Supreme Court New South Wales Medium Neutral Citation: Agricultural & Rural Finance Pty Ltd v Atkinson [2013] NSWSC 1066 Hearing dates: 5 August 2013 Decision date: 09 August 2013 Jurisdiction: Equity Division - Commercial List Before: Stevenson J Decision: Motion dismissed Catchwords: PRACTICE AND PROCEDURE - judgments and orders - whether jurisdiction to vary orders made by the Court of Appeal or to set aside writs for levy of property issued to enforce such orders - whether writs issued for collateral purpose Legislation Cited: Corporations Act 2000 (Cth) Supreme Court Act 1970 Uniform Civil Procedure Rules Cases Cited: Wardle v Agricultural and Rural Finance Pty Limited [2012] NSWCA 107 Wardle v Agricultural and Rural Finance Pty Ltd; Agricultural and Rural Finance Pty Ltd v Brakatselos (No 2) [2012] NSWCA 388 Wardle v Agricultural & Rural Finance Pty Ltd (No 3) [2013] NSWCA 207 Williams v Spautz (1992) 174 CLR 509 Young v Jackman (1986) 7 NSWLR 97 Category: Interlocutory applications Parties: Agricultural & Rural Finance Pty Limited (plaintiff) Geoffrey Nevell Fredericksen (35th defendant) Nicholas Charles Rowe (75th defendant) Maria Francesca Russo (78th/189th defendant) Jennifer Dianne Wallace (124th defendant) Franco Giannuzzi (149th defendant) Representation: Counsel: C J Bevan S D Epstein SC Solicitors: Evangelos Patakas & Associates (plaintiff) Abadee Dresdner and Freeman Pty Ltd (defendants) File Number(s): SC 2003/92819 Publication restriction: Nil Judgment Introduction 1By an Amended Notice of Motion filed in Court on 5 August 2013 ("the Motion"), the plaintiff ("ARF") seeks to: - (1)vary orders made by the Court of Appeal on 30 November 2012 ("the Restitution Orders") that ARF repay to certain of the defendants ("the Respondents") money the Respondents paid to ARF under judgments entered against them by Einstein J and set aside by the Court of Appeal, to permit ARF, in lieu of making those payments, to provide security for the payments (by a bank guarantee, payment into Court, or otherwise); and (2)set aside Writs for Levy of Property ("the Writs") issued by the Principal Registrar on the application of the Respondents to enforce the Restitution Orders. Decision 2In my opinion, I have no jurisdiction to make the orders sought. If I had jurisdiction, I would not make the orders in any event. ARF's motion must be dismissed. Background 3In these proceedings ARF sues over 200 defendants to recover money it lent them for the purpose of investing in prescribed interests projects relating to the growing of tea trees. 4Einstein J struck out the defences of the Respondents and entered judgment in favour of ARF against each Respondent in the amounts of the money lent. 5On 26 April 2012, the Court of Appeal (comprising Campbell, Barrett JJA and Sackville AJA) set aside each of those judgments and remitted ARF's claims against the Respondents to the Equity Division for further hearing: Wardle v Agricultural and Rural Finance Pty Limited [2012] NSWCA 107. That hearing has not yet taken place. The matter is currently listed for directions on 18 October 2013. 6On 30 November 2012, the Court of Appeal (again comprising Campbell, Barrett JJA and Sackville AJA) made various orders, including the Restitution Orders. The Restitution Orders required ARF to pay: - (1)Mr Fredericksen $36,271.77; (2)Mr Rowe $80,123.14; (3)Ms Russo $80,123.14; (4)Mrs Wallace $31,958.80; and (5)Mr Giannuzzi $100,809.81 (Wardle v Agricultural and Rural Finance Pty Ltd; Agricultural and Rural Finance Pty Ltd v Brakatselos (No 2) [2012] NSWCA 388). 7ARF sought special leave to appeal to the High Court against the Restitution Orders. Leave was refused on 26 June 2013. 8On 10 December 2012, the Respondents made an application seeking to vary certain of the orders made on 30 November 2012 pursuant to the "slip rule" (Uniform Civil Procedure Rules r 36.17). 9ARF contended that, as Campbell JA had since retired, and since it did not consent to the remaining two members of the Court hearing the matter (see Supreme Court Act 1970 ("the SC Act") s 45 AA(1)) the Court of Appeal lacked jurisdiction to deal with the Respondents' application. ARF submitted that the only basis upon which any errors in the orders of 30 November 2012 could be corrected was if those orders were set aside and the question of restitution be reopened and argued afresh. 10On 11 July 2013, the Court of Appeal (now comprising McColl, Barrett JJA and Sackville AJA) rejected ARF's argument, held it had jurisdiction to deal with the matter notwithstanding Campbell JA's retirement, and made minor variations to the 30 November 2012, none of which are relevant to the dispute before me: Wardle v Agricultural & Rural Finance Pty Ltd (No 3) [2013] NSWCA 207. The Writs of Possession 11In the meantime, on 21 December 2012, the Respondents filed Notices of Motion seeking the issue of the Writs to enforce the Restitution Orders. 12The Notices of Motion were supported by an affidavit sworn on 20 December 2012 by the Respondents' solicitor, Mr Malcolm Forsyth, in which he stated that "I believe that the property of the judgment debtor is located" at its "principal place of business" (a rural property near Wauchope) and its "registered office" (an accountant's office in Port Macquarie). 13The Writs themselves were addressed to ARF at the registered office. 14On 27 June 2013, the Sheriff attempted to levy execution of the Writ issued at the request of Mr Rowe at the Port Macquarie address. The Sheriff reported, in a "Notice of Non-Levy", that "[n]o assets belonging to Judgment Debtor Company at given address" and that "Officer unable to execute". 15On or about 29 July 2013, the Sheriff attempted to levy execution in relation to the Writs issued at the request of Ms Russo, Mrs Wallace, Mr Fredericksen and Mr Giannuzzi, with the same result. 16There is no evidence that the Sheriff attempted to levy execution at the Wauchope address. Jurisdiction 17Mr Bevan, who appeared for ARF, submitted that I had jurisdiction to vary the Restitution Orders (notwithstanding the fact that they were made by the Court of Appeal) by reason of s 51 of the SC Act. 18 Subsections 51(1) and 51(2) of the SC Act are in the following terms: - (1) Where proceedings are commenced in a Division but are, under this or any other Act or under the rules, assigned to the Court of Appeal: (a) the proceedings shall be for all purposes well commenced on the date of commencement in the Division, notwithstanding that the proceedings are assigned to the Court of Appeal, (b) the Court of Appeal or the Court in the Division in which the proceedings are pending may, in either case on application by a party or of its own motion, order that the proceedings be removed into the Court of Appeal, (c) upon an order for removal being made under paragraph (b), the proceedings may be continued and disposed of in the Court of Appeal, and (d) subject to any order under paragraph (b) the proceedings may be continued and disposed of in a Division. (2) Where proceedings are commenced in the Court of Appeal but are, under this or any other Act or under the rules, assigned to a Division: (a) the proceedings shall be for all purposes well commenced on the date of commencement in the Court of Appeal, notwithstanding that the proceedings are assigned to a Division, (b) the Court of Appeal may, on application by a party or of its own motion, order that the proceedings be remitted to a Division, (c) upon an order for remission being made under paragraph (b), the proceedings may be continued and disposed of in a Division, and (d) subject to any order under paragraph (b), the proceedings may be continued and disposed of in the Court of Appeal. 19The effect of s 51(1) and s (2) is that if proceedings assigned to the Court of Appeal are commenced in a Division, or if proceedings assigned to a Division are commenced in the Court of Appeal, the proceedings are nonetheless deemed to have been "well commenced" on the date of their commencement. I see nothing in s 51(1) that gives me jurisdiction to decide matters that are within the jurisdiction of the Court of Appeal. 20"Proceedings" means the action itself, whether commenced by a statement of claim or summons (see UCPR r 6.2), and does not include a notice of motion commenced within a set of proceedings. Subsections 51(1)(a) and 51(2)(b) are directed to the position at the time proceedings are "commenced"; that is when the statement of claim or summons is filed. The subsections have nothing to say about the status of a notice of motion filed within proceedings. 21I therefore do not accept the proposition that the effect of s 51(1)(a) is to "validate" the commencement of the Motion in the Equity Division. 22Section 51(1)(b) only empowers me, as a Judge sitting in a Division, to remove "proceedings" to the Court of Appeal. 23The subsection gives me no power to hear "proceedings"; let alone the Motion involving, as it does, an application to vary an order made by the Court of Appeal and set aside Writs issued to enforce that order. 24I do not accept the proposition that a power to remove proceedings from a Division to the Court of Appeal confers jurisdiction to not remove the proceedings and thus to hear the proceedings. Absent jurisdiction to hear the Motion, my power as a Judge in a Division extends no further than to remove the Motion to the Court of Appeal. 25Even if s 51 did have the effect of conferring jurisdiction on me, as a matter of comity, I would be most reluctant to decide matters that are properly for the Court of Appeal. 26In my opinion, the order for remitter made by the Court of Appeal on 26 April 2012 takes the matter no further. Mr Bevan submitted that the order for remitter was made under s 51(2)(b) of the SC Act. I rather think the order was made under s 51(4), which is in the following terms: - "Where any proceedings are pending before the Court of Appeal, the Court of Appeal may, on application by a party or of its own motion, order that the whole or any part of the proceedings be remitted to a Division for the determination by trial or otherwise of the proceedings or any question arising in the proceedings." 27However that may be, what was remitted to the Equity Division was the "further hearing" of ARF's claim against, amongst others, the Respondents. The subject of the remitter was not the entirety of the proceedings before the Court of Appeal. The effect of the remitter was that certain defences agitated by the Respondents were to be redetermined by a Judge of the Equity Division. The remitter did not, in my opinion, carry with it a power for a Judge of the Division to vary an order made by the Court of Appeal; especially one made after the order for remitter. 28The Writs were issued to enforce the Restitution Orders; that is, to enforce orders of the Court of Appeal. 29In my opinion, it follows from what I have said that, just as I have no jurisdiction to vary the Restitution Orders, I have no jurisdiction to deal with the Writs issued to enforce those orders. 30Mr Bevan has pointed out that the Writs are intituled as having been issued in the Equity Division. In my opinion, that cannot affect the substance of the matter, which is that the Writs were issued to enforce an order of the Court of Appeal. 31For those reasons, my opinion is that I have no jurisdiction to deal with the Motion. 32I decline to exercise such power as I have under s 51(1)(b) of the SC Act to remove the Motion into the Court of Appeal. Mr Bevan did not submit I should do so. In any event it would be futile to do so as, in my opinion, the orders sought by ARF should not be made. The Young v Jackman point 33Mr Epstein SC, who appeared for the Respondents, submitted that a further reason why I should not entertain ARF's application was by parity of reasoning with the observations of Young J (as his Honour then was) in Young v Jackman (1986) 7 NSWLR 97 at 101, that (to adopt the words in the headnote at 97): - "The rule that a party found guilty of contempt should not be heard on an application made on his part to a court extends to the case where a party is considered to be prima facie in contempt, such as when the court can see he has disobeyed its order." 34Mr Epstein accepted that this rule is flexible and would not prevent a party from seeking to set aside an order that the party has not complied with, provided there were arguable grounds to do so. However, Mr Epstein submitted that as ARF is seeking to vary, rather than discharge, the Restitution Orders so as to permit it to provide security for the payments to the Respondents (rather than actually make payments) it should not be heard on this application absent payment by it of the monies into Court. 35I do not accept that submission. 36The orders sought by ARF are that the Restitution Orders be varied to permit it to provide security for payment and that: - "[T]he security to be provided by the plaintiff...be...in such form as may be agreed by the plaintiff and the respondents and, failing such agreement, that it be provided to the Court by payment into Court or bank guarantee or in such other form as may be acceptable to the Registrar." 37Two points may be made. First, ARF was proposing a number of bases upon which it provide security, only one of which was payment into Court. Second, and more fundamentally, the circumstances of this case are far different from those in which a party is "prima facie in contempt". ARF has not complied with the Restitution Orders. However, the evidence makes clear that the reason it has not done so was its apprehension that the Respondents (through their solicitor) had agreed that there would be a preservation of the "status quo" pending resolution of ARF's application for special leave to appeal to the High Court, the Respondents' "slip rule" application and ARF's contention that the Restitution Orders should be set aside (see [7] to [9] above). I deal further with the question of this alleged agreement later in these reasons. For present purposes, it is sufficient to say that I am satisfied that ARF, through its solicitor, believed that such an agreement was in place. That is, in my opinion, sufficient to dispose of the contention that the circumstances before me are ones to which the "rule" in Young v Jackman should apply. The merits of the Motion 38In view of the conclusion to which I have come as to my jurisdiction to hear this matter, it is not necessary for me to address the merits of the Motion. However, in deference to the careful arguments put to me by counsel, and because of the matter referred to at [32], I will do so. Setting Aside the Writs - alleged collateral purpose 39Mr Bevan submitted that the Writs should be set aside on the ground that they constitute an abuse of process. The alleged abuse of process is that the Writs were not issued for the purposes of achieving payment of the Restitution Orders but, rather, were issued for the collateral purpose of: - (a)bringing about a rebuttable presumption that ARF was insolvent by reason of execution issued under a judgment being returned unsatisfied: see s 459C(2) of the Corporations Act 2000 (Cth); and (b)avoiding whatever problems might have arisen had the Respondents served on ARF statutory demands under s 459E of the Corporations Act (Cth). 40Mr Bevan submitted that: - "The Writs are part of a subterfuge designed to avoid the statutory demand procedure for winding up ARF." 41In support of these submissions Mr Bevan pointed to the following circumstances: - (a)the Respondents' solicitor, Mr Forsyth, applied to issue the Writs on 20 December 2012 without telling ARF's solicitor, Mr Evangelos Patakas, and in the knowledge that ARF had filed an application for special leave to appeal to the High Court against the Restitution Orders; (b)the matters referred to at [12] and [13] above; (c)Mr Forsyth's statement, in a letter to Mr Patakas of 11 July 2013, that so far as he and his clients were aware, ARF: - "...has never had any business other than its business as the round robin-financier of the failed agricultural investment/tax avoidance scheme which terminated more than 10 years ago", which was said to reveal that Mr Forsyth's affidavit of 20 December 2012 (in which he stated that he believed that ARF had a property located at Wauchope and at Port Macquarie - see [12] above) was "untrue"; (d)the alleged fact that Mr Forsyth "applied to have the writs issued at the registered office in the case of each writ, where there could never have been property available to execute, rather than at the principal place of business, where ordinarily there logically would be property of a corporate judgment debtor available to execute against"; (e)Mr Forsyth's instruction to the Sheriff to attempt to levy execution in relation to the Writs issued at the request of Ms Russo, Mrs Wallace, Mr Fredericksen and Mr Giannuzzi at the end of July 2013 when he knew that, a month earlier, the writ issued at the request of Mr Rowe had been returned unsatisfied; and (f)Mr Forsyth's reference, in correspondence with Mr Patakas on 3 and 7 July 2013, to s 459C of the Corporations Act (Cth). 42As to the matter in [41(c)], I see nothing in the statement made by Mr Forsyth in his letter of 11 July 2013 that could lead to the conclusion that the statement in his affidavit of 20 December 2012 was "untrue". The alleged fact that ARF's only business was as described in the letter is not inconsistent with it retaining assets at either of the addresses nominated in Mr Forsyth's affidavit. 43Mr Forsyth was cross-examined about these matters. 44Mr Forsyth gave this evidence: - "Q. And can I suggest to you that you had no reason to believe that consistently with the statements made in your 11 July letter [referred to at [41(c)] and [42] above], there was any property available to execute at either of [the Wauchope and Port Macquarie addresses referred to at [12] above] on the date of your affidavit? A. I didn't know the position as to the assets or property of ARF. We could only do what we could. Q. You see the real reason for the issue of these writs was there was an expectation on your part that the Sheriff would return a notice of non-execution? A. It seems [sic] to be a good possibility that that would happen. Q. Because the real reason for the issue of these writs was to secure against ARF a presumption of insolvency under 459C(2)(b) of the Corporations Act, wasn't it? A. The reason for the issue of the writs was to try to recover for our clients the money that was due to them, that hadn't been paid and I was under pressure from my clients to seek to recover the money. And this was the most effective way that we could see, to achieve that." 45Later Mr Forsyth gave this evidence: - "Q. And I want to suggest to you that the reason you sent the Sheriff back on the third week of July to execute writs which you knew were not going to achieve satisfaction of the judgment is that... A. No, that's not correct. It was hoped that it would achieve restitution of the judgments by payment by ARF ... Q. I want to suggest to you that the reason you sent the Sheriff back was you wanted to give all of your clients the benefit of the presumption of insolvency that arose from the return of the writs unsatisfied under s 459C(2)(b) of the Corporations Act? A. That is one benefit. Q. I want to suggest to you that that was the only benefit from the issue of writs in circumstances where you knew they were not going to involve any levy of property? A. Its key potential benefit was that it might result in the repayment...of the restitution monies... Q. I want to suggest to you that your principal motivation for issuing these writs was to secure that presumption of insolvency? A. I don't think that is correct as the principal reason. I think the principal reason was to try and obtain the money. I was under pressure from my clients to recover the money. It was certainly an available end result." 46This evidence must be considered in its context. Prior to the making of the Restitution Orders, the Respondents paid to ARF the full amount claimed by ARF from them. The Respondents made those payments under judgments entered against them by Einstein J, which judgments were set aside by the Court of Appeal on 26 April 2012. The Respondents' primary interest was to secure compliance with the Restitution Orders. Unless those orders were complied with, the liquidation of ARF as a result of a deemed insolvency arising under s 459C(2)(b) would be of no avail to the Respondents, even if it resulted in the cessation of these proceedings. The Respondents would, in those circumstances, still be out of their money. 47There is no suggestion in the evidence, and it was not put to Mr Forsyth, that the Respondents, through Mr Forsyth, gave directions to the Sheriff as to how to execute the Writs. The writ issued at the request of Mr Rowe was executed at the end of June 2013 because, at that time, it was the only writ received at the Sheriff's office at Port Macquarie. The writs of the other Respondents were executed later because, for some reason, they arrived at the Sheriff's office at Port Macquarie during July. 48In this context, I have no difficulty accepting Mr Forsyth's evidence as accurately reflecting his, and the Respondents', motivation so far as concerns the Writs. The conclusion I draw is that the Respondents' primary motivation in causing the Writs to be issued was to cause their levy to prompt ARF to comply with the Restitution Orders. I would attribute to the Respondents only a secondary motivation to cause a deemed insolvency to arise under s 459C(2)(b); and then only if ARF did not pay the money it owed them. 49In those circumstances, I see no basis for a conclusion that there has been an abuse of process. In my opinion, the Respondents intended to "obtain a result within the scope of the remedy" in the proceedings and that there was no "impropriety of purpose" even if the Respondents had "an ulterior purpose - or motive - which will be fulfilled in consequence of obtaining the legal remedy which the proceeding is intended to produce": Williams v Spautz (1992) 174 CLR 509 at 535 per Brennan J. Setting aside the Writs - the alleged "stand still" agreement 50Mr Bevan also contended for a "procedural estoppel against execution of the Restitution Orders" arising from an agreement said to have been reached between Mr Patakas and Mr Forsyth in a conversation on 12 December 2012. This matter was listed for directions before McDougall J on that date. The conversation for which Mr Bevan contends allegedly set out the basis upon which the proceedings would be adjourned from that date. 51According to Mr Patakas, it was agreed that there would be "a general adjournment to preserve the status quo". 52Mr Forsyth denied agreeing to an adjournment "to preserve the status quo" and stated that, at all times, he made clear that the Respondents reserved their rights. 53Mr Bevan submitted that Mr Forsyth had "secretly" applied ex parte for the issue of the Writs and did so contrary to the "mutual assumption/agreement" arising from the 12 December 2012 conversation. 54There is some documentary support for Mr Patakas' position. Mr Patakas' file note of the 12 December 2012 conversation refers to ARF only being prepared to "adjourn to keep status quo for both". 55Further, in his letter to Mr Forsyth of 5 July 2013, Mr Patakas asserted that, on 12 December 2012, it had been agreed that ARF's "recovery proceedings" against the Respondents would be adjourned pending the application of ARF's application for special leave to appeal to the High Court: - "...and that your clients who are the subject of the restitution orders would not, therefore, take any action to seek a stay of the said proceedings nor would they seek to enforce the restitution orders". 56I have seen no correspondence from Mr Forsyth disputing this statement. 57However, it is not necessary for me to come to a firm conclusion about the alleged agreement. That is because, assuming there was an agreement or understanding of the kind contended for, and assuming it was breached, I am not able to see how this could lead to the setting aside of the Writs. 58Mr Bevan submitted that, in reliance on the agreement, ARF awaited the outcome of its application for special leave to appeal to the High Court and the proceedings in the Court of Appeal referred to at [10] above and did not take steps "needed to be taken by ARF to secure finance to make the restitution payments". 59However, there is no evidence to support that submission. 60Mr Patakas gave evidence that: - "ARF has in-principle approval for finance to repay the judgment moneys by way of restitution. The funds will be available within four weeks of the date of this affidavit [1 August 2013], I understand. Subject to variation of the Court's orders for restitution dated 30 November 2012, ARF will either pay into a joint controlled moneys account... or into Court the restitution moneys and interest accrued on them by no later than Friday, 30 August 2013." 61That evidence was admitted only as evidence of Mr Patakas' instructions and not as evidence of the matters asserted. 62There is thus no evidence of what steps ARF has, in fact, taken "to secure finance to make the restitution payments", let alone evidence that ARF has taken, or failed to take any steps in reliance on, or by reason of the agreement said to have been made on 12 December 2012. 63In those circumstances, I fail to see how the alleged agreement, or any breach of it can be deployed by ARF to set aside the Writs. Variation of the Restitution Orders 64ARF seeks to vary the Restitution Orders by permitting it to perform the orders either by provision of security, or payment into Court on the grounds that (it alleges): - (a)all Respondents are at risk of having to repay their judgments if ARF succeeds on the matters remitted to this Division for rehearing; and (b)three defendants, including one Respondent (Ms Russo) are guilty of misleading the Court and ARF as to their true financial position or of rearranging their affairs with the intention of defeating any judgment obtained against them by ARF. 65In my opinion, there are a number of reasons why, assuming I had jurisdiction to do so, I would not accede to this application. 66First, any conduct of defendants who are not amongst the Respondents seems to me to be irrelevant. 67Second, so far as Ms Russo is concerned, the evidence reveals no more than that, on 18 May 2010, Ms Russo transferred her interest in a property to a superannuation fund. Mr Bevan submitted that Ms Russo did this during the course of the proceedings before Einstein J "in order to defeat any judgment against her" and only made payment to ARF "after her conduct was brought to the attention of Einstein J by ARF". There was no evidence before me of any of these matters. I know nothing of the circumstances in which Ms Russo transferred her interest in the property and am not prepared to draw any inference adverse to her on the basis of such material as is before me. 68In any event, there is, in my opinion, a more fundamental problem with the application made by ARF. 69The Respondents paid ARF the amounts of judgments entered against them by Einstein J which judgments have now been set aside. 70Campbell JA pointed out in the Court of Appeal's decision of 30 November 2012 (see [6] above) that: - "Orders for restitution, made by an appellate court where the judgment below has been set aside, is a matter of right, not discretion...[Therefore], it is unnecessary to consider whether there was a basis for the Court to make a discretionary decision to make restitution conditional upon the outcome of the remitted hearing". (at [105], citations omitted) 71Now that the judgments against them have been set aside, the Respondents are entitled to be put in the position they would have been in had the judgments not been entered against them. That was the object of the Restitution Orders. 72The Respondents are entitled to be repaid the amounts they paid to ARF under the judgments which have now been set aside. If ARF is successful on the rehearing of its claims against the Respondents then it will obtain a judgment and will have to take the Respondents as it then finds them. 73I see no basis for the variation to the Restitution Orders sought by ARF. If I had jurisdiction to make the orders sought by ARF, I would refuse to do so. Conclusion 74ARF's application fails. The Amended Notice of Motion of 5 August 2013 should be 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. Decision last updated: 09 August 2013