Paltos v Bartier Perry Pty Ltd (No 3)

1. [1]

   HIS HONOUR: On 1 December 2020, the Court issued orders, which included judgment for the plaintiff. Those orders followed a dispute and discussion as to the most appropriate way to deal with the possibility that, in unrelated proceedings, the plaintiff may be entitled to amounts that, had they been determined prior to the judgment, may have reduced the damages.

2. [2]

   While that occurrence was and is unlikely, it was a possibility, as a consequence of which undertakings were required of the plaintiff to pay any amount received or allowed to him in those unrelated proceedings, being amounts on account of goodwill relating to the partnership or amounts on account of work in progress paid or credited to the plaintiff in these proceedings. [1]

3. [3]

   Following the liability judgment, [2] issues arose in relation to the terms of the orders to be made by the Court and, in particular, whether costs should be assessed on an indemnity basis as a result of an offer of compromise said to have been made on about 28 February 2018. Those issues were dealt with in the second judgment and indemnity costs were ordered on and from 1 March 2018.

4. [4]

   In the course of the second judgment, the Court made an order the effect of which was that pre-judgment interest would be paid in accordance with the rate prescribed in the Supreme Court practice note SC GEN 16.

5. [5]

   In the first judgment, the Court commented [3] that pre-judgment interest "shall be calculated … at the same rate as prescribed for post-judgment interest". While it was the intention of the Court that all of the issues associated with the judgment to be entered, other than liability and the calculation of the judgment sum, could be and was to be the subject of the leave reserved, the issue associated with pre-judgment interest and the rate upon which it would be calculated was not the subject of submissions, prior to the issuing of the second judgment and the issuing of the orders.

6. [6]

   No substantive orders issued with the first judgment. The “orders" that issued with the first judgment were an indication of the judgment sum to be ordered and a direction that a minute of order be filed reflecting the reasons for judgment.

7. [7]

   I make no criticism of either party as to the issue now raised. Each of the parties took the view that, given the comments made by the Court in the first judgment at [437], the minute was required to reflect that pre-judgment interest would be calculated at the same rate as post-judgment interest.

8. [8]

   Further to the foregoing, it should be noted that no party made submissions on the rate that interest should be calculated prior to the release of the first judgment.

Ability to alter orders

1. [9]

   It is necessary to refer, initially, to the provisions of the Uniform Civil Procedure Rules 2005 (UCPR) and, in particular, UCPR r 36.11, which deals with the entry of judgment. The second judgment issued orders and those orders were entered on the day that the judgment issued, namely, 1 December 2020.

2. [10]

   The foregoing results from the fact that the provisions of UCPR r 36.11(2) provides, unless the Court otherwise orders, that the orders are taken to be entered upon their recording in the Court's computerised court record system. On 1 December 2020, the orders issued in the second judgment were recorded on the computerised record and, therefore, entered.

3. [11]

   On 16 December 2020, the plaintiff asked for the matter to be relisted pursuant to the provisions of UCPR r 36.17. The computerised entry of judgments is qualified by the provisions of UCPR r 36.16(3A) which allows the Court, for any reason, to set aside or vary a judgment or order in circumstances where a motion for such variation or setting aside is made within 14 days of the entry onto the computer system and to do so as if the judgment order had not been entered.

4. [12]

   Unfortunately for the plaintiff, although, ultimately as will be seen, it makes no difference, the application, which I take to be a motion, was made outside the 14 day period to which UCPR r 36.16(3A) refers. The 14 day period prescribed in that rule may not be extended. [4]

5. [13]

   As a consequence, the orders issued on 1 December 2020 were entered and must be treated as entered. It is necessary to deal with a general power to set aside or vary a judgment or order both before and after entry. Included in that requirement is the requirement to deal with the variation of reasons for judgment.

6. [14]

   The Supreme Court of New South Wales, being a superior court a record of general jurisdiction, which jurisdiction was declared by the Third Charter of Justice in 1824, has inherent jurisdiction. That inherent jurisdiction was continued by operation of ss 22 and 23 of the Supreme Court Act 1970 (NSW) and is embodied in s 23 of the Supreme Court Act.

7. [15]

   The first judgment was essentially a judgment that was, as a matter of substance, reasons for judgment. As earlier stated, orders were not entered as a result of the first judgment. Rather, the first judgment dealt with principles of liability and the basis upon which, once a minute was filed and accepted, orders would issue and be entered.

8. [16]

   The judgment of the Court, once entered, forms part of the record of the proceedings and, at common law, and absent statutory expansion, forms the basis for certain writs. [5]

9. [17]

   Reasons for judgment do not form part of the record of the Court, although, in relation to courts, or tribunals, other than the Supreme Court, in New South Wales the reasons for judgment form part of the record for the purposes of writs to be issued by the Supreme Court. [6]

10. [18]

    As a consequence of their status as part of the record and the basis for judicial review, there are significant restrictions imposed upon the jurisdiction of a Superior Court, or any Court, to alter judgments, once entered.

11. [19]

    There are, however, two quite distinct periods each of which determines the principles that apply to the alteration of judgments or orders. Prior to the judgment being entered, the circumstances in which a court will be persuaded to entertain further argument (and possibly further evidence) are extremely limited. Nevertheless, there are such circumstances. [7] The High Court has summarised the principle of the following way:

12. [20]

    On the other hand, after judgment has been entered, there are three bases upon which a judgment or order may be reopened and amended. They are:

    1. (1)

       The "slip" rule;

    2. (2)

       The power to amend the rule with the intention of the Court has not manifested in the judgment; and

    3. (3)

       The capacity to allow the opening of orders made in chambers. [9]

13. [21]

    In DJL, supra, the High Court [10] said:

14. [22]

    The principles that apply to alteration of the reasons the judgment were the subject of comment by the Victorian Court of Appeal, which said:

15. [23]

    Further, the inherent jurisdiction of the Court was dealt with by the Court of Appeal at length. [12]

16. [24]

    As a consequence of the principles outlined above, it was, it seems, open to any of the parties to deal with the issue of the rate at which interest will be calculated prior to the making of orders or the entry of orders and, therefore, prior to the issuing of the second judgment on 1 December 2020. Neither party exercised that opportunity.

17. [25]

    Initially, the plaintiff sought to vary the orders made on 1 December 2020 on the basis of the "slip" rule, submitting that the order was a clerical or administrative error. During the course of discussion, it seemed that, in truth, the plaintiff was relying upon the orders not manifesting the intention of the Court as originally adumbrated. For present purposes the difference in reliance matters little.

18. [26]

    The defendant opposes the alteration on the basis that it is not a “slip". If the intention of the Court was to give effect to a final view outlined in the first judgment by the issuing of the orders on the second judgment, there was no "slip".

19. [27]

    If the statement as to the interest rate was a final view then the orders issued on 1 December 2020 did not manifest the intention of the Court expressed in the first judgment. I apply the principles already described in determining the issue before the Court.

The original intention of the Court

1. [28]

   A check of the Court’s notes reveals that the initial statement as to the pre-judgment interest rate being the same as the post-judgment interest rate was intended to reflect the fact that there should be no differential between pre-judgement interest rate and post-judgment interest rate, because each was, on the face of it, covered by the provisions of Clause 5.1(f) of the Put and Call Option Agreement. That provision is in the following terms:

2. [29]

   As has been remarked on a number of occasions, the Put and Call Option Agreement, and the other documents relating to the Partnership, are not well drafted. Nevertheless, there is a definition of "Internal Debt Amount" and it is defined as "the amount of any debt owed by a Business Entity to any of the parties to this Deed or to any Associate of a party to this Deed".

3. [30]

   A Business Entity, as a term, is also defined and is the Partnership. Utilising the ordinary rules of construction, reference to which has been provided in the previous judgments in this matter, it would seem that the amount that is required to be paid under the provisions of Clause 5 of the Put and Call Option Agreement are included in the term "Internal Debt Amount" and the amount that was payable on the 30th day after the six month period, if not paid, was required to be the subject of interest, calculated daily, at the rate payable by the Partnership on its overdraft.

4. [31]

   As a consequence, the loss occasioned by the failure to exercise the option, and give notice of its operation, was a loss that included the interest that was required to be paid on the amount, at least between the Completion Date and the date of judgment.

5. [32]

   Having clarified the intention of the Court, it is necessary to deal with whether it is appropriate to vary the orders that issued on 1 December 2020.

The overdraft interest rate

1. [33]

   There is no evidence before the Court as to where the majority of the Partnership's accounts were held. There is evidence that there was an overdraft with Westpac and the evidence of banking seems to have involved bank accounts with Westpac. I draw the inference that Westpac is the bank at which the Partnership accounts were held or a majority of them.

2. [34]

   I also draw the inference that the overdraft of the Partnership was not secured on the residential premises of either one of the partners. An examination of the publicly available interest rates for overdraft lending that are provided by banks, albeit on average, and published by the Reserve Bank of Australia discloses that, on average, the overdraft lending rate, unsecured, is approximately 4.4% above the cash rate and has, historically, been at that rate or about that rate since at least 2016.

3. [35]

   The rate prescribed for pre-judgment interest under the Practice Note [13] is 4% above the cash rate. While there is a minor discrepancy that discrepancy may be as much a result of the line of best fit the Court has utilised in deriving the figure of 4.4% to which earlier reference has been made.

4. [36]

   Further, it may be that one of the other overdraft rates was used, being one that related, for example, to larger businesses, or that a rate was fixed by the lending institution on the basis that the amount was secured, given the level of trust funds that no doubt were deposited as a result of the operation of the Partnership.

5. [37]

   Whatever be the circumstance, it seems that the difference between the pre-judgment lending rate and the overdraft rate to which Clause 5.1(f) of the Put and Call Option Agreement relates is not such that the Court ought to order a rate other than that prescribed in the Practice Note, notwithstanding the provisions of Clause 5.1(f) of the Put and Call Option Agreement.

Conclusion

1. [38]

   As a consequence of the foregoing, and notwithstanding that the orders issued and entered on 1 December 2020 did not manifest the stated intention of the Court's reasons for judgment in the first judgment, it is inappropriate for the Court to alter the judgment issued and entered on 1 December 2020.

2. [39]

   I am grateful to the parties for having raised the issue. The Court makes the following orders:

   1. (1)

      Motion dismissed;

   2. (2)

      No order for costs.