New South Wales Supreme Court CITATION : Padkohe Pty Ltd v Fletcher [2006] NSWSC 1239 HEARING DATE(S) : 17/11/06 JUDGMENT DATE : 21 November 2006 JURISDICTION : Equity Division JUDGMENT OF : Barrett J DECISION : Stay of execution of judgment refused CATCHWORDS : PROCEDURE - judgments and orders - execution of judgment - where one plaintiff has money judgment against two defendants - where in each of two other proceedings one of those defendants obtained a costs order against plaintiff - where costs not quantified in either case - whether execution of judgment by plaintiff should be stayed LEGISLATION CITED : Civil Procedure Act 2005, ss.21, 96, 135 Australian Beverage Distributors Pty Ltd v Evans & Tate Premium Wines Pty Ltd (2006) 58 ACSR 22 CASES CITED : Re A Debtor No 21 of 1950 [1951] Ch 612 Stooke v Taylor (1880) 5 QBD 569 Widgery v Tepper (1877) 6 ChD 364 Padkohe Pty Limited - First Plaintiff PARTIES : Davis Davis - Second Plaintiff Deborah Jayne Fletcher - First Defendant Tatlers.Com.Au Pty Ltd - Second Defendant FILE NUMBER(S) : SC 5298/05 COUNSEL : Mr E.A.J. Hyde - Plaintiffs Mr M.K. Condon - Defendants SOLICITORS : Malcolm Johns & Company - Plaintiffs Sage Solicitors - Defendants IN THE SUPREME COURT OF NEW SOUTH WALES EQUITY DIVISION BARRETT J TUESDAY, 21 NOVEMBER 2006 5298/05 PADKOHE PTY LIMITED & ANOR v DEBORAH JANE FLETCHER & ANOR JUDGMENT 1 The defendants (Ms Fletcher and a company I shall refer to as "Tatlers") apply by notice of motion for an order staying until further order execution of a judgment entered against them in these proceedings on 8 May 2006. 2 The background circumstances are uncontroversial and may be stated relatively briefly: 1. By their statement of claim, the plaintiffs (Padkohe and Mr Davis) sought various relief against Ms Fletcher and Tatlers based on allegations about beneficial ownership of a leasehold and other assets related to an entertainment business. The claims were defended. 2. On 2 May 2006, the solicitors for the parties signed terms of settlement providing, so far as is relevant, as follows: "The parties agree to settle the proceedings on the following terms: 1. Verdict and judgment for the Second Plaintiff [ie, Mr Davis] against the Defendants [Ms Fletcher and Tatlers] in the amount of $75,000.00 and the return of the items referred to in the schedule to the Statement of Claim as numbered 18, 34, 35, 47, 48, 49 and 50. 2. The payment of the verdict and payment of the items to take place within 28 days of today." 3. Orders of the court were made on 5 May 2006 and entered on 8 May 2006. The first and sixth orders were: "1. a verdict and judgment be entered for the Second Plaintiff for $75,000.00. … 6. execution of the judgment referred to in Order 1 be stayed for 28 days from the date hereof." 4. On 13 June 2006, the court made, upon an ex parte application of Ms Fletcher and Tatlers (judgment debtors), an instalment order in respect of the judgment debt. The effect of that order was to make the judgment debt payable by monthly instalments of $10,000 on the last day of each month, commencing June 2006. That instalment order later ceased to have effect as a result of non-compliance with it. 5. On 11 August 2006, the court made another instalment order, again on the ex parte application of Ms Fletcher and Tatlers. That instalment order also required payment by monthly instalments of $10,000. This instalment order is no longer in effect, again because of non-compliance with it. 6. On 6 October 2006, there was an order in other proceedings in this court (being proceedings between Tatlers and Mr Davis, which I shall call "the statutory demand proceedings") that Mr Davis pay Tatlers' costs of the proceedings. 7. On 23 October 2006, there was an order of the Federal Magistrates Court in proceedings in that court (which I shall call "the bankruptcy proceedings") that Mr Davis pay Ms Fletcher's costs of the proceedings "as agreed or assessed under the Bankruptcy Rules". 8. Having regard to instalments already paid, the judgment debt in these present proceedings is now $31,370.00. 9. The costs the subject of the costs order in the statutory demand proceedings have not yet been quantified by assessment under the Legal Profession Act 2004; nor have the costs the subject of the costs order in the bankruptcy proceedings been quantified either by agreement or by assessment under the Bankruptcy Rules . 3 It is the contention of Ms Fletcher and Tatlers that the costs under the orders in the statutory demand proceedings and the bankruptcy proceedings are most likely to exceed the balance of the judgment debt still outstanding in these proceedings and that, for that reason, the court should grant the stay of execution sought. 4 I was taken to ss.21 and 96 of the Civil Procedure Act 2005 both of which deal with the general issue of set-off but neither of which is of any relevance. Both counsel approached the matter on the basis that the question of stay of execution and the more general issue of recognising any set-off are matters for the court's discretion. So far as staying execution of judgment is concerned, there is express power under s.135 of the Civil Procedure Act. There also exists an aspect of the inherent jurisdiction for the court to allow what is effectively set-off by granting a stay of execution of a judgment "if it be just": Re A Debtor No 21 of 1950 [1951] Ch 612 at p.621. 5 Dealing specifically with costs orders, White J, in Australian Beverage Distributors Pty Ltd v Evans & Tate Premium Wines Pty Ltd (2006) 58 ACSR 22, put the matter thus (at [68] – [70]: "[68] … Set-off of judgments for costs in different actions and in different courts has long been allowed, as has the set-off of judgments for costs against judgments for debt or damages. Such set-offs do not depend upon the statutes of set-off, or the general equitable jurisdiction, but on the control a court exercises over its own proceedings. The jurisdiction is explained in many cases dealing with claims by solicitors to assert a lien over a judgment for costs in favour of their client where the opposite party has obtained judgment against their client in the same or in other proceedings ( Edwards v Hope (1885) 14 QBD 922 at 926-927; Reid v Cupper [1915] 2 KB 147; Puddephatt v Leith (No 2) [1916] 2 Ch 168 especially at 173-174; Re a Debtor No 21 of 1950 [1951] 1 Ch 612 at 617-618). [69] This jurisdiction is accurately described in R Derham, The Law of Set-Off , 3 ed, 2003, at paras 2.71-2.83. Although in Edwards v Hope , Brett MR and Bowen LJ (at 926 and 927) described the jurisdiction as an equitable jurisdiction, in truth, it was not a creature of the Court of Chancery, but was applied by all courts. Indeed, it was applied more liberally in the Courts of law than in the Court of Chancery owing to Lord Eldon's care that solicitors should not be deprived of liens for their costs ( Puddephatt v Leith (No 2) at 174-179). [70] Dr Derham says at para 2.80 that: ' The basis of the set-off is the general jurisdiction of the Court over the suitors in it ', citing Mitchell v Oldfield (1791) 4 Term Rep 123; 100 ER 929. There, in a case where each party had recovered judgment against the other for separate debts in separate actions, Lord Kenyon CJ stated that the case did not depend on the statutes of set-off, but the general jurisdiction of the Court over the suitors in it. ' 6 I therefore ask what the justice of this case requires by way of exercise of the general jurisdiction of the court over the suitors in it, having regard to the application now before the court. 7 If the court does not intervene in the way sought by Ms Fletcher and Tatlers, they are liable to suffer, at the hands of Mr Davis, execution of the judgment in respect of the present balance of $31,370.00. That vulnerability will subsist in circumstances where Tatlers has an entitlement to payment by Mr Davis of an unquantified sum for costs in the statutory demand proceedings; and Ms Fletcher has a like entitlement to payment by Mr Davis in the bankruptcy proceedings. 8 Argument before me proceeded on the basis that the liability of Ms Fletcher and Tatlers to Mr Davis by virtue of the judgment in these proceedings is joint and several. If that is so and if the balance under that judgment is in truth $31,370.00, the situation can be seen to be one in which: (a) Mr Davis is entitled to recover of $31,370 from Ms Fletcher. (b) Mr Davis is entitled to recover $31,370 from Tatlers; (c) Mr Davis cannot, however, recover $31,370 from each of Ms Fletcher and Tatlers, his right being such that the total recovered from both is limited to $31,370; (d) Tatlers is entitled to recover a sum as yet unquantified from Mr Davis as a result of the costs order in the statutory demand proceedings; and (e) Ms Fletcher is entitled to recover a sum as yet unquantified from Mr Davis as a result of the costs order in the bankruptcy proceedings. 9 It is, however, necessary to say more about the circumstances in which Mr Davis's right of recovery against Ms Fletcher and Tatlers arose. The terms of settlement and the orders giving effect to it (see items 2 and 3 of [2] above) expressly contemplated that Ms Fletcher and Tatlers would pay the sum of $75,000 to Mr Davis within 28 days and that the verdict and judgment in his favour for that sum would become enforceable at once if the payment was not made within that period. This regime was not one imposed by the court as a matter of compulsion against the will of the parties bound to pay. It was a regime to which those parties voluntarily and consciously submitted as part of an agreed basis of settlement. 10 Having entered into that agreement and submitted to orders of the court giving effect to it, Ms Fletcher and Tatlers then embarked on a deliberate course of unilateral conduct designed to deprive Mr Davis of the immediate enjoyment of the position into which the terms of settlement and the court's orders placed him. This was done by means of the evasive action involved in the successive application for instalment orders. It was said on behalf of Ms Fletcher and Tatlers that an application of that kind is something that the legislation and the court rules make available to any judgment debtor. That is true. But Ms Fletcher and Tatlers cannot, in the present context, be regarded as simply part of the faceless crowd of judgment debtors against whom judgments are entered in invitum. They are judgment debtors who voluntarily submitted to a particular payment regime (i.e. payment within 28 days after signing of the terms of settlement and the making of the consent orders). 11 The judgment debtors who thus voluntarily submitted to the particular payment regime now come to court asking that they be freed from the consequences of their agreement. They say that the person to whom they, jointly and severally, are bound by order of the court to pay $31,370 owes one of them one unquantified sum and the other of them another unquantified sum. That, they say, is a sufficient ground for the court to intervene to alter the consequences of the agreement they accepted, as reflected in a verdict and judgment of the court to which they consented. 12 The solicitor for Ms Fletcher and Tatlers says in an affidavit of 31 October 200t that the "total amount of the legal costs incurred by" Tatlers in respect of the statutory demand proceedings is $13,677.06, no doubt on the solicitor/client basis. He also says that the "total amount of the legal costs incurred by" Fletcher in respect of the bankruptcy proceedings is $17,504.30, presumably on the same basis. No particulars are given. A later affidavit of the solicitor (16 November 2006) has annexed to it two "bills of costs" prepared by Ms Hardman, a solicitor who operates a legal costing business. These show a total of $15,027.31 costs for the statutory demand proceedings and $18,845.28 for the bankruptcy proceedings. No one can possibly say what will be allowed, by way of costs, on assessment in one case and taxation on the other – although it can obviously be said, having regard to the indemnity principle, that the sum recoverable under the relevant costs order will not exceed the costs actually incurred. It follows that, whatever the costs consultant might say, the maximum will be $13,677.06 in the statutory demand proceedings and $17,504.30 in the bankruptcy proceedings, with experience suggesting that the actual outcome in each case is likely to be somewhat less than the sum calculated by the costs consultant. 13 But the fact that the costs in the statutory demand proceedings have not been assessed and that the costs in the bankruptcy proceedings have not been taxed means that, whether or not it is possible to estimate the amounts that might ultimately be allowed, the party with the benefit of the costs orders does not stand on the same plane as the party with the existing money judgment. Tatlers and Ms Fletcher, as beneficiaries of the respective costs orders, are not in a position to obtain execution. Neither of them could, for example, obtain a charging order over funds in court: Widgery v Tepper (1877) 6 ChD 364. To allow Ms Fletcher and Tatlers to assert their respective costs orders as a basis for denying Mr Davis the ability to obtain satisfaction of his judgment against Ms Fletcher and Tatlers would be to promote them to a position of equal ranking with him which, in the absence of an enforceable judgment for an ascertained sum, they have not in fact achieved. 14 The rationale of set-off is to avoid multiplicity of actions. Set-off operates, on principle, where there are, on each side of the account, what Cockburn CJ in Stooke v Taylor (1880) 5 QBD 569 (at p.575) referred to as "liquidated debts, or money demands which can be readily and without difficulty ascertained". The entitlements of Ms Fletcher and Tatlers under their respective costs order cannot, as to quantum, be ascertained at this point. 15 The stay order Ms Fletcher and Tatlers seek in this case lies within the discretion of the court, having regard to what is just. In light of the fact that Mr Davis has an immediately enforceable judgment for a defined and uncontroversial amount, that that judgment was the product of an agreement which contained an express promise by Ms Fletcher and Tatlers to pay within 28 days (with the judgment stayed in the meantime), that Mr Davis is now free to proceed to immediate execution (both in terms of the agreement and by force of the judgment itself), that the liability of Mr Davis to each of Ms Fletcher and Tatlers under the particular costs order is unquantified so that neither of them is in any sense free to proceed to execution for any sum, I am of the opinion that it is not just to order the stay of execution sought by Ms Fletcher and Tatlers. Rather, Mr Davis should be free to proceed at once to execution against Ms Fletcher and Tatlers and each of them, in turn, should be free to proceed to execution against him as and when she or it has completed the steps necessary to attain a position where there is a legal right to do so. 16 The defendants' notice of motion filed on 31 October 2006 is dismissed with costs. ********** 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.