In Clone Pty Ltd v Players Pty Ltd (in liq) (R & M Appted)  HCA 12 (21 March 2018), the issue was whether the power of a court to set aside its perfected judgment extends to:
1. misconduct by the party who succeeded at trial which does not amount to fraud; and
2. where the unsuccessful party failed to exercise reasonable diligence to discover the fraud or misconduct during the earlier proceedings.
Players negotiated an agreement to lease premises that became known and the Planet Hotel from Clone. The agreement to lease provided that “[t]he Lessee will upon expiration or early determination of the Lease transfer to the Lessor any Liquor Licences or gaming machine Licences held in respect of the premises for NIL consideration”.
An issue arose in subsequent proceedings as to whether Players had struck through the word “NIL” when three of its directors executed the agreement to lease, with the result that consideration was payable to it by Clone under the agreement to lease. It sought rectification of the memorandum of lease. The original agreement to lease was not in evidence at the trial but Clone and Players each discovered and tendered a copy. Each copy showed the word “NIL” with a faint line through the letters “NI” and over the top of the word “for”. Clone argued that the line had been made accidentally or mechanically. Clone called evidence that it could not locate any other copies.
During the trial, Clone’s instructing solicitor asked an employee of the Liquor and Gambling Commissioner to search the Commissioner’s files for any copies of the agreement to lease. The employee advised that she had located a copy on a different file to the “Planet Hotel premises file”. Upon inspection of that copy, Clone’s junior counsel noticed a line through the word “NIL”. He did not photocopy it, to avoid it becoming discoverable, and asked the Commissioner’s employee to inform him of any inspection by Players’ solicitors. The Commissioner’s employee complied with that request when Players’ solicitors subsequently inspected the Commissioner’s files but only requested, and were shown, the Planet Hotel premises file. Clone’s principal solicitor then gave a notice to the Commissioner to produce all “Planet files” in the Commissioner’s possession, which the solicitor advised required production of the Planet Hotel premises file only. Nonetheless, another file was also produced to the Court, which included a fourth copy of the agreement to lease.
Clone was successful at trial on almost all issues. Relevantly, the trial judge held that Clone was not obliged to pay reasonable consideration for the licences, in part on the basis of her Honour’s conclusion that the word “NIL” had not been struck through in the agreement to lease. Players appealed to the Full Court, which upheld this conclusion.
After the proceedings concluded, Players learned that Clone knew about the third copy and that the fourth copy had been contained in a file produced to the Court, but was not called upon by Clone. In 2010, Players relevantly brought an application to set aside the judgment and to obtain an order for a new trial. Players argued that the judgment could be set aside on the basis of Clone’s malpractice. Both the primary judge and a majority of the Full Court held that Clone had engaged in malpractice and that its misconduct was a sufficient basis to enliven the Court’s discretionary power to set aside the judgment. A new trial was ordered.
By grant of special leave, Clone appealed to the High Court on two grounds:
1. that the Supreme Court’s equitable power to set aside perfected orders is limited to fraud and does not extend to misconduct; and
2. that the Supreme Court’s power to set aside its perfected judgment on the ground of misconduct was conditional upon proof that, absent the misconduct, the judgment would probably have been different, and the party applying to set aside the judgment exercised reasonable diligence.
The Court held the following:-
1. the general power of a court to set aside its perfected judgment requires actual fraud; and
2. 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.