Court of Appeal Supreme Court New South Wales Medium Neutral Citation: Zisti v Bartter Enterprises Pty Ltd [2013] NSWCA 146 Hearing dates: 23 April 2013 Decision date: 06 June 2013 Before: Beazley P (at [1]); Barrett JA (at [2]); Ward JA (at [84]) Decision: 1. Appeal allowed. 2. Vary Order 3 made by the District Court on 23 January 2012 by: (a) omitting "30 September 2011,"; (b) omitting the words "such costs to be paid as agreed or assessed on the indemnity basis forthwith"; (c) substituting for the last-mentioned words "such costs to be as agreed or assessed on the indemnity basis in the case of the costs of 17 November 2011 and the ordinary basis in the case of the costs of 9 December 2011 and, in each such case, to be payable forthwith". 3. Set aside Order 4 made by the District Court on 23 January 2012. 4. Set aside the orders made by the District Court on 16 March 2012. 5. Remit the notice of motion filed by the appellant on 29 August 2011 to the District Court for hearing and determination. 6. That the respondent pay the appellant's costs of the appeal. [Note: The Uniform Civil Procedure Rules 2005 provide (Rule 36.11) that unless the Court otherwise orders, a judgment or order is taken to be entered when it is recorded in the Court's computerised court record system. Setting aside and variation of judgments or orders is dealt with by Rules 36.15, 36.16, 36.17 and 36.18. Parties should in particular note the time limit of fourteen days in Rule 36.16.] Catchwords: PROCEDURE - costs - where plaintiff obtains judgment in default of defence - application by defendant for order setting aside the default judgment - application adjourned on several occasions - orders made against defendant on 23 January 2012 in respect of costs of that and several earlier days, all such costs to be assessed on an indemnity basis and to be payable forthwith - where costs order had already been made in respect of one such day - whether the later order for that day should be set aside - whether assessment on indemnity basis warranted - PROCEDURE - order for payment of specified sum "on account of" costs already ordered - whether District Court had power to make such order - whether order made on wrong principle - defendant's pending application for order setting aside default judgment dismissed because of failure to pay the specified sum "on account of" costs already ordered - no attention to the merits of the case - whether the order of dismissal should be set aside Legislation Cited: Civil Procedure Act 2005, s 98 Uniform Civil Procedure Rules 2005, rules 2.1, 42.7(2), 47.21 Cases Cited: Ex parte Currie; Re Dempsey (1969) 70 SR (NSW) 443 Guttershield Systems Australia Pty Ltd v LBI Holdings Pty Ltd (No 2) (2009) NSWSC 1409 Harrison v Schipp [2002] NSWCA 213; (2002) 54 NSWLR 738 House v The King [1936] HCA 40; (1936) 55 CLR 499 Kabat Investments Pty Ltd v Compleat Imports Pty Ltd [2002] VSCA 134 Keller v LED Technologies Pty Ltd (No 2) [2010] FCAFC 160 L v Director-General, Department of Community Services (NSW) (No 2) [1997] HCA 14; (1997) 190 CLR 207 Mars UK Ltd v Teknowledge Ltd [1999] EWHC 226 (Pat) McCarthy v McCarthy [2010] NSWCA 103 Palmer v Clarke (1989) 19 NSWLR 158 Rajski v Computer Manufacture & Design Pty Ltd [1982] 2 NSWLR 443 Re Bruce (1886) 12 VLR 696 Williamson v Scarano [2011] NSWSC 1318 Williamson v Scarano [2012] NSWCA 432 Category: Principal judgment Parties: Terry Zisti - Appellant Bartter Enterprises Pty Ltd - Respondent Representation: E Chrysostomou - Appellant B DeBuse - Respondent Appellant in person Kreisson Legal- Respondent File Number(s): 2012/91125 Decision under appeal Before: Rolfe DCJ File Number(s): 2011/37013 Judgment 1BEAZLEY P: I agree with Barrett JA. 2BARRETT JA: This appeal is brought by leave in respect of an order of the District Court (Rolfe DCJ) dismissing an application by the appellant (defendant below) for an order setting aside a judgment entered against him by default in proceedings brought against him by the present respondent. Other orders are also challenged. 3Because it will be necessary to refer in detail to steps taken in the District Court proceedings, it is convenient to refer to the parties by reference to the roles they played there. Hence, I shall refer to the present appellant as "the defendant" and the present respondent as "the plaintiff". Chronology 4The proceedings in the District Court were commenced on 4 February 2011 when the plaintiff filed a statement of claim seeking to recover $429,167.04 (plus interest) said to be due by the defendant under a deed executed by him on 18 October 2010. The statement of claim was served on 3 March 2010. Subsequent events of relevance were as follows: 13 April 2011: The plaintiff files a motion seeking judgment in default of defence. 14 April 2011: Judgment by default is ordered. 29 August 2011: A notice of motion seeking an order setting aside the default judgment is filed by the defendant, supported by an affidavit of his solicitor. 2 September 2011: The proceedings are stayed until further order. Directions are made for the filing and service of affidavits. Listing on 30 September 2011 is directed. 29 September 2011: The defendant files an amended notice of motion; 30 September 2011: The notice of motion is adjourned for hearing to 17 November 2011. it is directed that any amended motion and any further affidavits in support of the motion to be filed by 14 October 2011; and that any further affidavits of plaintiff to be served by 14 October 2011. It is ordered that the defendant to pay the plaintiff's costs thrown away by reason of the adjournment as agreed or assessed. 18 October 2011: An amended notice of motion is served with an unsworn affidavit of the defendant. 17 November 2011: The hearing of the defendant's notice of motion begins before Ashford DCJ. The motion is stood over part heard to 9 December 2011; 9 December 2011: The part heard status is vacated and the matter stood over for hearing by Judge Rolfe on 23 January 2012. It is ordered that the costs of 9 December 2011 and 17 November 2011 "reserved to the hearing of the claim"; 23 January 2012: The motion comes before Judge Rolfe for hearing but, in circumstances to be referred to presently, the hearing does not proceed. Orders are made as follows: 1. "Direct the defendant to file and serve by 6 February his affidavit setting out all facts and circumstances on which he intends to rely in support of his application to set aside the default judgment in these proceedings". 2. "Plaintiff to file and serve by 20 February any affidavit or affidavits in reply". 3. "As a condition of granting the Defendant leave pursuant to order 1, the defendant is ordered to pay the plaintiff's costs of 30 September 2011, 17 November 2011, 9 December 2011 and 23 January 2012 including any costs thrown away as a consequence of the adjournments on each of these occasions, such costs to be paid as agreed or assessed on an indemnity basis forthwith". 4. "As a condition of adjourning the matter today and the grant of leave contained in order 1 the defendant to pay the amount of $20,000 on account of the order for costs made in favour of the plaintiff. Such payment to be made no later than 13 February". 5. Proceedings stood over to 9 March 2012. 23 February 2012: An affidavit of the defendant sworn 20 February 2012 is served. 8 March 2012: The matter comes before Judge Rolfe for hearing but again the hearing does not proceed. Orders are made as follows: 1. Defendant to file and service by 13 March 2012 an affidavit setting out his assets and liabilities and disclosing in full his personal financial circumstances together with draft of any proposed cross-claim. 2. Vacate the hearing on 9 March 2012 and stand over to 16 March 2012. 3. On 16 March 2012 the defendant is to show cause as to why the motion to set aside the judgment should not be dismissed for failure to comply with the orders of 23 January 2012. 4. If the defendant satisfies the court on that matter, his motion is to be heard on 16 March 2012. 5. Costs reserved. 16 March 2012: The defendant's notice of motion is dismissed. It is ordered that the defendant pay the plaintiff's costs of the amended notice of motion, such costs to be agreed or assessed on an indemnity basis. Issues on appeal 5The defendant's appeal relates to: (a) the inclusion in Order 3 of 23 January 2012 of the costs of 30 September 2011; (b) the element of Order 3 of 23 January 2012 directing that costs of 17 November 2011 and 9 December 2011 be assessed on an indemnity basis; (c) Order 4 of 23 January 2012; and (d) the orders of 16 March 2012. 6The complaint about inclusion of the costs of 30 September 2011 in Order 3 of 23 January 2012 is that a costs order had been made on 30 September 2011 in respect of the costs of that day and had not been vacated. 7The complaint about the part of Order 3 of 23 January 2012 requiring costs of 17 November 2011 and 9 December 2011 to be assessed on an indemnity basis is that there was no evidence of circumstances warranting that basis of assessment and no demonstrated reason for directing such assessment. Those costs had, on 9 December 2011, been reserved to the hearing of the defendant's notice of motion and, although the notice of motion was not heard on 23 January 2012, the defendant takes no point on that score. 8The complaint about Order 4 of 23 January 2012 is similar but more far-reaching. It is said, in essence, that no basis was articulated for the imposition of a regime under which the continued existence of the defendant's right or ability to have his motion heard by the court was made to depend on his paying "on account of the order for costs" a specific sum of $20,000 - particularly when there was no indication or evidence providing a basis for the fixing of that sum as the "price" for the continued existence of the right or ability. The power of the District Court to make such an order is also questioned. 9The objections to the Order 4 of 23 January 2012 also underlie the challenge to the judge's ultimate decision of 16 March 2012 to dismiss the defendant's notice of motion, thereby putting an end to his attempt to be allowed in to defend the claim brought against him. The defendant complains that the effect of Order 4 of 23 January 2012 was to create a situation in which his impecuniosity came to be the factor that brought about dismissal of his motion, without the judge ever considering the questions central to an application of the relevant type, that is, the reason for failure to file a defence and whether some arguable ground of defence may exist. 10It is necessary to say more about the course of proceedings on relevant days. Proceedings on 17 November 2011 11The hearing of the defendant's motion began on 17 November 2011 before Judge Ashford. The defendant, as applicant, sought to rely on an affidavit he had sworn on 9 November 2011. A copy of that affidavit had been served by fax to the plaintiff's solicitors just after 4pm on Friday 11 November 2011. The original was served on Tuesday 15 November. Also on 15 November 2011, the plaintiff gave notice that the defendant would be required for cross-examination. The defendant was not present in court on 17 November 2011. He had attended for scheduled medical treatment. The plaintiff took objection to the reading of the defendant's affidavit because he had not been made available for cross-examination. Judge Ashford then adjourned the motion to 9 December 2011. Proceedings on 9 December 2011 12The matter came before Judge Ashford again on 9 December 2011. The defendant was present. The judge was informed that the defendant would require an interpreter in order to give evidence in the witness box (his first language is Greek) and that, although an interpreter had been booked in advance by the defendant's solicitor, the interpreter had been prevented by unexpected illness from attending. Attempts to obtain another interpreter had been unsuccessful. 13The judge questioned the defendant's solicitors about the steps taken to secure interpreting services. Counsel for the defendant applied for an adjournment, indicating that only "a short adjournment" was sought and that "we can come back on any day that is suitable to my friends and ensure that on the next occasion an interpreter is present for the purposes of Mr Terry Zisti". Counsel for the plaintiff opposed the application, saying that there should first be an inquiry into the defendant's ability to cope with cross-examination in English. The judge asked counsel for the defendant his view of the defendant's ability to speak English. Counsel's reply was that he always spoke to him in Greek and that, while the defendant had some English speaking ability, he might be prejudiced by lack of understanding if questioned in English. The judge ultimately expressed herself satisfied that an interpreter was needed. After adjourning briefly to ascertain the availability of other judges to hear the matter, her Honour appointed a hearing on 23 January 2012. 14The question of costs was then addressed. Counsel for the plaintiff sought costs assessed on an indemnity basis and payable forthwith. The judge said that she could not understand why costs should be assessed on an indemnity basis. In the course of her judgment, the judge said: "The costs issue is one which, at the present time, I believe is properly dealt with by the judge hearing the substantive application." "It can be properly tested on another occasion, and I am therefore, not prepared to make any costs order at this time other than that the costs of each of the applications, being on 17 November and 9 December, be matters dealt with by the trial judge. The costs are, therefore, reserved to the hearing of the claim." Proceedings on 23 January 2012 15The defendant's application came before Judge Rolfe on 23 January 2012. His Honour had not been involved at any earlier stage. Counsel for the defendant briefly opened to the court and then identified the affidavits on which the defendant proposed to rely. These were an affidavit of the defendant's solicitor and two affidavits sworn by the defendant himself (30 September 2011 and 9 November 2011). Counsel for the plaintiff in turn identified affidavits to be read. There were no objections to any affidavit. Certain documents were tendered. 16Judge Rolfe then undertook a brief consideration of the defence foreshadowed by the defendant and raised a question whether the draft defence correctly identified a particular document. Counsel for the plaintiff sought to tender emails said to be relevant to that matter. The tender was objected to on the basis that the emails were part of a "without prejudice" chain of communication. The emails were admitted. 17Following discussion about the description, by date, of a particular document referred to in the draft defence, counsel for the defendant said that there had been a mistake in the preparation of the draft defence and that an incorrect date had been inserted. 18The judge then described the situation as "entirely unsatisfactory". The transcript records the following: "HIS HONOUR: Look this is entirely unsatisfactory. First of all it's confused me. I've put Ms Obrart [counsel for the plaintiff] to a whole lot of trouble because I understood that the issue was about that you'd pleaded an issue in connection with the document that wasn't relevant but now you are telling me it's about the draft pleading addresses, the deed upon which the plaintiff sues in this case. KARAKIS [counsel for the defendant]: Yes your Honour. The defence was drafted in some hast. Mr Zisti is an elderly - HIS HONOUR: No understand all of that. Ms Obrart I'm concerned about the matters that appear in the draft defence. I agree with your submission that it's unsatisfactory for the solicitor to be doing it on information and belief. Mr Zisti should put his name on an affidavit and swear to the facts in support of it. OBRART: Yes your Honour. HIS HONOUR: What I'm proposing to do is to give him leave to put on an affidavit setting out the facts and circumstances on which he relies in order to set aside the guarantee and for him to annex to his affidavit any draft offence [sic] that he tends to rely on. As a condition of granting that adjournment I'm going to order him to pay your costs on an indemnity basis today which I will assess and make it a condition of proceeding further with the motion that those costs be paid. Is there anything you want to say about that?" 19Counsel for the plaintiff raised, in response, the possibility that there was not an error in the typing of the date of the document referred to by date in the draft response and that the reference was to a document that in fact bore the particular date but to which the defendant was not a party. His Honour told counsel for the defendant that he would expect to be informed whether solicitors were involved in the preparation and execution of the particular document. There was then a short adjournment, after which counsel for the defendant informed the court of certain instructions he had been given about the signing of a document by the defendant without advice from a solicitor. The judge then referred to certain avenues of defence that might be relevant and indicated an intention of granting leave for the defendant to adduce further evidence on matters relevant to that. 20The judge next asked counsel for the plaintiff whether she had told counsel for the defendant "what your indemnity costs were" (there had been an earlier request that the respondent's counsel "tell his side what your client's indemnity costs are for today and the previous occasion, so that if we come to that issue he'll be able to tell me whether or not he resists that"). The transcript continues: "OBRART: They come to $43,590. Just in further explanation for the application your Honour in effect there are two criteria for an application to set aside judgment. One is having a good bona fide defence on the merit and the second is proof of the facts sworn by the person capable of swearing them in the proceedings and neither of those have been put before the Court in five occasions and in effect what has happened to now has been just a waste of time. So in effect the defendant is really seeking to start again and that's an indulgence that the Court may grant to the defendant for various reasons so that the defence can have its best opportunity but we say the plaintiff in fairness would be compensated for the defendant's conduct of the proceedings which has been, we say it's not an over statement to say really HIS HONOUR: Okay Ms Obrart. Mr Karakis what I'm going to do is I'm going to make an order that your client pay the indemnity costs of the date [sic; scil: "dates"] identified. I'm not going to assess them myself at 43,000 because it's a bit too hard for me to do that. I'm going to make an order though conditional on this case being, conditional on this motion being adjourned part heard before me that your client pay $20,000 within the period of time that it's going to be stood over to and if he doesn't discharge that order I'm going to dismiss the application. KARAKIS: Yes your Honour. HIS HONOUR: Okay, do you need to get some instructions about that? KARAKIS: Could I? HIS HONOUR: That's fine because there are a couple of other matters for mention, I'll stand it down. MATTER STOOD IN LIST KARAKIS: Your Honour I have those instructions." 21There was then discussion about how long should be allowed for an affidavit of the defendant to be prepared and for the plaintiff to respond. When that had been settled, the five orders already set out above were pronounced. Proceedings on 8 March 2012 22Judge Rolfe asked whether the affidavit of the defendant the subject of the leave granted on 23 January 2012 had been filed. Counsel for the defendant stated that it had been sworn on 20 February 2012 (later than the deadline imposed by the court). The judge then asked whether the sum of $20,000 had been paid as contemplated by the earlier order. Counsel for the defendant said that it had not and that the defendant was impecunious. The judge said: "I am concerned that - I made an order on the last occasion because the plaintiff had been mucked around, to put it in a nutshell. I don't recall if you made submissions to me about the impecuniosity of your client. I rather doubt it because it is something that I may have taken into account in terms of making an order requiring him to pay money on account. What I propose to do is to stand it over to a date next week that suits both of you. I think we need to deal with the preliminary issue, and that is whether I ought to strike out the motion for failure to comply with the previous order, or vary that order. I have got in mind doing it on either Thursday or Friday of next week." 23And later: "I am concerned about the matters raised by Mr Zisti in his affidavit of 20 February because prima facie they support a claim for economic duress and raise other issues under the Contracts Review Act. To be quite frank with you I am open to persuasion about vacating the order I made that the money be paid on account, but that is why I am going to require an affidavit of Mr Zisti's financial circumstances to be filed and served. You can leave it until the day before we deal with it. I will give you leave to put on any affidavit evidence by the Thursday and you can make a tactical decision between now and then as to what you want to do." 24The order requiring an affidavit of the defendant's financial circumstances was then made. The judge continued: "The next order is to vacate the hearing on 9 March. The next order is to stand the matter over before me on Friday 16 March 2012 with the applicant/defendant to show cause as to why his motion to set aside the judgment should not be dismissed by reason of his failure to comply with the orders made on 23 January. In the event that the defendant satisfies the Court about these matters the defendant's motion will be heard on16 March in respect of which, and without prejudice to the respondent's position on the show cause hearing, granted leave to serve any affidavit evidence by close of business on 15 March. I reserve the costs of today." Proceedings on 16 March 2012 25Judge Rolfe began by enquiring about the defendant's affidavit of assets and liabilities. A dialogue between the judge and counsel for the defendant ensued in which the judge asked a number of questions as to why certain perceived sources of finance had not been utilised and counsel replied in terms of instructions he had been given. 26His Honour then addressed counsel for the plaintiff as follows: "There's just something going through my mind. Ms Obrart, one thing I'm thinking of doing is giv ing an extension of time for costs previously assessed to be paid, plus the costs which I'll assess for the last time and today. I hear the argument about setting aside the judgment, but if I was satisfied that the judgment ought to be set aside I would make any such order conditional upon compliance with the orders for costs. Do you want to say anything about that type of arrangement? I'll ask you in a moment about the merits issue, but it seems to me your client would be protected because they'd just have to come up with the funds. It seems to me on the face of the affidavit, first of all the man's been honest and he's put forward the situation concerning these assets and it's of assistance to have the valuation. Secondly, he appears to have come to arrangements with other creditors, so your client can't be left in the lurch, at the moment it's a creditor. But it seems to me that that's a way of protecting your client's interests and in fact advancing them over other creditors in the sense that, if I make it a condition of setting aside the judgment that you've got to be paid the costs, then at least your client's not in a disadvantaged position, unless there is some other - is there anything else on foot that might have an impact on that?" 27Counsel for the plaintiff then submitted, referring to a particular document that she proposed to put into evidence, that the defendant had not made a full and frank disclosure of his financial position. That submission was not accepted. Counsel for the plaintiff next referred to evidence of rental income of $1,500 per month and a credit balance of $6,000 in a Commonwealth Bank account and the apparent availability of those resources towards the $20,000 the subject of Order 4 of 23 January 2012. The judge then expressed what was clearly a provisional or tentative view as follows: "But look, there's $6,000 sitting in a Commonwealth Bank account that could have been paid to the plaintiff in terms of part compliance with the order I made. There's just no explanation in his affidavit as to why he wouldn't do that and I think, as a practical matter, what Ms Obrart says is a fair point, that surety, amongst all the members of the family, particularly having regard to the fact there's rent coming in for that apartment and that it's on the market, another $14,000 in the overall scheme of things could have been raised." 28Submissions of counsel were read by his Honour during a short adjournment. Counsel for the defendant also handed up a copy of a case (not identified). Upon resumption, the following exchanges occurred: "HIS HONOUR: Okay. Yes, Mr Korakis. That case that you've handed up, I can't see that that's relevant, that's about security for costs, this is about a costs order that was made. It's a different matter entirely. A security for costs order is an order designed to protect a party in whose favour it is made in relation to costs to be incurred. That order I made was to put the plaintiff in the same position it would have been in if your client had filed his defence on time, which he failed to do. KORAKIS: Yes your Honour. HIS HONOUR: I'm minded not to let him proceed ay further. I'm just not satisfied he's done anything to pay those costs. Looks to me as though he's just thumbing his nose at the Court. KORAKIS: Your Honour, I have these instructions and otherwise I'm in the Court's hands, that the defendant can pay $10,000 in four weeks and otherwise, your Honour, I'm in the Court's hands. HIS HONOUR: Okay. While I appreciate you've satisfied yourself that they are what your instructions are, Mr Zisti would have been fully aware of the significance of the order that I made before and the fact that I gave him one last chance on the previous occasion to explain why he hasn't complied with it, and he hasn't done so. And you've done your best to persuade me to the contrary, but justice has to be done in this case, and it would be unjust from the plaintiff's point of view if I was to let the thing drag on any further." 29A judgment was then delivered. The judgment of 16 March 2012 30His Honour's judgment began in this way: "Before the Court is a notice of motion by the defendant to set aside the default judgment in this matter. As a preliminary issue however, the defendant has been required to show cause as to why the motion should not be dismissed by reason of his failure to comply with orders made on 23 January. Those orders included an order that the defendant pay the plaintiff $20,000 0n account of the order for costs made on that date, with a requirement that the money be paid no later than 13 February" 31The judge referred to aspects of the defendant's affidavit outlining his financial position that, in the judge's assessment, indicated sources from which funds might be obtained to meet the $20,000 contemplated by that order. His Honour said that the defendant had "made no effort at all to meet the order made by the court concerning the payment of $20,000 towards the plaintiff's costs" and that there was "no satisfactory explanation from the defendant before the court as to why he did not use t$6,000 that he had in a Commonwealth Savings Bank "at least to make a contribution to the costs". Then, after referring to other financial resources that appeared to him to be available, the judge said: "The defendant has been dilatory throughout the whole of the conduct of the litigation. The Court has gone out of its way to give him the opportunity to let him defend. However, the defendant's failure to do anything about satisfying the order for costs previously made is nothing less than a contumelious disregard of the orders of the Court." 32Orders were then made dismissing the amended notice of motion filed on 28 September 2011 and requiring the defendant to pay the plaintiff's costs of the amended notice of motion, such costs to be agreed or assessed on the ordinary basis. Consideration and assessment - costs of 30 September 2011 33It is clear that, when Judge Rolfe included the costs of 30 September 2011 in Order 3 made on 23 January 2012, he was not aware that those costs had already been dealt with by Judge Ashford's order of 30 September 2011. Indeed, Judge Rolfe was invited by counsel then appearing for the plaintiff to make an order that the defendant pay those costs and that the costs be assessed on an indemnity basis and be payable forthwith. There was no reference to the order already made by Judge Ashford; nor was there any application for an order vacating it. And there was no reference to or evidence of facts that might warrant departure from the ordinary basis of assessment. 34It seems very likely that the then counsel for the plaintiff had simply forgotten or overlooked the making of the costs order by Judge Ashford. There is no suggestion whatsoever of any knowing concealment. 35It is in my view plain that, had Judge Rolfe been aware of the order made by Judge Ashford on 30 September 2011, he would not have included the costs of that day in Order 3 of 23 January 2012. It is also plain that it lay within the power of Judge Rolfe to correct the matter, had the true position being drawn to his attention. In L v Director-General, Department of Community Services (NSW) (No 2) [1997] HCA 14; (1997) 190 CLR 207, the majority (at 223) acknowledged that reopening is permitted "to allow consideration of a matter accidentally overlooked so that it may be taken into account". And in McCarthy v McCarthy [2010] NSWCA 103, Young JA said (at [25]) that "when a judgment is produced, probably because of the stresses of a busy list, which contains obvious errors, it is the duty of the lawyers involved to go back to the judge within the time for appealing and point out the problems and get them rectified rather than having them used on appeal because it is far cheaper, and so in the interest of the parties, to have such errors corrected at first instance." 36In Re Bruce (1886) 12 VLR 696, the Full Court of the Supreme Court of Victoria said: "We are of opinion ... that the Court of Insolvency, like every other court, or judge of a court, has power to set aside an order made by it or by him upon being satisfied either that the order has been made improvidently, or that facts have been withheld from him which should have been disclosed to him, but which were not disclosed either through negligence or some other cause. Every court and every judge has, we think, power to do that, and to set aside any act of their or his own shown to have been done under circumstances which operated to deprive his mind of the power of exercising a fair judgment of the time." 37That corrective jurisdiction is also exercisable on appeal: Kabat Investments Pty Ltd v Compleat Imports Pty Ltd [2002] VSCA 134. 38It is appropriate that the corrective jurisdiction be exercised in this case by varying Order 3 of 23 January 2012 by omitting the reference to 30 September 2011 so that Judge Ashford's order of that date is left to operate in an unqualified way. Consideration and assessment - costs of 17 November 2011 and 9 December 2011 39The order of 23 January 2012 in respect of the costs of 17 November 2011 and 9 December 2011 not only required that the defendant pay the costs of the plaintiff (and that the costs be payable forthwith) but also that assessment be on an indemnity basis. No specific reason referable to events of those two days was mentioned for that aspect of the order. 40On the first of the two days, Judge Ashford ordered an adjournment because the defendant was not available for cross-examination. Notice that he was required was given on the day the sworn original of the affidavit was served (Tuesday, 15 November 2011) following service of a faxed copy late in the afternoon of the preceding Friday, 11 November 2011. The notice was short, but nor unreasonably short bearing in mind when the faxed copy and original were served. Counsel for the plaintiff also makes the valid point that an applicant moving for an indulgence on the strength of his own affidavit should, in practical terms, take it as likely that he will be required for cross-examination. 41On the second relevant day, 9 December 2011, the application did not proceed because the defendant's attempts to have an interpreter in attendance miscarried on account of the interpreter's last minute illness. 42On 23 January 2012, the attention of Judge Rolfe was not drawn to the circumstances in which the hearings before Judge Ashford scheduled for 17 November 2011 and 9 December 2011 were adjourned. His Honour was informed by the then counsel for the plaintiff that there had been four adjournments and on (or, more precisely, after) two of those occasions the defendant had filed further material. The two occasions in question were 2 September 2011 and 30 September 2011 and it may be accepted that a new affidavit on which the defendant intended to rely was served after each of those days. 43Judge Rolfe, in the passage quoted at [20] above, then apparently accepted a submission that there was a need for "proof of the facts sworn to by the person capable of swearing them in the proceedings" (the defendant, obviously) and that that had not been put before the court "on five occasions" so that everything to that point had been "just a waste of time". 44The impression created by that submission was an inaccurate impression. The defendant's affidavit deposing to relevant facts had been before the court on 17 November 2011 and the defendant, through his counsel, had sought to proceed with the motion on that day. It was because the defendant was not present to meet the plaintiff's reasonable requirement to cross-examine that the matter did not proceed on that day. A similar situation prevailed on 9 December 2011. Again, it seems that the defendant wished to proceed - and he was apparently willing to be cross-examined - but the last minute non-attendance of an interpreter prevented this. 45Costs are in the discretion of the court. An appeal in relation to costs can only succeed on grounds of the kind referred to in House v The King [1936] HCA 40; (1936) 55 CLR 499 at 504-5 including where the judge's decision is affected by extraneous or irrelevant matters or the judge mistakes the facts, acts on a wrong principle or does not take into account a material consideration. 46In this case, the decision that the costs of 17 November 2011 and 9 December 2011 (when the proceedings were before Judge Ashford) should be assessed on an indemnity basis was made by Judge Rolfe on the basis of an incorrect appreciation of the course of proceedings on each of those days. His Honour was under the impression that no affidavit of the defendant deposing to the facts he relied on had been put before the court. That was not the case. Matters that prevented cross-examination of the defendant on just such an affidavit had brought about further adjournment on each of the two relevant days. His Honour may well have been right when he said that "what has happened to now has been just a waste of time". But the basis on which he lay blame for that at the feet of the defendant was not in accord with the facts which, I hasten to say, were not accurately placed before him. 47In these circumstances, the discretionary decision as to the basis of assessment of the relevant costs can be seen to have miscarried. This Court must re-exercise the discretion. 48In relation to the costs of 17 November 2011, assessment on an indemnity basis should stand. The affidavit of the defendant was served only a short time before the hearing. That left little time for the plaintiff to digest the content and decide whether cross-examination would be necessary. The notice the plaintiff gave requiring the deponent for cross-examination was reasonable notice in the circumstances. In any event, where the defendant's own evidence was obviously central to his claim, he should have anticipated that he would be required. He attended instead for scheduled medical treatment. There is nothing to suggest that that was of immediate urgency or that it could not have been arranged for another day. The defendant had known since 30 September 2011 that his application would be listed for hearing on 17 November 2011. 49In these circumstances, the defendant's conduct in relation to the hearing on 17 November 2011 warrants criticism and was unreasonable. It put the plaintiff to expense that could and should have been avoided by the defendant's presence at a court fixture of which he had some seven weeks notice and at which, as he must have known, his evidence would be of central importance. 50In re-exercising the relevant discretion, therefore, I would not disturb the part of the order of 23 January 2012 that required costs of 17 November 2011 to be assessed on an indemnity basis. 51The position in relation to the costs of 9 December 2011 is different. The defendant's conduct in that connection does not merit criticism. He did not act unreasonably in relation to proceedings on that day. Judge Ashford accepted, albeit with some scepticism, that the defendant required an interpreter in order to give oral evidence. Her Honour also accepted that an interpreter arranged by the defendant had become ill at a time when it was not practically possible to obtain a replacement. 52Events relevant to 9 December 2011 were not such as to warrant an order that the costs of that day awarded to the plaintiff be assessed on an indemnity basis. The order should be varied by excising that element of it. Consideration and assessment - Order 4 of 23 January 2012 53Order 4 of 23 January 2011 was, in terms, an order that the defendant pay $20,000 to the defendant "on account of" the costs the subject of Order 3, this being a "condition of" the granting of the adjournment to 9 March 2011 and the grant of leave for the defendant to file and serve by 6 February 2012 an affidavit as referred to in Order 1. 54In the course of the hearing on 23 January 2012, Judge Rolfe stated the intention underlying the order as being that, if the sum of $20,000 was not paid during the adjournment he was about to grant, he would dismiss the defendant's application. The purpose of the order was stated by the judge in a somewhat different way in the course of the hearing on 16 March 2012 (the words were addressed to counsel for the defendant): "That order I made was to put the plaintiff in the same position it would have been in if your client had filed his defence on time." 55On either basis, the requirement to pay the plaintiff $20,000 on account of costs was portrayed as a price the defendant had to pay if he was to be allowed to progress his motion to have the default judgment set aside. 56It is because of that quality of the order that counsel for the defendant in this Court likened it to an order for security for costs. There are, it seems to me, both similarities and differences when one recognises that, although his counsel preferred to portray his client as merely a party responding to the principal claim, the defendant was in reality the moving party throughout the long period after the filing of the motion to have the default judgment set aside. The effect of the order was similar to that of an order for security for costs because it required the defendant, as applicant, to put up money as a condition of being permitted to progress his application. It was unlike an order for security for costs because the money would be irrevocably lost to the defendant whatever might be the outcome of his motion and regardless of the costs order made upon its determination; and because the plaintiff would be the immediate and direct recipient of the funds and would be permitted to keep them regardless of the result of any future facet of the litigation. 57The judge did not specifically resort to any provision of legislation or the rules of court in formulating and making the order. He did, however, make it clear that it was not his intention to make an order for the payment of costs in a specified gross sum pursuant to s 98(4)(c) of the Civil Procedure Act 2005. That is understandable when it is recognised that the order was not an order for the payment of costs but an order for a payment "on account of" costs ordered but not yet agreed or assessed. 58It is useful to set out s 98 of the Civil Procedure Act in full: "(1) Subject to rules of court and to this or any other Act: (a) costs are in the discretion of the court, and (b) the court has full power to determine by whom, to whom and to what extent costs are to be paid, and (c) the court may order that costs are to be awarded on the ordinary basis or on an indemnity basis. (2) Subject to rules of court and to this or any other Act, a party to proceedings may not recover costs from any other party otherwise than pursuant to an order of the court. (3) An order as to costs may be made by the court at any stage of the proceedings or after the conclusion of the proceedings. (4) In particular, at any time before costs are referred for assessment, the court may make an order to the effect that the party to whom costs are to be paid is to be entitled to: (a) costs up to, or from, a specified stage of the proceedings, or (b) a specified proportion of the assessed costs, or (c) a specified gross sum instead of assessed costs, or (d) such proportion of the assessed costs as does not exceed a specified amount." 59Counsel for the plaintiff emphasised that, under s 98(1), costs are in the discretion of the court which has full power to determine by whom, to whom and to what extent costs are to be paid while, under s 98(3), an order as to costs may be made at any stage of the proceedings. 60The question of power to order payment of a specified sum on account of costs yet to be quantified was considered by the Full Federal Court in Keller v LED Technologies Pty Ltd (No 2) [2010] FCAFC 160. In that case, the proceedings had come to a conclusion. A costs order was made in favour of the respondent. The respondent sought, in addition, an order requiring the parties liable under the costs order to make a payment on account, even though the costs had not been taxed. The respondent relied on an English case, Mars UK Ltd v Teknowledge Ltd [1999] EWHC 226 (Pat), but it was clear that the order for payment on account had been made in that case under a rule of court dealing specifically with the question. As Jacob J said (at [3] of the supplementary judgment): "Before the CPR, if costs were sent off to taxation there was no power to order interim payment but now there is such a power." 61In the Full Federal Court, Emmett and Jessup JJ, with the concurrence of Besanko J, noted that there was no like power in the rules of the Federal Court and that they had not been directed to any case in which any such power had been exercised. The order sought was refused. 62The question whether the Supreme Court has power to make an order of this kind was addressed by Campbell JA in Guttershield Systems Australia Pty Ltd v LBI Holdings Pty Ltd (No 2) (2009) NSWSC 1409. In that case, the plaintiffs estimated that their costs in uncompleted proceedings exceeded $150,000 and sought an order that the defendants pay $50,000 immediately. After noting that the application was advanced under s 98 of the Civil Procedure Act and the submission of that counsel for the plaintiffs that that section authorised an order for interim payment of costs, Campbell JA said (at [56] - [57): "[56] I observe that while section 98(4) refers to certain specific types of orders for costs that the Court has power to make, an order for payment on account of costs is not specifically referred to. I also observe that when the Court was given power to make orders for interim payment of damages, by sections 81 to 84 of the Civil Procedure Act, specific power was conferred upon it to do so. [57] I propose to proceed on the basis of assuming, without deciding, that the Court has power to make an interim order for payment of costs." 63In the event and after reviewing the merits, his Honour declined to make the order, saying (at [58]): "On that basis, in my view the circumstances of the present case do not call for the making of any such order. The proceedings have been on foot since 2002. No special reason is put forward for making what is, even assuming that there is power to make it, an unusual order, beyond the fact that costs have been mounting up. I decline to make the order for interim payment of costs." 64In Williamson v Scarano [2012] NSWCA 432, by contrast, this Court accepted without question or discussion the power of the Supreme Court to make an order for the payment of a particular amount on account of costs. It is sufficient to quote the following parts of the judgment of Meagher JA (with whom Hoeben and Ward JJA agreed) at [32] - [33]: "[32] ......The appellant submits that the primary judge did not have power to order him to make a payment of $20,000 to the respondent on account of costs incurred or to be incurred in the proceedings. ...... [33] The primary judge had power to impose the term as a condition of the grant of leave. However, he erred in exercising his discretion to impose such a term because he took into account the wrong consideration identified by the appellant. ......." 65At first instance in those proceedings (Williamson v Scarano [2011] NSWSC 1318), Bryson AJ had made an order as follows: "Leave to amend is granted upon terms that the plaintiff is to pay to the defendant within 28 days of this order the sum of $20,000 on account of costs ordered and any costs to be ordered to be paid by the plaintiff to the defendant in these proceedings, credit to be given by the defendant when final costs orders are made." 66The reasons of Bryson AJ for making this order (at [21] and [23]) were as follows: "[21] I am prepared, subject to terms, to allow the plaintiff to amend so as to allege facts relating to disposition of the property by the defendant, receipt by the defendant of proceeds and the claim to a charge over the proceeds. However, I am prepared to do so only on stringent terms relating to costs. By this stage costs in the litigation must be considerable. The parties had a day in court in August 2010 before White J, the plaintiff was ordered to pay the costs but those costs are not yet payable; enforcement is deferred until disposition of the proceedings. Significant time has passed since then, enough time, with better conduct of the litigation, for the proceedings to have been heard and disposed of. Most of the time lost should be attributed to the conduct of the proceedings on behalf of the plaintiff; time taken to decide to amend and to amend, time taken to produce the plaintiff's affidavit evidence, time taken to produce the plaintiff's next amendment proposal in the face of impending Summary Disposal. ... [23] In my opinion I should grant limited leave to amend on terms which require the plaintiff, if he is to take advantage of leave to amend, first to pay a significant sum to the defendant on account of costs incurred and potentially to be incurred in these proceedings. ..." 67As I have said, this Court accepted without question the power of Bryson AJ to make the order he made. The source of the power was not discussed. It did not arise from s 98 which is wholly concerned with costs, not estimated amounts on account of costs. Nor did the source lie in provisions about security for costs, such as rule 47.21 of the Uniform Civil Procedure Rules 2005. 68It may readily be accepted, however, that the Supreme Court possesses such a power. A superior court of record has an inherent jurisdiction which was held in Rajski v Computer Manufacture & Design Pty Ltd [1982] 2 NSWLR 443 to be sufficient to enable the Supreme Court to order security for costs in circumstances not provided for in the rules of court. An order for security was there made against a plaintiff who was not within any of the categories contemplated by the rules. Holland J said (at 447): "Courts have frequently asserted inherent power to regulate their own practice and procedure to procure proper and effective administration of justice and prevent abuse of process." 69The District Court, however, is a court of limited statutory jurisdiction and not a superior court of record. That being so, the following words of Herron CJ, Wallace P and Manning JA in Ex parte Currie; Re Dempsey (1969) 70 SR (NSW) 443 (at 447), quoted by Kirby P in Palmer v Clarke (1989) 19 NSWLR 158 at 166-167, are apposite: "... The jurisdiction of an inferior court is defined by the Act of Parliament by which it is constituted or such general provisions of statutes which extend such jurisdiction. It is in connection with jurisdiction that lie the chief distinctions between superior and inferior courts. Prima facie, no matter is deemed to be beyond the jurisdiction of a superior court unless it is expressly shown on the face of the proceedings that the particular matter is within the cognizance of the particular court: Halsbury's Laws of England, 3rd ed, vol 9, p 349. Such a tribunal is not invested with those powers which are commonly exercised by courts of supreme judicature such as the Supreme Court of this State or higher tribunals. Such powers have their origin in tradition and their procedures are often dictated by convention." 70In making Order 4 of 23 January 2012, Judge Rolfe did not refer to any power made available to the District Court by statute or the rules of court. But if some relevant power did exist, the fact that it was not explicitly mentioned is beside the point. Rule 2.1 of the Uniform Civil Procedure Rules is in these terms: "The court may, at any time and from time to time, give such directions and make such orders for the conduct of any proceedings as appear convenient (whether or not inconsistent with these rules or any other rules of court) for the just, quick and cheap disposal of the proceedings." 71The transcript shows that Judge Rolfe was concerned about the delay that occurred in the matter and the costs that had consequentially been incurred. His reasons reveal an intention to make an order consistent with rule 2.1. It may therefore be accepted that there was resort to an available power of the court. 72I am nevertheless of the opinion that the particular exercise of the available power should be set aside as being made on a wrong principle: House v The King (above). There are three reasons for this. 73First, the costs "on account of" which the payment was ordered were costs that the court had ordered should be payable forthwith. There was therefore a displacement of rule 42.7(2) which would otherwise have made the costs payable only at the conclusion of the proceedings. Because of the displacing order, it was open to the plaintiff, as the beneficiary of the displacement, to proceed immediately to obtain quantification of the costs through the assessment process and, subject only to that, to register the certificate of assessment as a judgment and to proceed to enforcement accordingly. There was no other or further need to provide assurance for the plaintiff regarding payment of costs. 74Second, such an order may not properly be based merely on what is relayed, as to quantum, by a party's counsel as a figure provided by the party's solicitor. Upon an application for security for costs, it is necessary that the court have before it evidence by reference to which the relevant assessment can be made; and the evidence should be given in the usual way that allows any challenge or testing to be undertaken by the other party. The same principle applies to any other case where the court's decision depends on the formation of an opinion as to the amount of costs incurred or likely to be incurred, such as where a fixed sum costs order is sought: see, for example, Harrison v Schipp [2002] NSWCA 213; (2002) 54 NSWLR 738. 75Third, the order operated, in relation to the defendant's notice of motion, in the same way as an order for security for costs. The defendant, as the moving party on the notice of motion, was, in an immediate sense, akin to a plaintiff and therefore a party against whom security might be ordered. On a broader view, however, the notice of motion was in reality part of the machinery the defendant was deploying to resist the plaintiff's principal claim in the proceedings. 76To the extent that the judge's order had an effect similar to that of an order for security for costs against a moving party, it would have been appropriate to have regard to factors to be taken into account in such a case, particularly where that moving party is a natural person. There was no clear addressing of those factors, although the judge did, in his assessment of financial resources, give some indirect consideration to the question whether the order might stultify the pursuit of the motion. To the extent that the order took effect in a broader way as an order for security for costs made against a defending party, there is an objection of principle since, in general, the ability of a defending party to defend proceedings to which he or she is involuntarily subjected should not be made to depend on the outlay of money. 77Order 4 of 23 January 2012 should be set aside. Consideration and assessment - orders of 16 March 2012 78The order dismissing the defendant's notice of motion was made without any hearing on the merits. Given the nature of the application, it raised two key issues: first, as to why the defendant had not filed a defence within the required time; and second, as to the existence of arguable grounds of defence. 79The judge did not address either of those issues. He failed to do so, moreover, in circumstances where he had, at the immediately preceding hearing on 8 March 2012, observed that the matters in the defendant's affidavit "prima facie support a claim for economic duress and raise other issues under the Contracts Review Act". His Honour had thus recognised that there was at least a possibility that the defendant might show an arguable defence. 80The judgment of 16 March 2012 began in the way set out at [30] above. There was immediate reference to the need for the defendant to show cause why the motion should not be dismissed because of failure to pay the sum of $20,000 on account of costs by 13 February 2012. The judge then stated conclusions that the defendant had made no effort to make the payment, even though he had available to him $6,000 that would have enabled him to make part-payment (and also appeared to have "equity" in properties in the form of a margin between the value and amount secured by mortgage. The particular shortcoming in not resorting to the $6,000 was described as "a contumelious disregard of the orders of the Court" which, coupled with the defendant's dilatoriness 'throughout the whole of the conduct of the litigation" justified dismissal of the notice of motion with costs. 81For reasons I have stated, I am of the opinion that Order 4 of 23 January 2012 should not have been made. On that basis, the decision of 16 March 2012 to let the default judgment stand against the defendant merely because he had not made a payment to the plaintiff and without even the most cursory consideration of the issues central to the defendant's application was a decision reached upon a wrong principle. 82The orders of 16 March 2012 should be set aside and the defendant's notice of motion seeking to have the default judgment set aside should be remitted to the District Court for hearing and determination. Proposed disposition 83I propose orders as follows: 1. Appeal allowed. 2. Vary Order 3 made by the District Court on 23 January 2012 by: (a) omitting "30 September 2011,"; (b) omitting the words "such costs to be paid as agreed or assessed on the indemnity basis forthwith"; (c) substituting for the last-mentioned words "such costs to be as agreed or assessed on the indemnity basis in the case of the costs of 17 November 2011 and the ordinary basis in the case of the costs of 9 December 2011 and, in each such case, to be payable forthwith". 3. Set aside Order 4 made by the District Court on 23 January 2012. 4. Set aside the orders made by the District Court on 16 March 2012. 5. Remit the notice of motion filed by the appellant on 29 August 2011 to the District Court for hearing and determination. 6. That the respondent pay the appellant's costs of the appeal. 84WARD JA: I agree with the reasons of Barrett JA and the orders his Honour proposes. ********** 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. Decision last updated: 06 June 2013