Perpetual Trustees Australia Ltd v Heperu Pty Ltd & Ors [2009] NSWCA 387 | Case summary

HEADNOTE Between August 2001 and November 2003 an agent of the respondents misappropriated cheques with a face value of $2,744,254 drawn in favour of the appellant by investing them in an account in his wife's name. He subsequently misappropriated the proceeds. In 2007 Palmer J held that the appellant had converted those cheques and he gave judgment for the respondents for their face value and prejudgment interest. On 23 April 2009 the Court allowed the appellant's appeal on the merits and entered judgment in its favour in the action. The orders were entered in the Court's computerised record on the same day. On 20 May the respondents applied on motion seeking to have the orders of 23 April set aside on the ground that the appellant was not the correct defendant, but prior to the trial it had represented that it was, failed to disclose the identity of the subsidiary that was the correct defendant, or give proper discovery of the subsidiary's documents. The respondents claimed that as a result of these representations and non-disclosures they had been prevented from pleading causes of action against the subsidiary based on sections of the Corporations Act which imposed a legally enforceable duty of care on the single responsible entity of an investment scheme. The notice of motion was filed outside the 14 day period allowed by UCPR Pt.36.16(3A), but when this was drawn to the attention of the parties the respondents relied on Pt.36.15, and later still on s 63 of the Civil Procedure Act to support their motion. The Court directed that two questions relating to the competency of the motion be decided separately from any other questions on the motion. The respondents claimed that the orders of 23 April had been given, made, or entered irregularly within Pt.36.15(1), and that the appellant's representations and procedural defaults prior to the trial were failures to comply with the requirements in s 56(3) of the Act, and in various provisions of the rules so as to attract the Court's powers under s 63(3). HELD in answering the questions in favour of the appellant and dismissing the motion as incompetent (1) the orders of 23 April had not been made, entered or given irregularly within Pt.36.15(1); (2) s 63(1) was concerned with specific requirements of the Act and rules and s 56(3) did not impose a requirement which could fall within s 63(1); (3) some of the alleged breaches of the rules were capable of coming within s 63(1); (4) a final judgment on the merits given after a trial or appeal when the parties had been fully heard was not within the general language of s 63(3)(a) including its reference to "judgment"; (5) the general reference to "judgment" in s 63(3)(a) did not disclose a clear intention to displace the fundamental common law rule that a final judgment formally entered could only be set aside on appeal or in proceedings based on fraud: Benson v Northern Ireland Road Transport Board [1942] AC 520, Davern v Messel [1984] HCA 34, 155 CLR 21 applied; (6) rectification of an obvious omission in the hard copies of the Court's reasons for judgment that were filed and given to the parties on 23 April did not have the effect of restarting time under Pt.36.16(3A). ORDERS

Judgment 1 THE COURT: The appeal from the judgment of Palmer J was heard by the Court, as presently constituted, on 28 and 29 August 2008. On 23 April 2009 the Court published its reasons and made orders allowing the appeal with costs, and entering judgment for the defendant appellant in the action. The Court later heard argument on separate questions arising from the respondents' motion to set aside the orders made on 23 April. 2 The orders were entered in the Court's computerised record on the same day, and a hard copy was filed on 5 May. The Court has inherent jurisdiction to recall its oral orders before they are perfected by formal entry: Re Harrison's Share [1955] Ch 260 CA. This power has been drastically curtailed by the Uniform Civil Procedure Rules Pt 36.11(2) which provides that a judgment or order is taken to be entered when entered in the Court's computerised court record system (the system), and the Court's practice of having its orders entered in the system on the day they are pronounced. 3 Part 36.16(1) and (3A) provide a limited opportunity for the exercise of the Court's inherent power to recall its orders if an appropriate notice of motion is filed within 14 days after their entry in the system, but Pt 36.16(3C) provides that the Court may not extend this time limit. 4 On 20 May the respondents to the appeal (the respondents) filed a notice of motion seeking to have the orders made on 23 April set aside and associated relief. It was based on additional or fresh evidence that had since become available to the respondents. It was filed outside the 14 day time limit in Pt 36.16(3A) and, subject to one argument, was incompetent. 5 There is also power to set aside or rescind perfected orders on proof that they were procured by fraud: Jonesco v Beard [1930] AC 298; McDonald v McDonald [1965] HCA 45; 113 CLR 529. The affidavit evidence filed by the respondents on the motion contained allegations of misrepresentation by the appellant prior to and at the trial, and it was not clear initially whether they were alleging that the misrepresentations were fraudulent. However Mr Digby QC, who appeared for the respondents on the hearing of the separate questions, expressly disclaimed any such allegation. 6 In any event, an action on pleadings is the appropriate procedure for invoking the Court's power to set aside its perfected orders for fraud: Jonesco v Beard at 300-301; McDonald v McDonald at [5]; 533. There is no support in the decided cases for holding that perfected orders can be set aside for innocent misrepresentation. 7 On 3 September the Registrar, at the direction of the President, wrote to the solicitors for the parties drawing attention to Pt. 36.16(3A) and (3C), and the entry of the orders in the system on 23 April. 8 The motion was listed before Handley AJA for directions on 24 September. Since counsel for the respondents claimed that the notice of motion was competent, either under Pt 36.16(1), or under Pt 36.15(1), the following questions were ordered to be decided separately from any other questions in the motion: "1. Whether the matters alleged in the respondents' position statement, if proved, are capable of establishing that the orders of this Court pronounced and entered on 23 April 2009 were made 'irregularly, illegally, or against good faith' within the meaning of UCPR Pt 36.15(1). 2. Whether the notice of motion filed on 20 May 2009, seeking to have the orders of this Court pronounced and entered on 23 April 2009 set aside under UCPR Pt 36.16, was competent in view of the time limit in UCPR Pt 36.16(3A)." 9 The hearing of the separate questions was fixed for 12 November. 10 Part 36.15(1) relevantly provides: "A judgment or order of the court in any proceedings may, on sufficient cause being shown, be set aside by order of the court if the judgment was given or entered, or the order was made, irregularly, illegally or against good faith." 11 Mr Digby QC submitted that the orders of 23 April were "made or entered … irregularly", and reliance on the other grounds in Pt 36.15(1) was disclaimed. The irregularities were said to have occurred because the only appropriate defendant was Perpetual Investment Management Ltd (PIML), a wholly owned subsidiary of the appellant (PTAL). PIML was the single responsible entity licensed by ASIC to operate the registered management investment scheme (the scheme) in which the respondents' funds were invested. The trial was conducted on the basis that PTAL, as the trustee of its cash management fund, a common fund, was the appropriate defendant that received and dealt with the respondents' cheques. 12 It was said that the cheques and their proceeds were received and dealt with by PIML, and that all payments pursuant to fraudulent withdrawals by Mr Cincotta were made by it. 13 PTAL did not take the point that it was the wrong defendant, but its silence in this respect, and the misrepresentations that have been particularised, were said to have prevented the respondents' legal representatives identifying PIML as the correct defendant. As a result they failed to appreciate the potential relevance of ss 601MA and 1325 of the Corporations Act which impose a legally enforceable duty of care on a responsible entity owed to the members of the scheme. 14 The respondents pleaded a number of causes of action against PTAL, relevantly, conversion of their cheques, and breaches of a common law duty of care to potential investors. It was not suggested that the fact that the claims in conversion were heard and determined on a conventional basis disadvantaged the respondents which succeeded below on those causes of action. The detriment or disadvantage was their failure to plead causes of action based on ss 601MA and 1325. 15 The irregularities relied on included the failure of the appellant to take or disclose the wrong party point in its verified defence, its express or implied assertions that it was the correct defendant, and its failure to discover documents relevant to the role of PIML in the transactions. 16 The focus of Pt 36.15(1) is on the judgment or order that is attacked, and question is whether it was "given, … entered or … made" irregularly etc. The focus is on irregularity in those steps, not on the merits of any decision, or the irregularity of other steps in the proceedings, or in the proceedings below. 17 The rule applies with particular force to default or consent judgments and orders, and those given or made ex parte. It can only have limited application to judgments and orders made or entered after a hearing on the merits at which all parties were represented and fully heard. 18 In our judgment, the orders of this Court pronounced orally on 23 April following the publication of reserved reasons were not "given or made" irregularly. The irregularities relied upon occurred prior to the filing of the notice of appeal, indeed before and during the hearing of the matter at first instance. 19 The judgment and orders entered in the system later on 23 April were not entered prematurely, and they correctly reflected those pronounced in open court and set out in the hard copies given to the parties. In our judgment they were not entered irregularly and the case is not within Pt 36 r 15(1). 20 During the hearing of the separate questions Mr Digby QC was granted leave to amend the first question by adding "or further or alternatively irregularity within s 63(1) of the Civil Procedure Act". The amendment was made on the run, and the English is inelegant but Mr Digby's intention was clear. He wished to rely on s 63(1) to give the Court power to hear and determine the notice of motion on the merits. The Court should rephrase the amendment so that it reads: "or further or in the alternative that those matters, if proved, fall within s 63(1) of the Civil Procedure Act and attract the Court's powers under s 63(3)." 21 Section 63(1) provides: "This section applies to proceedings in connection with which there is, by reason of anything done or omitted to be done, a failure to comply with any requirement of this Act or rules of court, whether in respect of time, place, manner, form or content or in any other respect." 22 Mr Digby submitted that the appellant had failed to comply with s 56. Section 56(1) provides: "The overriding purpose of this Act and of rules of court, in their application to civil proceedings, is to facilitate the just, quick and cheap resolution of the real issues in the proceedings." 23 Section 56(2) requires the Court to give effect to the overriding purpose when exercising its powers, and subs (3) imposes a duty on the parties "to assist the Court to further the overriding purpose". It was submitted that the appellant's failure to take the point that the wrong defendant had been sued and to give discovery of PMIL's documents were breaches of s 56(3). 24 The Civil Procedure Act commenced in August 2005, but it applied to pending actions such as this one which was commenced in 2003. We will assume in favour of the respondents that the Act and Rules applied to this action from its commencement, without examining the effect of the transitional provisions. 25 Section 56(1) is concerned with the resolution of "the real issues in the proceedings". The respondents initiated those proceedings, and their statement of claim against PTAL pleaded the material facts on which they relied and tendered issues for admission or denial. 26 If the appellant had taken the wrong party point the respondents would presumably have sought leave to add PIML as a defendant, or to have it substituted for PTAL. This would have caused delay, increased the costs, and probably attracted an order for costs in favour of PTAL. 27 In these circumstances the appellant's decision that it would not take the wrong party point was not a breach of s 56(3). 28 A failure by the appellant to discover documents of PIML may or may not have been a breach of the section depending on whether they were relevant to "the real issues in the proceedings" against PTAL. 29 Whether or not a failure to discover documents is a breach of s 56(3), a breach of that section is not, in our judgment, within s 63(1). This applies where: "… there is … a failure to comply with any requirement of this Act or rules of court, whether in respect of time, place, manner, form or content or in any other respect." 30 The section only applies to specific requirements of the Act or rules which are capable of giving rise to an identifiable irregularity. It cannot apply to breaches of the general duty under s 56(3). The consequences of the construction of s 63(1) urged on us by Mr Digby would be extraordinary. A party who lost at trial or on appeal would, by alleging a breach of s 56(3), be entitled to investigate the conduct of the successful party before and at the trial in an attempt to establish the breach. If it succeeded it would then be entitled to seek orders under s 63(3) which provides: "The Court may do either or both of the following in respect of proceedings the subject of a failure referred to in subsection (1): (a) it may, by order, set aside the proceedings, any step taken in the proceedings, or any documents, judgment or order in the proceedings, either wholly or in part, (b) it may exercise its powers to allow amendments and to make orders dealing with the proceedings generally." 31 Thus the orders potentially available to the respondents include setting aside the judgments of this Court and the Division, allowing amendments to the pleadings, and ordering a new trial. 32 In Burrell v R [2008] HCA 34, 82 ALJR 1221, 1226 Gummow ACJ, Hayne, Heydon, Crennan and Kiefel JJ said: "A central and pervading tenet of the judicial system is that controversies, once resolved, are not to be reopened except in a few, narrowly defined, circumstances. That tenet finds reflection in rules concerning the bringing of an action to set aside a final judgment on the ground that it was procured by fraud and in the doctrines of res judicata and issue estoppel. The principal qualification to the general principle of finality is provided by the appellate system. But in courts other than the court of final resort, the tenet also finds reflection in the restrictions upon reopening of final orders after they have been formally recorded." 33 The Court should be slow to adopt a construction of ss 56(3) and 63(1) which would drastically subvert these fundamental principles. 34 One of the significant matters relied on to bring the case within s 63(1) is PTAL's failure to discover PMIL documents. There is no longer any automatic right to general discovery, or indeed any discovery. Part 21.2(1) enables the Court to order discovery of a class or classes of documents, or samples of documents in a class. Thus initial discovery that is inadequate is not a breach of the Act or rules, but may be a breach of an order. However breach of an order as such is not within s 63(1). 35 It would be remarkable if the Court was bound by s63(2)(a) to treat failure to comply with one of its orders as prima facie no more than an irregularity. Moreover if an order is not complied with it is not be easy to identify the proceedings etc which could be set aside under s 63(3). 36 However there may have been failures to comply with the duty to give continuing discovery imposed by Pt 21.6, and with the duty to verify PTAL's defence in acdcordance with Pt 14.23(2) and (3) which were irregularities within s 63(2). 37 The Court must therefore consider whether irregularities within s 63(1) and (2) which occurred before trial are capable of supporting an order under subs (3)(a) setting aside a final judgment of this Court after it has been perfected. 38 This depends on the meaning of "judgment" in subs (3)(a). It could mean any judgment whatever, but in a section dealing with irregularities it may have a more limited meaning. Thus it could be limited for example to interlocutory judgments, and judgments given without a hearing on the merits such as default or consent judgments or those given ex parte. 39 Proof of the alleged irregularities, without more, could not justify an order setting aside the judgments of this Court and of Palmer J. The respondents would also need leave to adduce fresh evidence which could support a different result against PTAL. 40 The respondents however accept that PTAL was not liable. It is not clear in these circumstances why the judgment in its favour could properly be set aside under this section merely because there is evidence that PIML may be liable. 41 Fresh evidence alone, without proof of fraud, is not a ground for setting aside final orders which have been formally entered. As the High Court said in Burrell v The Queen [2008] HCA 34, 82 ALJR 1221, 1227: "Identifying the formal recording of the order of a superior Court of record as the point at which that Court's power to reconsider the matter is at an end provides a readily ascertainable and easily applied criterion. But more than that, identifying the formal recording of the order as the watershed both marks the end of the litigation in that Court, and provides conclusive certainty about … the end result in that Court." 42 The orders of this Court established cause of action estoppels in favour of the appellant which cannot be displaced by the discovery and proof of fresh evidence: Arnold v National Westminster Bank Plc [1991] 2 AC 93. 43 If the respondents are correct a final judgment of this Court formally entered could be set aside on an application made long after the time for an appeal or an application for special leave had expired provided it was made within a "reasonable" time: section 63(4). 44 The general rule is that final orders regularly made and formally entered can only be challenged on appeal or in proceedings to set aside the judgment for fraud. 45 This "central and pervading tenet of the judicial system" requires this Court to give a narrow interpretation to the word judgment in s 63(3)(a). General words conferring a right of appeal from decisions of an inferior Court in criminal cases have been construed so as not to give the prosecution any right of appeal against an acquittal: Benson v Northern Ireland Road Transport Board [1942] AC 520; Davern v Messel [1984] HCA 34; 155 CLR 21, 31-33 per Gibbs CJ. Similarly retrospective legislation dealing with substantive rights does not reopen cause of action estoppels in the absence of clear words: Lemm v Mitchell [1912] AC 400. As Gibbs CJ said in Davern v Messel at 33: "… a statutory provision will not be construed as overthrowing a fundamental rule of the common law unless it expresses a clear intention to do so." 46 Similarly in Lemm v Mitchell at 405 Lord Robson referred to: "… the ordinary principle that the man is not to be vexed twice for the same alleged cause of action … unless it be excluded by the Legislature in explicit and unmistakable terms." 47 Both cases reflect principles intended to prevent the reopening of judicial decisions. 48 The general word "judgment" in s 63(3)(a) without more does not disclose a clear intention to allow perfected final decisions to be reopened when both parties were fully heard. 49 We conclude therefore that the respondents' allegations, taken at their highest, do not give this Court the power to set aside the perfected orders made on 23 April. Separate question (1) should therefore be answered No. 50 The only argument advanced against a negative answer to separate question (2) was based on the omission of a page from the authorised copy of the reasons for judgment placed in the file and from the hard copies given to the parties on 23 April. This was later rectified but Mr Digby argued that that restarted time under Pt 36.16(3A). The electronic copy entered in the Court's computer system and disseminated on the internet was complete. The missing page was an obvious error because the pages and paragraphs were numbered. In any event, the reasons for judgment, even if they were defective in this respect, are not the orders of the Court. 51 The Court has never withdrawn or amended its orders made on 23 April. In our judgment the steps taken to amend the hard copies did not restart time under Pt 36.16(3A). Separate question (2) should therefore be answered "No". 52 The answers to the separate questions establish that the notice of motion of 20 May is incompetent and must be dismissed. The parties should have the opportunity of addressing the question of costs in written submissions. 53 The following orders are made: (1) Separate question (1) is amended by adding "further or in the alternative that those matters, if proved, fell within s 63(1) of the Civil Procedure Act and attracted the Court's powers in s 63(3)." (2) Separate Questions answered: 1. No. 2. No. (3) Notice of Motion of 20 May 2009 dismissed. (4) Costs reserved. (5) Respondents to file and serve written submissions on the appropriate order or orders for costs within 5 days. (6) The appellant to file and serve written submissions on those questions within a further 5 days.

Perpetual Trustees Australia Ltd v Heperu Pty Ltd & Ors

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