Case: Chesson v Smith (1992) 35 FCR 594
Outcome: considered
Some decisions involving the application of s 40(1)(g) have involved circumstances in which a costs order has been made in an interlocutory application and the question as to whether the " cross-claim, set-off or cross demand " sought to be relied upon could have been raised in that interlocutory application. Notwithstanding the interlocutory nature of a proceeding, reliance in such cases is placed upon s 40(3) of the 1966 Act which relevantly provides as follows: For the purposes of paragraph (1)(g): ... (b) a judgment or order that is enforceable as, or in the same manner as, a final judgment obtained in an action shall be deemed to be a final judgment so obtained and the proceedings in which, or in consequence of which, the judgment or order was obtained shall be deemed to be the action in which it was obtained; ... One such decision is Re Gould; Ex parte Skinner (1983) 72 FLR 393. An application had there been made for an interlocutory injunction to restrain the sale of property. That application failed because there was a failure to establish that an undertaking as to damages would have had any substance. The cross-claim or set off was there said to be a claim for damages for breach of an obligation as encumbrancee to exercise reasonable care with respect to the sale of the property. That cross-claim or set-off, Fitzgerald J held, could not have been set up in the action seeking the interlocutory injunction. His Honour concluded (at 407 8): It was not in dispute before me that the order for costs upon the dismissal of the application for an interlocutory injunction in Queensland Supreme Court action No 1473 of 1982 is one which is enforceable as or in the same manner as a final judgment obtained in an action in that Court. The order for costs is therefore deemed by s 40(3)(b) of the Act to be a "final judgment so obtained", that is, a "final judgment" obtained in an "action". However, s 40(3)(b) of the Act does not stop there; the "action" is identified. For the purposes of s 40(1)(g), the statutory fiction effected by the deeming is extended to convert the "proceedings" in which the order was in fact obtained into the "action" in which the notional "final judgment" was obtained. In my opinion, the test in such circumstances called for by s 40(1)(g) of the Act is to ascertain not whether the cross demand could have been set up in the Supreme Court action No 1473 of 1982, but whether it could have been set up in the deemed action, the proceeding in which the order for costs was made, that is, the application for an interlocutory injunction in that action. The answer is clearly negative. ... Another comparable decision is Chesson v Smith (1992) 35 FCR 594. An application had there been filed in the Supreme Court of New South Wales seeking leave to commence proceedings under the De Facto Relationships Act 1984 (NSW) out of time. The application was dismissed with costs. A certificate of taxation issued and, subsequently, a bankruptcy notice. It was accepted that there was a cross demand which exceeded the debt. But it was not a cross demand which could have been set up in the " proceeding ", that " proceeding " either being the application for the interlocutory order for leave or the application for the costs order in that interlocutory application. 34 In the present Application there was a lack of precision in the identification by the Applicant of the " action or proceeding in which the judgment or order was obtained ". At the outset of oral submissions it was contended that the " action or proceeding " was to be found in the Supreme Court proceedings and was either: (i) the claim for declaratory relief, together with costs; or, more narrowly (ii) the claim for the costs order. An analogy was sought to be drawn between the interlocutory nature of the " proceeding " before Hall J in the Supreme Court and the decisions in Re Gould and Chesson v Smith . The narrower the identification of the " proceeding ", the easier the Applicant contended it was to conclude that the claim in respect of losses could not have been set up as an answer. A more broadly phrased submission advanced on behalf of the Applicant in his written submission was that " where an order for costs is made on an interlocutory application within other proceedings, that interlocutory application is itself deemed to be the action in which the relevant order is obtained (see s40(3)(b)) ". By the end of oral submissions, however, the Applicant contended that the " action or proceeding " was: (iii) the " proceeding " in the District Court whereby judgment was entered for the sum of money assessed in the Certificate of Determination of Costs .