New South Wales Supreme Court CITATION : Adamson v Ede [2008] NSWSC 1184 HEARING DATE(S) : 2 & 30 May 2008 JUDGMENT DATE : 10 November 2008 JURISDICTION : Common Law JUDGMENT OF : McCallum J 1) The defendant's amended notice of motion filed in Court on 24 April 2008 is dismissed. DECISION : 2) I direct the parties to bring in short minutes of orders to give effect to these reasons. 3) I will hear the parties as to costs. LEGISLATION CITED : Civil Procedure Act 2005 Uniform Civil Procedure Rules 1999 CATEGORY : Procedural and other rulings Australian Beverage Distributors Pty Limited v Evans & Tate (2006) 58 ACSR 22; [2006] NSWSC 560 CASES CITED : Australian Beverage Distributors Pty Limited v Evans & Tate (2007) 61 ACSR 441; [2007] NSWCA 57 In Re A debtor, No. 21 of 1950 (No. 2); Ex parte The Petitioning Creditors v The Debtor [1951] CH 612 Padkohe Pty Limited v Fletcher [2006] NSWSC 1239 TEXTS CITED : The Law of Set-Off, 3rd ed 2003 PARTIES : Christopher Michael Adamson (Plaintiff) Kenneth John Ede (Defendant) FILE NUMBER(S) : SC 20311/04 COUNSEL : In Person (Plaintiff) Mr R Horsley (Defendant) SOLICITORS : Horowitz & Bilinsky (Defendant) - 15 - IN THE SUPREME COURT OF NEW SOUTH WALES COMMON LAW DIVISION McCALLUM J 10 NOVEMBER 2008 20311/04 Christopher Michael ADAMSON v Kenneth John EDE JUDGMENT 1 HER HONOUR: Christopher Adamson and Kenneth Ede appear to have once had a civilised relationship. They are now firmly entrenched in bitter and unseemly dispute. The circumstances of their falling out were not disclosed in the evidence. Mr Adamson stated only that he had been Mr Ede's solicitor until June 2003 and that in September 2003 Mr Ede had broken off relations with him without warning. 2 In August last year Mr Adamson obtained a verdict against Mr Ede in these proceedings for $60,000 for defamation. He now seeks to enforce that judgment, while Mr Ede seeks to have its execution stayed on the basis that Mr Adamson owes him more than he owes Mr Adamson. Background 3 In July 2004 Mr Adamson was suing a former client, Elizabeth Fitzpatrick, for unpaid fees. Mr Ede, who did not know Mrs Fitzpatrick, rang her solicitor and made some defamatory statements to him about Mr Adamson. The solicitor repeated the substance of those statements in open court. 4 Mr Adamson commenced these proceedings against Mr Ede for defamation in respect of the original statements made by him on the telephone and their repetition in court by Mrs Fitzpatrick's solicitor. A jury found that Mr Ede's words conveyed meanings that were defamatory of Mr Adamson. On 1 August 2007, Adams J rejected Mr Ede's defence and granted a verdict for Mr Adamson and judgment in the sum of $60,000. The judgment was entered on 7 August 2007 and remains unpaid. 5 Mr Adamson has taken a number of steps to enforce the judgment. On 23 August 2007 he served an examination notice, which Mr Ede ignored. On 16 October 2007 he obtained an order for oral examination of Mr Ede but was unable to serve the order at that time. On 10 January 2008 he obtained a charging order over some shares held by Mr Ede and moneys held in trust by his solicitor. He obtained an amended examination order for a hearing on 21 February 2008 but was unable to effect service of that order either. 6 On 17 March 2008 Mr Adamson was successful in effecting service of an examination order which required Mr Ede to attend for oral examination on 15 April 2008. Before the date scheduled for the oral examination, Mr Ede filed a notice of motion seeking orders setting aside the examination order and the charging order. 7 Mr Ede did not appear for the oral examination but was represented that day by a solicitor, who applied for an adjournment. The grounds for the application were that Mr Ede was ill and, separately, the fact that the motion had been filed seeking to have the examination order set aside. The examination was stood over to a date to be fixed. Mr Adamson's applications 8 Mr Adamson does not accept that Mr Ede was too ill to attend Court on 15 April. He filed a notice of motion that day seeking an arrest warrant for failure to comply with the examination order. 9 By a separate notice of motion also filed on 15 April, Mr Adamson seeks a variety of orders in aid of the enforcement of his judgment in circumstances where he says there has been wilful disobedience of orders of the Court. The orders sought include an order that Mr Ede make "an initial lump sum payment of $15,000" to him in reduction of the judgment debt and an order staying any steps taken by Mr Ede against him in any proceedings. That motion was replaced on 2 May 2008 with an amended motion adding a claim for a freezing order against Mr Ede. Mr Ede's application 10 By his amended notice of motion filed on 24 April 2008, Mr Ede seeks orders setting aside the examination order and the charging order, together with an order that the enforcement of the judgment be stayed. The motion seeks a stay only until the finalisation of proceedings No. 5312 of 2004 between the parties (discussed below). In those other proceedings, Mr Adamson challenges the assignment to Mr Ede of a debt owed by Mr Adamson to another person (resulting from a costs order against him). That is one of several debts (considered below) relied on by Mr Ede in support of his contention that the enforcement of the judgment in these proceedings should be stayed. 11 On 20 May 2008, after the hearing of the three motions had concluded, Mr Adamson filed a notice of motion in the Registry seeking leave to reopen his case on his amended motion and on Mr Ede's amended motion. That motion was heard on 30 May 2008 and leave was granted to Mr Adamson to read a further affidavit which established that his costs of the hearing before Adams J in these proceedings have now been determined by a costs assessor in the sum of $85,000. Mr Ede has filed a summons seeking to set aside that determination. Mr Adamson has obtained judgment in the District Court for that sum and has obtained a charging order in aid of that judgment over shares and moneys held in trust by the defendant's solicitors. 12 By letter, Mr Ede later sought to have the proceedings again re-listed in order to re-open his case to read two further affidavits. After attempting unsuccessfully to fix a date to have the proceedings re-listed at a time convenient to Mr Adamson, I determined to deal with that application on written submissions, which the parties provided on 22 August 2008. In short, Mr Adamson's submission was that I should not entertain the application in the absence of a formal motion and that he should have the opportunity to "file and serve a cross-notice of motion" to put on further material. No other reason was provided for not admitting the evidence and, accordingly, I admit it. 13 Having regard to the conclusion I have reached on the substantive applications, it is not necessary to give Mr Adamson an opportunity to adduce further evidence in reply. 14 The issues raised by the three motions are: (a) whether enforcement of the judgment should be stayed until the finalisation of other litigation between the parties; (b) whether the charging order made 10 January and the order for oral examination of Mr Ede should be set aside; (c) if no to issues (a) and (b), what further orders should be made in aid of the enforcement of the judgment. 15 Mr Adamson accepted that it would be logical to decide Mr Ede's application first. Should enforcement of the judgment be stayed? 16 The basis for Mr Ede's application is that he says Mr Adamson has debts to him that far exceed the amount of the judgment debt and Mr Adamson's costs of the proceedings. Mr Ede's claims against Mr Adamson were described as being mostly unquantified costs orders in other proceedings. 17 Both parties adduced evidence of numerous proceedings between them. I do not know whether it was a complete catalogue of all of their litigation. As best I have been able to ascertain from that material, which was not presented as clearly as it might have been, the main proceedings giving rise to the present claims by Mr Ede are as follows. 18 The history of their litigation appears to begin in 2003 when Mr Adamson and his family trust commenced proceedings No. 6285 of 2003 against Mr Ede, after he filed a lapsing notice in relation to a caveat lodged by Mr Adamson over a rural residential property at Nabiac. Judgment was given in those proceedings on 14 December 2007. In relation to costs, Windeyer J ordered: (a) the trust to pay 90% of the costs of Mr Ede on the plaintiff's claim; (b) Mr Adamson to pay 50% of Mr Ede's costs of the cross-claim; and (c) Mr Adamson to pay $750 to Mr Ede in proceedings 3712 of 2006 which was a claim in detinue that had been transferred from the Local Court and joined with the proceedings heard by Windeyer J. 19 In 2004 Mr Adamson commenced proceedings against Adeline Liu and Mr Ede in the Equity Division of this Court, No. 5312 of 2004. Those proceedings were dismissed by Associate Justice McLaughlin when Mr Adamson failed to appear on 18 July 2008. Mr Adamson was ordered to pay the defendants' costs. Mr Ede estimates his costs to be approximately $25,000. Mr Adamson has since filed a notice of motion seeking to have the judgment of Associate Justice McLaughlin set aside. 20 On one view, those proceedings are now finalised and, as already noted, the stay was sought only until that point. However, in light of the application to set aside the decision of Associate Justice McLaughlin and against the possibility that a further stay is sought, it is appropriate to deal with the application on its merits. 21 Mr Ede sued Mr Adamson in proceedings in the Local Court, No. 4721 of 2006, apparently for fees for an expert building report. He obtained judgment against Mr Adamson in the sum of approximately $18,000 and an order for costs. His solicitor estimates the costs at $95,000. 22 Mr Adamson sought leave to appeal from that decision to this Court, No. 30007 of 2008. That application was dismissed by Smart J on 30 July 2008 and Mr Adamson was ordered to pay Mr Ede's costs, which are estimated to be approximately $15,000. 23 Mr Adamson commenced proceedings against Mr Ede for defamation and malicious prosecution in the District Court of New South Wales at Newcastle, No. 394 of 2007. Mr Adamson says he commenced those proceedings "to protect [his] position from any Statute of Limitations problem" and "to deter Mr Ede from making any more false allegations". He says he attempted to have the proceedings stayed. There was little other information about those proceedings before me other than that Mr Ede claims his costs of a notice of motion and costs thrown away by an amendment to the statement of claim. 24 Mr Adamson and his trust commenced proceedings in this Court, No. 2930 of 2008. No detail as to the nature of those proceedings was in evidence before me. 25 Mr Adamson commenced proceedings in this Court, No. 11862 of 2008. Those proceedings were determined by Harrison J on 31 October 2008. They concerned a dispute as to the existence of a lease Mr Adamson claims he holds over the property at Nabiac (which is owned by Mr Ede). Harrison J found that the lease remains on foot but upheld, in part, Mr Ede's cross claim that some of its terms are unjust. The commercial impact of those findings on the parties is not clear. 26 Since the hearing of the present application, Mr Adamson has commenced bankruptcy proceedings against Mr Ede alleging that he committed acts of bankruptcy by causing various barristers and solicitors to be paid for work done in relation to litigation in which Mr Adamson was a party and entering into costs agreements in respect of those matters. Mr Adamson has also issued a bankruptcy notice to Mr Ede based on the judgment debt and costs determination in these proceedings. 27 Mr Ede also adduced evidence that Mr Adamson's trust company has issued a bankruptcy notice against him but that is of doubtful relevance to the present dispute, since it involves a different party. 28 After the defamation verdict was entered against Mr Ede in these proceedings, he took an assignment for consideration of $1 of a costs order against Mr Adamson in favour of Ms Liu. The costs had been taxed and determined in the sum of $83,562.95. The assignment was effected by deed dated 1 November 2007. On 27 March 2008, judgment was obtained in the District Court for $109,861.24 being the costs as taxed plus interest. Mr Adamson disputes the validity of the assignment. 29 I have not referred to every set of proceedings touched on in the evidence, but only those which seemed most pertinent to Mr Ede's application. 30 Mr Ede claims liquidated debts against Mr Adamson in the sum of $133,133.37 arising from those various proceedings, based on the following amounts (which in fact add up to $133,883.37): Judgment in the District Court in respect of the costs assigned by Ms Liu $ $109,861.24 Judgment in the Local Court in respect of the building report (proceedings No. 4271 of 2006) $ $23,272.13 (judgment for $18,160 plus interest) Costs ordered by Windeyer J in Supreme Court proceedings No. 3712 of 2006 (detinue claim transferred from the Local Court) $ $750.00 31 In addition, Mr Ede quantified his unliquidated claims as follows: 50% of Mr Ede's costs of his cross-claim in Supreme Court proceedings No. 6285 of 2003 heard by Windeyer J $50,000.00 Mr Ede's costs of the Local Court proceedings in respect of the building report (No. 4271 of 2006) $95,000.00 Costs of Mr Ede's notice of motion and costs thrown away by amendment of the statement of claim in the malicious prosecution proceedings No. 394 of 2000 (sic) in the District Court at Newcastle [it appears from other evidence that these proceedings were in fact commenced in 2007] $10,000.00 Mr Ede's costs incurred from 21 November 2007 in bankruptcy proceedings in the Federal Magistrates Court $8,000.00 32 The estimated total of the unliquidated claims is $163,000. However, as I have stated, those costs have not been assessed but are based on estimates by Mr Ede's solicitor. 33 In response to Mr Ede's evidence, Mr Adamson adduced evidence of liquidated claims he and his family trust have against Mr Ede. I do not think I should have regard to the claims by the family trust. The liquidated claims of Mr Adamson, apart from the judgment debt in these proceedings, were an amount of $7686.42 for costs in proceedings in the Supreme Court and $3973.04 for costs in proceedings in the Family Court. The total of those sums, together with interest claimed, was in the order of $15,000. However, each claim is referred to by Mr Adamson as "stayed". 34 Mr Adamson also claimed unliquidated costs orders which, excluding the costs order in these proceedings (which has now been assessed in the sum of $85,000), add up to almost $85,000. 35 To give the flavour of the level of acrimony between the parties, Mr Adamson's evidence stated that the judgment in these proceedings is $60,000 and that interest on that sum up to 2 May 2008 was $4438.55. Mr Ede's evidence in reply (in an affidavit sworn by his solicitor) was that "only $4432.83 interest is conceded". The difference is $5.72. 36 Mr Ede's evidence in reply also referred to a number of interlocutory costs orders made in his favour in the proceedings heard by Windeyer J but did not quantify those orders. 37 As to Mr Adamson's unliquidated claims, without descending to the detail of Mr Ede's response, it is enough to say that in respect of each claim, he either disputes it or questions the amount claimed. 38 I am unable on the evidence before me to conclude with any confidence where the account between Mr Adamson and Mr Ede would ultimately fall if it were subjected to rigorous assessment. It certainly appears likely that Mr Adamson owes Mr Ede more than Mr Ede owes Mr Adamson, but that conclusion rests on a level of speculation and imprecision. 39 There are two further aspects of the evidence that caused me particular concern. One is that the sheer volume of litigation between the parties suggests intransigence on both sides, which may indicate that some of the costs were unreasonably incurred. The second is that the overall drain of legal costs or fees on the combined resources of the parties suggests that some of their decisions about litigation have been irrational, or at least uncommercial. Legal principles 40 Mr Horsley, who appeared for Mr Ede, submitted that the Court has general power to stay execution of a judgment. He relied on ss 67 and 135 of the Civil Procedure Act 2005 and on the Court's inherent jurisdiction over its own procedure to stay execution of a judgment "if it be just". He referred to In Re A debtor, No. 21 of 1950 (No. 2); Ex parte The Petitioning Creditors v The Debtor [1951] CH 612 at 621 where it was held that the Court has inherent jurisdiction to grant a stay of execution effectively amounting to set-off "if it be just". 41 That principle was cited with approval by Barrett J in Padkohe Pty Limited v Fletcher [2006] NSWSC 1239 at [4] and, specifically in the context of set-off for costs in different actions and in different courts, by White J in Australian Beverage Distributors Pty Limited v Evans & Tate (2006) 58 ACSR 22; [2006] NSWSC 560 at [79]. 42 As noted by Mr Horsley, the Court's power to stay execution of a judgment on the grounds of set-off does not depend on satisfaction of the requirements for establishing an equitable set-off: Australian Beverage Distibutors at [79], where White J said: "On the materials before me, ABD owes more to ETPW than ETPW owes to it. Even though that is not sufficient to give rise to a set-off in equity, and even though a stay of execution is tantamount to allowing a set-off, the jurisdiction to stay execution of the order for costs does not depend on satisfaction of the requirements for establishing an equitable set-off. There is no reason to think that it should, as an equitable set-off extinguishes or reduces the debt, whereas a stay merely precludes enforcement of the debt for so long as the stay operates." 43 White J granted a stay which, in due course, was overturned by the Court of Appeal: Australian Beverage Distributors Pty Limited v Evans & Tate (2007) 61 ACSR 441; [2007] NSWCA 57. However, as submitted by Mr Horsley, his Honour's summary of the law was not the subject of any criticism by the Court of Appeal. 44 Nonetheless, it should be noted that the Court of Appeal (per Beazley JA, with whom Hodgson and Santow JJA agreed) said at para [145]: "The mere fact that there were other claims between the parties, some of which were disputed and some of which were not, was not sufficient in my opinion in all the circumstances of this case … to stay the enforcement of an order that created another indebtedness. As I have indicated, this is even the more so when, even if a stay was granted, the debt subject of the stay remains due and payable". 45 In Padkohe, Barrett J formulated the principle in the terms discussed by Dr Durham in The Law of Set-Off, 3rd ed 2003 at para 2.80 (also approved by White J at first instance in Australian Beverage Distributors), namely, that the issue is "what the justice of this case requires by way of exercise of the general jurisdiction of the Court over the suitors in it". What does the justice of this case require? 46 I am not satisfied that I should exercise my discretion to stay execution of the judgment in these proceedings. First, I do not accept the premise of Mr Ede's application that the dealings between the parties may be summarised in the statement that Mr Adamson owes Mr Ede more than Mr Ede owes Mr Adamson. 47 The evidence makes it plain that justice as between Mr Adamson and Mr Ede cannot be summarised in such simple terms. Further, the position is constantly changing with each manoeuvre and counter-manoeuvre, as disclosed by the applications to re-open the evidence made by each party in these proceedings. 48 Secondly, it is relevant to consider the nature of the debts relied on by Mr Ede to sustain the application for a stay. As frankly acknowledged by Mr Horsely, they are, in the main, costs orders that have not yet been assessed but have been estimated by Mr Ede's solicitor, Mr Bilinsky. I do not doubt Mr Blinsky's sincerity, but I have some doubt as to the reliability of his estimates. One is an estimate of costs of the proceedings in the Local Court in which Mr Ede obtained judgment against Mr Adamson in the sum of $18,160. Mr Bilinsky estimates Mr Ede's costs of those proceedings at $95,000. No evidence was placed before me from which I can assess the reasonableness of Mr Ede's incurring such costs. I do not know whether the amount claimed was substantially more than the amount awarded, or indeed anything about the issues in dispute in the proceedings. Taken at face value, the estimated costs appear to be completely disproportionate to the amount awarded but I have no basis for assessing whether that is due to any unreasonable conduct on the part of Mr Ede, or Mr Adamson, or both, or whether there is some other entirely reasonable explanation. 49 Equally, there is no material before me on the strength of which I can assess the reasonableness of the other costs estimates nor, indeed, the reasonableness of their being pitted against a verdict and judgment of this Court. 50 As to the liquidated claims, the fact that Mr Ede was able to take an assignment of a debt in the order of $110,000 for consideration of $1, and did so after the judgment in these proceedings was entered, suggests a strategic imperative that has not been explained to this Court. I suspect that it may be as simple as the proposition that Mr Adamson and Mr Ede dislike each other intensely and will stop at nothing to make each other's lives miserable. I do not think the Court should permit its powers to be deployed as artillery in such a battle. 51 I do not mean to suggest that Mr Ede is the author of the present situation, or that he is not entitled to stand on his legal rights. It is impossible for me to discern whether either gentleman is the greater aggressor in these disputes. However, it is Mr Ede who now seeks the stay of execution. If Mr Adamson and Mr Ede have a multiplicity of causes of action against each other, they are entitled to pursue them in multiple sets of proceedings but I do not think that it is in the interests of justice to permit one set of proceedings to become bogged down by the others. The judgment in these proceedings was entered after two contested hearings (one before a jury) and is not the subject of any appeal. I do not think that I should stay its enforcement. Whether the previous orders should be set aside 52 Mr Horsley acknowledged that the application to have the charging order and the examination order set aside raises the same issue as the application for a stay. It follows that no basis has been established to set aside either of those orders. Orders sought by Mr Adamson 53 The first order sought by Mr Adamson in aid of execution of the judgment was for an initial lump sum payment of $15,000. I do not think that I should make that order. Mr Ede is already under an obligation to pay the judgment debt of $60,000 and costs (which are now the subject of a District Court judgment for $85,000). Since he appears unprepared to pay those debts, there would be little utility in making a discrete order for payment of an "initial lump sum". 54 The second order sought by Mr Adamson is for a stay of all Court proceedings Mr Ede has against Mr Adamson. I doubt whether I have power to make such an order but, in any event, I would not be prepared to do so, for the reasons for which I have refused Mr Ede's application for a stay of enforcement of the judgment in these proceedings. 55 With two exceptions, the other orders sought in Mr Adamson's notice of motion went to procedural matters that have been overtaken by events. It remains to consider Mr Adamson's application for a freezing order and his application for a warrant. 56 As to the application for a freezing order, I am not satisfied that there are grounds for making such an order at this stage. Plainly, Mr Ede has not paid the judgment debt and has, at the same time, incurred legal expenses in litigation against Mr Adamson. However, I am unable to assess, on the strength of the material before me, the merits of Mr Ede's decisions in that respect. It may be that a different picture will emerge after the oral examination but I am not satisfied at this stage that a freezing order is appropriate. Arrest warrant 57 It is not necessary to proceed to consider Mr Adamson's application for an arrest warrant at this stage. Rule 38.6 effectively imposes a requirement that the Court warn a person of the risk of arrest before a warrant may be issued. It appears no such warning was included in the notice sent by the Court to Mr Ede ordering him to attend for examination on 15 April. Mr Adamson volunteered that he would not press the application for the arrest warrant in that circumstance. 58 The application for a stay having been rejected, the appropriate course is for me to fix a further date in respect of the order for examination. My orders giving effect to these reasons will include notice to the defendant that failure to attend for examination on the date fixed may result in his arrest (a fact which must now be apparent to him in any event). My orders will then serve as notice to Mr Ede for the purpose of rule 38.6(c) of the Uniform Civil Procedure Rules 1999. Conclusion 59 The defendant's amended notice of motion filed in Court on 24 April 2008 is dismissed. 60 I direct the parties to bring in short minutes of orders to give effect to these reasons. 61 I will hear the parties as to 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. 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