Larkin v Merhi

Restitution of garnisheed monies

1. The order now sought for payment to Merhi's solicitor is an order in the nature of a review of the Registrar's decision pursuant to the Uniform Civil Procedure Rules 2005, r 49.20. I extend time for making the application.
2. In The Proprietors of Strata Plan 5399 v Feehan (unreported, Supreme Court of NSW, 8 February 1996), the Court considered facts similar to this matter. Money had been paid under a garnishee order based on a default judgment. The default judgment was set aside and in the proceedings a magistrate refused to order restitution of the amount to the defendant holding that he had no jurisdiction for an equitable remedy. The defendant then commenced proceedings for an order for restitution of the amount in the Equity Division of the Supreme Court. Justice Young held that the claim for restitution of money paid under a judgment which has been set aside is not an equitable claim but a simple claim for money had and received at common law. His Honour said that the word 'equity' is often used in different senses and does not necessarily mean that the matter lies in the equitable jurisdiction of the Supreme Court. His Honour cited Production Spray Painting & Panel Beating Pty Ltd v Newnham (No 2) (1992) 27 NSWLR 659 saying that where a court quashes or reverses a judgment and moneys had been paid pursuant to that judgment the court must order restitution of the moneys.
3. In Coshott v The Owners of SP No 48892 [2008] NSWSC 854 the Court considered facts similar to this matter. Money had been paid under a garnishee order based on a default judgment. On the motion to set aside default judgment the defendant sought an order for repayment of the garnisheed moneys. The default judgment was set aside and the magistrate held that he did not have power to order repayment of the garnisheed moneys. The defendant filed a cross claim seeking return of the garnisheed moneys. On the hearing day the plaintiff's claim was withdrawn and the magistrate gave judgment for the defendant on the cross claim for the return of the garnisheed moneys. The plaintiff/cross defendant appealed.
4. On appeal the plaintiff/cross defendant argued that his default judgment ought not to have been set aside because the judgment had been satisfied pursuant to the garnishee order. Justice Adams held that this functus officio argument did not apply where a judgment had been obtained irregularly and in particular where an order was obtained ex parte. See Cook v Australian Postal Corporation (unreported, Federal Court of Australia, 30 May 1997). Locke JR cited Feehan and held that the Local Court did have jurisdiction to make an order requiring restitution of the money paid to the plaintiff under the garnishee order, certainly when there were substantive proceedings seeking its repayment (the cross claim).
5. In Go Electrical Pty Ltd v Class Electrical Services Pty Ltd [2013] NSWSC 517 the Supreme Court quashed a determination made by an adjudicator under the Building and Construction Industry Security of Payment Act 1999. The plaintiff had garnisheed an amount under the adjudication. The defendant sought repayment of the garnisheed moneys. The Court held that it had inherent power to make orders necessary and ancillary to an order setting aside judgment. The court rejected the plaintiff's submission that it had a discretion to refuse to order the repayment to the defendant describing the argument as manifestly unsustainable.
6. In this matter where a default judgment has been set aside the Local Court has power to make an order for repayment of the garnisheed moneys as a common law money claim pursuant to s 30 of the Local Court Act 2007. Justice dictates that it be paid to Merhi (not his solicitor) forthwith as there is evidence of a complete defence on the merits and no evidence to support Larkin's claim.
7. In a circumstance where moneys have been paid under a garnishee order and the default judgment is set aside the Court has power to order repayment of the garnisheed moneys to the defendant on the motion to set aside default judgment. Neither a cross claim nor fresh proceedings pleading a common money count are required. The order must be that the money is to be repaid to the defendant not into his solicitor's trust account or into Court.
8. The repayment order may be enforced as a judgment of the Court.

Civil contempt

1. Merhi has moved the Court for a finding that Larkin is in contempt of court for his failure to comply with the Court's order to pay the money into court and for punishment for that contempt.
2. A civil contempt may be committed by a party to litigation failing to pay money into court as ordered. In a case of civil contempt the Court imposes a sanction to compel compliance with its orders. A civil contempt may be waived by the opposing party taking another step in the action. An application to punish a civil contempt should only be pursued if no other remedy is available. See generally Halsbury's Laws of Australia at [105-250] and [105-500].
3. The order I have made today replaces the order made by the Registrar. Larkin is not now obliged to comply with that order. By moving the Court in argument for an order that the money be paid to his solicitor Merhi has taken a step in the proceeding. The order I have made is a remedy to the civil contempt and can be enforced by Merhi. There is no legal basis is to impose a sanction upon Larkin. I dismiss the Statement of Charge for contempt in proceedings 2016/00113138.

Costs

1. Merhi has sought the payment of his costs in the sum of $15,000: 1. on the motion to set aside the default judgment before the Registrar on 19 February 2016, 2. on the motion for contempt filed by Merhi and returnable on 18 March 2016 when Larkin failed to attend, and 3. for the appearance to argue the motion for contempt when Larkin attended court represented by a solicitor on 26 April 2016.
2. As formulated by the draft orders handed up on 26 April 2016, Merhi's application became an application for a review of the Registrar's order. An order by way of sanction for civil contempt to compel compliance with the order to pay the garnisheed moneys into court may have been available had the Court refused to review the Registrar's order. I am satisfied that it was a reasonable step in the proceedings to prepare a charge of civil contempt against the prospect of the Court not being satisfied that it had power to make an order for payment of the garnisheed moneys to Mr Merhi.
3. I order Larkin to pay Merhi's costs of and incidental to the motion to set aside default judgment and the motion for contempt on an ordinary basis. I will not quantify the amount, which can be agreed or assessed.
4. The substantive proceedings are stayed until Larkin satisfies the Court's order for repayment of the garnisheed moneys.
5. The Court orders: 1. The plaintiff to pay $59,234 to the defendant. 2. Interest to accrue on $59,234 from 7 December 2015 pursuant to s 101 of the Civil Procedure Act 2005. 3. The plaintiff to pay the defendant's costs of and incidental to the motion to set aside default judgment before the registrar and the motion for review and contempt on an ordinary basis. 4. Proceedings 2016/00113138 in the Local Court at Waverley be dismissed. 5. These proceedings be stayed until satisfaction of orders 1, 2 and 3 by the plaintiff. Magistrate L Stapleton Waverley Local Court 20 May 2016

Note: 8 August 2016 - orders (1) and (2) in paragraph 23 amended under the slip rule (UCPR r 36.17) to correct a typographical error as to the judgment amount. 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: 08 August 2016