COURT OF AUSTRALIA

Smith v Boné, in the matter of ACN 002 864 002 Pty Ltd (in liq) (No 3) [2016] FCA 1350

ORDERS

THE COURT ORDERS THAT:

1.    Leave be granted to the defendants to file amended interlocutory application dated 19 October 2016.

2.    Pursuant to r 39.05(f) of the Federal Court Rules 2011, the judgment given on 24 April 2015 be set aside.

3.    The proceeding be dismissed with no order as to costs.

Note:    Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

REASONS FOR JUDGMENT

GLEESON J:

1    The defendants seek orders, by consent, setting aside the Court’s judgment made on 24 April 2015 in Smith v Boné, in the matter of ACN 002 864 002 Pty Ltd (in liq) (No 2) [2015] FCA 389.

2    The orders made on 24 April 2015 included the following:

1.    Pursuant to s 588M of the Corporations Act 2001 (Cth), the first defendant pay the plaintiffs the amount of $669,582.86.

2.    Pursuant to s 588FF of the Corporations Act 2001 (Cth), the second defendant pay the plaintiffs the amount of $95,065.41.

3    In support of the application, the defendants relied on two affidavits of Nicholas Christiansen, sworn 5 October 2016 and 19 October 2016 respectively.

Background facts

4    Mr Christiansen’s affidavits disclosed the following facts.

5    Following the entry of the 24 April 2015 judgment, the parties engaged in settlement negotiations in relation to both the judgment and related proceedings between the parties in this Court.

6    On or about 9 June 2015, the parties entered into a settlement agreement. By the terms of that agreement, Mr Boné was to pay the sum of $200,000 in satisfaction of the judgment debt, and the parties agreed that:

4.    Upon payment of the Agreed Sum in accordance with the terms of paragraph 3, the Current Judgment be regarded as being full satisfied including in relation to any costs orders, and the liquidator will co-operate with Mr Boné in taking reasonable steps to obtain a setting aside of the Current Judgment, or alternatively remove any reference that the Current Judgment has not been satisfied in any records maintained by any credit reference agencies.

7    By the agreement, the parties also agreed that certain interlocutory applications filed by each of Mr Boné and Mr Smith (the first plaintiff), and the defendants’ appeal from the 24 April 2015 judgment, would be discontinued.

8    On 28 July 2015, in proceeding NSD1691/2011, the Court made the following order:

1.    Pursuant to section 477(2A) of the Corporations Act 2001 (the Act), Michael John Morris Smith (the Liquidator), the official liquidator of ACN 002 864 002 Pty Ltd (In Liquidation) (the Company) has the approval of the Court to compromise the judgment debts presently owed to the Company by Mr Bone and Valvelink Pty Ltd on the terms set out in the Heads of Agreement document made between the Liquidator, the Company, Mr Barry Henry Bone and Valvelink Pty Ltd dated 9 June 2015 (the Agreement), being annexure A to these Orders.

9    The agreed sum of $200,000 has been paid in full.

Legal framework

10    By r 39.05(f) of the Federal Court Rules 2011, the Court may set aside a judgment or order after it has been entered if the party in whose favour it was made consents.

11    In Deputy Commissioner of Taxation v Leaver [2016] FCA 1028 (“Leaver”), Wigney J set aside a judgment entered in favour of the Deputy Commissioner in circumstances that are analogous to this case. His Honour said:

[10]    It may readily be accepted that the principle of finality of litigation is an important principle and objective of the law. It may also readily be accepted that, in many cases, a court would be unwilling to set aside a final judgment or order unless there were exceptional circumstances. In my view, however, it does not necessarily follow that exceptional circumstances are required in every case before a final order or judgment can be set aside. That is particularly the case where the party in whose favour the order or judgment was made consents. Much will depend on the particular facts and circumstances of the case. Equally, however, it should not simply be assumed that the Court will necessarily set aside a final judgment simply because it is by consent. The Court retains a discretion not to set aside the judgment. There might well be cases where the Court would refuse to set aside a final judgment even though it was by consent.

[11]    This, however, is not such a case. There are sound reasons why, having regard to the particular facts and circumstances of the case, the judgment should be set aside. It may reasonably be inferred that the setting aside of the judgment was an important consideration for Mr Leaver in his entering into an agreement with the Deputy Commissioner in relation to the payment of the judgment debt. One can readily understand why that would be so. The agreement was no doubt facilitated by the willingness of the Deputy Commissioner to consent to the setting aside of the judgment. Perhaps more importantly, the setting aside of the judgment in this matter does not in any way conflict with the important objective of finality in litigation. That is because the orders sought by the parties include an order that, upon the judgment being set aside, the proceeding be dismissed. There will, therefore, be finality. Had an agreement not been reached between the parties, there may well have been ongoing litigation in relation to the enforcement of the judgment.

Consideration

12    In my view, applying the reasoning in Leaver, the following circumstances warrant the exercise of the Court’s discretion to make the orders sought by the defendants:

(1)    the orders are sought with the consent of Mr Smith, the liquidator of the second plaintiff;

(2)    the orders sought will achieve finality in the litigation;

(3)    the defendants agreed to discontinue their appeal on the basis that they would seek to have the judgment set aside by consent after payment of the settlement sum. Having performed the agreement, there is no apparent reason why they should not have the benefit of the orders now sought; and

(4)    the settlement agreement was approved by this Court.

13    Therefore, I will make the orders sought by the defendants.

Associate:

Dated:    18 November 2016