FEDERAL COURT OF AUSTRALIA Josephine Waldron v GR Finance Limited [2011] FCA 127 Citation: Josephine Waldron v GR Finance Limited [2011] FCA 127 Appeal from: GR Finance Limited v Waldron (No 2) [2010] FMCA 168 Parties: JOSEPHINE CARMEL WALDRON v GR FINANCE LIMITED (ACN 093 549 305) File number: NSD 322 of 2010 Judge: SIOPIS J Date of judgment: 21 February 2011 Corrigendum: 23 February 2011 Catchwords: BANKRUPTCY – judgment was obtained against the debtor – the judgment was not satisfied – the judgment creditor commenced proceedings against valuers in relation to the loss caused to the judgment creditor by the judgment debtor's failure to meet the judgment debt – the judgment creditor received a settlement sum from the settlement of the proceeding against the valuers – the judgment creditor petitioned for the sequestration of the judgment debtor - whether the judgment debt was reduced by the extent of the settlement sum – whether the judgment creditor was seeking to obtain "double satisfaction" in respect of the loss. Legislation: Bankruptcy Act 1966 (Cth) s 52(2)(b) Cases cited: Baxter v Obacelo Pty Ltd (2001) 205 CLR 635 B O Morris Ltd v Perrott and Bolton [1945] 1 All ER 567 Date of hearing: 8 November 2010 Place: Sydney Division: GENERAL DIVISION Category: Catchwords Number of paragraphs: 36 Counsel for the Appellant: Ms K Balendra Solicitor for the Appellant: Bowles Lawyers Counsel for the Respondent: The Respondent did not appear. FEDERAL COURT OF AUSTRALIA Josephine Waldron v GR Finance Limited [2011] FCA 127 CORRIGENDUM 1. In paragraph 33 of the Reasons for Judgment, the second line should read: "Federal Magistrate's finding that in bringing the petition, GR Finance was not acting for a". I certify that the preceding one (1) numbered paragraph is a true copy of the Corrigendum to the Reasons for Judgment herein of the Honourable Justice Siopis. Associate: Dated: 23 February 2011 IN THE FEDERAL COURT OF AUSTRALIA NEW SOUTH WALES DISTRICT REGISTRY GENERAL DIVISION NSD 322 of 2010 ON APPEAL FROM THE FEDERAL MAGISTRATES COURT OF AUSTRALIA BETWEEN: JOSEPHINE CARMEL WALDRON Appellant AND: GR FINANCE LIMITED (ACN 093 549 305) Respondent JUDGE: SIOPIS J DATE OF ORDER: 21 february 2011 WHERE MADE: SYDNEY THE COURT ORDERS THAT: 1. The appeal is dismissed. 2. The appellant is to pay the respondent's costs. Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules. The text of entered orders can be located using Federal Law Search on the Court's website. IN THE FEDERAL COURT OF AUSTRALIA NEW SOUTH WALES DISTRICT REGISTRY GENERAL DIVISION NSD 322 of 2010 ON APPEAL FROM THE FEDERAL MAGISTRATES COURT OF AUSTRALIA BETWEEN: JOSEPHINE CARMEL WALDRON Appellant AND: GR FINANCE LIMITED (ACN 093 549 305) Respondent JUDGE: SIOPIS J DATE: 21 february 2011 PLACE: SYDNEY REASONS FOR JUDGMENT 1 In June 2006, the respondent, GR Finance Limited, advanced $532,250 to Mr and Mrs Waldron under a loan agreement. Mr and Mrs Waldron were the registered proprietors of a property at 53-55 Junction Road, Wahroonga in the State of New South Wales. GR Finance advanced the monies to Mr and Mrs Waldron on the security of a second registered mortgage over the Junction Road property. Another lender, Angus Securities Limited, had a first mortgage over the Junction Road property securing the sum of $2.3 million which it had advanced to Mr and Mrs Waldron. Before advancing the monies to Mr and Mrs Waldron, GR Finance obtained a valuation of the Junction Road property from Langshaw Valuations Pty Ltd (Langshaw). 2 In or about December 2006, Mr and Mrs Waldron ceased making repayments under the loan agreement with GR Finance. Mr and Mrs Waldron also defaulted under the loan agreement with Angus Securities. 3 On 15 May 2008, GR Finance obtained judgment against the appellant, Mrs Waldron, and her husband, Mr Francis Gerard Waldron, in the sum of $689,269.88, representing the debt, interest and costs. Mr and Mrs Waldron did not satisfy the judgment. 4 On 9 September 2008, GR Finance commenced a proceeding in the Federal Court against Langshaw for damages on the grounds that GR Finance had been induced by a valuation provided by Langshaw, to advance monies in the amount of $532,250 to Mr and Mrs Waldron for a 12 month term. GR Finance alleged that in providing the valuation, Langshaw had acted in contravention of the Trade Practices Act 1974 (Cth) and negligently. 5 GR Finance also alleged that by reason of the valuation provided by Langshaw, GR Finance had refrained from seeking possession of the Junction Road property or exercising its rights as a second mortgagee until March 2008. Langshaw cross-claimed against Rural Valuations Australia Pty Ltd and Mr Anthony Richard O'Dea, who were also valuers. GR Finance then amended its application to add two other valuers, Rural Valuations Australia Pty Ltd and Mr O'Dea, as respondents. 6 On 16 May 2009, GR Finance served a bankruptcy notice on Mrs Waldron in the sum of $759,194.30 comprising the judgment debt and interest. Mrs Waldron failed to comply with the bankruptcy notice. 7 On 16 September 2009, GR Finance issued a creditor's petition for a sequestration order against the estate of Mrs Waldron, after Mrs Waldron failed to comply with the bankruptcy notice. 8 On or about 5 November 2009, the three valuers and GR Finance settled the Federal Court proceeding to which they were parties. The parties entered into a deed of settlement and release whereby the valuers jointly and severally agreed to pay GR Finance the settlement sum of $790,000. the settlement deed 9 The following provisions of the settlement deed are relevant to the disposition of this appeal: 3. PAYMENT 3.1 Langshaw Valuations, Rural Valuations and O'Dea agree to jointly and severally pay GR Finance the Settlement Sum on or before the Settlement Date. 3.2 Payment of the Settlement Sum shall be made by telegraphic transfer to an account as directed by WFW. 3.3 GR Finance agrees to accept the Settlement Sum in full and final settlement of the Principal Proceeding inclusive of all and any interest and costs. 4. SETTLEMENT 4.1 Exchange of this Deed shall be effected by way of CBP and WFW faxing a signed counterpart of the Deed to each other and also forwarding by email to the practitioners having the care and conduct of the matter from both CBP and WFW. The parties agree that the Deed shall have been exchanged upon both parties having provided either via facsimile or via email a true copy of their clients' duly executed counterpart and Deed. CBP and WFW shall then also send the original counterpart to each other by ordinary post. 4.2 Settlement as provided under this Deed shall take place upon payment of the Settlement Sum pursuant to clause 2.2 on or by the Settlement Date. 4.3 The Settlement Sum comprises: 4.3.1 $425,000.00 in respect of damages claimed by GR Finance in the Principal Proceeding 4.3.2 $225,000.00 in respect of interest claimed by GR Finance in the Principal Proceeding, and 4.3.3 $140,000.00 in respect of costs claimed by GR Finance in the Principal Proceeding. 4.4 The Settlement Sum is provided by the Principal Proceeding Respondents with a denial of liability. … 10. RIGHTS OF SUBROGATION 10.1 GR Finance retains its rights under the loan to the Waldrons (as described in paragraph 16 of the Amended Statement of Claim dated 20 February 2009 in the Principal Proceeding) (Loan) to seek payment of the full outstanding amount due to it by Francis Gerard Waldron and Josephine Carmel Waldron (Waldrons). This clause imposes no duty upon GR Finance to commence legal proceedings or take other action to enforce its rights or otherwise seek payment under the terms of the Loan. Whether to pursue such claim or action is at the sole discretion of GR Finance. Subject to the priorities set out in clause 10.2 below, the parties agree that Rural Valuations and O'Dea are entitled to recovery of the amount of up to $650,000 plus interest at the rate applicable to judgments of the Supreme Court of Victoria from the Settlement Date to date of final payment (together the Subrogated Amount). 10.2 Any amounts received from or pursuant to the Loan are to be divided between: 10.2.1 GR Finance; and 10.2.2 Rural Valuations and O'Dea (jointly) on the following basis: 10.2.3 first to GR Finance up to the full amount of GR Finance's entitlement under the Loan inclusive of any and all accrued interest under the Loan outstanding at that date; 10.2.4 next, to the extent not already included in the amount recovered under GR Finance's entitlement under the Loan, GR Finance's legal costs and disbursements calculated on a solicitor/own client basis, and reasonable expenses incurred by GR Finance in connection with or related to the obtaining of payment of the Loan or any part thereof by the Waldrons; 10.2.5 the Subrogated Amounts to Rural Valuations and O'Dea; 10.2.6 any remaining amounts to GR Finance. 10.3 Pending payment to Rural Valuations and O'Dea in accordance with this clause, the Subrogated Amount or any part thereof shall be held on trust for Rural Valuations and O'Dea by GR Finance and GR Finance hereby undertakes to inform CBP immediately on receipt of the settlement amount or any part thereof. 10 On 12 February 2010, Mrs Waldron filed an amended notice stating grounds of opposition to the petition. The essence of Mrs Waldron's grounds of opposition was a contention that GR Finance could not seek to enforce the judgment debt in full, whilst at the same time, having recovered the settlement sum from the settlement of the Federal Court proceeding against the valuers. Mrs Waldron contended that the petition should, accordingly, be dismissed. the federal magistrate 11 The creditor's petition was heard by the Federal Magistrate on 9 March 2010. 12 Before the Federal Magistrate, there was an affidavit of debt which asserted a continuing indebtedness under the New South Wales Supreme Court judgment of $759,194.30. 13 Mrs Waldron contended that the Federal Magistrate should reject the affidavit of debt on the grounds that the payment of the settlement sum to GR Finance, had reduced Mrs Waldron's indebtedness below the amount asserted in the affidavit of debt. Mrs Waldron contended that the damages claimed from the valuers were "the same as those payable under the judgment debt" and that the judgment debt had by reason of the payment of the settlement sum, been wholly or partially satisfied. 14 The Federal Magistrate rejected that contention. The Federal Magistrate found that there had been no evidence of any intention on the part of the parties to the settlement deed that the payment of the settlement sum should discharge the debt due by Mrs Waldron to GR Finance. In fact, said the Federal Magistrate, the terms of the settlement deed were plainly inconsistent with any intention that the payment of the settlement sum should operate to discharge Mrs Waldron's debt. Further, said the Federal Magistrate, there was no waiver or estoppel which would preclude GR Finance from recovering the full amount of the judgment debt. The Federal Magistrate went on to say at [15] of his reasons for decision: To the extent that an equitable principle of indemnity or subrogation or other principle against unjust enrichment would apply to the situation I have outlined, in my opinion, it would operate in favour of the valuers and not Mrs Waldron. 15 The Federal Magistrate also rejected the contention that payment of the monies to GR Finance by the valuers under the settlement deed, amounted to an "other sufficient cause" why "a sequestration order ought not to be made" within s 52(2)(b) of the Bankruptcy Act 1966 (Cth). 16 The Federal Magistrate also rejected the contention that GR Finance was abusing process by bringing the petition on the basis that there was a continuing liability for the full amount of the judgment debt. The Federal Magistrate said: I am unable to identify any "illegitimate" collateral objective in the present petition, nor in GR Finance's reliance upon the full amount of that indebtedness notwithstanding its receipt of the settlement sum which was intended partially to compensate its losses under the financing agreement. the appeal 17 On 29 March 2010, Mrs Waldron filed a notice of appeal. The grounds of appeal alleged that the Federal Magistrate erred in the following respects: 1. in finding that the indebtedness relied on in the creditor's petition and asserted in the affidavit of debt before the Federal Magistrates Court, was still owing at the date of the hearing of the petition; 2. in failing to find that Mrs Waldron was liable to pay GR Finance a lesser amount as a consequence of payment to GR Finance by a "third party tortfeasor"; and 3. erred in the exercise of his discretion in making a sequestration order. grounds one and two 18 I will deal with grounds one and two together because they are related. 19 Mrs Waldron contended that the Federal Magistrate had erred in finding that payment made under the settlement by the valuers had not discharged Mrs Waldron's debt, or, at least, had not reduced that amount. 20 In support of her contention, Mrs Waldron relied upon the principle that the Court will not permit a party to obtain double satisfaction in respect of one loss, by that party proceeding against a number of different parties in respect of that loss. 21 Mrs Waldron referred to the case of Baxter v Obacelo Pty Ltd (2001) 205 CLR 635 (Baxter) as an instance where the High Court had accepted the existence of that principle. In that case, former clients of a solicitor sued both the solicitor and the solicitor's employee who had provided the impugned services in negligence. The former clients claimed damages in excess of $430,000 and settled their claim against the solicitor for $250,000 inclusive of costs and released him from all claims. The plaintiffs then amended their statement of claim so as to pursue their claim against the employee only. The employee then sought to dismiss the claim on the basis that having settled with one joint tortfeasor, it was not open for the plaintiffs to continue the action against another joint tortfeasor. The High Court held that the terms of the settlement did not amount to a settlement in respect of the whole claim, and the High Court permitted the former clients to pursue the employee for the balance of the loss claimed. It was accepted by the parties in that case, that there was no entitlement in the plaintiffs to recover more than the loss suffered. 22 In Baxter, at [57]-[58], Gummow and Hayne JJ have referred to the rule that a plaintiff cannot recover more than he or she has lost and went on to observe: [57] The principles respecting "double satisfaction" may be seen as a particular application of that rule. That particular application involves the unconscientious exercise of legal rights. [58] The subject is best illustrated with reference to the treatment by Viscount Simon LC in United Australia Ltd v Barclays Bank Ltd of the decision of the Court of King's Bench in Morris v Robinson. The Lord Chancellor said of that case: There, cargo belonging to the plaintiffs had been improperly sold during the course of a voyage. There were thus two lines of remedy which the plaintiffs could pursue. They first brought an action against the shipowners for breach of their duty as carriers, with a count in trover. They recovered a verdict, but they did not enter up judgment and there had been no actual satisfaction of their claim. Instead, they brought another action against different defendants – namely, an action for conversion against the purchasers who had bought the cargo. It was held by the Court of King's Bench that the former action was no bar, and that the defendants in the second action were liable for their act in purchasing the plaintiff's goods. Bayley J, in giving judgment, observed: If concurrent actions had been brought, that against the owners could not have barred the other; why then should it have that effect because they have been brought at different times? If indeed the plaintiffs were to recover the full value of the goods in each action, a Court of Equity would interfere to prevent them from having a double satisfaction, but there is nothing in the former action which can, in a Court of Law, prevent the recovery in this. (Footnotes omitted.) 23 Gummow and Hayne JJ then observed at [64]: Where it is accepted that the recovery under a settlement of the first action is of a sum less than that otherwise recoverable by judgment in the second action, it is not apparent that a question of "double satisfaction" arises. There will be no breach of the universal rule that the plaintiff cannot recover more than he or she has lost if the judgment in the second action gives credit for the recovery upon settlement of the first. The source of the equity described by Viscount Simon LC in United Australia will not be present. 24 Gummow and Hayne JJ also referred with approval, to the decision of B O Morris Ltd v Perrott and Bolton [1945] 1 All ER 567. 25 In that case, the Court of Appeal held that a party could obtain judgments against each of two defendants on different causes of action in relation to the same loss. The two defendants, in the case, were Mr Perrott and Mr Bolton and the amount of the loss was £5,379. At 570, Lord Goddard (with whom MacKinnon and Duparcq LJJ agreed) went on to observe: The plaintiff can levy execution against either or both, so however that he does not recover more than the real amount of his claim. Had he been able to recover, say £2,000 from Perrott, he could recover no more than £3,379 from Bolton. Formerly had a plaintiff endeavoured to recover by execution on both judgments more than the real amount the Court of Chancery would have restrained him, exercising the jurisdiction it possessed of restraining proceedings at law. 26 At 570, Lord Goddard went on to say: This jurisdiction can now be exercised by any Division of the High Court, the material section of the Judicature (Consolidation) Act being section 41, and as execution is a part of the proceedings in an action an application in the action could be made to prevent the plaintiff from executing more than was really due. 27 These authorities show that the basis on which the Court will restrain a party from enforcing a judgment debt that will give that party "double satisfaction", is by the exercise of its jurisdiction to restrain the unconscientious exercise of legal rights. 28 In my view, the Federal Magistrate did not err in finding that GR Finance was not acting unconscionably in bringing the creditor's petition. The settlement deed shows that GR Finance will be entitled to retain from any amount recovered from Mrs Waldron, an amount reflecting its actual losses, and that the rest of any sum recovered, will be paid to the valuers pursuant to a subrogation agreement between GR Finance and the valuers. In my view, the subrogation agreement between GR Finance and the valuers properly reflects the equities of the situation because it is the valuers who have paid GR Finance the settlement sum. It would be inequitable if Mrs Waldron was entitled to the benefit of that payment, to the detriment of the valuers. 29 It follows that grounds one and two of the appeal are dismissed. ground three 30 This ground of appeal contends that the Federal Magistrate erred in the exercise of his discretion by not dismissing the petition. 31 Before the Federal Magistrate, Mrs Waldron contended that in bringing the creditor's petition, GR Finance was abusing process because, it was not acting for the purpose simply of recovering a debt, but for the purpose of discharging a potential liability to a third party. As mentioned, the Federal Magistrate dismissed this contention. The Federal Magistrate found that GR Finance was not acting for a collateral purpose and there was no abuse of process. 32 In her written submissions, before this Court, Mrs Waldron relied upon a contention that in bringing the petition, GR Finance was seeking double satisfaction, and it was that action which comprised the abuse of process. 33 In so far as Mrs Waldron, by reference to this ground of appeal, sought to impugn the Federal Magistrate's finding that in bringing the petition, GR Finance was acting for a collateral improper purpose, in my view, the Federal Magistrate did not err. As mentioned above, a judgment creditor is entitled to seek to enforce a judgment debt, subject to the rule in respect of double satisfaction. As I have, also, mentioned above, in my view, the evidence does not support the contention that in seeking to enforce the judgment debt, GR Finance is seeking to obtain a double satisfaction. 34 Insofar as Mrs Waldron sought to rely, in support of this ground of appeal, on the alternative argument referred to in [32] above, for reasons which I have already given, Mrs Waldron's contention is rejected. 35 The third ground of appeal is dismissed. 36 The appeal is dismissed. I certify that the preceding thirtysix (36) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Siopis. Associate: Dated: 21 February 2011