McLeary v Swift

Judgment 1On 21 November 2012 I delivered a judgment in this matter when I indicated the mandatory order I proposed to make and stood the matter over to enable the parties to agree on interest calculations and to consider the wording of the order: McLeary v Swift [2012] NSWSC 1403. 2On 26 November 2012 I made orders in the following form: 1. The Defendant to pay within 28 days to the Deputy Commissioner of Taxation, into Australian Taxation Office income tax account number 83911332/00551, in favour of Teffcog Pty Limited (Teffcog), the amount of $822,595.47 made up of the following sums: (a) The amount of $485,100 representing the Defendant's obligation to pay one half of the amended taxation liability assessed as payable by the Australian Taxation Office for Teffcog for the financial year ended 30 June 2006 pursuant to clause 5.9 of the Heads of Agreement between the parties dated 27 February 2009; (b) The amount of $242,550 representing the Defendant's obligation to pay one half of the short fall penalty imposed by the Australian Taxation Office for Teffcog for the financial year ended 30 June 2006 pursuant to clause 5.9 of the Heads of Agreement between the parties dated 27 February 2009; and (c) The amount of $94,945.47 representing one half of the unremitted Shortfall Interest Charge imposed by the Australian Taxation Office on Teffcog on 9 July 2010 together with all unremitted General Interest Charges imposed on Teffcog on its unpaid taxation debt since 24 October 2011. 2. The Defendant to pay the Plaintiff's costs. 3. Exhibits to be returned to the custody of the Plaintiff. The Court notes: 4. For the avoidance of doubt, Order (1) is made for the benefit of both the Plaintiff and Teffcog and, in the event of the Defendant's failure to comply with Order (1), it may be enforced by either the Plaintiff or Teffcog or both. The notation in paragraph 4 was inserted at the suggestion and by the agreement of the parties. 3There has been an appeal and cross appeal from those orders which has not yet been heard. The Notice of Cross Appeal is in evidence (Ex 1), having been filed on 14 October 2013. 4The defendant has not complied with the orders. The plaintiff has tried to enforce them by the issue of a bankruptcy notice and creditor's petition, and a Notice of Motion for the issue of a garnishee order. It is accepted that the bankruptcy proceedings must fail as the plaintiff is not a judgment creditor to whom monies are owing by a judgment debtor. 5On the Notice of Motion for issue of a garnishee order against Astbury Enterprises Pty Limited the Court raised a requisition stating that the applicant (Mr McLeary) was not a judgment creditor and also pointing out that a freezing order was in place binding the proposed garnishee. 6In a way not made altogether clear the matter came before Justice Hallen. To be of assistance, presumably because a number of problems were raised on behalf of the plaintiff, Hallen J directed the parties agree on a Statement of Issues which needed to be determined and directed the matter be listed, before me if possible, for the determination of those issues. While this may seem to have had some technical problems it was clearly an effective way of disposing of a number of questions between the parties. 7It is convenient to set out each issue and then to decide that issue rather than setting out all the issues at the start. I will refer to the Civil Procedure Act 2005 as the CPA and the Uniform Civil Procedure Rules 2005 as UCPR. Before that, however, there are some definitions in s 3 of the CPA which are relevant as follows: judgment includes any order for the payment of money, including any order for payment of costs. judgment creditor means the person to whom a judgment debt is payable. judgment debt includes: (a) any amount payable under a judgment, and (b) any interest after judgment that is payable on that amount under section 101, and (c) any other amount payable under rules of court without the need for a judgment. judgment debtor means the person by whom a judgment debt is payable. 8The plaintiff is not a judgment creditor. Teffcog Pty Limited is not a judgment creditor. The defendant, Mr Swift, is a judgment debtor. The Deputy Commissioner of Taxation is a judgment creditor. Issue 1 Whether the orders made by the Court on 26 November 2012, including order 1, are enforceable pursuant to s 106(1) of the CPA and pursuant to rr 38.1, 39.2, 39.4, 39.44 of the UCPR, by: a. the plaintiff; and b. Teffcog Pty Limited? 9Section 106(1) of the CPA is as follows: (1) A judgment debt may be enforced by means of any one or more of the following: (a) a writ for the levy of property, (b) a garnishee order, (c) in the case of a judgment of the Supreme Court or the District Court, a charging order. Rule 38.1 of the UCPR 10Although the approved form (Form 51) clearly indicates that the examination procedure is available to a judgment creditor, the wording of the rule extends to a person in whose favour an order has been given. It is at least arguable this would extend to the plaintiff. Once costs have been assessed and a certificate filed, the plaintiff will be a judgment creditor. In the words of the issue under consideration, r 38.1 is not a means of enforcement but a step towards it. Rule 39.2 of the UCPR 11Part 39 of the Rules is headed "Enforcement of Judgments". Rule 39.2 deals with execution. It is I think clear that only a judgment creditor can apply for a writ of execution. Until there is a judgment for costs, the plaintiff is not such a person. Teffcog is not such a person. Rule 39.34 of the UCPR 12In the Statement of Issues there is a mistake in reference to r 39.4 but it was acknowledged at the hearing that this should have been r 39.34. The same reasoning applies to this. It is of course possible to become a judgment creditor by taking an assignment of the debt from the original judgment creditor but that is not the case here. The Notice of Motion for a garnishee order will have to be dismissed. Rule 39.44 of the UCPR 13The same reasoning applies under this rule. Issue 2 Whether, by reason of the terms of the orders made by the Court on 26 November 2012, including order 4, and/or by reason of UCPR r 39.49, either or both of the plaintiff and Teffcog Pty Limited are judgment creditors of the defendant in respect of the amounts payable pursuant to order 1 and any interest thereon pursuant to s 101 of the CPA ("the judgment debt")? 14Leaving to one side r 39.49, the answer is no. Rule 39.49 is as follows: 39.49 Enforcement by or against non-party (1) If, in any proceedings, a person who is not a party obtains an order, or an order is made in favour of a person who is not a party, that person may enforce the order as if that person were a party. (2) If, in any proceedings, a judgment or order may be enforced against a person who is not a party, the judgment or order may be enforced against that person by the same means as if that person were a party. (3) If, in any proceedings, compliance with a judgment or order may be enforced against a corporation that is not a party, any senior officer of the corporation is liable to the same process of enforcement as if the corporation were a party. 15This is a more difficult question. Order 1 of the orders of 26 November 2012 requires payment to the Deputy Commissioner of Taxation into a nominated account in favour of Teffcog Pty Limited. I consider on its proper construction this order is in favour of the Deputy Commissioner who could enforce the order. There are some difficulties with this now because the taxation debt has in fact been paid by parties associated with the plaintiff. The promise under the contract was to pay to the Deputy Commissioner of Taxation, albeit for the credit of Teffcog. In Beswick v Beswick [1968] AC 58 at 91 Lord Pearce in his speech referred to a similar rule in O 45, r 9(1) of the Rules of the Supreme Court 1965 (UK). His Lordship, in referring to the rights of the widow entitled to the benefit of a contract but not a contracting party, said that the rule would appear to enable the widow "to enforce ... payment by the appointment of a receiver, by writ of fi. fa., or even by judgment summons". However, as I have said, I think that this right or power would reside in the Deputy Commissioner of Taxation not in Teffcog. Issue 3 Whether the orders made by the Court on 26 November 2012 should be varied pursuant so as to enable the plaintiff and/or Teffcog Pty Limited to enforce order 1 of those orders and to constitute either or both of them, a judgment creditor, and if so, in what way. 16The plaintiff relied upon r 36.16 and r 36.17 and the inherent jurisdiction of the Court. Rule 36.16, so far as it is relevant, states: 36.16 Further power to set aside or vary judgment or order (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. 17It was argued that the order should be varied, as I understood it, because the question of damages was not dealt with. I think this is incorrect for three reasons. The first is that the judgment and order finally determined the claim for relief. The second is that the question of damages was discussed in the judgment. The primary relief sought was an order for specific performance. In the alternative damages were sought. The primary relief sought was given. It would of course not be possible to make an order for specific performance predicated upon the contract remaining in force and an order for damages which would be predicated upon breach of the contract and its termination. The third reason is that as there is a cross appeal on this very question it would be a abuse of process at this stage to seek to have the judgment appealed against varied in some way. 18Rule 36.17 is as follows: 36.17 Correction of judgment or order ("slip rule") If there is a clerical mistake, or an error arising from an accidental slip or omission, in a judgment or order, or in a certificate, the court, on the application of any party or of its own motion, may, at any time, correct the mistake or error. 19There is no clerical mistake in the judgment or orders: neither is there an error arising from an accidental slip or omission. In fact, right or wrong, the judgment says what it was intended to say. It is perhaps unfortunate that, at trial, I was not referred to the decision of White J in Paterson v Pongrass Group Operations Pty Limited [2011] NSWSC 1588. It might have been possible to argue that an order should be made for payment to the plaintiff on his undertaking to apply the money forthwith to discharge the liability of Teffcog to the Deputy Commissioner of Taxation but failure to make such an order did not arise by mistake or error. It was not suggested. I have given attention to Newmont Yandal Operations Pty Ltd v The J Aron Corporation and the Goldman Sachs Group Inc (2007) 70 NSWLR 411 particularly in the judgment of Spigelman CJ at 433-434 but I do not consider they assist the plaintiff. Inherent Jurisdiction 20Counsel for the plaintiff also placed reliance on the decision in Newmont Yandal Operations Pty Ltd in that it dealt not only with the slip rule and its proper operation having regard to the overriding purpose in s 56 of the CPA, but also the power to amend under the inherent jurisdiction of the Court. I do not think that decision assists the plaintiff. No doubt it could be said that the intention of the Court was to ascertain whether there was a remedy available to the plaintiff and if so decide, within the reasonable limits of the pleadings, the appropriate remedy. However as I was the trial Judge I know that the orders pronounced and the relief given were those which I intended. I do not understand how it could be said that damages sustained by the plaintiff could equate with the amount ordered to be paid to the third party. Counsel for the plaintiff continued to press the argument that as the plaintiff was the sole shareholder of Teffcog then by reason of the defendant's failure to pay it was the plaintiff's loss not that of Teffcog when the tax debt was not paid. That cannot be correct. It is for a company to recover its loss not a shareholder: Gould v Vaggelas (1984) 157 CLR 215. 21I should add that the written submissions of counsel for the plaintiff sought exercise of the inherent jurisdiction to vary the judgment by entry of a monetary judgment against the defendant in favour of the plaintiff or in favour of Teffcog. For the reasons I have given that cannot be done while the orders for specific performance stands. Issue 4 Whether the Court should give directions or make orders pursuant to s 135 of the CPA, and if so, what directions should be given or orders made. 22Section 135 of the CPA, which empowers the Court to give directions with respect to the enforcement of judgments, cannot assist the plaintiff. Part 8 of the CPA relates to the enforcement of judgments and orders. None of its provisions assist except perhaps s 103 which provides that subject to Part 8 the procedure for enforcement of a judgment or order of the Court is to be as prescribed by the rules of Court. However wide the authority and direction given by s 56 of the CPA, I do not think it enables the Court to give judicial advice as to how a judgment or order might be enforced. 23I find it difficult to accept that the Court is powerless to enforce an order of the type made in this action. I said during the hearing that I was sympathetic to the plaintiff as the Court expects its orders to be obeyed. There is no evidence the defendant does not have the resources to obey it but there was no occasion to adduce that evidence. There is an important question of the interaction of ss 130 and 131 of the CPA and rule 40.6 of the UCPR. In addition there is a question of the powers of the Court under rule 40.2. The normal method of enforcement of orders for specific performance and an order in the nature of that made here is by proceedings for contempt. I refer to this only because I do not accept that the Court is powerless in a situation such as has arisen here but it is not proper to go into this in detail as it was not argued. Result 24The result of the hearing is that the plaintiff has failed on the issues put forward for determination. Thus he must pay the costs of the hearing. In addition the Notice of Motion for a garnishee order filed on 20 June 2013 should be dismissed with costs. Orders