Supreme Court New South Wales Medium Neutral Citation: Power v Bassett [2018] NSWSC 1266 Hearing dates: 14 August 2018 Date of orders: 14 August 2018 Decision date: 14 August 2018 Jurisdiction: Common Law Before: Campbell J Decision: I refuse the order for payment by instalment Catchwords: CIVIL PROCEDURE – Application for order for payment by instalment of judgment debt – whether an instalment order should be made - court's discretion – financial restructure – earning capacity – suspended builder's licence – amount offered – interests of justice Legislation Cited: Uniform Civil Procedure Rules 2005 (NSW), r 37 Cases Cited: Bendigo and Adelaide Bank Ltd v Young [2012] VCC 55; Hellier Capital Pty Ltd v Richard Albarran [2009] NSWSC 403; SRG Civil Pty Ltd v Brolton Group Ltd [2018] NSWSC 618 Texts Cited: Nil Category: Procedural and other rulings Parties: Bianca Power (Plaintiff) Matthew Bassett (Defendant) Representation: Counsel: M Klooster (Plaintiff/judgment creditor) K McLean (solicitor) (Defendant/judgment debtor) Solicitors: K McLean (Defendant/judgment debtor) File Number(s): 2018/176840 EX TEMPORE Judgment - Revised 1. I am dealing with an objection to an order made by the Registrar under r 37.3 of the Uniform Civil Procedure Rules 2005 (NSW) refusing the judgment debtor's application for an order that he pay the judgment debt by instalments. The judgment creditor opposes the making of any such order. The judgment creditors were the plaintiffs in civil proceedings in the District Court arising out of a building contract with the judgment debtor. The subject matter of the contract was the performance of works at their Seaforth home. The parties fell into dispute which was litigated in the District Court. The dispute was determined by reference out, and judgment was entered in favour of the judgment creditor for damages in the sum of $140,509. That judgment was entered on 26 October 2016. 2. Orders were entered on the judgment debtor's cross-claim and costs orders were entered in favour of the judgment creditors with an apportionment in favour of the judgment debtor in the sum $45,000. The judgment debtor disputed the costs which were then referred for assessment. The first instance assessor assessed the costs after allowing for the apportionment in the sum of $300,081.76 (including the costs of the assessment). Judgment was entered in that amount in this Court on 24 November 2017. 3. As he was entitled to do, the judgment debtor filed an application for review. The decision of the review panel is contained in a certificate of determination ("the certificate") dated 5 May 2018 which was published on 22 May 2018. The outcome was little different, the judgment creditors costs were assessed at $299,772.07. I allow myself the observation that it is a regrettable feature of the conduct of civil litigation in this State that so often the costs of enforcing civil rights exceed, often by a large measure, what is at stake in the dispute. I make no criticism of the present parties. I simply make the comment. 4. Judgment was entered by the filing of the certificate in this Court on 6 June 2018. The judgment debtor made an application to the Registrar for an order that he satisfy the judgment by instalments. 5. The proposal that has been put forward is in terms that the judgment debtor pay an amount of $275 per week for an interim period of 6 months to enable him to take legal and financial advice with a view to, if possible, undertaking a financial restructure of some kind which may enable him to pay-off the judgment debt in the short term. If he is unable to achieve that within 6 months he proposes that he would pay $25,000 as a lump sum in or about January 2019. I infer that it is put with that degree of uncertainty because what he really means is that at the expiration of a 6 month period from the date of the order, if any, made in his favour. At that time he would put forward a further proposal. I stress that what is being proposed at the moment is very much an interim measure. 6. The affidavit evidence which has been prepared on his behalf by his solicitor, Ms McLean, who appeared before me today and ably presented the judgment debtor's case, shows that he is a carpenter by trade. He is also the holder of a builder's licence. I note, however, that it is subject to a condition or endorsement that he is only licensed for contracts not requiring home warranty insurance. His licence is now suspended because of the non-payment of the judgment debt. This limits his capacity to generate income in his own business and he has fallen back on his primary trade as a carpenter working for wages or perhaps, from time to time, as a subcontractor. Ms McLean submits that this has limited his earning capacity. 7. She also informs me that if the Court makes an order for payment by instalments the judgment debtor will be able to apply to the Department of Fair Trading ("the Department") for the dissolution of the suspension. Ms McLean submits that even if the whole amount is not paid, if an arrangement has been entered into to secure that result, the Department has discretion to lift the suspension. 8. The judgment debtor has provided a statement of his financial position showing his income and outgoings, and assets and liabilities. He is currently earning apparently about $1,800 per week (after tax) which is not surprising given his experience and qualifications as a tradesman. His weekly outgoings are about $750 per week leaving about $1,050. These details are not fully explained. 9. So far as assets are concerned, he and his partner are the joint owners of a home unit on the Northern Beaches which he values currently at $750,000. It is subject to a mortgage to the National Australia Bank in the sum of $350,000. 10. I have taken a different approach from the judgment debtor in assessing his net worth. If one takes away the mortgage, one is left with $400,000 which should be divided equally between the co-owners. He also owns a motor vehicle valued at $20,000 and his share of the contents of the home which he puts at $15,000. It seems to me that the latter two assets are not likely to be available given he will need a motor vehicle to work as a tradesman and there is no real market for second-hand household content, unless of a rare or otherwise valuable kind. 11. Apart from the mortgage, there is also a credit card debt of $61,000. This would leave only about $140,000 as his net worth if he could either re-finance, which may not be easy in the current climate, or even if he sold the home unit and fully achieves his estimated value. That falls a long way short of the amount of the judgment debt currently owed. Obviously, his partner's share aggregated with his would cover the debt if the estimated value of their equity is realised but there is no legal reason of course why she should feel compelled to do that and there is no affidavit from her suggesting that she is. 12. Ms McLean and Mr Klooster of counsel, who appears for the judgment creditors have drawn my attention to the relevant authorities which explain the principles upon which the discretion vested in the Court is ordinarily exercised. I do not propose to be either exhaustive or comprehensive in my treatment of these authorities. The relevant considerations are explained by Natalie Adams J in SRG Civil Pty Ltd v Brolton Group Ltd [2018] NSWSC 618 ("SRG v Brolton"). Her Honour having reviewed the authorities in her characteristically comprehensive manner identified a primary principal (at [70]) in these terms: "It is clear that whilst a number of factors are relevant to determining whether an instalment order should be made, the primary issue for the Court is whether such an order will be more conducive to [the judgment creditor] obtaining full satisfaction of [their] judgment debt in a reasonable time". I note in passing, although the facts are not material, that in that case the judgment was for nearly $2,000,000 and the proposed instalments were of $150,000 per month. Her Honour made the order for the payment of judgment by instalments. 1. I am also referred to the case of Bendigo and Adelaide Bank Ltd v Young [2012] VCC 55 a decision of his Honour Judge Anderson of the County Court of Victoria. His Honour pointed out there that if the judgment debtor were bankrupted his ability to conduct his business would be severely affected and, in the circumstances, it will be unlikely that he would have the capacity to satisfy the judgment. His Honour observed (at [11]): "If the purpose of the legislation is primarily to ensure the payment of judgment debts, I consider this is best achieved by confirming the instalment order previously made by the Registrar. It is likely that this will result in the payment of the judgment debt over a period of approximately two years". In that case the judgment was in the sum of $100,000 and the amounts of the instalments were $4,300 per month. 1. In Hellier Capital Pty Limited v Richard Albarran [2009] NSWSC 403 ("Hellier Capital") McDougall J pointed out (at [11]) that it would not ordinarily be a proper exercise of the discretion to make an instalment order if the amount proposed to be paid would not enable some reduction to be made in the amount of the judgment debt. His Honour used the descriptive expression of an instalment order merely chipping away at part only of the interest obligation without achieving any reduction of the principal amount of the judgment. Orders of this type are inefficacious. 2. In Hellier Capital the judgment debtor was an insolvency practitioner, a partner in a firm of insolvency practitioners. The most likely way of enabling the debt to be paid was to permit him to continue in his practice. A bankruptcy order would certainly have disqualified him from practicing as a partner in a firm of chartered accountants. It may also have precluded him from practicing at all. In those circumstances the amount due to the judgment creditor of about $1,600,000 million would not be paid. In those circumstances, his Honour made an order for payment by instalments in an amount which would see the judgment debt paid off within a period of four or five years. 3. The discretion I have to exercise is effectively at large although it is clear that, as Adams J said, the primary purpose is to procure the payment of the judgment debt while at the same doing justice between the parties. There is an important public interest, as McDougall J pointed out, in judgment creditors being able to secure the fruits of the judgment quickly. It is an important to the Rule of Law that curial adjudications are effective. This maintains order in our society and discourages attempts at self-help in debt recovery. 4. I fully appreciate that the judgment debtor's proposal is put forward on an interim basis and that he is hoping for something better to turn up. However, I must say with respect to the very capable argument put to me today, the judgment debtor's attitude is marked by a high degree of Micawberism. 5. As Mr Klooster pointed out, and I think these considerations of delay are relevant to the decision I should make: the costs order was made as long as ago as December 2016; the primary assessment was made in November 2017; and judgment in the Court was entered on 6 June 2018. 6. There is no evidence of the steps the judgment debtor has taken to obtain the requisite legal and financial advice of which he speaks (apart from instructing Ms McLean) to enable a real proposal for reduction of the judgment debt within a reasonable time to be put together. The amount proposed of $250, per week taking the judgment debtor's own figures at face value, is somewhat less than I would think he can afford to pay from his income if it is indeed the case that, after payment of all outgoings, he has $1,050 per week left over from his net salary. As Mr Klooster has pointed out, this is a case where what is proposed, even if it is only an interim measure, does no more than chip away at the interest and even then not very effectively. The current rate of judgment interest is 7.5 per cent. On this debt that means interest is accruing at about $22,000 a year, or $432 per week. What is proposed even on an interim basis is simply not encouraging let alone satisfactory. 7. I understand that, at the moment, the judgment debtor is not here in court today because he is engaged in an employed capacity on a yacht involved in a race to Great Keppel Island and he is not readily contactable. I do have to allow myself the observation that he perhaps has not addressed this matter with the degree of urgency that his situation requires. Moreover, the evidence discloses that he sold other property to pay the damages to which the judgment creditor was entitled leaving him with a sum of about $150,000 leftover. There is no explanation in his affidavit of what became of that money. 8. I am not satisfied that the interests of justice require me to accede to the proposal that is put forward for payment by instalments on an interim basis. I appreciate the force of Ms McLean's argument which has found favour in the cases to which she has referred that allowing payment by instalments may enable the judgment debtor to have the suspension of his licence dissolved and to fully engage in business as a builder which would probably increase his capacity to pay-off the debt. But frankly what is proposed does not give me confidence that the debt can be paid off within a reasonable time. I am not satisfied that this particular proposal is the most efficacious manner of ensuring that the judgment debt is paid within a reasonable time. I refuse the order for payment by instalment. ********** 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: 21 August 2018