Setting Aside Judgements and Orders

Setting Aside Judgments and Orders Dr Andrew Greinke 13 St James’ Hall Chambers

1.

The competing general principles involved in reopening, rehearing and setting aside judgments and orders are: 1.1

the private interest in achieving “perfect” justice as between the parties to the proceeding;

1.2

the private and – more importantly – the public interest in the finality of litigation.

2.

It has recently also been recognised that the Civil Procedure Act 2005  (NSW) reinforces the latter consideration, and emphasises the affordable, efficient and timely disposal of matters before the courts as a relevant factor. 1

3.

While the court has a general inherent power to control its own processes, including entry and setting aside of judgments, the following are typical examples of where the court will and will not intervene. This inherent power has also been supplemented and modified by express rules.

Reopening 4.

With leave of the court, a party may reopen its case at any stage of the trial including after the trial has concluded. Whether leave will be given typically turns on the extent of prejudice to the other parties, 2 and an explanation why the evidence was with reasonable diligence was not discovered earlier. 3

5.

Other factors relevant to reopening evidence are: 5.1

where a party believed a particular witness would be called who was not ultimately called at trial; 4

5.2

a defence is raised for the first time during addresses;5

5.3

whether if credible the new evidence would affect the result.6

1

MK & JA Roche Pty Ltd v Metro Edgley Pty Ltd [2006] Ltd  [2006] NSWSC 810 at [94] per Einstein J.

2

Smith v New South Wales Bar Association (No 2) (1992) 176 CLR 256.

3

Re Australasian Meat Industry Employee’s Union (WA Branch); ex parte Ferguson (1986) Ferguson  (1986) 67 ALR 491.

4

Baker v Furlong [1891] Furlong [1891] 2 Ch 172.

5

Burns v Joseph [1969] Joseph  [1969] Qd R 130.

6

Baker v Palm Bay Island Resort Pty Ltd (No 1) [1970] QWN 25.

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6.

Reopening will not be permitted merely to fortify the evidence by calling a witness that might have been made available for the trial, or where the evidence is the result of a deliberate choice by Counsel, rather than inadvertence. 7

7.

The courts take an even more stringent approach to an application to reopen a case so as to make further argument. That is a jurisdiction “sparingly exercised” so as not to “subvert the finality of litigation”. 8 One example where further argument would be permitted is where the court has reached a conclusion of fact or law that the unsuccessful party had no opportunity to argue. The lost opportunity must be through accident and without fault by that party. 9

8.

Other examples where further argument may be permitted are: 8.1

where the authorities on which judgment was determined have been subsequently overruled; 10

8.2

the court proceeded on a clearly mistaken view as to the state of the evidence; 11

8.3

the court proceeded in ignorance of a statutory provision.12

Entry of Orders 9.

There are two stages to the making of the order, the order is “pronounced” when it is given by the court, usually orally, and when it is “entered”, ie formally drawn up and sealed by the court. Unless varied by the rules of court, an order takes effect as soon as it is pronounced, 13 and the “date” of an order is the date on which it is pronounced, even though the filing date will be later.

10.

An order or judgment of the court is taken to be “entered”:14 10.1

if ordered to be entered forthwith, as soon as a document embodying the order is signed and sealed by the registrar;

10.2

otherwise, where it is recorded as entered in a computerised court record system, or otherwise treated as having been entered with the practice of the court. 15

7

Murray v Figge (1974) 4 ALR 612.

8

Autodesk Inc v Dyason (No 2) (1993) 176 CLR 300 per Brennan J.

9

Wentworth v Woolahra Municipal Council (1982) 149 CLR 672.

10

Harrison v Harrison [1955] Ch 260.

11

Smith v New South Wales Bar Association (No 2) (1992) 176 CLR 256.

12

Morelle Ltd v Wakeling [1955] 2 QB 379.

13

Rule 36.4 UCPR ; O 35 r 3 Federal Court Rules . Orders as to costs take effect from the filing of the decision on costs assessment: Rule 36.4(2).

14

UCPR Rule 36.11; compare O 36 r 7 of Federal Court Rules.

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11.

The process of entering or “taking out” orders is also known as “settlement” of orders. Typically the party seeking the formal order will lodge a draft of the formal order with the registry, which then crosschecks the draft against the court file 16 before drawing up the final order and sealing it. This process used to involve making an “appointment” with the registry and attendances from the parties before a registrar. Fortunately modern registries tend to eliminate much of the bureaucracy inherited from 19th century chancery practice.

12.

The formal entry of an order is a significant event as the jurisdiction to reopen, set aside or otherwise recall an order is broader before it is entered than after. Once entered, the interest in finality of litigation strongly militates against any review of a judgment otherwise than by way of appeal. 17

Default Judgments 13.

14.

A default judgment may be set aside: 13.1

as of right if it was irregularly entered;

13.2

otherwise as a matter of discretion of the court.

In assessing irregularity strict compliance with the rules is required. Even the slightest failure to comply with the rules may render the judgment liable to be set aside.18 If found to be irregular the judgment must be set aside and the court will not inquire as to whether any reasonable defence can be shown. Costs are usually ordered against the plaintiff.

15.

The plaintiff might seek to amend a default judgment as a matter of the court’s general discretionary power to amend documents at any stage of the proceeding. Such an amendment could be sought, for example, where default judgment was entered for an incorrect sum.

16.

Where regularly entered the court has an unfettered discretion to review all the circumstances of the case. The most cogent consideration is whether the defendant has an arguable defence on the merits. 19 The court will also take into account the reasons for

___________________________

15

Unfortunately this is a field where the (often arcane) internal practices of particular court registries can play a significant role.

16

Usually the certificate of the associate or the judge’s signature or initials on short minutes handed up during the hearing. There was also a practice of using Counsel’s notes.

17

University of Wollongong v Metwally (No 2) (1985) 60 ALR 68.

18

The order while defective is nonetheless operative and enforceable until such time as it is set aside: DCT  v Abberwood Pty Ltd (1990) 19 NSWLR 530.

19

National Mutual Life Association of Australasia Pty Ltd v Oasis Developments Pty Ltd  [1983] 2 Qd R 441.

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default, any delay in applying to set the judgment aside, and prejudice to the plaintiff. 17.

The defendant will be required to show an arguable defence brought in good faith.20 This usually requires direct evidence by persons who themselves can swear to the facts giving rise to triable issues. An affidavit sworn by a solicitor as to instructions provided by a client is not a sufficient affidavit as to merits. 21

18.

While a draft defence should be annexed, an affidavit made in general terms verifying a proposed pleading will not be a sufficient affidavit as to the merits.

19.

On some applications the court may permit cross-examination on the affidavit as to merits, although such a course might only underscore the triable issues.

20.

The court has wide powers to impose terms on any an order setting aside a default judgment. Such terms will be designed to protect the position of the non-defaulting party. These can include payment in court or security for costs. The court will typically order the defendant to pay the costs of the plaintiff of entering the judgment and the motion to set aside.

21.

There is authority for the view that since an application to set aside a default judgment is interlocutory, repeated applications can be made if initially unsuccessful. 22 This runs contrary to the principle of finality of litigation.

22.

The better view of the law is that a second application to set aside will be an abuse of process unless exceptional circumstances can be shown such as: 22.1

fraud; 23

22.2

the first application was dismissed on a technicality, without a hearing of the issues on the merits; 24

22.3

new evidence has become available which was not available at the time of the first application. 25

20

Evans v Bartlam [1937] AC 473.

21

Yankee Doodles Pty Ltd v Blemvale Pty Ltd [1999] QSC 134.

22

Hall v Nominal Defendant (1966) 117 CLR 423 at 440.

23

Guss v Magistrates Court of Victoria [1998] 2 VR 106.

24

Hewitt v Mirror Newspapers Ltd (1977) 17 ACTR 1.

25

Eddaglide Pty Ltd v Taubert [2000] NSWSC 1226; Christie v Baker [1998] 2 VR 582; Meddings v Council  of the City of Gold Coast [1988] 1 Qd R 528.

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23.

The proper course where an application has been dismissed on its merits is to appeal that decision rather than bring another application.

Before Judgment Entered 24.

The superior courts have an inherent power to control their own process, which includes power to set aside or vary its own orders, whether interlocutory or final. The real issue is when such a power is likely to be exercised.

25.

The courts have a discretion to set aside or vary a judgment before it has been entered. 26 Nonetheless the courts will be reluctant to exercise that power due to the interest in finality and the potential for reopening of the proceedings more broadly. 27 The power will not be exercised to enable some general reopening or review of the case. 28 The power is exercisable by the trial judge and may be exercised on the judge’s own initiative.

26.

The principles here are generally the same as for reopening of a case as discussed above. Examples of intervention by the courts are: ♦

mistake about the state of the evidence;

♦

appeal court’s misunderstanding of trial judge’s reasons;

♦

authorities subsequently overruled (eg by House of Lords, High Court);

♦

fresh evidence;

♦

material misapprehension of the facts;

♦

issue overlooked by Counsel;

♦

ignorance of applicable legislation.

After Judgment Entered 27.

In NSW and also in the Federal Court, there are express powers to set aside a judgment or order even after it has been entered where: 27.1

the judgment was made irregularly, illegally or against good faith (in the Federal Court, “obtained by fraud”); 29

27.2

the parties consent; 30

27.3

the judgment was entered by default (above);

26

Rule 36.16(1) UCPR ; O 35 r 7(1) Federal Court Rules .

27

Autodesk Inc v Dyason (No 2) (1993) 176 CLR 300.

28

State Rail Authority v Codelfa Constructions Pty Ltd (1982) 150 CLR 29.

29

Rule 36.15(1) UCPR ; O 35 r 7(2)(b).

30

Rule 36.15(2) UCPR ; O 35 r 7(2)(f).

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27.4

the judgment was entered in the absence of a party;31

27.5

the judgment was entered in the absence of a party to be added as a defendant to a claim for possession of land (NSW only); 32

27.6

the order was interlocutory; 33

27.7

the order was for an injunction or the appointment of a receiver (Federal Court only); 34

27.8

the order does not properly reflect the intention of the court (Federal Court only); 35

27.9 28.

the “slip rule” applies. 36

While there remains an inherent power for a court to set aside a final judgment based on fresh evidence, this jurisdiction has in practice been subsumed within the appellate process.37 As all appellate courts have a statutory power to receive additional evidence, the proper course where the only  basis for review is fresh evidence is by way of appeal, and not by application to set the judgment aside.

29.

The applicant can show irregularity and illegality without alleging any misconduct. An example would be entering judgment for more than was found to be due by the court, or was in ignorance of payments made, or absence of proper service. 38 Another basis would be the entry of default judgment contrary to an agreement between the parties.

30.

Where the basis to set aside is fraud, the applicant should initiate fresh proceedings so that the allegations of fraud can be properly tried, including provision of full particulars of the fraudulent conduct.39 There is an unresolved question as to whether a judgment obtained by fraud is a nullity ab initio .

31

Rule 36.16(2)(b) UCPR ; O 35 r 7(2)(a).

32

Rule 36.16.(2)(c) UCPR .

33

Rule 36.16(3) UCPR ; O 35 r 7(2)(c).

34

O 35 r 7(2)(d).

35

O 35 r 7(2)(e).

36

Rule 36.17 UCPR ; O 35 r 7(3).

37

Harrison v Schipp (2002) 54 NSWLR 612.

38

Hoskins v Van Den-Braak (1998) 43 NSWLR 290.

39

McDonald v McDonald (1965) 113 CLR 529.

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31.

To set aside on the grounds of fraud the applicant must show that: 31.1

the information would probably have affected the judgment;

31.2

the fraud was not in contest and was only discovered after judgment.

32.

Where both parties consent orders may be set aside provided the court is satisfied that rights of third parties will not be affected.

33.

Orders made in the absence of a party are liable to be set aside as a breach of natural justice. 40 The power of the court is broad and extends to wholly discharging the first order and substituting a different order. 41

34.

This ground applies not only in respect of ex parte  applications, such as urgent injunctions, but even were a party fails to appear after being given proper notice of a hearing. In the latter case, however, the court will require a reasonable explanation for the failure to appear and an evidentiary basis for reopening.

35.

The party bringing the application to set aside need not be the absent party - the party who obtained the order can also apply under the rule. 42 The rule also applies to cross-claimants and cross-defendants, as well as third parties likely to be adversely affected by the orders.43

Interlocutory Orders 36.

The court may at any time revisit and vary or set aside its interlocutory orders. Such an approach does not offend the principle of finality of litigation as interlocutory orders do not create any res judicata  or other estoppels, but the courts do limit the scope to which interlocutory issues can be re-agitated by the parties.

37.

Procedural directions and orders may be revisited and varied at any time where necessary for the proper conduct of the proceeding. 44

38.

Where a matter of substance has been determined on the merits, however, then the abuse of process principle applies. Examples are setting aside a default judgment, staying proceedings or imposing an interlocutory injunction. An applicant seeking to revisit a substantive

40

Cameron v Cole (1944) 68 CLR 571, Re Great Eastern Cleaning Services Pty Ltd [1978] 2 NSWLR 278.

41

Douglass v Gillman (1990) 19 NSWLR 570.

42

Nicholson v Nicholson [1974] 2 NSWLR 59.

43

Hardie Rubber Co Pty Ltd v General Tire & Rubber Co (1973) 129 CLR 521.

44

Wilkshire v Commonwealth (1976) 9 ALR 325.

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interlocutory order will also need to show a ground for reopening the issue, such as: 45

39.

38.1

fraud;

38.2

fresh evidence not reasonably available at the first hearing;46

38.3

a material change in circumstances;47

38.4

breach of a condition of the order or a related order.

There is a widely held view that consent orders cannot be revisited except by the agreement of the parties. This is an incorrect view. Any interlocutory order may be set aside even if made by consent and formally entered. 48 This also applies to interlocutory undertakings formally made to the court.

40.

When an order is made “by consent” or an undertaking volunteered it may indicate a binding agreement between the parties,49 or it may merely indicate that one of the parties took a position that it would not oppose the orders sought by the other. 50

41.

Even if the court finds a binding agreement the ultimate question is what the interests of justice require. In this context the agreement of the parties is merely one factor – albeit an important one – to take into account. 51

42.

Similarly, self-executing orders may be revisited even where time limits have been breached. It is within the power of the court to extend time for compliance with a self-executing order even if made by consent. 52

43.

It was at one time believed that where a self-executing order dismissed a proceeding (for example for want of prosecution) this became a final order not capable of being set aside except by appeal.53 This is now seen as incorrect. 54

45

Brimaud v Honeysett Instant Print Pty Ltd (1988) 217 ALR 44.

46

Chanel Ltd v FW Woolworth & Co Ltd [1981] 1 WLR 485.

47

Adam P Brown Male Fashions Pty Ltd v Phillip Morris Inc  (1981) 148 CLR 170.

48

Mullins v Howell (1879) 11 Ch D 763; Ainsworth v Wilding [1896] 1 Ch 673.

49

Chandless-Chandless v Nicholson [1942] 2 KB 321.

50

Siebe Gorman & Co v Pneupac Ltd [1982] 1 All ER 377.

51

Alford v Ebbage [2003] 1 Qd R 343; Morgan v 45 Flers Avenue Pty Ltd (1987) 11 NSWLR 573; Purcell v  FC Trigwell Ltd [1971] 1 QB 358.

52

Baines v State Bank of New South Wales (1985) 2 NSWLR 729.

53

There was a long line of cases following Whistler v Hancock  (1878) 3 QBD 83, see Freeman v Rabinov  [1981] VR 539.

54

Torrac Nominees Pty Ltd Karabay [2007] NSWCA 96.

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44.

Where an order is made expressly “until further order”, or “until the hearing or earlier order”, even where by consent, such order is usually construed as contemplating that either party to seek to vary or set aside the order.

The “slip rule” 45.

The court has a power to vary an order even after it has been entered under the “slip rule”. 55 The principal matter that needs to be shown is that the error arises from a “slip” or “accidental omission” rather than from a deliberate decision by the judge.

46.

A widely used formula in determining whether the slip rule applies is whether, if the error had been drawn to the attention of the court the error would have been corrected as a matter of course. 56 The rule can only apply where there can be no bona fide  difference of opinion as between the parties. If the correction is controversial then the slip rule is inappropriate. 57

47.

Examples of where the slip rule applies are: ♦

correcting the names of the parties;

♦

correcting the grammar of the order - eg inserting a “not” where accidentally omitted;

♦

correcting the calculation of interest, or including interest where omitted due to oversight of the judge or the parties;

♦

clarification of an order as to costs where ambiguously drafted;

♦

correcting an incorrect date for compliance, or inserting a date for compliance where accidentally omitted;

♦

48.

granting a certificate for Counsel.

The slip rule does not permit supplementary orders on matters not considered or decided at the original hearing. That would be a question of reopening.58

49.

The slip rule acts retrospectively from the date of the original order, so the court will not apply the slip rule where to do so would adversely affect third parties or would otherwise create difficulties. 59

55

Rule 36.17 UCPR ; O 35 r 7(3).

56

Hatton v Harris [1892] AC 5478; Arnett v Holloway [1960] VR 22.

57

Brew v Whitlock (No 3) [1968] VR 504.

58

D’Angola v Rio Pioneer Gravel Co Pty Ltd [1977] 2 NSWLR 227.

59

Permanent Trustee Co (Canberra) Ltd v Stocks & Holdings (Canberra) Pty Ltd  (1976) 15 ACTR 45; 28 FLR 195.

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50.

While preferable to apply to the same judge that made the original order, any judge has power to apply the slip rule. Costs may be imposed on a party if the party was responsible for the mistake or error.

Liberty to Apply 51.

A court may provide for “liberty to apply”, which contemplates that the parties may require the assistance of the court in implementation of the order. The provision for liberty is particularly important when dealing with final orders, which (apart from the situations above) can only be set aside by appeal or the instigation of a fresh proceeding.

52.

A liberty to apply on a final order does not permit a reopening of the issue, but will be limited to questions of practical implementation of the order. 60 A liberty is exercised by bringing a motion within the existing proceeding.

53.

Liberty to apply is implied within interlocutory orders, by their very nature, and is to be implied where an order is expressly made “until further order”. 61 In some statutory jurisdictions (eg family law) parties may be permitted to make any application to vary or discharge a range of particular orders at any time (eg parenting orders, child support).

54.

While liberty to apply is technically unnecessary for interlocutory orders, the usefulness of making such a provision lies in: 54.1

regulation of the manner of the application (eg liberty to apply on notice of “24 hours” or even “one hour”);

54.2

removal of the need to demonstrate by evidence a change in circumstances or fresh evidence as the basis for revisiting the order (although these will be matters relevant to the court’s discretion).

Appeal 55.

Any order of a court, whether interlocutory or final may be revisited on appeal. The issue is typically which path to take. There will be instances where both an appeal and an application to set aside are available. As a general rule of thumb an appeal is more appropriate where the parties’ ultimate rights are at issue, or where an important point of principle is involved.

60

San-Dee Pty Ltd v Farah Constructions Pty Ltd (No 3) [2006] NSWCA 329.

61

Chanel Ltd v FW Woolworth & Co Ltd [1981] 1 All ER 745.

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56.

This is reflected in the rules, which provide for varying or setting aside of interlocutory orders (above), and (in most jurisdictions) requiring leave to appeal from an interlocutory order. 62 Leave is also required to appeal an order entered by consent or as to costs only. 63

57.

The issue of whether an order is final or interlocutory can be a difficult one, to which no single formula has been successfully applied. It turns on the nature of the order, and not the nature of the application giving rise to the order. An order is a final order to the extent that the order finally disposes of the rights of the parties in relation to the principal proceeding. 64

58.

Regard must be had to the legal  rather than the practical  effect of the order. An order dismissing an application to set aside a default judgment is treated as interlocutory even though the effect is final.65 This is because the order maybe reopened by the court in a technical sense, even though in a practical sense such an application may be doomed to failure. Similarly, an order refusing an application to dismiss a proceeding for want of prosecution is interlocutory, but an order dismissing the proceeding is final.

59.

An order for a permanent stay will be final, as will orders dismissing a proceeding or entering judgment with damages to be assessed following determination of a preliminary question or case stated.

60.

When in doubt the prudent course might be to bring an application to seek leave to appeal. An applicant will need to show: 60.1

a prima facie case for error in the original decision; and

60.2

substantial injustice would be done if the decision were to stand.

61.

Wrongness of the decision is not sufficient to show injustice. Something further needs to be shown, which may well be that the decision, while technically interlocutory, finally determines the parties’ rights in a practical sense. 66

62

s101(2)(e) Supreme Court Act 1970  (NSW); ss24(1), 24(1A) and 25 Federal Court of Australia Act 1976  (Cth); compare s 254 Supreme Court Act 1995 (Qld).

63

s101(2)(c) Supreme Court Act 1970 (NSW); s253 Supreme Court Act 1995 (Qld).

64

Carr v Finance Corp of Australia Ltd (No 1) (1981) 147 CLR 246.

65

Hall v Nominal Defendant (1966) 117 CLR 423.

66

Niemann v Electronic Industries Ltd [1978] VR 431.

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Dr Andrew Greinke Barrister [email protected] 13th Floor St James' Hall 169 Phillip Street Sydney NSW 2000 DX 266 Sydney Clerk: Emma Cupitt

Chambers Mobile Fax

02 9335 3091 04 0746 0076 02 9012 0065

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