New South Wales Supreme Court CITATION : Custom Coaches (Sales) Pty Ltd v Frankish [2002] NSWSC 795 CURRENT JURISDICTION: Equity FILE NUMBER(S) : SC 2530/02 HEARING DATE(S) : 30 August 2002 JUDGMENT DATE : 30 August 2002 Custom Coaches (Sales) Pty Limited (P) PARTIES : Peter Alan Frankish (D1) Susan Jennifer Robinson (D2) Catherine Frances Frankish (D3) JUDGMENT OF : Hamilton J T J Hancock (P) COUNSEL : No appearance (D1 & 3) C J Hockey, Solicitor (D2) Wotton & Kearney Lawyers (P) SOLICITORS : Charles Hockey (D2) Watts McCray (D3) CATCHWORDS : PROCEDURE [484] - Judgments and orders - Amending, varying and setting aside - Ex parte orders and judgments - Final orders after ex parte trial - Whether orders should be set aside. LEGISLATION CITED : Supreme Court Rules Part 48 r 2 & Part 72 CASES CITED : Custom Coaches (Sales) Pty Ltd v Frankish [2002] NSWSC 469 National Commercial Banking Corporation of Australia Limited v Batty (1986) 160 CLR 251 DECISION : Motion to set aside judgment adjourned for further investigation of proposed defence. IN THE SUPREME COURT OF NEW SOUTH WALES EQUITY DIVISION HAMILTON J FRIDAY, 30 AUGUST 2002 2530/02 CUSTOM COACHES (SALES) PTY LIMITED v PETER ALAN FRANKISH & ORS JUDGMENT 1 HIS HONOUR: This is an application to set aside a judgment entered against the second defendant after an ex parte hearing before me. The general circumstances of the case and the circumstances in which that judgment came to be entered are set out in the reasons I gave for that decision: Custom Coaches (Sales) Pty Ltd v Frankish [2002] NSWSC 469. That judgment was given on 17 May 2002. The orders consequent upon it were made on 29 May 2002 and entered on 5 June 2002. Very curiously, the second defendant had already applied for the judgment against her to be set aside on 24 May 2002, before the orders against her were made, much less entered. 2 The second defendant's explanation for allowing the judgment to go against her in her absence is that she had taken the papers served on her not to one but to two solicitors, both of whom had told her that nothing drastic would happen in the short term. The papers included the orders that I made on 7 May 2002 which, the evidence shows, were served on the second defendant on 8 May 2002. The solicitor or solicitors to whom these orders were given by the second defendant - and there is no reason to doubt her word that she did seek advice about them - did not read the orders very carefully (although they extended swingeing Mareva relief against the second defendant), because they contained notice that, on 14 May 2002, unless the second defendant appeared, the plaintiff would seek to proceed to judgment against her as well as the first defendant. Urgent attention to the matter on her part was therefore called for, but her undisputed evidence is to the effect that she was told quite the contrary. The urgent nature of the situation did not come to her attention until after she had been told of my decision of 17 May 2002. Her inattention to the matter is, in my view, duly explained and there has not been any other undue delay on her part since the matter was so forcibly brought to her attention. 3 I can only assume that she was not, when told of my decision of 17 May, told that the orders had not actually been made, which led to her applying to have the orders set aside before they were made. Nor am I told how the plaintiff proceeded to have the orders made, then entered, after the motion to set them aside had been filed. In favour of the plaintiff's solicitor (who is no longer acting for it) there is no evidence as to when the motion was served. 4 So far as these aspects are concerned, the judgment ought be set aside. Whether or not it ought be set aside depends upon whether or not the second defendant has demonstrated that, upon its being set aside, she would file in the Court a defence on the merits that was at least arguable. Affidavit material has been filed as to her state of mind and state of knowledge at the time of the operation of the joint account and the removal of funds from it. They were, in essence, that she was not aware at those times that moneys in the joint account had been, in effect, stolen by the first defendant from his employer and she was given by him a plausible explanation as to where the moneys came from that involved no impropriety. She accepted that explanation. 5 Mr Hockey, for the second defendant, refers to National Commercial Banking Corporation of Australia Limited v Batty (1986) 160 CLR 251 and, in particular, to the passage in the judgment of Gibbs CJ at 268 - 269. He says, and it is certainly arguably correct, that if the first defendant put moneys into a joint account he had with the second defendant, although there was technically a receipt by her of the moneys, if he subsequently abstracted them and used them for his own purposes, she cannot be held responsible for the moneys to that extent. 6 The second defendant has two difficulties. The first is that the defence put forward as proposed to be filed does not correspond with this defence. In effect, it simply denies receipt of the moneys. If a defence is to be filed, it should be filed in a form that reflects its true nature under Batty's case. Secondly, the defence will only be available insofar as it can be put forward that moneys received into the account were in fact taken by the first defendant and used for his own purposes. Despite her asserted innocence of the first defendant's dishonesty at the relevant time, she may still be liable for the moneys if she has, in effect, had the benefit of them by their being used in the purchase and/or improvement of the property held by her jointly with the first defendant. The evidence as it stands does not demonstrate that any moneys were taken by the first defendant from the account and used for his sole purposes, as opposed to being expended upon that property. 7 It would be possible on this state of the evidence for me simply to dismiss the second defendant's motion upon the basis that she could subsequently bring a further motion. If there were more ample evidence as to the use of the moneys, its success would not be precluded by the dismissal of the earlier motion. 8 However, I think - and this course is sensibly not opposed by Mr Hancock, of counsel for the plaintiff - that the better course is to stand the matter over for a short time so that it can be seen whether, by cooperation between the plaintiff and the second defendant, it can be established to what degree it is clear that moneys out of the joint account went into the property in which the second defendant had an interest and that she has therefore had the benefit of the moneys (to which extent, as the matter appears at the moment, there should be judgment against her), and as to what degree they were used otherwise by the first defendant, in which case there is certainly an arguable defence that she is not responsible for them. If the real situation is that all the moneys went for her benefit in the way I have outlined, there may be no case for setting the judgment aside at all. If the moneys all went elsewhere, which seems improbable, then the judgment would simply be set aside and she would be allowed to defend generally. If, as may well be the situation, some of the moneys went to her benefit in the way indicated, but others went to the sole use of the first defendant, it may be that the judgment in its present form ought be set aside, but on condition that the second defendant consent to judgment in respect of moneys of which she has had the benefit. 9 Part of the orders that I made on 29 May 2002 and which still stand are for an inquiry before the Master. If the task of establishing the ultimate destination of the moneys proves too hard to be done by informal means, then the proper course may be for that inquiry to proceed and its results be obtained before further steps are taken in relation to the judgment. An inquiry may be ordered to proceed at any stage of the proceedings: Part 48 r 2. Furthermore, the parties may like to consider whether, if assistance is needed in clarifying the situation, it may be preferable to do that by a reference under Part 72, or perhaps the obtaining of an expert report, whether by a court appointed expert or by an expert appointed jointly by the parties. These courses may be deemed appropriate as being quicker and cheaper than a formal inquiry before the Master. In any event, the course that I propose to take at the moment is to stand the matter over to Friday, 20 September at 9.30 am before me for further directions. ********** Last Modified: 09/11/2002 DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated.