'246 CATCHHORDS Practice and procedure - Federal Court of Australia - Notice of Motion - whether judgment should be set aside ~- absence of Parties - effect of contract to set aside judgment - consideration - whether further execution of judgment should be stayed. Federal Court Rules 0.35 rr.3,7, 0.36 r.8, 0.37 r.10 Trade Practices Act 1974 (Cth) 5.52 IAN LESLIE CAMERON and JEAN LARAINE CAMERON and PURE AND NATURAL FOOD COMPANY PTY. LTD., FRANCHISING AND MARKETING COMPANY OF AUSTRALIA LTD., ANTHONY MICHAEL ASHFORD and TAFCO THE AUSTRALIA FOOD COMPANY . LTD. V. No. G 170 of 1985 NORTHROP J. 22 MAY 1987 MELBOURNE IN THE FEDERAL COURT OF AUSTRALIA ) ) VICTORIA DISTRICT REGISTRY ) V. No. G 170 of 1985 ) ) GENERAL DIVISION BETWEEN : IAN LESLIE CAMERON and JEAN LARAINE CAMERON Applicants and PURE AND NATURAL FOOD COMPANY PTY. LTD., FRANCHISING AND MARKETING COMPANY OF AUSTRALIA LTID., ANTHONY MICHAEL ASHFORD and TAFCO THE AUS' IA FOOD COMPANY PTY. LTD. Respondents COURT: NORTHROP J. DATE: 22 MAY 1987 PLACE: MELBOURNE MINUTE OF ORDER THE COURT ORDERS THAT the motion be refused with costs. (Settlement and entry of Orders is dealt with in 0.36 of the Rules of Court.) IN THE FEDERAL COURT OF AUSTRALIA VICTORIA DISTRICT REGISTRY GENERAL DIVISION V. No. G 170 of 1985 BETWEEN: AN LEST CAMERON and EAN LARAINE CAMERON Applicants and PURE AND NA' FOOD COMP, PTY. LTD., FRANCHISING AND ETING COMP. OF AUS' IA LTD., ANTHONY HAEL ASHFORD and TAFCO THE AUSTRALIA FOOD COMPANY PTY. LTD. Respondents COURT: NORTHROP J. DATE: 22 MAY 1987 PLACE: MELBOURNE REASONS FOR JUDGMENT Pursuant to notice dated 3 April 1987, the respondents Franchising and Marketing Company of Australia Ltd. ("Franchising"), Anthony Michael Ashford ("Ashford"), and Tafco The Australia Food Company Pty. Ltd. ("Tafco"), are moving the Court for an order that "the Judgment entered by the Applicants against (them) on 20th February, 1987 he vacated" alternatively for an order that further execution of the judgment be stayed until further order. Initially, counsel for Franchising, Ashford and Tafco, in support of the first order, relied upon 0.35 r.7(2)(a), but during the course of submissions, relied upon r.7(2)(f). In support of the second order he relied upon 0.37 r.10. The facts giving rise to the motion are stated shortly. The applicants commenced these proceedings in July 1985 seeking recovery of moneys paid by them for the purchase of a business and damages arising from conduct in contravention of 5.52 of the Trade Practices Act 1974. The proceeding was settled and the terms of the settlement are contained in "Terms of Settlement" dated 8 September 1986. Under those terms the respondents agreed to pay ta the applicants §230,000 "in full settlement of all claims including costs." That sum was to be paid as to the sum of $100,000 on or before 30 September 1986 and the balance of $130,000 on or before 31 January 1987, or earlier if certain events occurred. Those events did not occur. If default was made in the payment of the $100,000, the respondents agreed to consent to judgment "in the sum of $260,000, less full credit for any monies paid by the respondents prior to the entry of judgment." If default was made in the payment of the §130,000, "each of the respondents shall consent to judgment in the sum of $160,000, less full credit for any monies (in addition to the said sum of $100,000 referred to above) paid by the respondents prior to the entry of judgment." This term must be read in conjunction with clause 12 of the terms of settlement. Under clause 12, upon payment of the said sum of §100,000 the respondent Pure and Natural Food Company Pty. Ltd. ("Pure and Natural"), was to "be discharged and released from any further liability to the applicants and the reference in these terms of settlement to 'respondents' shall where the context so requires to give effect to this paragraph mean the second third and fourth named respondents." The said sum of §100,000 was paid pursuant to the terms of settlement. It follows therefore, that for the purposes of the terms of settlement, Franchising, Ashford and Tafco are the respondents. Hereinafter, those three respondents are referred to collectively as the respondents. By paragraph 10 of the terms of settlement, the parties agreed to consent to orders being made that the application be struck out with no order for costs and the cross-claim be struck out with no order for costs. By order made on 8 September 1986 and entered on 27 February 1987, the Court, by consent, ordered:- "1. That the proceeding and the cross-claim be struck out of the List of Cases for hearing. 2. That there be no Order for costs." It is noted that the order made was in a form different from that referred to in paragraph 10 of the terms of settlement. The respondents failed to pay the said sum of $130,000 or any part thereof on or before 31 January 1987. On 20 February 1987 the Court, on the motion of the applicants, ordered that:- "1. Judgment be entered for the Applicant (sic) in the sum of $160,000.00 against the secondnamed, thirdnamed and fourthnamed Respondents. 2. The secondnamed, thirdnamed and fourthnamed Respondents to pay the costs of the Applicants of this Application for Judgment." The respondents had notice of the motion but did not appear to oppose the motion. The judgment was entered on 2 March 1987. It should be noted that this order was made in the proceedings commenced in July 1985 and, presumably, was made in accordance with the principles applied in Roberts v. Gippsland Agricultural and Earth Moving Contracting Co. Pty. Ltd. £19563 V.L.R. 555. It was fortuitous that the order made on 8 September 1986 was not in accordance with the terms of settlement. See also Bailey v. Marinoff (1971) 125 C.UL.R. 529 and Pollard v. Incorporated Nominal Defendant £1972] V.R. 955. One of the paragraphs of the terms of settlement was to the effect that if the business or fittings the subject of the proceedings were sold by the respondents or any of them, they agreed to notify the applicants' solicitors and to grant an irrevocable authority to the purchaser to pay the moneys then owing to the applicants under the terms of settlement to the applicants in discharge of the respondents' liability. The business was not sold but the landlord of the premises in which the business was being conducted commenced proceedings in the Supreme Court of Victoria to recover possession of those premises. The landlord offered to pay Pure and Natural, the lessee, $55,000 to surrender the lease. Later the landlord offered to pay Pure and Natural $105,000. The solicitor for the respondents, Mr. Harrowell, who resides in Sydney, notified the solicitor for the applicants, Mr. Pilkington, of these developments, together with comments suggesting the danger that if Tafco went into liquidation, which was possible, the liquidator would be entitled to recover the sum of $100,000 paid to the applicants pursuant to the terms of settlement. By letter dated 16 February 1987 to Mr. Pilkington, Mr. Harrowell commented on a number of these matters. The letter included the following paragraph:- "The long and the short of the situation is that if your client instructs you to proceed with the notice of motion on 20 February there is no chance of any further funds being available, Tafco will be Placed into liquidation putting at jeopardy the sum of $100,000.00 already received and Mr Ashford will move into bankruptcy." Mr. Harrowell sought an adjournment of the hearing of the motion for judgment from 20 February 1987. On 25 February 1987, the landlord of the premises had offered $105,000 to the respondents if the lessee surrendered its lease of the premises on condition that the matter was finalised by 27 February 1987. On 25 February, Mr. Harrowell spoke by telephone to Mr. Pilkington. He told him of the state of negotiations between the landlord and the respondents. He then put a proposal to settle the matter on the following basis:- - we (the respondents) would accept the landlord's offer of §105,000.00 and pay same to Cameron (the applicants) on 27 February 1987 when it was received from the landlord. - a further $25,000.00 would be paid in three months making a total of §130,000.00. - judgments entered 20 February 1987 would he set aside but if default on final payment judgment for that amount." Mr. Pilkington indicated he would seek instructions. On 26 February 1987, Mr. Harrowell rang Mr. Pilkington. Mr. Harrowell says that the conversation was to the effect:- Mr. Pilkington: "Cameron will accept $105,000.00 and the balance at the end of May. " Mr. Harrowell : "I will ring you tomorrow about getting the money across we are due to settle with the landlord tomorrow afternoon." On 27 February 1987, in a further telephone conversation, Mr. Harrowell says the conversation was to the effect:- Mr. Pilkington: "Cameron wants $160,000.00 and you have until the end of May to pay §55,000.00." Mr. Harrowell : We had a deal, the balance is $25,000.00 and that deal was the basis on which our client instructed us to settle with the landlord at 109 Little Collins Street." Mr. Pilkington: "I'm sorry if there is a misunderstanding Cameron never agreed to less than $160,000.00." The §105,000 was paid by the landlord. At present it is being held in the trust account of the solicitors for the applicants. The statements concerning the conversations set out are taken from an affidavit sworn by Mr. Harrowell. Mr. Harrowell, who practises in Sydney, was not cross-examined on his affidavit. An affidavit was sworn by Mr. Pilkington. His version of the three conversations are:- "On the 25 February 1987 I was contacted by Mr Harrowell who proposed that the matter be settled upon payment of one hundred and five thousand dollars ($105,000.00) immediately it was received as settlement of a dispute concerning the sale of the leasehold to 109 Collins Street, Melbourne with a further payment of twenty five thousand dollars (§25,000.00) by the end of May 1987. I told him that I would seek instructions from my clients." On 26 February 1987, Mr. Pilkington rang Mr. Harrowell, who was not available. The affidavit continues:- "That afternoon Mr Harrowell telephoned and told me that he was calling from the airport. I told him that my instructions were to accept one hundred and five thousand dollars (105,000.00) payable immediately with the balance of fifty five thousand dollars ($55,000.00) to be paid in three (3) months. He indicated that he would get instructions and call me back." "On the 27 February 1987 Mr Harrowell telephoned me and told me that his client had instructed that he would agree to make payment of one hundred and five thousand dollars (§105,000.00) plus the balance of twenty five thousand dollars ($25,000.00) by the end of May 1987. I told him that my instructions were clearly that the balance to be paid was fifty five thousand dollars ($55,000.00) and that there must have been some misunderstanding on his part." Mr. Pilkington was cross-examined on his affidavit. Under 0.35 r.3, a judgment or order, unless the Court otherwise orders, takes effect on the date on which it is pronounced or made. Order 36 contains provisions for the entry of orders. Under r.8, unless the Court otherwise orders, a party may enter an order at any time. [It is not mandatory that an order be entered. Under sub-rule 8(2), an order must be entered in the following cases:- ""(a) where the order only takes effect on the signing of the order; (b) where the order is to be served; (c) where the order is to be enforced; (d) where an appeal from the order has been instituted, or an application for leave to appeal from the order has been made; (e) where the Court so directs." Order 35 r.7 is set out in full:- "7. (1) The Court may vary or set aside a judgment or order before it has been entered. (2) The Court, where it is not exercising its appellate or related jurisdiction under Division 2 of Part III of the Act, may if it thinks fit vary or set aside a judgment or order after the order has been entered where - (a) the order has been made in the absence of a party, whether or not the absent party is in default of appearance or otherwise in default and whether or not the absent party had notice of the motion for the order; (b) the order was obtained by fraud; (c) the order is interlocutory; (ad) the order is an injunction or for the appointment of a receiver; (e) the order does not reflect the intention of the Court; or (f) the party in whose favour the order was made consents. (3) A clerical mistake in a judgment or order, or an error arising in a judgment or order from an accidental slip or omission, may at any time be corrected by the Court. (4) Sub-rule (2) shall not affect the power of the Court to vary or terminate the operation of an order by a supplementary order." - 10 - It is a well accepted principle that a court such as the Federal Court, apart from any appeal proceedings, has no power to set aside any final judgment which has been entered. That principle is illustrated by 0.35 r.7. In stra i leat ustr Employees Union v. Mudqinberri Statio ty. Ltd. (19986) 65 A.L.R. 683, the Court had before it an application to set aside orders made in the Federal Court which the applicant alleged were obtained by fraud. The proceedings were commenced by a separate application and were not on motion in the proceeding in which the orders had been made. The question of the jurisdiction of the Court was not raised by the parties nor was the question raised as to whether the matter should have been by way of motion in the existing proceedings. At p.688, Gray J. said:- "It is clearly established that a judgment procured by the fraud of one party to a proceeding may be set aside at the suit of the other party, and that it is appropriate to institute a separate proceeding for this purpose. The authorities are conveniently collected in McHarg v. Woods Radio Pty. Ltd. £1948] VLR 496 at 497. It is appropriate to refer also to Halsbury''s Laws of England 4th ed, vol 26, para 560. There can be little doubt that the Federal Court of Australia possesses an inherent power to strike down its own judgments obtained by fraud, and to do so in a =separate proceeding. Sections 5(2) and 23 of the Federal Court of Australia Act 1976 undoubtedly carry these powers. This proposition was not disputed by any of the respondents in the present proceeding." It should be noted that in McHarg, the order challenged was an order of a Court of Petty Sessions and was so challenged by action commenced by writ in the Supreme Court of Victoria. - ll - In the present case, I am prepared to find jurisdiction based in the proceedings commenced in July 1985 and that 1t is appropriate to bring this matter before the Court by motion. These matters were not debated at the hearing of the motion. Initially, counsel for the respondents sought to rely upon 0.35 r.7(2)(a) but in so0 doing relied on facts arising after the judgment had been pronounced. On a literal reading, paragraph (a) would permit this to be done but that would have the strange effect that if the respondents had been present at the hearing of the motion for judgment, they could not rely upon paragraph 7(2)(a). In my opinion, before that paragraph applies, there must be some defect in the order resulting from facts in existence before or at the time the order was pronounced. That construction 15 consistent with the general principle stated earlier and with the provisions of r.7. Counsel then submitted that the Court should stay execution of the judgment or order under 0.37 r.10. He based that submission on 0.35 r.7(2)(a). For reasons given above, 0.37 r.10 does not permit that to be done. Counsel's attention was then directed to 0.35 er.7(2)(£). He then submitted that the agreement between the solicitors constituted a consent by the applicants that the - 12 - judgment pronounced on 20 February be set aside even though counsel for the applicants opposed the motion to set aside the judgment. In a matter of this kind, it 1s very difficult to determine a conflict of fact. In my opinion, the respondents carry the onus of proof, albeit on the balance of probabilities, of proving the terms of the agreement creating the consent to set aside the judgment. The cross~examination of Mr. Pilkington did not affect his credit adversely. The difference between the evidence of the witnesses is very minor. In an issue of this kind, it 15 most important that the solicitors are very explicit in what they say. There was room for confusion. The respondents were seeking an indulgence. They owed $160,000 to the applicants. They had difficulty raising the money. They could get $105,000 from the landlord. They wanted time to pay the balance. There was ample room for confusion as to what was the balance. That depended on what was to be treated as the primary debt - $130,000 or $160,000. In all the circumstances, I find that the respondents have not satisfied the onus cast upon them. I am not satisfied that the respondents have proved that the applicants consented to have the judgment set aside. Further, if there was an agreement, in my opinion, it was not supported by consideration moving from the applicants. It is trite law that payment of a lesser sum in satisfaction of a greater sum cannot be good consideration. The gift of a "horse, hawk or robe" in satisfaction 1s good. - 13- An agreement to accept later payment is no consideration; generally see Pinnel's Case (1602) 5 Co. Rep. 1il7a. The surrounding facts by which the $105,000 was received from the landlord cannot constitute good consideration moving from the applicants to accept a lesser amount at a ilater date. On this ground, even on the evidence given by Mr. Harrowell, there is no contract to support a consent by the applicants to have the judgment set aside. Finally, even if there was a contract to set aside the judgment, in the exercise of the discretion conferred by sub-rule 7(2), I would not set aside the judgment. There was room for confusion arising between the solicitors. A judgment of this Court is not set aside lightly. Inall the circumstances, I would exercise my discretion against the respondents. In the result, the motion is refused with costs. I certify that this and the twewe (12) preceding pages are a true copy of the Reasons for Judgment herein of the Henourable Mr. Justice R M Northnrp/ Sharm P LIULou Associate Dated: 22 Mas 1981 mee oe ATTACHMENT _A Title of Action IAN LESLIE CAMERON and JEAN LARAINE CAMERON v. PURE AND NATURAL FOOD COMPANY PTY. LTD., FRANCHISING AND MARKETING COMPANY OF AUSTRALIA LTD., ANTHONY MICHAFL ASHFORD and TAFCO THE AUSTRALIA FOOD COMPANY Pry. LTD. File Number V. No. G 170 of 1985 Date of Hearing 1 May 1987 Judgment Delivered 22 May 1987 Counsel for Applicants Mr. J. Riordan Solicitors for Applicants : Messrs. H.S.W. Lawson Hughes & Co Mr. R. Garratt (2nd to 4th respondents) Counsel for Respondents Solicitors for Respondents: Messrs. Weigall Crowther signea . Shorwv. . Wueer Date 22 May 1987