fairness to Mr Hillam for the Court to now base any of its reasoning upon a view that the undertaking was improperly given or was misleading. Leduva urges upon the Court in final submissions a submission that a decree of specific performance should be declined on discretionary grounds, because Mr Hillam did not disclose to the Court that there was a dispute over the first sum of $175,000 at a time prior to it being paid by Bonython to Holman Webb in November 2011. Evidence before me does establish, at least to a prima facie level, that prior to CFM giving the undertaking, there was a dispute between Ample and Mr Hillam about whether the $175,000 could be applied to the purchase of the Alexandria apartment. Ms Linda Lau, Ample's representative on the Board of Bonython was pressing Ample's concern about this issue. But Mr Hillam says that the advance was regular, was appropriately authorised by the Board of Bonython, was secured in Bonython's interest and was consistent with Bonython's best interests. The merits of Mr Hillam's arguments are yet to be evaluated. It is impossible to determine Mr Hillam's and CFM's state of mind in giving the undertaking without a contest about the issues between Ample, CFM and Mr Hillam shortly prior to the undertaking being given. That contest has not yet occurred. I do not take into account against Mr Hillam any alleged impropriety in giving the undertaking. 47But the giving and the withdrawal of the undertaking have lead to the re-listing of the proceedings and to Leduva incurring additional costs. Leduva may have some application about those costs. The Court will grant liberty to apply to allow submission to be advanced about the consequences of the giving and withdrawal of the undertaking. The Court will itself examine those circumstances. 48Moreover, Leduva's case does not depend upon a finding of impropriety associated with CFM's giving of the undertaking. Leduva's case is that the undertaking was an essential part of the Court's reasoning to the conclusion that Mr Hillam was ready, willing and able to complete. Now the undertaking is withdrawn the conclusion is unsupportable. In my view there is merit in that argument. 49The troubled course of events between January 2008 and July 2010 set out in my first judgment does not inspire confidence that Mr Hillam has the ready capacity to complete this contract: Hillam v Leduva Pty Limited [2010] NSWSC 1360 at [12]- [29]. There is a history of default on his part and applications for last minute reprieves, especially during 2010. I will not reproduce that material in this judgment. Importantly at the hearing on 12 and 19 November 2010 Mr Hillam himself advanced evidence of the cheque from Bonython and its deposit into the Holman Webb trust account. This was rightly made a prominent part of Mr Smallbone's submissions on Mr Hillam's behalf to establish Mr Hillam's readiness, willingness and ability to complete. Without that cheque, how Mr Hillam was going to make up the difference between the Liberty Financial approval of approximately $500,000 and the further $210,000 balance of purchase price to be paid to Leduva would have been unexplained. That lack of explanation would have been a decisive factor against granting the relief Mr Hillam sought. In my view the removal of the undertaking puts Mr Hillam back at that position. There is very little evidence as to how he can complete the contract. The evidence of this that he does identify is examined below.

Can Mr Hillam Complete? 50Although in oral submissions Mr Hillam seemed to suggest that the Court should continue to look at the matter of his ability to complete as at the date of the giving of the CFM undertaking or of the principal judgment, in final submissions he appeared to have abandoned this position. In paragraph 7 of his submissions of 8 March 2011, based upon decisions such as Grylis Pty Limited v Magenta Holdings Ltd & Ampersand International Ltd [1989] Supreme Court of New South Wales, Equity division, Waddell CJ in Eq BC9002795, Mr Hillam correctly submitted that an applicant for specific performance should establish a capacity to complete within the time frame that the Court is likely to order specific performance, which is now March 2011. 51Mr Hillam submits that he now has reasonable prospects of being able to secure funding. He refers the Court to a loan facility apparently approved by Hilton Commercial Finance Pty Ltd on 15 May 2010 for a principal amount of $636,000 at an interest rate of 10 per cent for a term of 3 years to be secured by first registered mortgage over the Alexandria apartment. But there is no basis in the evidence to believe that this money would be available in the next 14 to 21 days to Mr Hillam in addition to the funds from Liberty Financial. 52Mr Hillam also refers to a letter he received from Australian Unity regarding an interested lender seeking his 2010 tax return to complete an assessment of his credit worthiness. But again this material does not provide a basis to infer that Mr Hillam has available to him moneys in addition to an advance from Liberty Financial to complete the contract over the short term, say 21 days from now. 53Finally, Mr Hillam gives a summary of his assets as at November 2010 which includes 32,000 shares in BMG that he says are valued at approximately $224 million and certain other assets that he lists. However, the evidence does not show that these assets provide any basis to infer that Mr Hillam has available to him in the short term any monies in addition to the Liberty Financial approval, to complete this contract for sale.

Final Hearing in the Federal Court Proceedings 54Mr Hillam put before the Court detailed evidence about the circumstances of the Bonython advances. This evidence supported a complaint that Foster J had only been given one version of events and that BMG had been denied a practical opportunity to lead its available evidence. Whilst I have very considerable doubts about the correctness of this submission, it and the evidence advanced to the Court suffer from one fundamental problem. Even if it were correct that further evidence might have presented a different picture to Foster J, the Court has no basis to infer that his Honour's orders are going to be discharged or reversed in the short term. No doubt all this extra material can be put before the Federal Court in a final hearing. But that is sometime in the future. No serious case has been put to me that there is proposed to be any alteration to Foster J's orders in the time frame in which the Court might now order specific performance of up to 21 days. Were such an application to be made to Foster J indeed, I would have expected it to have already been made in February this year at a time well before the hearing before me on 4 March 2011. 55In my view though an examination of the material tendered before me does not throw any doubt upon Foster J's findings that there was a prima facie case to grant the relief which he did. All that is now available to me is a closer understanding of the detail of what Mr Hillam will say at the final hearing. That additional material makes clear that the second sum of $175,035 paid in December 2010 meant that the first sum of $175,000 could then be held by Holman Webb on behalf of BMG. Mr Hillam's evidence also shows greater cash available to BMG to support the pre-payment. But the additional evidence also shows that Ms Linda Lau on behalf of Ample was making very serious allegations of breach of director's duties against Mr Hillam in relation to these proposed funds transfers. 56These matters do not assist me to determine that Mr Hillam will have funds available in the short term to complete this contract. Mr Hillam has not demonstrated the capacity to complete this contract within a period of 14 to 21 days, being the period that I would have normally have allowed for completion as part of a decree of specific performance. I draw this inference without reference to Mr Hillam's past defaults. Although those defaults do allow the Court to draw the inference with greater confidence.

Conclusion and Orders 57In the result, for the reasons expressed, the circumstances have so changed since 20 December 2010 that the Court is no longer able to find that Mr Hillam is ready, willing and able to complete the contract for sale of the Alexandria apartment were a decree for its specific performance to be made. I will make orders now dismissing the claim for specific performance. There are orders arising out of my first judgment that may need to be perfected. I will direct the parties to provide a draft of their proposed orders to the Court within 7 days of today. Then the Court will make orders disposing of the balance of the proceedings with the exception of any claims for damages or costs on Leduva's part and any issues in relation to CFM's undertaking as to damages. 58The Court accordingly orders:- (1)Dismiss Orders 1, 2, 3, 4, 5 and 6 of the relief sought in the Statement of Claim. (2)Direct each party to provide to the Court by 8 April 2010 draft short minutes of the orders that the party proposes for the disposal of the balance of the relief sought (i) by the plaintiff in the Statement of Claim and (ii) by the defendant in its motion dated 21 February 2011. (3)Reserve for further consideration issues of: (i)costs; (ii)any damages claimed by Leduva; (iii)the consequences of the giving and withdrawal of CFM's undertaking to the Court. (4)Grant liberty to apply.

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. Decision last updated: 01 April 2011

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