Palinkas v Palinkas

Supreme Court of NSW|2010-07-12|Before: Bergin CJ, Austin J

CITATION : Palinkas v Palinkas [2010] NSWSC 923

CATCHWORDS : JUDGMENT AND ORDERS - application to set aside orders made in absence of defendant consequent upon orders after a trial - where no appeal in respect of orders made after trial - whether orders irregular where equipment subject to mortgage and financiers not joined - whether discretion should be re-exercised

LEGISLATION CITED : Uniform Civil Procedure Rules 2005 r 36.16(2)(b)

Rudi Palinkas (First Plaintiff / Respondent) PARTIES : Gizella Palinkas (Second Plaintiff / Respondent) Rudolph Charles Palinkas (Defendant / Applicant)

COUNSEL : SK Hill (Plaintiffs / Respondents) C Wood / T Catanzariti (Defendant / Applicant)

SOLICITORS : Jade Solicitors (Plaintiffs / Respondents) Watson McNamara & Watt Solicitors (Defendant / Applicant)

20 - IN THE SUPREME COURT OF NEW SOUTH WALES EQUITY DIVISION

2008/278489 RUDI PALINKAS & ANOR v RUDOLPH CHARLES PALINKAS JUDGMENT 1 This application by the defendant, Rudolph Charles Palinkas, to set aside certain orders made by Macready AsJ on 30 October 2009 (the 30 October orders) was heard on 12 July 2010 when Mr C Wood, of counsel, leading Ms T Catanzariti, of counsel, appeared for the defendant/applicant and Ms SK Hill, of counsel, appeared for the respondents/plaintiffs. The proceedings 2 The plaintiffs, Rudi Palinkas and his wife Gizella Palinkas, sued the defendant, their son, in proceedings that were heard and determined by Austin J in February 2009: Palinkas v Palinkas [2009] NSWSC 92. In those proceedings the plaintiffs sought, inter alia, an order that the defendant's property at Boggabri known as Uplands was charged with specific amounts of money that the plaintiffs had contributed to the defendant. 3 The plaintiffs filed a Further Amended Statement of Claim (FASOC) during the trial before Austin J. They had previously abandoned a number of claims that had been made in the Statement of Claim including a claim for a declaration that any farm chattels purchased by the defendant using the plaintiffs' money were held by him on trust for the plaintiffs. The plaintiffs had also abandoned a claim for any ancillary order allowing the plaintiffs to sell any such chattels that were still in the defendant's control and possession and to retain any net proceeds from that sale. 4 The FASOC included claims that the plaintiffs and the defendant entered into a number of agreements pursuant to which the plaintiffs advanced money to the defendant in return for which the plaintiffs were entitled to live in a Cottage on Uplands. The first agreement was alleged to have been entered into in August 2001 pursuant to which the plaintiffs advanced $10,000 "for the purpose of renovating the Cottage" on Uplands. It was alleged that a further agreement was entered into in October 2001 (confirmed in writing in February 2002) pursuant to which the plaintiffs advanced $210,000 to the defendant "for the purpose of reducing the defendant's liabilities in relation to Uplands and making improvements to Uplands". It was also alleged that in February 2002 an agreement was entered into varying the October 2001 agreement and providing that if the plaintiffs decided to vacate the Cottage the defendant was to acquire other suitable accommodation for them. The FASOC also included the following: Constructive Trust Arising From Joint Endeavour 75 Further or in the alternative, the plaintiffs and the defendant, on or about August 2001, entered into a joint endeavour the purposes of which were: i. To allow the defendant to reduce his liabilities in respect of Uplands and make improvements to Uplands, ii. To allow the plaintiffs to reside in the Cottage for life. 76 Pursuant to the said joint endeavour: i. The plaintiffs contributed their resources to improvement of Uplands and the cottage as pleaded in paragraph 66 and paragraph 74 (i). ii The plaintiffs also made significant non-financial contributions to the improvement of Uplands. 77 On or about August 2006 the relationship between the parties broke down and thus the sub-stratum of the said joint endeavour was removed. 78 The defendant was and remains the sole registered proprietor of Uplands. 79 In the circumstances it would be unconscionable for the defendant to deny that the plaintiffs hold a beneficial interest in Uplands. 80 In the premises the defendant holds his interest in Uplands subject to a charge or lien in favour of the plaintiffs in respect of their contributions.

5 The declaratory relief sought in the FASOC was limited to declarations that the agreement in February 2002 was valid and enforceable and that the defendant's interest and title in Uplands was charged with the sum of $210,000 "being the sum contributed by the plaintiffs to Uplands" and a further sum of $43,654.82 "being other amounts contributed towards Uplands". It was alleged that the plaintiffs paid the defendant various sums "for the purpose of reducing the defendant's liabilities in relation to Uplands and making improvements to Uplands" (par 66). The judgment 6 Austin J concluded that there was a joint relationship between the plaintiffs and the defendant pursuant to which the plaintiffs provided $210,000 to the defendant for use in improving and running Uplands including the Cottage in respect of which the plaintiffs had a right of occupation for the rest of their lives. His Honour also concluded that the substratum of that joint relationship or endeavour had been removed because the parties had fallen out and the plaintiffs no longer lived in the Cottage: [51]. 7 Austin J described the case as one in which "the benefit of the money contributed by one party (the plaintiffs) on the basis and for the purposes of the relationship or endeavour (the working of the farm upon which they were to live in harmony) would otherwise be enjoyed by the other party (the defendant) in circumstances in which it was not specifically intended or specifically provided that the other party should do so": [53]. His Honour was satisfied that those circumstances attracted the principle described in Muschinski v Dodds (1985) 160 CLR 583 at 619-620 and Baumgartner v Baumgartner (1987) 164 CLR 137 at 148, that equity would not permit the defendant to retain the benefit of the plaintiffs' contributions to the extent that it would be unconscionable to do so: [53]. His Honour concluded that the equity related to the plaintiffs' contribution to the property, being a contribution of $210,000 plus any subsequent payments properly characterised as contributions to the property within that equitable principle: [54]. 8 After referring to equity's capacity to design a remedy that gives effect to the proposition that it would be unconscionable for the defendant to retain the benefit of the plaintiffs' contributions, his Honour referred to Morris v Morris [1982] 1 NSWLR 61. That was a case in which McLelland J, as the former Chief Judge in Equity then was, concluded, at 64, that the appropriate remedy for a plaintiff in whose favour an equity had arisen in respect of money spent on the defendant's property was an equitable charge over the defendant's property in the amount of the plaintiff's contribution plus interest at 10% per annum from the commencement of the proceedings. Austin J concluded that the "same remedy" was appropriate and said at [59]: Here the equity is better satisfied by the imposition of an equitable charge over the Uplands property reflecting an entitlement to be repaid the contribution, with interest from the date of commencement of the proceedings at an appropriate rate, rather than by the imposition of a constructive trust that would give the plaintiffs a proportionate beneficial interest in the property or an order for equitable compensation. 9 His Honour then embarked on an analysis of the written agreement of February 2002 for the purpose of identifying whether it had encompassed and replaced the pre-existing equitable rights of the plaintiffs. In this analysis his Honour extracted Recital B of the agreement that recorded that the plaintiffs had contributed various funds to assist the defendant "both in relation to some machinery and to the property" and that whilst they amounted to approximately $240,000 the parties had agreed that the net contribution was "to be noted at $210,000": [64]. This was the first reference in the judgment to the plaintiffs having contributed any funds towards machinery, albeit that it was contained in the Recital as extracted. However, his Honour in par [65] expressed the view that "it is plain that Recital B records that the plaintiffs have contributed funds of approximately $240,000 in relation to some machinery…". His Honour also found that Recital B was "significant" because it recorded the parties' agreement to note the plaintiffs' contribution to "the property and machinery" at $210,000 even though these contributions were $240,000: at [66]. 10 For various reasons, which are unnecessary to detail, his Honour concluded that the written agreement had no application to the events that had occurred between the parties and said: 88 The law report of Morris v Morris does not reveal the precise orders made by McLelland J. It seems to me that the best way to recognise and give effect to the plaintiffs' equitable right is to declare that in the events that have happened the plaintiff is ( sic ) entitled to recoupment of the amount of their contribution (which is to be specified) plus interest, and then to order that the property at Uplands be subject to an equitable charge to secure that entitlement. I want counsel for the plaintiffs to give some consideration to the terms of those orders, particularly as to the degree of specificity that will be needed for effective orders and the rate of interest to be charged. 11 As can be seen from this paragraph, Austin J made no reference to any entitlement to an equitable charge in relation to the machinery. The "entitlement" to be secured was the recoupment of the plaintiffs' contributions and the method of securing it was the order that "the property at Uplands" be subject to an equitable charge. However his Honour said: 91 The plaintiffs are entitled to a declaratory order recognising, in the events that have happened, their equitable right to recoupment of their contribution to the improvement of the Uplands property and related machinery in the sum of $210,000 plus interest, and an order securing that entitlement by the imposition of an equitable charge over the Uplands property. As I have said, I want counsel for the plaintiffs to give some consideration to the terms of the orders including the rate of interest to be charged. Therefore I shall direct the plaintiffs, on or before Friday 6 March 2009, to serve on the defendant (with a copy to my associate) draft orders to give effect to these reasons for judgment, and I shall stand the proceedings over to 9:30 a.m. on Thursday 12 March 2009 for the purpose of my hearing submissions on the form of the orders and on the question of costs.

Orders - 12 March 2009 12 On 12 March 2009 Austin J heard argument in relation to the orders that should be made to reflect his judgment. In his ex tempore reasons his Honour said: 8 I make the orders in the defendant's version of the draft short minutes of order which I now initial and date for identification. 13 Those draft short minutes as initialed by his Honour included the following: 1 A declaration that the plaintiffs are entitled to recoupment of their contribution to the acquisition, maintenance and improvement of the property situated at Boggabri and known as "Uplands" … and to the machinery used in connection with Uplands in the sum of $210,000 plus interest thereon at the rate of 8% per annum from 30 May 2008.

2 An order that the Defendant pay the Plaintiffs the sum of $224, 314.52 within 3 months. 3 A declaration that the Defendant's interest and title in Uplands together with the machinery used in connection with Uplands is subject to an equitable charge in favour of the Plaintiffs for the balance of the amount owing from time to time pursuant to Order 2 and any interest thereon pursuant to section 101 of the Civil Procedure Act 2005. 14 The defendant failed to make payment to the plaintiffs in accordance with the orders made on 12 March 2009. Notice of Motion - 2 October 2009 15 On 2 October 2009 the plaintiffs filed a Notice of Motion returnable on 14 October 2009 and served it on the defendant's then solicitor Russell John Booby of Bell & Johnson Solicitors. The Notice of Motion sought orders for the judicial sale of Uplands and the machinery used in connection with Uplands with payment to the plaintiffs from the proceeds of sale of Uplands and the machinery. 16 It is apparent that Mr Booby spoke to the defendant and his partner on about 13 October 2009. A file note dated 13 October 2009 included the following: Client's son in law … has been trying to deal with other side to strike a deal. … things have not worked out.

Currently owes nab $2.4m. … property worth about 3 mill in good times but maybe 2 mill now.

All plant and machinery is mortgaged as are cattle.

RJB p/call out to plaintiffs solicitor - they are ok to remove caveat if it gets refinance and gets them paid.

Advised Liz - she will talk to RP and advise when they can talk to bank. 17 On 13 October 2009 Mr Booby wrote to the defendant enclosing a copy of the Notice of Motion and a copy of his letter to the plaintiffs' solicitors Watson, McNamara & Watt, that included the following: I have discussed at some length with my client the options available and it is clear that the enforcement of the Court order would likely see the property sold for well below market value realising less than the outstanding mortgage which I understand stands at $2.4 million.

The enforcement action will have catastrophic results on my client and in a depressed rural environment mortgagee sales realise up to 25% below market value. I am advised that a neighbouring property to "Uplands" recently sold for about 2/3rds of that property's former valuation.

Seasonal conditions since the Supreme Court judgement have significantly affected our client's ability to pay the judgement however he is quite committed to trying to get the matter resolved.

He will immediately seek to meet with the bank to organise refinancing on the basis that the caveat is removed.

On this basis I would ask that the Notice of Motion be adjourned to allow the abovementioned negotiations to proceed.

18 On 14 October 2009 the matter was listed before the Registrar in Equity. Counsel for the plaintiffs mentioned the matter by consent for the defendant and it was stood over to 30 October 2009.

Orders - 30 October 2009 19 On 30 October 2009 the matter was before Macready AsJ when the plaintiffs were represented by counsel. There was no appearance of or for the defendant. The order made by Macready AsJ was: "I make orders in accordance with the Short Minutes of Order signed by me and dated today." Those orders included orders for the sale of Uplands (orders 1 to 11A) and the following in respect of the sale of the machinery: Sale of Machinery 12 The machinery used in connection with the Property ("the Machinery") be sold subject to the supervision of the Court; 13 Within 14 days of the date of the making of this order, the Defendant serve upon the Plaintiffs a verified list of all the items of Machinery owned by the Defendant or which he has owned at any time since 12 March 2009 and used in connection with the Property, such list to include details of any encumbrances or charges, estimates of value and sale price of any item of Machinery sold since 12 March 2009; 14 For the purposes of Order 13, items of Machinery owned by the Defendant or which he has owned include any items of Machinery he owns or has owned either individually or jointly and either at law or in equity; 15 The Defendant deliver up to the Plaintiffs the Machinery within 28 days of the making of this Order; 16 The Machinery be sold by the Plaintiffs in such a manner and on such terms as the Court may in these Orders and from time to time direct, except to the extent of such direction, as the Plaintiffs see fit; 17 The Plaintiffs be appointed to transfer the Machinery to the purchaser or purchasers of the Machinery to effectuate sale of the Machinery; 18 Upon sale of each item of the Machinery, and after the payment of all expenses with respect to the sale, the sale proceeds are to be applied in discharge of any encumbrances over each item of Machinery and the discharge of the Plaintiffs' charge over the Defendant's share in each item of Machinery in order of their priority and in accordance with their terms, with any residue, subject to Order 22, to be paid to the Defendant; 19 Such further orders as may be required to effectuate judicial sale of the Machinery; 20 Liberty to the parties and to any other party claiming an interest in the Machinery, to apply with respect to any matter that may arise with respect to the sale of the Machinery or distribution of the proceeds of sale; 20A An order that the Plaintiffs are to act at all times in relation to the selling of the Machinery in accordance with the duties owed by a mortgagee in exercising a mortgagee's power of sale. Freezing orders 20 On 13 May 2010 the defendant was served with a Notice to vacate Uplands by no later than 2 June 2010. The defendant has since vacated and the sale process has commenced. It is apparent that the defendant sold some of the Machinery that was on Uplands and the plaintiffs moved for and were granted freezing orders in May 2010. When further application was made for the extension of those freezing orders the defendant proffered undertakings to the Court that he would not take any steps to sell Uplands or dispose of any plant and equipment. Present application 21 On 1 June 2010 the defendant filed a Notice of Motion seeking to set aside some of the orders made by Macready AsJ on 30 October 2009. The defendant's affidavit in support of the Motion sworn 3 June 2010 includes a claim that Mr Booby informed him that the plaintiffs were asking for the plant and machinery to be included in the orders that were made by Austin J and that he informed Mr Booby that his machinery was "encumbered" and most of it did not have any value. He also advised Mr Booby that he needed to make a living and earn income for his two sons and did not want the plant and machinery to form part of the orders. There is nothing in the evidence to suggest that Mr Booby was aware in March 2009 that the defendant's machinery was encumbered. The file note of 13 October 2009 suggests that this was when Mr Booby was informed that the machinery was mortgaged. 22 The defendant received a copy of the orders made by Austin J on 12 March 2009 in which the declaration was made that the machinery used in connection with Uplands was subject to the equitable charge. He claimed that after he received a copy of these orders he was informed that the plaintiffs did not wish to enforce the orders and that it was best to negotiate and deal with them on a "correspondence basis".

23 The defendant claimed in his affidavit that he did not receive a copy of the proposed orders that were sent to Mr Booby and was not informed that the orders had been made until the afternoon of 30 October 2009. He said that if he had notice of the proposed orders he would have instructed his solicitors to either object to the orders being made or to seek to have the orders made by Austin J on 12 March 2009 varied. The defendant's affidavit included a claim that after he received the orders of 30 October 2009 he changed his solicitor and although he informed that solicitor that he would not be able to deliver the machinery that was "under finance", that solicitor apparently informed him that he did not like dealing with matters in Court and that he should negotiate with the plaintiffs in relation to the orders they had obtained. The defendant claimed that he made several unsuccessful attempts to negotiate payment of the judgment debt. He has also reviewed all the plant and machinery located on and connected with Uplands and set them out in his affidavit. 24 The defendant identified six items of machinery that are the subject of finance being: a 6920 tractor, a 741 self levelling loader and a 467 silage special, subject to finance from John Deere Credit Limited (John Deere); a 1997 John Deere Model 8400 MFWD row crop tractor and a Caterpillar D 7G crawler tractor subject to finance from National Australia Bank; and a 2005 3425 cattle feed mixer subject to finance from CNH Capital Australia Pty Ltd (CNH Capital). 25 The defendant claimed in his affidavit that he did not previously understand his obligations under the orders made on 30 October 2009 and that he was advised by both his previous solicitors that he could negotiate with the plaintiffs in relation to those orders. He claimed that he did not deliver the machinery to the plaintiffs because a substantial number of items were under finance and because he and his son needed the machinery to make a living. Until June this year the defendant's two sons, aged 23 and 16 lived on Uplands and worked the farm with the defendant. 26 The defendant claimed that the 30 October orders should be set aside because: (1) they were made in his absence; (2) there was no claim pleaded for an equitable charge over the machinery; (3) the 30 October orders related to machinery the defendant did not own; (4) the finance companies were not joined as defendants; and (5) there was no basis in Austin J's reasons for the inclusion of the machinery in the 30 October orders.

Orders in defendant's absence 27 The defendant submitted that although the 30 October orders were made pursuant to a Notice of Motion properly served, the orders were made in his absence. The defendant relied on rule 36.16(2)(b) of the Uniform Civil Procedure Rules 2005 which provides that a Court may set aside an order after it has been entered if it was given or made in the absence of a party irrespective of whether that party had notice of the relevant hearing or application for the order. 28 The defendant accepted in cross-examination that he became aware of the orders made by Austin J within a week of them being made on 12 March 2009. He also agreed that he knew the effect of the declaration in respect of the equitable charge that was imposed over both Uplands and the machinery. He agreed that he received Mr Booby's letter and the Notice of Motion on about 12 October 2009. He gave evidence that he had a discussion with Mr Booby about seeking an adjournment and about negotiations in relation to the machinery. 29 The defendant and his partner, Ms Thorby, decided to go to a new solicitor for legal advice about applying to set aside the 30 October orders. He agreed in cross-examination that rather than make an application to set aside the 30 October orders he accepted advice to negotiate with the plaintiffs. That new solicitor advised him that he could seek to have the 30 October orders set aside but that his advice was not to do so. The defendant instructed that solicitor to write to the plaintiffs' solicitors on 18 November 2009. That letter referred to the National Australia Bank's first registered mortgage over Uplands and its demands for repayment of its loans and included the following: Our client has accepted that 'Uplands' and the associated plant and equipment must be sold to satisfy those two demands.

In accordance with Order 13 of the Short Minutes of Order, our client advises that the plant and equipment associated with the property 'Uplands' is as follows: 30 The letter then listed three tractors, a rock picker, a hay rake, a bailer, a fodder mixer and a combine harvester with an estimated sale price of $249,000 with debts owed to banks and other entities of $216,166. 31 On 27 November 2009 the defendant's solicitor wrote to the plaintiffs' solicitor once again setting out various assets and stating that the estimated value of machinery had been calculated on "an orderly sale basis". It was noted that if a "quick sale" were to occur it was expected that the values would be "significantly less". On this occasion the estimated value of the machinery was recorded at $249,000 with "liability" recorded at $246,249. 32 When the defendant was shown these letters in cross-examination he accepted that in November 2009 he was aware that the plant and equipment would most likely have to be sold unless settlement could be reached with the plaintiffs. He also agreed that his only concern with the 30 October orders was that it would be a forced sale when in fact he wanted an orderly sale. 33 It is significant that the defendant proposed the draft Short Minutes of Order to Austin J on 12 March 2009 which included the declaration of the equitable charge over not only Uplands but also the machinery. Judgment was delivered on 27 February 2009. The parties were given until 12 March 2009 to consider his Honour's reasons and were provided with the opportunity on 12 March 2009 to make any relevant submissions to his Honour in respect of the proposed orders. If the defendant wished to make submissions for the exclusion of the machinery he could have done so rather than propose an order which included the machinery. 34 I am satisfied that the defendant was aware that the orders were being sought; that he had the opportunity to oppose the orders being made; that he had every opportunity to make application to the Court for the orders to be varied immediately thereafter; and that the correspondence with the plaintiffs' solicitors amounts to a clear acceptance that the machinery is included in the 30 October orders. I am satisfied that this complaint is not a proper basis to set aside the 30 October orders. Unpleaded claim 35 It is true that the FASOC did not mention the machinery. However the pleading referred to the various agreements allegedly entered into between the plaintiffs and the defendant. One of those agreements included Recital B referred to in Austin J's judgment in which the parties recited that the plaintiffs had contributed their funds in relation to "some machinery and to the property".

36 The parties were represented by counsel both during the trial and on 12 March 2009 when Austin J made the orders. The defendant has not appealed from his Honour's judgment and/or orders. There has been no suggestion that the defendant was ambushed by the ruling in relation to the inclusion of the machinery. There is no evidence on this application of any objection being raised during or after the trial to the inclusion of the machinery as an item in respect of which the plaintiffs made their contribution. It appears to me that notwithstanding the pleadings, the parties conducted the trial on the basis that the machinery was included. That being the case and there being no appeal from Austin J's judgment, this complaint is without foundation. Equipment not owned by defendant 37 It was submitted that the 30 October orders in respect of the equipment are "entirely improper and beyond power to the extent that it relates to machinery [the defendant] did not own". It was submitted that some of the machinery is the subject of an "old style" chattel mortgage, which involved a transfer to the mortgagee with a right to have title transferred back. The equipment that falls into this category are the three tractors and the 467 silage special mortgaged to John Deere. It was submitted that the Court cannot grant a lien over something that the defendant did not own. 38 The plaintiffs submitted that they were not aware at the time of the filing of the Notice of Motion for the 30 October orders whether there were any encumbrances on the machinery and that is why orders 13, 18 and 20 were sought and made by the Court. The National Australia Bank was served with the Notice of Motion as a respondent to the Notice of Motion. The National Australia Bank's position was that it neither consented to nor opposed the orders sought. A copy of the 30 October orders was served on the National Australia Bank on 3 November 2009. 39 The plaintiffs were not aware of the arrangements between the defendant and John Deere and CNH Capital until they were served with the affidavit of the defendant sworn 3 June 2010. One of the items of equipment, the feed mixer also referred to as the fodder mixer, was only recently refinanced to CNH Capital on 11 May 2010. Neither CNH Capital nor John Deere have made any application in respect of the 30 October orders. The plaintiff submitted that if the financiers do not oppose the sale of their respectively mortgaged machines in accordance with the orders for judicial sale then there is no reason to set aside those orders. 40 The 30 October orders required the defendant to inform the plaintiff of the extent of the machinery and of the existence of any "encumbrances" on the title to the machinery. The plaintiff has notified each of the mortgagees of the 30 October orders and no application has been made to set aside or vary the orders. I am not satisfied that this complaint justifies the setting aside of the 30 October orders. Finance companies not joined as defendants 41 It was submitted that the finance companies and the National Australia Bank were necessary parties and it was the responsibility of the plaintiffs to correctly constitute its suit by joining those parties. In support of this submission the defendant relied upon the following passage of John Alexander's Clubs Pty Ltd v White City Tennis Club Ltd [2010] HCA 19 as follows: 116. These circumstances had several important and related consequences for the litigation between the Club and JACS (and Poplar), to be developed in more detail below. The first was that Walker Corporation had become a necessary party to the proceeding and that it was, at its peril, the responsibility of the Club to see to the proper constitution of its suit. The second was that a remedial constructive trust which would seek to provide an unencumbered registered title for the Club to the Option Land would not be an available or appropriate remedy. The third was that, contrary to the stance which seems to have been taken by the Court of Appeal and was supported by the Club in this Court, the field for contention was not subsequent litigation of what is described as disputed priority between the Club and Walker Corporation; rather, the issue should have been whether that dispute was to be created in the first place by the decision, in the absence of Walker Corporation, to declare Poplar a constructive trustee for the Club. The fourth consequence, in more general terms, was to provide an example of the caution required in imposing a remedial constructive trust to ensure that the legitimate interests of third parties will not be adversely affected. 42 The 30 October orders were made consequent upon the defendant failing to comply with the orders made by Austin J on 12 March 2010. The machinery was encumbered at the time Austin J made his orders and as I have said earlier there was no appeal from Austin J's judgment or orders. The absence of such an appeal is in my view fatal to the defendant's submissions on this point. No basis in the judgment 43 It was submitted that it is difficult to find a basis in Austin J's reasons for judgment for applying a Morris v Morris lien over the equipment. It was submitted that the issue of ownership or encumbrance of the equipment is not dealt with in the reasons and there was no finding that the contributions made by the plaintiffs were made in respect of the machinery. The defendant accepted that Austin J referred to Recital B of the agreement which recorded the contributions in relation to the machinery but submitted that this was the sole factual basis for the inclusion of the reference to machinery in the ultimate paragraph of his Honour's reasons. It was submitted that the central finding of the entitlement to the equitable interest in the property, set out in [88], does not include the machinery. 44 The observations I have made above in relation to the defendant's failure to appeal from Austin J's judgment or orders apply with even more force to this complaint. This is not a basis for setting aside the 30 October orders. Re-exercise of discretion 45 The defendant submitted that the proper exercise of the Court's discretion is to set aside the 30 October orders and to let the defendant in to defend the action in respect of the machinery forming part of the equitable lien. In this regard the defendant relied upon the following passage of Jenkins LJ's judgment in Grimshaw v Dunbar (1953) 1 QB 408 at 416: Be that as it may, a party to an action is prima facie entitled to have it heard in his presence; he is entitled to dispute his opponent's case and cross-examine his opponent's witnesses, and he is entitled to call his own witnesses and give his own evidence before the Court. Prima facie that is his right, and if by some mischance or accident a party is shut out from that right and an order is made in his absence, then common justice demands, so far as it can be given effect to without injustice to other parties, that that litigant who is accidentally absent should be allowed to come to Court and present his case - no doubt on suitable terms as to costs. 46 This passage from Grimshaw v Dunbar was cited with approval in Taylor v Taylor (1979) 143 CLR 1. 47 The defendant also submitted that the Court should give consideration to the hardship that would be caused by the sale of the machinery because: (a) it would put the defendant in breach of his obligations to the financiers; (b) without the equipment, he is unable to earn any income through contracting work; and (c) he remains liable for the lease payments in respect of machinery that in some cases is worth less than the outstanding payments. It was submitted that given the demonstrated hardship and the limited scope of any connection between the contributions made by the plaintiffs and the machinery, the Court ought not give effect to the lien order. In any event it was submitted that the orders should be vacated to the extent that they relate to machinery that the defendant does not own. 48 The plaintiffs submitted that the defendant now appears to seek a de facto appeal of the orders made on 12 March 2009 by seeking to set aside the 30 October orders. It was submitted that the plaintiffs are prejudiced by the defendant's delay in bringing this application because they have proceeded on the basis that the defendant did not have any objection to the sale of the machinery but only to the method by which the machinery was to be sold. Ms Hill submitted that if, for example, an application to set aside the orders for the sale of the machinery was made soon after the orders were made and the application granted and if the equity in Uplands was not enough to satisfy this judgment debt, the plaintiffs may have moved to bankrupt the defendant or appoint a receiver to the farm as a way of enforcing their judgment debt. It was submitted that the defendant should not be permitted to now set aside orders when the plaintiffs have lost the opportunity of pursuing other means of enforcement of their judgment in the belief that it was secured over the machinery listed in the defendant's solicitor's letter of 18 November 2009 referred to earlier. 49 The defendant's explanation for the delay in bringing this application is in my view wanting. He has had the benefit of at least two firms of solicitors the latter of whom, on his version, advised him that he could make application to set aside or vary the 30 October orders. However he waited until June 2010, fifteen months after Austin J's orders and eight months after the 30 October orders. It is probable having regard to the fact that the plaintiffs are the parents of the defendant that it was hoped that a negotiated settlement could be possible. There is no evidence to suggest that the defendant or his sons could not earn a living without access to the machinery. I am not satisfied that there is any proper basis demonstrated to set aside the 30 October orders. 50 The defendant's Motion is dismissed with costs. **********

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At a glance

Court

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Before

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Judgment (27 paragraphs)

Parties

Cases Cited (5)