Clone Pty Ltd v Players Pty Ltd: High Court Allows Appeal to Set Aside Retrial of 12 Year Old Case

“The essential questions in these appeals are whether the power of a court to set aside its perfected judgment extends to each of the following circumstances:  (i) misconduct by the party who succeeded at trial which does not amount to fraud; and (ii) where the unsuccessful party failed to exercise reasonable diligence to discover the fraud or misconduct during the earlier proceedings. 

The answers to each of these questions are as follows.  First, the general power of a court to set aside its perfected judgment requires actual fraud, although there are other discrete grounds to set aside a perfected judgment which were not in issue in these appeals.  Secondly, it is not a precondition to the exercise of the power that the party seeking to set aside the judgment exercised reasonable diligence to attempt to discover the fraud during the earlier proceedings. 

In their applications to set aside the Supreme Court's perfected judgment, the first to fourth respondents did not allege or prove any fraud by the appellant.  Therefore the appeals must be allowed.”

1. whether Clone had consented to the removal of the hotel licence and the surrender of the gaming machine licence;
2. if Clone had consented, the conditions of that consent and whether they had been satisfied;
3. if Clone had not consented, whether Clone was obliged to pay reasonable consideration to Players for the licences upon determination of the lease;
4. whether Clone had validly terminated the memorandum of lease before its expiry for breach by Players, including issues concerning four notices to remedy various alleged breaches and whether those breaches had been remedied within the time stipulated; and
5. if any breach had been committed by Players which would have entitled Clone to terminate the memorandum of lease, whether Players should be granted relief against forfeiture.

“After a 29-day trial, the trial judge upheld Clone's claims in relation to all of the issues set out above, except in relation to one of the breach issues.  It was unnecessary to determine the fifth issue, namely whether Players was entitled to relief against forfeiture, because her Honour had found that one of the breaches of the memorandum of lease committed by Players was incapable of being remedied.  Her Honour also dismissed all of Players' counterclaims.  Players was ordered to deliver up the licences to Clone, declared to be liable to transfer the licences to Clone, and ordered to pay damages.”

“Players' case of malpractice was threefold.  First, Players alleged that Clone had breached an obligation to discover the third copy of the agreement to lease.  Secondly, Players alleged that Clone had misled the Court and had misled Players by failing to inform them of the existence of the third copy of the agreement to lease and by prosecuting a case on the false premise that the provenance of copies of the agreement to lease was unknown.  Thirdly, Players alleged that Clone had breached an obligation to disclose to Players the Commissioner's production of the files to the Court under the April 2005 notice to produce.”

• “the Supreme Court's equitable power to set aside perfected orders, outside a statutory appeal, is limited to fraud and does not extend to forms of malpractice not amounting to fraud” (paragraph [41]).
• “the Supreme Court's power to set aside its perfected judgment on the ground of malpractice not amounting to fraud was conditional upon proof of various matters which essentially required that (i) but for the serious malpractice the irregularly obtained judgment would probably have been different, and (ii) the party applying to set aside the judgment had exercised reasonable diligence” (paragraph [42]).

“The general power to set aside a judgment on the ground of fraud required actual fraud.  The "essence of the action [was] fraud".  The general ground of fraud was not diluted to allow, for instance, the judgment to be set aside for misconduct, accident, surprise, or mistake.”

“Such a requirement is not present in other areas of the law concerned with fraud.  As Brennan J said in Gould v Vaggelas, "[a] knave does not escape liability because he is dealing with a fool".  The effect of such a requirement would be that a judgment might be set aside for a less serious, but well concealed, fraud but the judgment could never be set aside for an extremely serious but brazen fraud that could reasonably have been detected. 

The requirement is also inconsistent with the sharp historical distinction between an original bill to set a judgment aside for fraud and a bill of review.  Reasonable diligence was never a requirement of an original action based upon fraud to set aside a judgment.  It was only ever a condition for leave to be granted for a bill of review based on fresh evidence, where the fresh evidence could relate to any subject matter.  But it was not a condition where the bill of review was based on some error of law."

“In the Full Court, Players submitted that a strict approach to the requirements for a court to set aside its own perfected judgment, which confined the general power to fraud, would have an absurd consequence.  It would mean that misconduct that is discovered before an appeal might be sufficient for the appellate court to order a new trial but if discovered after the appeal then it would not be sufficient.  There is nothing absurd about this consequence.  As Debelle AJ correctly observed in the Full Court, the submission ignores the interest of finality in litigation.  As five members of this Court said in Burrell v The Queen, the interest of finality means that "[l]ater correction of error is not always possible.  If it is possible, it is often difficult and time-consuming, and it is almost always costly."  Even then, if the misconduct amounts to fraud, equity supplies a narrowly defined exception to the principle of finality that permits rescission of a perfected judgment by the original court even after the appeal process has been concluded.”