AKRON SECURITIES LTD y ILIFFE and ORS (No 3) SUPREME COURT OF NEW SOUTH WALES COURT OF APPEAL MASON P, PRIESTLEY and MEAGHER JJA 25 August 1997, 26 September 1997 [1997] NSWCA 10 "Slip rule" — Pt20 r10 Supreme Court Rules In Akron Securities Ltd v Iliffe (No 1) (1997) 143 ALR 457 the Court allowed an appeal challenging orders for rescission consequent upon a finding of breach of s52 of the Trade Practices Act. In Akron Securities v Iliffe (No 2) (CA, unreported, 26 June 1997) the Court made restitutionary orders in the absence of agreement by the parties. On 2 July 1997 the appellant notified the Court of a supposed mathematical error in relation to the restitutionary order. On 10 July 1997, the orders were entered, despite directions given by the President and the Registrar. The appellant seeks a correction of the court's error under the slip rule or, alternatively, under any similar inherent power. The respondent contends that the error is outside the scope of the slip rule because the restitutionary order faithfully reflects the reasoning of the judgment in Akron (No 2) Elyard Corporation Pty Ltd v DDB Needham Sydney Pty Ltd (1995) 61 FCR 385 applied. Mason P The appellant would have us follow St Augustine of Hippo, who said that "to err is human, to persist in error is devilish" (Sermons). The respondents prefer John Locke who wrote in the aptly named Essay on Human Understanding that "it is one thing to show a man that he is in error, and another to put him in possession of truth". At trial, Rolfe J had found that the appellant's agent had misrepresented the effect of the "minimum receipts guarantee" component of the Bernborough 1988 Breeding Venture. This amounted to a breach of s52 of the Trade Practices Act. The learned judge declared void ab initio all contractual arrangements between the parties. This set aside the Loan Agreement and Lease Agreement pursuant to which the appellant was suing the respondents for outstanding moneys (totalling $60,080 plus interest per share) (hereafter "the unpaid sums"). The appellant was also ordered to repay to the respondents the net sum received to date from the respondents (then totalling $62,297 per share) (hereafter "the refunded sums"). The appellant accepted the finding of breach, but challenged the remedy on appeal. In Akron Securities Ltd v Iliffe (1997) 143 ALR 457 ("Akron (No 1)") this Court allowed the appeal. In lieu of orders in the nature of rescission, the Court (by majority) proposed orders in the nature of damages effectively requiring the appellant to pay to the respondents the monetary equivalent of the "minimum receipts guarantee" which it had been represented to them was part of the congeries of rights which they had acquired in the Venture. This was a sum of $40,201 (ie $43,436 less $3,135) per share, plus interest calculated from the date of termination of the Venture. The parties were directed to calculate the precise sum and to bring in Short Minutes. These orders were proposed in my reasons, with which Priestley JA agreed. 2 UNREPORTED JUDGMENTS It emerged that the parties were unable to agree as to the calculation of what was due, or as to costs. The matter was debated in a chain of written submissions, which were addressed by the Court in its judgment in Akron Securities Ltd v lliffe & Ors (No 2) (Court of Appeal, unreported 26 June 1997) (Akron (No 2)). In lieu of the orders made by Rolfe J, the Court in Akron (No 2) ordered judgment for the appellant against the first respondent in the sum of $61,078.24 and against the second and third respondents each in the sum of $30,539.12. There were consequential orders relating to interest and costs which are not presently relevant. (I shall refer to these judgments and consequential orders as the "substantive orders'".) We also made orders in the nature of restitution to which it will be necessary to turn. The reasoning in Akron (No 2) makes plain the basis upon which the sums involved in the substantive orders were calculated. Priestley JA and I said that: "\..we think that the simpler and fairer way of assessing damages is to treat Akron as having made good the minimum receipts guarantee at the appropriate date (we are content with 1 August 1991) and the respondents as having used that sum on that date to pay out Akron what was due for lease residual and loan principal. This would leave the respondents exposed to judgment representing: (i) Lease rental for fiscal 1991 ($10,754 per share); (ii) "penalty " interest thereon to date of judgment; (iii) Loan Agreement interest for fiscal 1991 ($5,900 per share); (iv) "penalty " interest thereon to date of judgment. Judgment should be entered in favour of Akron against each respondent for the resultant figures. That judgment will take effect on 18 August 1994, the date on which the judgment below took effect." Calculations provided by the parties showed that this approach yielded the figures of $61,078.24 and $30,539.12 that were embodied in the substantive orders made by the unanimous Court in Akron (No 2). The effect of these orders was that the respondents were to have the "damages" for the appellant's s52 breach set off against what they owed the appellant with respect to the "unpaid sums". Thus far in the reasoning of the Court in Akron (No 2) we had not addressed the "refunded sums". Both in Akron (No 1) and Akron (No 2) the majority recognised that the appellant had, in obedience to Rolfe J's orders, paid substantial sums of money to the respondents. In a note at the end of my reasons in Akron (No 1), I stated that the parties should also address, in their Short Minutes, issues of costs and of the restitution of any moneys paid under the orders of Rolfe J. Restitution was required because, on 29 November 1994, the appellant had, in obedience to the orders of Rolfe J, refunded the "refunded sums" to the respondents. With the addition of interest, this represented a sum of $127,068.24 paid to the first respondent and $63,659.57 paid to each of the second and third respondents. These sums represented the net total of all moneys that had been paid by each respondent to Akron during the course of the Venture, plus interest. In Akron (No 2) (at p6) Priestley JA and I said: "Akron is entitled to partial restitution of these sums, pursuant to Pt51 r18. For each respondent there will need to be set of against the sums referred to at the beginning of this paragraph a sum calculated up to 29 November 1994 pursuant to the judgment (plus interest) which we propose to enter in favour of Akron." We stated that "the resultant sum" should carry interest. Consistent with these statements, we proposed the following order (hereafter referred to as the "restitutionary order"): URJ AKRON SECURITIES LTD v ILIFFE and ORS (No 3) (Mason P) 3 "3. By way of partial restitution each respondent is ordered to repay to the appellant a sum representing the difference between the moneys paid to that respondent by the appellant on 29 November 1994 and the sum calculated to that date in accordance with O(1) and O(2). The resultant sum is to bear interest until payment at the rate prescribed for the purpose of s95. Payment of the resultant sum with interest will discharge the judgment debt of the respondent involved. " Meagher JA concurred with the proposed orders. The reference to a "set off', a "resultant sum" and "the difference" in the passages just quoted from Akron (No 2) express an intention that the moneys paid by the appellant on 29 November 1994 in obedience to Rolfe J's orders were to be deducted from those ordered to be paid under the substantive judgments ordered in the appellant's favour in Akron (No 2). The respondents accept that this intention betrays a mistake. Nevertheless it is said to be a mistake beyond the recall of this Court because the orders made in Akron (No 2) have been entered. The nature of the mistake requires analysis, to which I shall return after explaining the circumstances in which the orders were entered. It will be seen that a further "mistake" occurred. On 26 June orders were pronounced at the same time that the reasons in Akron (No 2) were handed down. On 2 July the appellant wrote to the Registrar of the Court of Appeal asserting a "mathematical error" in relation to the restitutionary order. A copy of this letter was provided to the solicitor for the respondents. On 3 July the Registrar directed the Registry officer responsible for entering minutes of orders in the Court of Appeal (Ms Kole) that, if a minute of order were filed in the matter, it was not to be entered until the questions raised by the appellant had been resolved, or until the Court had otherwise authorised the entry of the order. Ms Kole was given a copy of the 2 July letter. Receipt of the letter was noted on the Court's computer record for the appeal. On 9 July Mason P instructed the Registrar that the orders made on 26 June were not to be entered pending further instructions. On 10 July 1997 a minute of order was filed at the general document lodgment office of the Supreme Court by the solicitors for the respondents. The draft orders were accompanied by a letter to the Registrar of that date which, significantly, stated inter alia: "We do not consider that what has been put to you by Kemp Strang & Chippendall in their correspondence or what may have been said by them to you by telephone can prevent the entering of the orders. In any event even if what Kemp Strang & Chippendall have put in their letter of 2 July 1997 is correct, which we do not admit, entering of the orders would not prevent the Court from exercising its discretion to amend the orders under the slip rule if the Court considered it were appropriate to do so." The orders were entered on 10 July, despite the directions previously given by the Registrar and Mason P. This came about in the following circumstances. Ms Kole was on leave between 8-11 July 1997. An officer from the general court registry, not the Court of Appeal registry, retrieved the relevant court file from Ms Kole's desk. He delivered the file, together with the draft Minute of Order, to the Court of Appeal Manager, Caseflow (Mr Cooke). Mr Cooke held a delegation to enter Court of Appeal orders while Ms Kole was absent. Unfortunately Mr Cooke had not been told of the earlier instructions from both the Registrar and the President. Nor did he see the letter from the appellant's solicitors requesting that the Orders be not entered. For some reason which is not now apparent the letter had become detached from the Court file. 4 UNREPORTED JUDGMENTS Copy of the letter dated 10 July was sent to the solicitors for the appellant, but apparently not received by them until after the orders had been entered. The first notice that the solicitor for the appellant received to the effect that the Orders had been entered was on 11 July 1997. The appellant filed a Notice of Motion on 14 July seeking the following orders that: "1.03 made by the Court of Appeal on 26 June 1997 and entered on 10 July 1997 be set aside pursuant to Pt20 rl0 of the Supreme Court Rules or alternatively pursuant to the Court's inherent jurisdiction, and there be substituted in lieu thereof: 3. The First Respondent pay to the Appellant the further sum of $165,241.06. 4. The Second Respondent pay to the Appellant the further sum of $82,615.83. 5. The Third Respondent pay to the Appellant the further sum of $82,778.77. 2. Such further or other order as this Honourable Court deems fit. 3. The Opponents pay the Claimant's costs of this motion." The respondents oppose these orders. They submit that the Court's acknowledged error (in the restitutionary order in Akron (No 2)) is beyond recall by the Court of Appeal because the orders made on 26 June 1997 were entered on 10 July 1997. It is contended that the mistake is outside the scope of the "slip rule" in Pt20 r10, or any similar inherent power, because the restitutionary order in Akron (No 2) faithfully reflects the reasoning of the joint judgment in Akron (No 2). (It is correctly pointed out that the reference to "the difference" between the two sums mentioned in the restitutionary order corresponds with the earlier references in the reasoning of Mason P and Priestley JA to "set off' and a "resultant sum''.) The respondents submit that, if there was error, it derived from the process of deliberate reasoning engaged in by the Court (or at least a majority of it) in Akron (No 2): see Ivanhoe Gold Corporation v Symonds (1906) 4 CLR 642 at 659-71. The respondents accept that the High Court may correct the error, although they do not offer an undertaking not to oppose the necessary grant of special leave. I shall assume for the moment that the orders are to be treated as entered, notwithstanding the evidence as to the circumstances in which this occurred. The scope of the "slip rule" is well established. I am happy to adopt the discussion by Lockhart J in Elyard Corporation Pty Ltd v DDB Needham Sydney Pty Ltd (1995) 61 FCR 385 at 390-2. At 391 his Honour said: "Tt is well settled that the application of the slip rule is not confined to giving effect to the intention of the judge at the time when the court's order was made, or judgment given. It extends to the intention which the court would have had, but for the failure that caused the accidental slip or omission: Symes v Commonwealth (1987) 89 FLR 356." These principles require the Court to grant the relief sought by the appellant in its Notice of Motion. The essential fallacy of the respondents' position lies in its failure to see Akron (No 2) as an adjunct to the main judgment in Akron (No 1), and to recognise that the manifest purpose of the restitutionary order was to restore the parties to the position to which they should have been put had the substantive orders proposed in Akron (No 1) been made in the court below. URJ AKRON SECURITIES LTD v ILIFFE and ORS (No 3) (Mason P) 5 Under the substantive orders proposed in Akron (No 2), the appellant was to have judgment against the respondents for sums which represented the unpaid sums (plus interest) due under the Loan and Lease Agreements (rescued from the rescission orders made by Rolfe J) less a sum representing the "damages" due for the appellant's breach of s52 of the Trade Practices Act. This calculus said nothing about the moneys received by the appellant during the currency of the Venture (what became the "refunded sums'). Rolfe J ordered these lastmentioned sums to be refunded, and they were refunded by the appellant. Yet, if the Lease and Loan Agreements were to stand, despite the misrepresentation about the minimum receipts guarantee, these sums were obviously to be retained by the appellant. Rolfe J set aside those Agreements, but this Court held that he was wrong in doing so. My judgment in Akron (No 1), with which Priestley JA concurred, made it clear that the refunded moneys were to be repaid to the appellant. In Akron (No 1) the majority also made it plain that the appellant had it in its own hands to avoid the draconian remedy of rescission, namely by tendering effectively the value of the "loss or damage" (cf s87) actually suffered by the respondents. By this means the respondents would avoid what I described as "remedial overkill" (ALR at 473). In Akron (No 2) the Court was addressing the orders necessary to give effect to its earlier reasons. In response to the submissions of the parties, and effectively in the respondents' favour (see Akron (No 2) p2-p3), we corrected one aspect of the reasoning in Akron (No 1). That detail has no present relevance. What is relevant is that it is clear from the reasoning that there was no intent to depart otherwise from the essential reasoning of the majority in Akron (No 1). This being so, it is wrong to isolate the reasoning in Akron (No 2) and to seize upon its correspondence with the restitutionary order there proposed as if that were the end of the matter. The expressed intent in Akron (No 1) was that there should be restitution in favour of the successful appellant with respect to the refunded sums. Nothing in the calculus in Akron (No 2) referable to the substantive orders addressed, let alone departed from, this clearly continuing intent. It is hardly surprising that the "slip" in the restitutionary order pronounced in Akron (No 2) carried back into the reasons in that judgment. But those reasons were only a minor part of the Court's expressed intent referable to the disposition of the appeal. As the appellant points out in its submissions, the restitutionary order not only fails to leave the respondents in the position which they should have been had the Court of Appeal's substantive orders been made in the first place; it actually leaves the respondents with a net monetary gain from the appellant. This is not the result for which any party contended in the appeal. Nor does it reflect the intention of the Court as expressed in Akron (No 1). The subtraction of one figure for the other, rather than the addition of the two figures, is clearly an accidental error which should be corrected under the slip rule. This correction of the orders also appears to be the very thing which the respondents' solicitors conceded could be done in the passage from the letter dated 10 July which has been set out. That letter had been read by the officer who entered the orders. It is therefore unnecessary to consider the appellant's two alternative arguments. The first is that the mistake within the Registry when the orders were entered contrary to the express direction of the Registrar and the President, itself represents an unintended error of the Court for which the Court will save the 6 UNREPORTED JUDGMENTS parties pursuant to the principle that "one of the first and highest duties of all Courts is to take care that the act of the Court does no injury to any of the suitors." (Commonwealth v McCormack (1984) 155 CLR 273 at 276). This submission is itself very compelling, although it is not ultimately necessary to address it (save in the context of the respondents' final arguments addressed below). The alternative submission of the appellant was that the Court of Appeal has, like the High Court, a limited power to recall entered judgments if necessary to avoid a clear unintended injustice. In Registrar, Court of Appeal v Craven (No 2) (1995) 80 A Crim R 272 at 273-4 Kirby P favoured the view that such power existed. Priestley and Handley JJA reserved their position. I will do likewise. At variance with the position adopted by the respondents when they pressed to procure entry of the orders in Akron (No 2), the respondents themselves seek to open matters that were not addressed in Akron (No 1) or (Akron No 2). The respondents submit that they are entitled to credit, in the calculation of the sums due by them under the Lease and Loan Agreements, for (a) $1,434.79 (in respect of the sale of the horse "Once Bitten") and (b) $8,188.86 (in respect of the proceeds of sale of the leased horses received by the appellant on 29 August 1994 after the Venture collapsed). As to (a), "Once Bitten" was a horse in the Venture that died. The appellant received the benefits of an insurance policy held by the investors in respect of that horse. As to (b), the Lease obliged the lessee to pay on demand, upon the expiration of the Lease, the amount by which the agreed residual value ($5,444 per share) exceeded the amount for which the lessor sold or disposed of the leased interest after allowing for all costs and expenses incidental to such disposal. The respondents submit that, if they had had the benefit of the "minimum receipts insurance" the residual would have been paid. It is then submitted that each respondent was entitled to the benefit of the whole of the sale price of the horses, in proportion to the number of investment units held. Since the proceeds of the sale of the horses were received by the appellant on 29 August 1994, outside the term of the Venture and not upon on its termination, those proceeds are said not to be part of the "minimum receipts". An initial difficulty lies in the fact that the respondents appear not to have claimed credit for these sums until their written submissions as to the orders appropriate to be made following publication of the Court's reasons in Akron (No 1). It also lies ill in the mouth of the respondents to claim credit for these sums in the light of their conduct in pressing to have the orders proposed in Akron (No 2) entered, and in opposing the correction of those orders upon what in my view is an unduly narrow approach to the slip rule totally at variance with the stance adopted by the respondents in their solicitor's letter dated 10 July. This said, I think it better to address the claim on its substantive merits. In my view the answer to the respondents' submissions is that offered by the appellant in its written submissions dated 27 August 1997. It is there pointed out that the calculations allow to the respondents the benefit of the full amount of the minimum receipts guarantee which it was represented to them they would enjoy. Given that this allowance has been made in their favour, it would provide double compensation were they to be entitled to the proceeds from the sale of the horses or further credit for insurance in relation to "Once Bitten". The other lessees who obtained a credit from the appellant in respect of items (a) and (b) were lessees who did not have the benefit of the minimum receipts guarantee. URJ AKRON SECURITIES LTD v ILIFFE and ORS (No 3) (Meagher JA) 7 The respondents also submit that they should not be liable for loan agreement interest for fiscal year 1991-1992. Under cl3.1 of the Loan Agreement, the principal was to be repaid on 1 June 1992. By cl5.1 the borrower was entitled to pre-pay the initial advance in whole or in part at any time and without penalty. The argument is that, since the Venture was terminated on 12 June 1991, each of the respondents were entitled to receive the minimum receipts payment on that date. It is submitted that the Court should therefore assume that this sum would have been used to repay the principal immediately, thereby avoiding interest due for fiscal 1991-1992. This argument should be rejected because it seeks to move away from something that was common ground in the submissions leading up to the orders in Akron (No 2) namely that | August 1991 was the date upon which the appellant should have made good "its" minimum receipts guarantee, thereby arming the respondents with funds from which they could then have paid out (in part) their obligations under the Lease Agreement and the Loan Agreement: see Akron (No 2) especially p4. It is therefore unnecessary to consider the appellant's other responses to this argument contained in the submissions dated 27 August 1997. I would make O1 and O3 as sought in the Notice of Motion. The respondents should pay the appellant's costs of this application. It was the respondents who pressed to have the orders entered when they knew there was a dispute about the matter. More importantly, the respondents have persisted in challenging the application of the slip rule and have failed. It is relevant that they persisted despite a fairly lengthy "dry run" at a directions hearing before the President on 21 July. Priestley JA I agree with Mason P. Meagher JA Hoping, but not expecting, that there will be no Akron Securities Ltd v Iliffe (No 4), I agree with the President. Application allowed. The intent of Akron (No 2) was to give effect to the decision in Akron (No 1). While the "slip" in the restitutionary order in Akron (No 2) carried back into some of the reasons in that judgment, those reasons were only part of the Court's expressed intent in Akron (No 1) and Akron (No 2). The Court grants O1 and O3 of the appellant's Notice of Motion. Counsel for the appellant: M Cashion Solicitors for the appellant: Kemp Strang & Chippindall Counsel for the respondent: S Wheelhouse Solicitors for the respondent: Sly & Weigall