Berrigan Shire Council v Ballerini & Anor

[2005] HCATrans 856

[2005] HCATrans 856

IN THE HIGH COURT OF AUSTRALIA

Office of the Registry
  Melbourne  No M86 of 2005

B e t w e e n -

BERRIGAN SHIRE COUNCIL

Applicant

and

JASON IAN BALLERINI

First Respondent

FORESTRY COMMISSION OF NEW SOUTH WALES

Second Respondent

Summons

HAYNE J

TRANSCRIPT OF PROCEEDINGS

FROM SYDNEY BY VIDEO LINK TO MELBOURNE

ON THURSDAY, 13 OCTOBER 2005, AT 2.00 PM

Copyright in the High Court of Australia

MR P.R. GARLING, SC:   May it please the Court, I appear for the applicant with my learned friend, MS K.C. MORGAN.  (instructed by Phillips Fox)

MR F.D. SACCARDO, SC:   If it please the Court, I appear with my learned friend, MS S.L. KEELING, on behalf of the respondent.  (instructed by Maurice Blackburn Cashman)

HIS HONOUR:   Yes, Mr Garling.

MR GARLING:   If the Court pleases, I move on a summons of 23 September 2005 seeking an order of the Court that the judgment below of the Supreme Court of Victoria dated 1 September be stayed pending further order, that is to say until the disposition of the proceedings by way of application for special leave and, if leave be granted, of the appeal in this Court.  In support of that summons I read the affidavits of Kieran John O’Brien of 29 September 2005 and the affidavit of Rowan Bassett Perkins of 29 September 2005.

HIS HONOUR:   Is there any objection, Mr Saccardo, to those affidavits?

MR SACCARDO:   No, your Honour.

HIS HONOUR:   I have looked at those affidavits, Mr Garling.  You should take whatever course you think fit about drawing my attention to particular parts of it, but I have looked at them.

MR GARLING:   Thank you, your Honour.  I think Mr Saccardo has some evidence, your Honour.

HIS HONOUR:   Yes.  Mr Saccardo, you rely on what affidavits?

MR SACCARDO:   There are two affidavits, your Honour, the affidavit of my instructing solicitor sworn 3 October 2005 and the affidavit of the applicant, Mr Ballerini, sworn 4 October 2005.

HIS HONOUR:   Can I just check the first one.  I think that it is sworn 4 October as well.

MR SACCARDO:   Yes, I am sorry, your Honour, both sworn 4 October.

HIS HONOUR:   Is there any objection to those being ‑ ‑ ‑

MR GARLING:   No, your Honour.

HIS HONOUR:   Again, I have looked at those affidavits.  Yes, Mr Garling.

MR GARLING:   Thank you.  Your Honour will have noticed that the applicant was one of the two unsuccessful defendants at trial and was the only unsuccessful party on the appeal of the proceedings before the Court of Appeal.  In short, the plaintiff, respondent to this motion, succeeded in obtaining a judgment in circumstances where he dived into a part of the Murray River from a log which projected from a bank, the top or a substantial part of which was found to be part of the Council’s territory. 

Your Honour, we accept that in order to obtain an order from this Court of the kind we seek that it is appropriate to demonstrate special or exceptional circumstances.  In support of that requirement, we submit that the following matters point to the existence of such special or exceptional circumstances.  The first is that a stay of the order will not deny to the plaintiff the fruits of the judgment below, for reasons which I will return to, nor will it cause any loss to the plaintiff.  The second matter is, in our submission, that there is a real risk that it would not be possible for the applicant Council, if successful in ultimately obtaining leave and setting the judgment aside, to be restored substantially to its former position.

May I go back to the first, your Honour.  It is, in our submission, clear in the particular circumstances of this case that the plaintiff is not seeking to have access to and therefore the full benefits of the verdict.  That is because the undertaking provided to the Court of Appeal of the Supreme Court of Victoria was that the judgment moneys would be paid into a trust account and there it would remain until the final disposition of the application for special leave and any other proceedings if that application is successful in this Court.  Therefore, this is not a case of the kind, in our respectful submission, which is contemplated by the notion that a successful party is entitled to the fruits of the verdict or the judgment.  Of course, as your Honour would appreciate, in the authority to which I wish to come very briefly, it is that notion that underlies the proposition that it is appropriate or necessary to have special or exceptional circumstances before a stay is granted.

The second matter to which I wish to come is the cost to the Council of not having a stay of the proceedings.  I need to take your Honour to the evidence just to draw your Honour’s attention to some parts of it, if I might.  The principal affidavit is that of Mr Perkins to which I wish to take your Honour.  If your Honour were to look at paragraph 2, your Honour will see that originally the Council had coverage first at a very small amount of its own moneys; secondly, up to $2 million inclusive of costs with a mutual scheme – that, your Honour, continues and remains – and then, thirdly, with the historically failed HIH Insurance Limited.  Paragraph 4 of the affidavit describes a scheme which has been brought into place for the benefit of councils and others facing unfunded liabilities due to the collapse of HIH.

Your Honour, the four points to be noticed are:  once a loss crystallises a claim can be lodged with the scheme; secondly, the claiming council is required to contribute 15 per cent of its average rate base, average determined over three years – in the case of this Council, that is about $430,000 – thirdly, the Council must exhaust all lower layers of insurance – that would include for the purposes of this the State-wide mutual layer – and then the scheme pays the difference between that exhausted sum and the amount of judgment, et cetera. 

Your Honour, may I repeat because it may not have been clear from what I said earlier, the State-wide layer includes defence costs, so that our costs are presently paid from that layer.  Once that layer is exhausted, the Council itself has to pay its legal costs. 

Your Honour, the submission on behalf of the applicant is that it is placed in this position by the order requiring it to pay the judgment in the particular circumstances.  Firstly, it either claims on the scheme now to pay the judgment, in which case it pays an excess now, $430,000, and then pays an excess when the matter is finalised – two excesses.  Alternatively, rather than making ‑ ‑ ‑

HIS HONOUR:   It is said against you, I think – perhaps I will be demonstrated to be wrong, but I thought it was said against you that the evidence of having to pay two excesses was, at best, equivocal.  Where do you say it is demonstrated that, if there were the course of events you have described, you would be paying excess twice?

MR GARLING:   Paragraph 5.2 of the affidavit of Mr Perkins, your Honour. 

HIS HONOUR:   That gives his version of events and I think a criticism that I understood to be made against it was where in the documents underpinning the scheme do we find this apparently unusual result given effect to?

MR GARLING:   Your Honour, appreciating that every word I say is written down and can be used against me at future instances, may I say this.  This is a government scheme which one will not find terms and conditions of a policy of insurance of the kind that your Honour might ordinarily be familiar with.  That is, we submit, the best evidence before the Court and it is not sought to be challenged by cross-examination or the tender of any contradictory material.  That is the way we can put it, your Honour.  I can put it no higher than that.

HIS HONOUR:   Yes, I understand that. 

MR GARLING:   The alternative I was putting to your Honour in terms of cost is that if one assumes no claim is made on the scheme for the moment then there is a source of loan funds identified which can give rise to the payment of the judgment moneys.  That is a loan from the Treasury of New South Wales at a rate of 5.45 per cent interest.  Your Honour, that would involve payment of interest by the Council on a regular monthly basis whilst ever the loan remained outstanding at that rate and would mean that the financial reserves of the Council would be taxed to the extent of that interest and the interest would not, of course ‑ ‑ ‑

HIS HONOUR:   It is said against you, I understand, in Mr Arocca’s material I thought – perhaps I am wrong – that the plaintiff, if I can refer to Mr Ballerini as the plaintiff, would be willing to let you have access to the interest accruing on the deposit if that would meet – as part contribution or perhaps entire contribution to the interest costs you incur.

MR GARLING:   I see that offer, in effect, your Honour.  I call it that.  Again, I mean no disrespect to Mr Arocca by saying that, but I see that.  That is not the current term and condition of the stay in the court below. 

HIS HONOUR:   I understand that, but were there to be that variation, what would you say?

MR GARLING:   The next response I would make is this, that it is accompanied by a term and condition, so to speak, that if that were to happen the plaintiff would wish to recover his penalty interest, if I may use that expression, the statutory interest rate which is higher than that.  The proposition we would respond with in that case is that there would still nevertheless be a cost to the Council unmet in that circumstance and we would also respond by saying as well, your Honour, in the event that we were successful, both in obtaining leave and on a judgment, the plaintiff accepts that he is not in a position to reimburse the Council anything over and above whatever he has earned on the trust fund.  So that, in the event that we were successful and we were entitled to an order for restitution, the Council would have no prospect of recovery of any interest at all on that capital sum, the interest having been handed over by the plaintiff, in effect, during the course of the deposit of that sum.  So we respond in those two ways to that proposition, your Honour.

Your Honour, may I just take the Court, with respect, to the decision of Justice Dawson in Commissioner of Taxation v Myer Emporium ‑ ‑ ‑

HIS HONOUR:   Just before you do that, can I just make sure that I understand the particular costs or detriments that you are praying in aid.  First, there is the possibility of having two excesses.

MR GARLING:   Yes.

HIS HONOUR:   Alternatively, and they are true alternatives I understand, there is the difficulty presented by paying interest on a borrowing to fund payment.

MR GARLING:   Yes, and there is a third, your Honour, that in the event that the claim is made on the scheme, namely the first of those two alternatives, the Council would have to fund its legal costs itself without access to the current State-wide mutual layer.

HIS HONOUR:   I understand that.  Now, understanding those to be the detriments to which you point, they are detriments that would ordinarily follow if you were to pay the amount of judgment to an otherwise solvent plaintiff who was able, from his own resources, to repay the judgment sum in the event that leave was granted and an appeal succeeded.  Is that right?

MR GARLING:   In the particular circumstances of this case, yes, your Honour.  May I just say what I mean by that.  In the absence of the HIH insurance coverage, yes, your Honour is correct.  If it were different in the sense of we were fully insured, we would not have those detriments.

HIS HONOUR:   That is why entities in the position of your client take insurance and it is why entities in the position of your client ordinarily trust to the solvency of the insurers with whom they deal.  I understand that through no fault of theirs, that is through no fault of your client, they are left in the position where the insurer with whom they dealt has proved not to be solvent.  But can I just persist a moment.  If the plaintiff were solvent and had sufficient resources of his own, sufficient resources to lead comfortably to the conclusion that were he to lose the application for leave and lose a subsequent appeal, he could repay the judgment, what would be the position of your client in connection with these detriments?  They would be encountered anyway, would they not?

MR GARLING:   Yes.

HIS HONOUR:   That then directs attention, does it not, to the fact that the plaintiff, seeking to meet his impecunious position, says, “Pay me the judgment debt, that is pay me the fruits of my judgment now, but I will preserve them and keep them whole so that you may get those fruits back”?

MR GARLING:   That partly meets the impecuniosity point, yes, your Honour.

HIS HONOUR:   Does it not meet it wholly?

MR GARLING:   No, because ‑ ‑ ‑

HIS HONOUR:   Why does it not meet it wholly?

MR GARLING:   For this reason, your Honour, that the ordinary rule for the ultimately unsuccessful plaintiff on repayment as a restitutio in integrum rule and the ordinary rate at which the moneys are ordered to be repaid includes interest at the statutory rate, that being the rate the plaintiff is entitled to for being held out of the money, et cetera, and the plaintiff accepts that he cannot repay that.

HIS HONOUR:   So instead of him standing out of his funds and obtaining a penal rate of interest from you for standing out of his judgment debt pending the resolution of proceedings in this Court, he says pay them into court and let them earn, perhaps even earn for your benefit, bank interest rather than penal rate, and your reply is, “No, we should have back from him the amount we have paid plus a penal rate”.

MR GARLING:   Yes, your Honour, because that is the statutory entitlement in that circumstance.

HIS HONOUR:   As is his statutory entitlement, is it not, to have a penal rate from you, subject to contrary discretionary order by the court?

MR GARLING:   Yes.

HIS HONOUR:   So are we not in a position, Mr Garling, where nobody is going to win, nobody is going to win because there is this third force introduced into the system through the fault of neither of these parties, namely the impecuniosity of the insurer, whom your client very prudently sought to protect itself by taking insurance from, and then what are we to do?  How is there ever going to be a pain-free solution to this?  You want the pain on the plaintiff.  The plaintiff wants the pain on you.  The Court of Appeal chose a measure of pain spreading.  There we are.  Now, what am I to do, Mr Garling?

MR GARLING:   Your Honour, I am here with the absolute solution that is pain-free.  May I be serious for a moment, your Honour.

HIS HONOUR:   The point is a serious one, I know that.

MR GARLING:   Yes, it is, but, your Honour, in the circumstances that this case finds itself, which are quite unusual given the orders below, the plaintiff is saying, “I don’t want my verdict.  There is no pain to me in not having my verdict”.

HIS HONOUR:   I do not know about that.  Is not the premise for the plaintiff’s demand for satisfaction the fear that if he does not obtain satisfaction now events might turn out otherwise that would embarrass everyone? 

MR GARLING:   The answer to that, your Honour, is that whether we are included within the scheme or not does not change between now and the High Court’s disposition of the case.  What is the suggested solution of the plaintiff is, “Just to give me more comfort, I want you to go and either make the claim early or, alternatively, borrow the funds in advance, accepting that there is to you an unrecoverable cost”.  Your Honour, we simply say that that is the very notion that Justice Dawson had in mind in the Myer Case where he said it was appropriate to grant a stay.  May I just take your Honour to that passage?

HIS HONOUR:   You were about to take me to Myer when I had interrupted you some time ago.

MR GARLING:   Yes, it is in 160 CLR 220. The passages I wish to draw to your Honour’s attention are, firstly, those at 222 at about point 8 on the page. Your Honour will see the paragraph commencing, “Order 70, r 12”. The part I wish to draw your Honour’s attention to is the part next after that sentence:

It is well established by authority that the discretion which it confers to order a stay of proceedings is only to be exercised where special circumstances exist –

your Honour, we accept that and I started off by saying we accepted that, but the words that follow are not unimportant in this case –

which justify a departure from the ordinary rule that a successful litigant is entitled to the fruits of his litigation pending the determination of any appeal. 

We submit that the plaintiff’s scheme proposed holds the plaintiff out from the fruits of his litigation and, therefore, to the extent that special or exceptional circumstances are necessary, they have to be seen against that.

The second part I wish to draw your Honour’s attention to is at the top of 223 where his Honour continues in that paragraph about the existence of special circumstances where his Honour says:

Generally that will occur when, because of the respondent’s financial state, there is no reasonable prospect of recovering moneys paid pursuant to the judgment at first instance.  However, special circumstances are not limited to that situation and will, I think, exist where for whatever reason, there is a real risk that it will not be possible for a successful appellant to be restored substantially to his former position if the judgment against him is executed

They are the passages that I wished to draw your Honour’s attention to.  May we just conclude – I recognise I have gone rather too long, your Honour, and I apologise – by saying, at the end of the day, the Council is put in the position where it is expending the funds of its ratepayers in a way which will cause, according to Mr Perkins’ affidavit, a detriment not specified, I accept, because it is rather difficult to do so, a likely detriment to the services to be provided to the citizens of Berrigan and, your Honour, we would submit that the Court would recognise that as an additional matter to be considered for what weight it carries.  If the Court pleases.

HIS HONOUR:   Yes, thank you Mr Garling.  Yes, Mr Saccardo.

MR SACCARDO:   If your Honour pleases.  Your Honour, might I just start by saying that the reason we are here is that the plaintiff respondent has a real concern about what is going on in terms of the security of his judgment.  When one looks at the letter which is exhibited to the affidavit of Mr Perkins, the first letter which is exhibit RBP1, it concludes by saying:

Therefore, subject to the formula used to measure hardship and other conditions attached to the agreement being satisfied, your council is eligible for assistance under the agreement –

That is all that the plaintiff knows about the security of his judgment which relies upon the Council being accepted under the agreement, which we know nothing about, subject to conditions which we know nothing about and subject to hardship which we know nothing about other than what is deposed to by Mr Perkins.  It may well be that there is no risk but that has not been demonstrated to the Court or to the plaintiff and, in those circumstances, it is submitted that it is not unreasonable for the plaintiff to seek some security.

It is submitted that the starting point of the exercise is for the applicant to demonstrate exceptional circumstances.  It is only in that timeframe and in that context that the Court looks at the question of the balance of convenience.  The exceptional circumstances seem to be, as set out by my learned friend, one, two excesses.  It is an exceptional circumstance in theory only.  It is not really conceded, it would seem, or suggested that the applicant will choose to pay two excesses if in fact it be the case that two excesses are required.  The Court should not accept that to be the case.  It is an assertion made on an understanding about which there is no proof.  But even if it is correct, it would be bizarre for the applicant, it is submitted, to go down that path when it has ready access to funds which are revenue neutral.  It will borrow from the New South Wales Government.  Funds will be deposited in a bank in Victoria and earn exactly the same rate.  It is a revenue‑neutral exercise. 

In the circumstances, in my submission, if one is going to the balance exercise, one then looks at what is the detriment.  One has statements on behalf of the Council in the initial affidavit which talk about the fact that the Council might need to look at curtailing some services and, in the second affidavit, the question of a mere look becomes a statement of fact that this will occur.  The words are very different, your Honour.  In terms of the first affidavit from Mr Perkins, he talks about the fact that the Council may need to consider the question of a reduction of some services that are not necessities and that the reduction will be temporary.  Within a week of that he is filing a further affidavit that talks about the fact that it will be a guaranteed fact that there will be a reduction and goes further to talk about not only services of a non-essential nature but subsequently interfering with essential services. 

What we say about that is, if it be the case that that is a consequence, it should have been the subject of specific material and supportive material that was supplied to the Court, and it is not.  But even if it is true, even if the assertions are accepted by the Court, there is a very simple way in which the balance can be restored completely, and that is to exact from the plaintiff, his instructing solicitor and myself – and I am authorised to give it – the undertaking that if it is required to restore the balance, interest will be released from the account in order to allow the applicant to maintain its position. 

It is a fundamental reason for the plaintiff being here that he is concerned that his judgment is not secure.  The affidavit of Mr Arocca attests to the fact that a guarantee was sought and a guarantee was not given.  The fact that we are here and that no application was made prior to the determination of the appeal by the Court of Appeal is because, as Mr Ballerini attests, he had a judgment at one stage which was secure, because he had a judgment against effectively a branch of the New South Wales Government which he has no longer.  

In the circumstances, it is submitted that, firstly, the question of exceptional circumstances are not made out; secondly, that a grant of a stay will not cause a loss to the respondent.  If the loss is merely penalty interest, that is not a loss in terms of substantial restitution; that is a loss in the form of failure to make a profit.  Substantial restitution would involve the returning of the money with interest at no cost.  That would be the case if the present arrangement, that is the arrangement that was sanctioned by the Court of Appeal, if that arrangement was maintained, there would be substantial restitution.

If your Honour is persuaded by the assertions from Mr Perkins that there will be a problem with respect to services, there is a cure which has been volunteered by the plaintiff and, in my submission, that should be the determining factor in the case.

HIS HONOUR:   Just as to this question of the undertaking, the text of the undertaking is found, is it, in exhibit KJO1 to the affidavit of Mr O’Brien of 29 September 2005?  Is that the text of the undertaking?

MR SACCARDO:   The present undertaking?

HIS HONOUR:   Yes.

MR SACCARDO:   Yes, your Honour.

HIS HONOUR:   And that is an undertaking to the Court of Appeal?

MR SACCARDO:   Yes, your Honour.

HIS HONOUR:   One aspect of that undertaking is in paragraph 3(e), as well as earlier paragraphs, an undertaking that interest will be retained?

MR SACCARDO:   Yes, your Honour.

HIS HONOUR:   If I were minded to go down this path – and I have yet to hear Mr Garling about his answer to what you have said, or his reply to what you have said – it seems to me that it is just a little more complicated than new undertakings being given to this Court or otherwise dealt with.  You would have to get discharged the undertaking given to the Court of Appeal.  You would have to get it varied.

MR SACCARDO:   Yes.

HIS HONOUR:   Maybe those are just mere mechanics, but they are points that I thought I should raise now in case there is anything further you

wanted to say about that aspect and also so that Mr Garling, when he comes time to reply, can look at that, if he wishes to, in the course of his reply. 

MR SACCARDO:   We would have to go back to the Court of Appeal.  The Court of Appeal gave us liberty to apply.  We would have to go back and I would have thought that we could go back quickly and it would be dealt with quickly, but it would have to go back.

HIS HONOUR:   It seems to me just to be a mere matter of mechanics that is relatively easily dealt with with a consent order being obtained, but I thought it right that I should at least flag this at this stage so that the parties are not unmindful of it if it becomes relevant.  It may be that we never get to the point.

MR SACCARDO:   No, your Honour.  Your Honour’s analysis is perfectly correct, that it would need to go back. 

HIS HONOUR:   Yes.

MR SACCARDO:   Your Honour, other than to say that the final position, in my submission, namely the question of balance of convenience, is only relevant in circumstances in which the Court is satisfied that the applicant has demonstrated exceptional circumstances.  The primary position with respect to the respondent to this application is that that has not been made out.  Other than to say that and to say that the need to modify the present undertaking given to the Court of Appeal only arises if, in fact, that primary issue is made out by the applicant, there is nothing else I wish to say.

HIS HONOUR:   Yes, thank you Mr Saccardo.  Yes, Mr Garling.

MR GARLING:   Thank you, your Honour.  Might I just draw your Honour’s attention to some detail of the figures for a moment to be found in paragraphs 11 and 12 of Mr Perkins’ affidavit.

HIS HONOUR:   Yes.

MR GARLING:   The amount presently owing under the judgment is in the order of $6.3 million – I am not seeking to be precise, your Honour.  In order to pay that, even with the loan facility contemplated by the letter from the Treasury annexed to Mr Perkins’ affidavit, would involve the exhaustion of the State-wide mutual layer, and that is in paragraph 12.1 and 12.2.  I draw your Honour’s attention to that because my learned friend’s submission that we are seeking to profit from the statutory interest rate when we are only borrowing at 5.45 per cent is not accurate with respect to the entirety of the sum that is required to be deposited.  So to the extent that that submission applies, it applies only to that component which is borrowed.  That is all I wish to say in reply, your Honour.  May I add ‑ ‑ ‑

HIS HONOUR:   One point while you have that affidavit, Mr Garling.  There is a point at paragraph 12.4 where there is an estimate of $75,000 for costs.  That is an estimate of whose costs, one party’s costs, both parties’ costs, what? 

MR GARLING:   The Council’s costs, your Honour, if a full appeal is to be heard and because we would be the opponent it involves the preparation of the appeal books and the like.  Your Honour, may I say with respect to what I might call the machinery matters raised by your Honour, it would be our view that if your Honour were persuaded that the additional offer – undertaking offered by Mr Arocca and the plaintiff were acceptable and relevant as an undertaking to this Court upon which your Honour, having received the undertaking, would dismiss the application, the appropriate course would be to take what I might call a full and complete undertaking to this Court and then to ask the Court of Appeal to release the plaintiff from the undertaking set out in Mr O’Brien’s exhibit.

HIS HONOUR:   Can I offer a different point of view, Mr Garling, which is that ‑ ‑ ‑

MR GARLING:   Your Honour’s is always preferable.

HIS HONOUR:   We have not heard it yet, Mr Garling.  If in the most unlikely event there were to be some dispute between the parties about whether the undertaking had been met, it would be far better that the trial of such proceedings occurred in a court other than this Court and that, therefore, if the undertaking were an undertaking to the Supreme Court rather than to this Court, any question of breach, which is no doubt to be regarded as wholly theoretical, is a question that would be dealt with there, not here, much as I might recall with nostalgia the days of running a witness action with real live witnesses going into the witness box. 

MR GARLING:   I cannot resist the attraction of that proposition, your Honour.

HIS HONOUR:   Yes, thank you.

MR GARLING:   That is all I wish to say.

HIS HONOUR:   One aspect of this undertaking which really does trouble me, is it your submission, Mr Garling, that your client should, in any event, have the interest accruing on the bank account or is it your submission that your client should have either a capped amount of interest or a capped

amount subject to some conditions?  Do you see the various possibilities that might have to be examined?

MR GARLING:   Yes.  Your Honour, my submission would be that it could be capped at the rate we are paying to borrow the funds and that would address the particular issue.  It seems to me from the material before the Court that the interest rate for the borrowing is a fixed interest rate, but I accept the interest rate on the deposit may not be fixed – it may vary. 

HIS HONOUR:   Does it capture your position if I describe it as an entitlement to so much of the interest accruing on the bank account as is necessary to pay interest on funds borrowed by the Council from – is it the State of New South Wales that would be the lending authority, Mr Garling?

MR GARLING:   Yes, your Honour.

HIS HONOUR:   So much interest as is necessary to pay interest on the funds borrowed by Council from the State of New South Wales to meet payment of the judgment debt.  Does that capture the position you adopt?

MR GARLING:   Yes, your Honour.

HIS HONOUR:   Yes, thank you.

In December 1996 Jason Ian Ballerini, then aged not quite 17 years, went to a public reserve in the town of Barooga.  After lunch he decided to go for a swim in an area of an anabranch of the Murray River known as Bullanginya Lagoon and part of which was known as the Barooga swimming hole.  Mr Ballerini, to whom it is convenient to refer to as the plaintiff, had swum in that swimming hole on a number of previous occasions. 

As he had on those earlier occasions, Mr Ballerini went out on a log which extended from the bank of the swimming hole over the water and dived into the water.  Unbeknown to him, recent flooding had made the water shallow.  Presumably silt had been deposited at the bottom of the waterhole, raising the level of the floor of the hole.  The plaintiff struck his head and suffered catastrophic injury.  He was rendered quadriplegic.

He brought action in the Supreme Court of Victoria against Berrigan Shire Council, a council under the Local Government Act 1993 (NSW), which had been appointed the trustee of the reserve adjacent to the swimming hole. He joined as a second defendant to that proceeding the Forestry Commission of New South Wales, in which the control and management of the lagoon and certain land to the south of the lagoon was vested. The plaintiff alleged that the Council and the Commission were each negligent and that their negligence was a cause of the injury which he had sustained.

At trial the trial judge gave judgment for the plaintiff in the amount of $5.6 million.  That judgment reflected a reduction in the agreed quantum of damages suffered by the plaintiff.  The parties had agreed that the plaintiff’s damages should be assessed at $8 million.  The amount of the judgment entered at trial reflected the reduction made on account of the plaintiff’s contributory negligence.

Both the Council and the Commission appealed to the Court of Appeal of Victoria, and the plaintiff cross‑appealed, against the judgment entered at trial.  The Court of Appeal ordered that the appeal by the Council be dismissed, the appeal by the Commission be allowed, and the cross‑appeal by the plaintiff be dismissed.  In consequence, the Court of Appeal ordered that the judgment at trial should be varied so as to provide for judgment against only the Council.

On 20 July 2005 the Council applied to this Court for special leave to appeal against the orders made by the Court of Appeal.  In September 2005, or thereabouts, the Council applied to the Court of Appeal for an order staying the judgment of the trial judge (as varied by the orders of the Court of Appeal that had been made on 22 June 2005) pending the disposition of the Council’s application for special leave to appeal to this Court.  The Council contended that the plaintiff would not, or might not, be able to repay the judgment sum if special leave to appeal were to be granted and an appeal allowed.

In the Court of Appeal the plaintiff sought to meet this contention by proposing that the judgment sum be paid into an interest‑bearing bank account under the control of both parties until the hearing and determination of the application for special leave to appeal, and any appeal if special leave were to be granted.  The Council then submitted that a stay should nonetheless be granted because, if not granted, it would suffer loss that would not be compensated and that, depending on the way in which it met the obligation to satisfy the judgment debt, it may, perhaps would, have to reduce services to its ratepayers. 

It will be necessary to say something further about these matters because substantially these arguments were repeated in argument before me.  For the moment, however, it is enough to notice that the Court of Appeal concluded that the balance of convenience lay with the plaintiff, not the Council, and that, subject to the provision of undertakings to give effect to the arrangements proposed by the plaintiff, the application for stay made to that court was dismissed.  The undertakings which had been foreshadowed in argument in the Court of Appeal were ultimately given to that court.  Those undertakings provide, in effect, for the retention of the sum paid in satisfaction of the judgment, and any interest earned on that judgment sum while on deposit with the bank, until the hearing and determination of the application for special leave and any subsequent appeal.  The amount standing to the credit of the account would then be disposed of in accordance with the outcome of those proceedings.

The Council now applies in this Court for a stay of execution.  The application is made afresh, not by way of appeal from the decision of the Court of Appeal, but the contentions advanced by the Council are not substantially different from those that were advanced to the Court of Appeal in conjunction with the application made to that court.  In essence, the Council submits that, once the plaintiff accepts, as he does by the undertaking he gave to the Court of Appeal, that he should not have access to the fruits of his judgment, the question of exceptional or special circumstances which must ordinarily be demonstrated in order to obtain a stay of execution of a judgment obtained in the courts below (as to which see Jennings Construction Ltd v Burgundy Royale Investments Pty Ltd (No 1) (1986) 161 CLR 681) takes on a different complexion. The Council submits that in the circumstances just described the focus of attention shifts to whether, if the Council were to succeed in its application for special leave to appeal and in its subsequent appeal to the Court, it could be restored to the position in which it now finds itself before having been called on to satisfy the judgment obtained at trial as modified in the Court of Appeal.

The Council points to a number of difficulties, all of them rooted in the fact that the insurance arrangements which it made to insure against liabilities of the kind now in issue included arrangements made with the HIH group of companies which have turned out to be insolvent.  In consequence, the Council faces a set of circumstances different from those that would obtain if it had been able to call upon all of the levels of insurance arrangement which it had made to insure it against consequences of the kind that now arise.

The Council’s insurance arrangements are that it bears the first $5,000 of the claim or costs made against it in respect of a public liability claim.  The balance of the claim up to $2 million is then covered by a mutual liability scheme for local government authorities in New South Wales and thereafter it had cover for the layer between $2 million and $20 million of liability with HIH Insurance Limited.

Following the collapse of the HIH group of companies, arrangements were made by the New South Wales and Commonwealth governments to provide a means of resort to local authorities which had been insured by the HIH Group and which otherwise would be left exposed to liabilities of the kind now in issue.  A letter to the Director of Corporate Services of the Berrigan Shire which is in evidence before me records that New South Wales has an agreement with the Commonwealth on assistance to be provided to councils suffering hardship due to the collapse of HIH.  Under this agreement the Commonwealth and the State will equally contribute to a council’s liability where the council experiences hardship, that is where the liability exceeds 15 per cent of the council’s ordinary rates averaged over three years.

It is, however, said to be a term of that scheme that a claim can be lodged with the scheme once loss crystallises but the claiming council is required to contribute 15 per cent of its average ordinary rates base of three years as an excess to qualify for the scheme.  In the Council’s case, that is said to equate to an amount of about $430,000.  It is a further condition of the scheme that the claiming council exhaust all lower layers of insurance, which in the current case would include the layer of cover provided by the mutual liability scheme mentioned earlier.  The scheme operated by the federal and New South Wales governments would then pay the difference between the amounts earlier described and the amount of the judgment or settlement debt, legal costs and any interest payable.

The Council contends that it is then placed in the following position by these arrangements if it is now to be called on to satisfy the judgment debt which the plaintiff has against it.  If it claims on the scheme conducted by the federal and New South Wales governments, it must first exhaust its first level of cover.  Exhausting that first level of cover would meet legal costs incurred to date but would not meet, so it is alleged, costs later to be incurred, either in the prosecution of the application for special leave or in any subsequent appeal.  Those costs are said to amount to about $75,000.

Further, if the Council were to make a claim on the scheme now, it would have to meet the excess or quasi‑excess imposed under that scheme of $430,000 and, so it is argued, if the Council were later to make a second claim with a view to recovering the amount it has outlaid by way of costs, it would have to encounter a still further excess.  At least on its face, however, the excess, that is to say the further excess, would likely far outweigh the costs that would have been incurred.

The alternative that the Council has is simply to borrow the money that it would need to use to pay the judgment debt.  The Council has access to funds from the State of New South Wales and the Council’s evidence on the stay records that that line of credit is made available to it at an interest rate of 5.5 per cent per annum.  The borrowing that would have to be made would approximate $5 million because the proposal that Council would consider would be to exhaust the mutual liability scheme layer entirely and then borrow the difference from the New South Wales State Treasury, leaving it in the position where it would, were it to prove unsuccessful in its application for leave or its appeal, only then make a claim on the federal and State scheme intended to provide support for local authorities in difficulties consequent on the collapse of HIH.

The Council submits that if it goes down the path of borrowing it must pay interest periodically.  As things presently stand, the sum which it is required to pay in satisfaction of the judgment debt would be paid into a bank account and interest accruing on that account would remain for reinvestment in the bank account and not be paid out until the conclusion of the proceedings in this Court.  Hovering behind all of these considerations of alternative courses available to Council remains the suggestion that if Council is put to expense its rate income is so stretched that it would, or might, or probably would be likely to, have to cut services to its ratepayers.

Finally, both Council and the plaintiff point to those provisions which would require payment of interest on judgment debts at a penal rate.  Council says that if it pays out the judgment now and ultimately is entitled to recover the judgment back from the plaintiff, the plaintiff’s financial position is such that the Council could not recover from him the penal rate of interest that otherwise would be applied.  The plaintiff, on the other hand, points out that if the judgment debt is paid now, even into a bank account, the time for payment of any interest at a penal rate is brought to an end and he, the plaintiff, would lose the consequences of the imposition of penal interest on the judgment debt were it to be satisfied later. 

In the end, I do not think anything turns on consideration of these statutory provisions for payment or allowance of penal rates, if only because the question of what rate, if any, should be allowed in respect of payments one way or the other would ultimately be a point on which it would be possible to make application and argument for imposition of some lower rate. 

Rather, the position comes to this.  Ordinarily speaking, the plaintiff is entitled to the fruits of his judgment.  Something special or extraordinary must be shown to deny him the fruits of that judgment.  In order to meet the Council’s justified concern about recoupment of the judgment sum if the Council were to obtain leave and succeed in an appeal, the plaintiff has proffered a special arrangement where the funds are sequestered in a bank account at interest and are not to be drawn until final determination of proceedings in this Court. 

It is true to say, as was pointed out in Federal Commissioner of Taxation v Myer Emporium Pty Ltd (No 1) (1986) 160 CLR 220, particularly at 223, that the circumstances to be considered in fashioning a stay order are not confined to the consideration of whether there is a reasonable prospect of recovering moneys paid pursuant to the judgment given at first instance and are not confined to considering whether there is a real risk that it will not be possible for a successful appellant to be restored substantially to the former position if the judgment against the appellant were to be executed.

In considering how to fashion a stay order in the circumstances of the present case it is necessary to recognise that there can be no solution which would save both parties harmless.  At least none is proffered by the parties.  That being so, and the prima facie position being that the plaintiff is entitled to the fruits of his judgment, pointing, without more, to adverse consequences for the Council if it were to meet that judgment does not conclude the issue that now arises.

What might be regarded as the principal harm that the Council would suffer were it to meet the judgment immediately is satisfied by the undertaking to sequester the moneys in a bank account.  The costs which the Council would incur if it has to borrow to meet that liability can be met, at least in part, by the application to the Council of the interest accruing on the sum that is held in the bank account. 

If the Council were to borrow funds, as I understand it, it would not need at once and would not intend at once to make a claim on the federal/State scheme that has been established to deal with HIH liabilities.  If that is so, it would follow that the question of double excesses is not a question that would arise.  Moreover, the question of meeting further legal costs out of the Council’s own pocket without recourse to the first layer of insurance or without making a second claim on the federal/State arrangements in respect of HIH is again a difficulty which either does not arise at all or is less pressing.  It would not arise at all if the sum borrowed covered those costs.  It would be less pressing if, without borrowing, the Council were to meet the costs but ultimately be in a position to make a claim against the federal/State HIH arrangements in respect of so much of the costs as has not been met out of the first layer of insurance.

In these circumstances, if the plaintiff were to obtain a variation of the undertaking which his solicitor has given to the Court of Appeal of Victoria so as to provide, in effect, that so much of the interest earned on the funds deposited pursuant to the undertaking as is necessary to pay interest on funds borrowed by Council from the State of New South Wales to meet the payment of the judgment debt, interest and costs, I would be minded to dismiss the present application for stay.  If the plaintiff either was unwilling or was unable for any reason to obtain such a modification of the undertaking given to the Court of Appeal within a reasonable time – as to which I will hear counsel – it would be necessary to re‑enter the matter for further argument before me to see what then I should do about the stay application that has been made by the Council.

Subject, therefore, to anything that counsel may say to me about the time within which application for variation of the undertaking should be made and what order I should make disposing of the costs of today, I would be minded to adjourn today’s application to a date to be fixed to enable the parties to go away and obtain the modification of undertaking and, subject to that occurring, then submit a consent order disposing of the application for stay in the manner indicated in my reasons.  I say submit a consent order simply with a view to obviating the need for counsel to appear again and incur still further costs in this matter.

Now, Mr Saccardo, do you wish to be heard about how long you should have to consider obtaining this undertaking variation?

MR SACCARDO:   Your Honour, applications are taken by the Court of Appeal on Fridays.  I would have thought that tomorrow will be too soon but I would hope that by next Friday we would be in a position to ‑ ‑ ‑

HIS HONOUR:   What I had in mind, frankly, Mr Saccardo, was 14 days just to keep the attention of the parties and their advisers focused upon the matter, if I might put it that way.

MR SACCARDO:   I would have thought there would be no problem with 14 days, your Honour.

HIS HONOUR:   Yes.  What do you say I should do about the costs of the matter?  Perhaps I am taking the parties out of turn, but you are on your feet, Mr Saccardo.  What do you say I should do about the costs of today?

MR SACCARDO:   Costs of today, in my submission, should be awarded against the applicant.

HIS HONOUR:   Why should they not go with the application for leave and be costs in the application?

MR SACCARDO:   Because we come before the Court for an application for stay which has been ultimately unsuccessful and, in those circumstances, they should be awarded to the respondent.

HIS HONOUR:   Yes.  Now, Mr Garling, first about timing and second about costs, what do you want to say?

MR GARLING:   Your Honour, I was not able to hear what Mr Saccardo said about timing but ‑ ‑ ‑

HIS HONOUR:   Fourteen days was what I suggested.  I suggested 14 days and ‑ ‑ ‑

MR GARLING:   Fourteen days is entirely satisfactory to us, your Honour.

HIS HONOUR:   Yes.

MR GARLING:   I do not wish to say anything about that.

HIS HONOUR:   Can I just interpose this:  if for some reason that it emerges that you cannot get the application on on an applications day, no doubt the parties will be sensible about it all, but it seems to me that 14 days should be enough to get you on.

MR GARLING:   Yes, I am confident of that, your Honour.

HIS HONOUR:   Yes.  Now, costs, what ‑ ‑ ‑

MR GARLING:   As to costs, it is our submission that the costs should be costs of the application for special leave.

HIS HONOUR:   Why should you not lose the costs when you lose the application, Mr Garling?

MR GARLING:   Your Honour, I have not lost the application.

HIS HONOUR:   Not yet.

MR GARLING:   With respect, a significant movement has been made by the plaintiff in the stay proceedings generally which has had what seems to us, having regard to what has fallen from your Honour, to have had an effect upon your Honour’s thinking and decision.  In those circumstances, neither party has won nor lost.  Therefore, costs should follow the event of the application for special leave.

HIS HONOUR:   Yes.  If events take the course which I anticipate they will, namely if the plaintiff obtains a modification of the undertaking in the fashion described in the reasons I have just given, it would then be appropriate to order that the application for stay stand dismissed.  Ordinarily speaking, the costs of the application should follow that event and I understand the force of the contention that the event is to be judged according to grant or dismissal.  Nonetheless, the fact remains that there is a not insignificant variation in the stay arrangements that are to be made by the parties.  For those reasons, if events follow the course that I anticipate, I would be minded in that set of circumstances to order that the costs of the application be costs in the application for special leave to appeal or any subsequent appeal.

Now, as I have said to the parties, assuming all goes according to Hoyle, it would seem to me that all that would remain would be for the parties to submit a consent order which could then be taken out in the ordinary way without the need for attendance of counsel or solicitors.  If something goes wrong, then I would be most grateful if the parties would keep the Registrar informed.  For the moment, I think the only order I need to make is to adjourn the application to a date to be fixed and reserve the costs, but I have indicated earlier the form of consent order I expect to be reading.  Yes, thank you.  I will adjourn the Court.

AT 3.23 PM THE MATTER WAS ADJOURNED