Coshott v Prentice
[2013] FCA 1085
•31 October 2013
FEDERAL COURT OF AUSTRALIA
Coshott v Prentice [2013] FCA 1085
Citation: Coshott v Prentice [2013] FCA 1085 Parties: LJILJANA COSHOTT and SCHLOTZKY'S NOMINEE COMPANY PTY LIMITED v MAXWELL WILLIAM PRENTICE (IN HIS CAPACITY AS TRUSTEE OF THE PROPERTY OF ROBERT GILBERT COSHOTT, A BANKRUPT), ROBERT GILBERT COSHOTT, A BANKRUPT and JAMES COSHOTT File number: NSD 2016 of 2013 AND Parties: FEWIN PTY LIMITED ACN 051 132 453 v MAXWELL WILLIAM PRENTICE (IN HIS CAPACITY AS TRUSTEE OF THE PROPERTY OF ROBERT GILBERT COSHOTT, A BANKRUPT), LJILJANA COSHOTT File number: NSD 2140 of 2013 Judge: PERRY J Date of judgment: 31 October 2013 Catchwords: PRACTICE AND PROCEDURE – Applications for a stay pending appeal – an interested person may apply – preservation of equitable mortgagee’s interest – relevance of delay – failure to take measures to protect interest Legislation: Bankruptcy Act 1966 (Cth) ss 28, 30, 115(1), 116(1)
Conveyancing Act 1919 (NSW) ss 7(1), 66F(1), 66G
Federal Court of Australia Act 1976 (Cth) ss 37M, 37N
Judiciary Act 1903 (Cth) s 79
Real Property Act 1900 (NSW) ss 42, 60
Federal Court Rules 2011 r 36.08, 36.10, Sch 1Cases cited: Alexander v Cambridge Credit Corporation Ltd (1985) 2 NSWLR 685
Coshott v Coshott [2013] FCA 907
Coshott v Prentice [2013] FCA 1036
Ozden v Ozden [2013] VSCA 195
Park v Barclay (2010) 239 FLR 396
Powerflex Services Pty Ltd v Data Access Corporation (1996) 67 FCR 65
Re Middle Harbour Investments Ltd (In liq) (Unreported, Court of Appeal, NSW, 15 December 1976)Dates of hearing: 21-22 October 2013 Date of last submissions: 22 October 2013 Place: Sydney Division: GENERAL DIVISION Category: Catchwords Number of paragraphs: 80 Counsel for the Applicant: Mr D Murr SC and Mr W Washington Solicitor for the Applicant: Shana Radnan & Co Pty Limited Counsel for the First Respondent: Mr J Johnson Solicitor for the First Respondent: Sally Nash & Co Laywers Counsel for the Second Respondent / the Appellant: Mr R Carey Solicitor for the Second Respondent / the Appellant: Spencer Whitby & Co Legal
IN THE FEDERAL COURT OF AUSTRALIA
NEW SOUTH WALES DISTRICT REGISTRY
GENERAL DIVISION
NSD 2016 of 2013
BETWEEN: LJILJANA COSHOTT
First AppellantSCHLOTZKY'S NOMINEE COMPANY PTY LIMITED
Second Appellant
AND: MAXWELL WILLIAM PRENTICE (IN HIS CAPACITY AS TRUSTEE OF THE PROPERTY OF ROBERT GILBERT COSHOTT, A BANKRUPT)
First RespondentROBERT GILBERT COSHOTT, A BANKRUPT
Second RespondentJAMES COSHOTT
Third Respondent
JUDGE:
PERRY J
DATE OF ORDER:
31 OCTOBER 2013
WHERE MADE:
SYDNEY
THE COURT ORDERS THAT:
1.The interlocutory application filed by the first appellant on 21 October 2013 seeking a stay of orders made on 10 September 2013 in proceeding (P)NSD 1412 of 2009, be dismissed.
2.The interlocutory application filed by Fewin Pty Limited ACN 051 132 453 on 22 October 2013 seeking a stay of orders made on 10 September 2013 in proceeding (P)NSD 1412 of 2009, be dismissed.
3.Judgment on the question of costs be reserved.
Note:Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.
IN THE FEDERAL COURT OF AUSTRALIA
NEW SOUTH WALES DISTRICT REGISTRY
GENERAL DIVISION
NSD 2140 of 2013
BETWEEN: FEWIN PTY LIMITED ACN 051 132 453
ApplicantAND: MAXWELL WILLIAM PRENTICE (IN HIS CAPACITY AS TRUSTEE OF THE PROPERTY OF ROBERT GILBERT COSHOTT, A BANKRUPT)
First RespondentLJILJANA COSHOTT
Second Respondent
JUDGE:
PERRY J
DATE OF ORDER:
31 OCTOBER 2013
WHERE MADE:
SYDNEY
THE COURT ORDERS THAT:
1.The interlocutory application filed by the applicant on 17 October 2013 for a stay of orders made on 10 September 2013 in proceeding (P)NSD 1412 of 2009, be dismissed.
2. Judgment on the question of costs be reserved.
3.The matter be listed for directions before Justice Flick at 9.30 AM on 7 November 2013.
Note:Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.
IN THE FEDERAL COURT OF AUSTRALIA
NEW SOUTH WALES DISTRICT REGISTRY
GENERAL DIVISION
NSD 2016 of 2013
BETWEEN: LJILJANA COSHOTT
First AppellantSCHLOTZKY'S NOMINEE COMPANY PTY LIMITED
Second Appellant
AND: MAXWELL WILLIAM PRENTICE (IN HIS CAPACITY AS TRUSTEE OF THE PROPERTY OF ROBERT GILBERT COSHOTT, A BANKRUPT)
First RespondentROBERT GILBERT COSHOTT, A BANKRUPT
Second RespondentJAMES COSHOTT
Third RespondentAND
IN THE FEDERAL COURT OF AUSTRALIA
NEW SOUTH WALES DISTRICT REGISTRY
GENERAL DIVISION
NSD 2140 of 2013
BETWEEN: FEWIN PTY LIMITED CAN 051 132 453
ApplicantAND: MAXWELL WILLIAM PRENTICE (IN HIS CAPACITY AS TRUSTEE OF THE PROPERTY OF ROBERT GILBERT COSHOTT, A BANKRUPT)
First RespondentLJILJANA COSHOTT
Second Respondent
JUDGE:
PERRY J
DATE:
31 OCTOBER 2013
PLACE:
SYDNEY
REASONS FOR JUDGMENT
1. INTRODUCTION
These reasons consider three applications for a stay of orders made by the primary judge in Coshott v Coshott [2013] FCA 907 (‘the Coshott proceedings’) pending the hearing and determination of an appeal against that decision by Ljiljana Coshott. First, a stay to this effect is sought in Fewin Pty Limited v Prentice & Anor (NSD 2140 of 2013) (‘the Fewin proceedings’), being separate proceedings instituted by Fewin Pty Ltd (‘Fewin’) on 17 October 2013. These proceedings are brought purportedly to protect the interests of Fewin as mortgagee in possession of a valuable property at 1 Bunyula Road, Bellevue Hill in the state of New South Wales, being the whole of the land contained in Certificate of Title Folio Identifier 2/336490 (‘the Bunyula property’). Secondly, on 21 October 2013, the first appellant in the Coshott proceedings, Ljiljana Coshott, applied during the hearing of the application in the Fewin proceedings for a stay of the orders pending the determination of the appeal. The other appellant has not joined in that application. An earlier application for a stay made by Ljiljana Coshott was refused on 4 October 2013 in Coshott v Prentice [2013] FCA 1036. Thirdly, Fewin applied on 22 October 2013 during the hearing of the two applications for an interim stay in the Coshott proceedings on the same terms as those sought by it in the Fewin proceedings in the alternative to its application in those proceedings.
The orders made in the Coshott proceedings to which these applications relate provide for the vesting of the Bunyula property in the first respondent, Mr Maxwell Prentice, as trustee for sale. The orders also required the delivery up of vacant possession of the Bunyula property by midnight on 22 October 2013 and provided for the sale of the property by the trustee for sale. The appeal against the judgment in the Coshott proceedings is listed to be heard by the Full Court of the Federal Court on 25 November 2013.
In the evolving circumstances in which the current applications were made, no formal order was made by me to hear and determine the applications together. However, in the circumstances, it proved convenient at the hearing to do so given that:
·the applications brought by Fewin in both the Fewin and Coshott proceedings seek orders in the same terms and rely upon the same evidence;
·the submissions by Fewin were the same in both proceedings and focused upon whether ground 3A of the further amended notice of appeal dated 15 October 2013 in the Coshott proceedings was reasonably arguable;
·the appellant in the Coshott proceedings adopted the submissions made by Fewin in support of the grant of a stay in its applications in the two sets of proceedings, albeit that the appellant made some additional submissions; and
·all three applications sought in substance the same interim relief, save that the stay sought by the appellant in the Coshott proceedings was simply for “a stay of the Orders of [the primary judge] in proceedings NSD1412 of 2009” and was not limited to seeking a stay of orders 6, 7, 8 and 9 as is sought by Fewin.
Equally, and for the same reasons, I consider that it is appropriate for the applications to be determined in the same judgment notwithstanding the absence of a formal order to that effect.
Finally, upon reserving my judgment on 22 October 2013, I made orders on conditions for a interim stay pending the delivery of my judgment, namely that:
“…
5.Orders 7, 8 and 9 made by Buchanan J on 10 September 2013 be stayed until judgment on the interlocutory application for a stay filed by the Appellant on 21 October 2013 on the conditions set out in orders 6 to 8 inclusive hereof.
6.On or before 9.30 AM on 23 October 2013 the Appellant notify the First Respondent in writing of the full names of all persons in physical occupation of the property at 1 Bunyula Road, Bellevue Hill in the state of New South Wales, being the property that is the subject of these proceedings (‘the Bunyula property’).
7.On or before 11.00 AM on 23 October 2013, the Appellant provide evidence of insurance over the Bunyula property together with evidence that the insurance premiums have been paid up to date.
8.On or before 5.00 PM on 23 October 2013 the Appellant provide a deposit to secure against any damage to the Bunyula property from the date of this order in the sum of $10,000 which sum is to be paid into the trust account of the solicitors for the Appellant, and is to be held subject to any further order of this Court.
…”
2. BACKGROUND
It is helpful first to expand upon the context in which the orders that are the subject of the stay applications and the appeal were made before dealing in detail with these applications.
2.1 The decision in Coshott v Coshott [2013] FCA 907 determined on 10 September 2013
Robert Coshott was made bankrupt on 7 November 2008. He and his wife Ljiljana Coshott were the registered proprietors of the Bunyula property which is and continues to be their family home. Their two sons, Michael and James Coshott, also lived in the Bunyula property.
The trustee of Robert Coshott’s bankrupt estate formed the view that the 50% interest held by him in the Bunyula property was an asset to be brought to account in his bankrupt estate.
In June 2009, proceedings were instituted in the Supreme Court of New South Wales by James Coshott against his parents seeking a declaration that they held the Bunyula property on trust for the Coshott Family Superannuation Fund (‘the Coshott Super Fund’). ‘Consent orders’ were initially signed in those proceedings that contained the declarations that James Coshott sought. However, the trustee became aware of the consent orders and subsequently sought successfully to have them set aside. The Supreme Court proceedings were then transferred to the Federal Court.
In the Federal Court, Ljiljana, Robert and James Coshott sought to establish that Robert Coshott held his 50% interest in the Bunyula property on trust for the benefit of the Coshott Super Fund. In the alternative, they contended that Robert Coshott held his 50% interest pursuant to a resulting trust in favour of the fourth cross-respondent, Schlotzky’s Nominee Company Pty Limited (‘Schlotzky’), on the basis that Schlotzky is (and was at all relevant times) the corporate trustee of the Coshott Super Fund and not Robert Coshott. Fewin was not a party to those proceedings.
In Coshott v Coshott [2013] FCA 907, the primary judge found that both contentions were without merit and that any suggestion or arrangement tending to suggest that Robert Coshott purchased the 50% interest in the Bunyula property registered in his name, otherwise than in his own interests, was and is a sham. His Honour dismissed the proceedings and made declarations on the cross-claim instituted by Mr Prentice in his capacity as the trustee in bankruptcy against James, Ljiljana and Robert Coshott and Schlotzky (the first, second, third and fourth cross-respondents respectively) that:
“3.The property 1 Bunyula Road, Bellevue Hill being the whole of the land contained in Certificate of Title Folio Identifier 2/336490 (‘the property’) was acquired by the second cross-respondent [Ljiljana Coshott] and the third cross-respondent [Robert Coshott, a bankrupt] beneficially as joint tenants.
4.Upon the date of bankruptcy of the third cross-respondent, the joint tenancy between the second cross-respondent and the third cross-respondent in the property was severed and the ownership became:
4.1the second cross-respondent as to an undivided one half share;
4.2the cross-claimant as to an undivided one half share as tenants in common.
5.The half interest in the property registered to the third cross-respondent vested in the cross-claimant pursuant to sections 58, 115(1) and 116(1) of the Bankruptcy Act 1966 (Cth), as and from the date of the commencement of the bankruptcy of the third cross-respondent.”
The orders in respect of which interim relief is now sought by Fewin made provision for the sale of the Bunyula property by the cross-claimant in the following terms:
“6.The property vest in the cross-claimant as trustee for sale.
7.The property be sold by the cross-claimant as trustee for sale, with all the obligations and privileges pertaining thereto (including signing for and on behalf of the second cross-respondent any contract for the sale of land and any transfer pursuant to the Real Property Act 1900 (NSW) and determining the price at which the property is to be sold) and the proceeds after payment of all expenses of and incidental to such sale to be divided equally between the cross-claimant and second cross-respondent, pursuant to order 11.
8.For the purposes of giving effect to order 7, the second cross-respondent, by herself her servants and agents do all such things, acts and deeds and sign all documents to list for sale and sell the property, and for that purpose, including but not limited to the following:
8.1maintain the property in a clean and presentable manner as required for the proper and effective marketing of the property;
8.2allow and permit for an inspection of the property on 24 hours notice of a request made by the cross-claimant or agent for sale.
9.Each cross-respondent deliver up vacant possession of the property 42 days from these orders.”
Orders were also made as to the manner and priority of the distribution of the proceeds of the sale of the Bunyula property. Costs were ordered against the cross-respondents on an indemnity basis.
2.2 The application for a stay in Coshott v Prentice [2013] FCA 1036 determined on 4 October 2013
On 27 September 2013 Ljiljana Coshott and Schlotzky instituted an appeal against the orders made on 10 September 2013. An application was also made at that time by Ljiljana Coshott for a stay of the orders made by the primary judge pending determination of the appeal.
In Coshott v Prentice [2013] FCA 1036, a single judge of this Court dismissed the application for a stay on 4 October 2013 with indemnity costs on the basis that his Honour did not accept that any of the four broad grounds of appeal raised in the amended notice of appeal were reasonably arguable. His Honour also ordered that the appeal be expedited. That appeal is listed to be heard and determined by the Full Court on 25 November 2013.
While the fact that none of the grounds were reasonably arguable sufficed to dispose of that application, his Honour also addressed the question of the detriment that would be suffered in the event that the application for a stay was not granted.
In this regard, his Honour stated that:
“46.For completeness, it is appropriate if I say something about irreparable harm, that being an important aspect of what I have broadly described as balance of convenience considerations. The appellants say, and not without some force, that the irreparable harm to the family in this case is clear. The orders made by Buchanan J will force the sale of the residential home, whether the Coshott family have apparently lived for over 10 years, and they say that the loss of the family home is not capable of reparation by the payment of moneys.
47.I would have expected in a case such as this, however, that if the appellants seek to persuade the court to attach weight to this aspect of irreparable harm, they would have gone into evidence and put before the court relevant material describing the residents’ personal individual financial circumstances. Mr Johnson, who appeared for Mr Coshott’s trustee in bankruptcy, drew my attention to a decision of the Victorian Court of Appeal in Ozden v Ozden [2013] VSCA 195, and in particular to the judgment of Robson AJA at [88] where his Honour said that:
In circumstances where the court is being asked to exercise its discretion to give a stay, the court should have been fully informed of all relevant matters.
48. I respectfully agree with that observation.”
His Honour also stated at [48]-[49] of his reasons that another matter also weighed with him on the issue of irreparable harm, namely that:
“48.…although under the current orders, vacant possession has to be provided by 22 October 2013, Mr Johnson indicated from the bar table, and it was not disputed, that the trustee expects that the auction of the relevant property will not take place until at least February 2014. Understandably, time needs to be taken after vacant possession has been delivered to put the property in order so as to maximise its sale price.
49. It seems to me that under that timeframe, while vacant possession needs to be delivered, if the appeal is heard and determined quickly, one might reasonably expect that the final judgment could be made available before any such auction takes place in February next year.”
2.3 Subsequent amendments to the notice of appeal
Following judgment on the first stay application, the notice of appeal was amended without leave on two further occasions pursuant to the Rule 36.10 so as to raise certain additional grounds of appeal. First, a further amended notice of appeal was filed on 15 October 2013 relevantly to insert ground 3A in the following terms:
“If the trial judge purported to make orders 6 to 11 pursuant to section 66G of the Conveyancing Act 1919 (NSW):
(a)the trial judge had no jurisdiction to do so because a claim for those orders under section 66G of the Conveyancing Act 1919 (NSW) was not within the original, accrued or associated jurisdiction of the Court;
(b)in any event, if the trial judge had jurisdiction to make orders 6 to 11 pursuant to section 66G of the Conveyancing Act 1919 (NSW), the exercise of the power to make those orders miscarried because the trial judge failed to have any regard to the need for trustees for sale appointed under that section to be impartial as between the co-owners, failed to have regard to the terms of sub-sections 66G(1) and (3) and failed to have regard to any other consideration relevant to the exercise of that power.”
Secondly, a second further amended notice of appeal was filed in court on 21 October 2013. In the event, no reliance was placed upon the amendments contained in the second further amended notice of appeal in support of any of the applications for an interim stay. Reliance was placed solely in each case upon ground 3A.
It was accepted by all parties that the matters raised by ground 3A had not been raised before the primary judge. Furthermore, while there was no evidence on the point, it was submitted by Ljiljana Coshott that the amendment was made following the issue having been raised at the hearing of the first application for a stay on 4 October 2013. In this regard, Griffiths J appeared at [40] of his reasons to accept that ground 3 of the amended notice of appeal alleging the court lacked power to make an order for sale under s 30 of the Bankruptcy Act 1966 (Cth) against a co-owner of real property who is not the relevant bankrupt, was arguable given that a submission to that effect had been upheld by Jarrett FM (as his Honour then was) in Park v Barclay (2010) 239 FLR 396. However, at the hearing of the first stay application his Honour raised with Mr Kidd SC, counsel for the appellants, whether s 66G of the Conveyancing Act 1919 (NSW) might not constitute a source of power for the orders. His Honour’s reasons at [40] record that counsel for the appellants “accepted that that provision could provide a source of power, however, he then said that if that was the power that was being relied upon, the exercise of the power miscarried”. His Honour held that that submission did not assist the appellants as ground 3 raised only a question as to the absence of any power to make such an order, as opposed to a miscarriage in the exercise of the power: at [42].
3. THE CURRENT APPLICATIONS FOR A STAY
As earlier explained, there are three current applications for a stay of the orders made by the primary judge on 10 September 2013. These can be summarised as follows.
3.1 The application for a stay in the Fewin proceedings
The first application arises in the Fewin proceedings. These proceedings were instituted on 17 October 2013 and served later that day on the first respondent in line with the orders made by Bennett J also on 17 October 2013.
The relief sought by Fewin in the Fewin proceedings relates to orders made in the Coshott proceedings in which Fewin had been neither a party nor had sought to be joined. Through its application, Fewin claims to be seeking to preserve the company’s alleged interest in the Bunyula property.
The final relief sought by Fewin can be summarised as follows:
·an order that the trustee be enjoined from taking any step to implement or enforce orders 7, 8 and 9 made by the Federal Court on 10 September 2013 in the Coshott proceedings, namely, for the delivery up of vacant possession of the Bunyula property on 22 October 2013, and for the property to be sold with 50% of the proceeds going to the trustee in bankruptcy (being the extent of the interest held by Robert Coshott, a bankrupt, in the Bunyula property) and 50% to Ljiljana Coshott;
·a declaration that Fewin has an equitable mortgage over Ljiljana Coshott’s 50% share in the Bunyula property; and
·a declaration that Fewin entered into possession of the property on 3 July 2013 pursuant to s 60 of the Real Property Act 1900 (NSW) and remains in such possession.
The first respondent filed a notice stating grounds of opposition to the application on 21 October 2013 on the basis that leave was required to institute proceedings against the trustee for sale to the extent that this was the capacity in which the first respondent was being sued, that the proceedings constitute an abuse of process and that, as the holder of an unregistered equitable mortgage only, Fewin could not exercise any of the powers of a mortgagee available under the Real Property Act 1900 (NSW). In relation to the first ground, Fewin contended in oral submissions in reply that the proceedings were brought against Mr Prentice in his capacity as trustee in bankruptcy.
An interim stay was also sought by Fewin. At the hearing of this application, Fewin abandoned the claim for interim relief in the terms sought in the originating application and provided substitute short minutes of order on 24 October 2013 to the following effect:
“An order that Orders 6, 7, 8 and 9 of the orders of Buchanan J made in the Federal Court of Australia on 10 September 2013 in Proceedings number (P)NSD 1412/2009 be stayed pending the determination of the appeal in those proceedings.”
The application for interim relief (as amended) is supported by the affidavit of Ronald Michael Coshott sworn on 16 October 2013. Ronald Coshott is the director of Fewin and is, in his own words, the “moving mind” of Fewin. He is also the brother-in-law of the first appellant in the Coshott proceedings, Ljiljana Coshott. As explained later, Ronald Coshott caused Fewin to advance substantial sums to Ljiljana Coshott and her two sons, which are said to be secured by the mortgage in favour of Fewin over the Bunyula property.
3.2 The application by the appellant in the Coshott proceedings
The hearing of the application in the Fewin proceedings commenced in the morning on 21 October 2013 but was adjourned on Fewin’s application.
Upon resumption of the hearing of the application in the Fewin proceedings at 2.30pm that day, the appellant in the Coshott proceedings by interlocutory application sought to apply for a stay of the orders made by the primary judge on 10 September 2013 in proceedings NSD1412 of 2009 pending determination of the appeal. The appellant also filed in court a second further amended notice of appeal (which notice was filed within the 28 days permitted by Rule 36.10 of the Federal Court Rules) and an affidavit of Keith Robert Spencer, the solicitor for the appellant, sworn on 21 October 2013 in support of the interlocutory application. No prior notice had been given of the appellant’s intention to file any of the aforementioned documents.
Notwithstanding that the matter was expressly raised by the Court on 21 October 2013 when the application was filed in court, counsel for the appellant confirmed that there would be no evidence led as to the financial circumstances or other detriment that would be suffered by the appellants if the stay were not granted.
In the circumstances, the hearing of the appellant’s application for a stay was set down for hearing on 22 October 2013 and was ultimately heard on that day together with the other application to which I have referred.
3.3 The application by Fewin in the Coshott proceedings
Finally, on 22 October 2013, Fewin applied for a stay in the Coshott proceedings of the said orders on the basis that it was an interested person under Rule 36.08 of the Federal Court Rules2011. That application was put in the alternative to Fewin’s application for a stay brought in the Fewin proceedings, and sought interim relief in the same terms.
By consent orders made on 23 October 2013, the evidence adduced on behalf of Fewin in the Fewin proceedings is evidence on its motion in the Coshott proceedings. The trustee also relied on the same evidence as had been tendered in the Fewin proceedings.
4. PRINCIPLES GOVERNING THE GRANT OF A STAY
The principles governing the grant of a stay in this Court are well settled.
The discretion is a broad one which does not require that special or exceptional circumstances be shown in line with the approach adopted in Alexander v Cambridge Credit Corporation Ltd (1985) 2 NSWLR 685 at 694. Rather, as Mahoney JA held in Re Middle Harbour Investments Ltd (In liq) (unreported, Court of Appeal, NSW, 15 December 1976) with the concurrence of the other members of the Court and in a passage approved by the Full Court of the Federal Court in Powerflex Services Pty Ltd v Data Access Corporation (1996) 67 FCR 65 at 66:
“Where an application is made for a stay of proceedings, it is necessary that the applicant demonstrate an appropriate case. Prima facie, a successful party is entitled to the benefit of the judgment obtained by him and is entitled to commence with the presumption that the judgment is correct. These are not matters of rigid principle and a court asked to grant a stay will consider each case upon its merits, but where an applicant for a stay has not demonstrated an appropriate case but has left the situation in the state of speculation or of mere argument, weight must be given to the fact that the judgment below has been in favour of the other party.”
Furthermore, as was held in Alexander v Cambridge op cit at 694:
“The onus is upon the applicant to demonstrate a proper basis for a stay that will be fair to all parties … The mere filing of an appeal will not, of itself, provide a reason or demonstrate an appropriate case, nor will it discharge the onus which the applicant bears … The Court has a discretion whether or not to grant the stay and, if so, as to the terms that would be fair. In the exercise of its discretion, the Court will weigh considerations such as the balance of convenience and the competing rights for the parties before it … Even where no order is made for the payment of part of a verdict, it is not at all unusual for the Court, in the exercise of its discretion, to grant a stay on terms that the appellant give to the judgment creditor security in terms defined by the Court as appropriate to the fair adjustment of the rights of the parties.” (citations omitted)
In determining whether or not to grant a stay of first instance orders where appeal proceedings are pending, clearly one important factor is whether the grounds of appeal are reasonably arguable. However, in line with the approach endorsed in Powerflex Services, neither that factor nor any other single factor is necessarily determinative.
5. THE APPLICATION FOR AN INTERIM STAY BY LJILJANA COSHOTT IN THE COSHOTT PROCEEDINGS
5.1 The appellant’s submissions in support of a stay
The appellant in the Coshott proceedings adopted and briefly supplemented the submissions made by Fewin in support of the submission that ground 3A of the further amended notice of appeal is reasonably arguable. For this reason, I consider Fewin’s submissions on this issue in the context of considering the application for a stay by Ljiljana Coshott.
The sole ground relied upon by Ljiljana Coshott to differentiate between the circumstances in which this application for a stay is made and those existing when the first application was made on 4 October 2013, is the amendment on 15 October to include ground 3A in the notice of appeal. That ground alleges that the Federal Court had no jurisdiction to make orders 6 to 11 of the 10 September 2013 orders, under s 66G of the Conveyancing Act 1919 (NSW).
Section 66G(1) of the Conveyancing Act 1919 (NSW) relevantly provides for the appointment of a trustee for sale of property held in co-ownership on the application of a co-owner in the following terms:
“66G(1) Where any property (other than chattels) is held in co-ownership the court may, on the application of any one or more of the co-owners, appoint trustees of the property and vest the same in such trustees, subject to incumbrances affecting the entirety, but free from incumbrances affecting any undivided shares, to be held by them on the statutory trust for sale or on the statutory trust for partition.”
“Co-ownership” is defined in s 66F(1) to mean “ownership whether at law or in equity in possession by two or more persons as joint tenants or as tenants in common; and co-owner has a corresponding meaning and includes an incumbrancer of the interest of a joint tenant or tenant in common”.The term “incumbrance” is defined in s 7(1) of the Conveyancing Act 1919 (NSW) to include “a mortgage in fee or for a less estate, and a trust for securing money, and a lien and a charge of a portion, annuity, or other capital or annual sum; and incumbrancee has a meaning corresponding with that of incumbrance, and includes every person entitled to the benefit of an incumbrance, or to require payment or satisfaction thereof.”
Fewin contended that the Bunyula property was held in co-ownership as defined, namely, by Ljiljana Coshott and the Trustee in Bankruptcy as tenants in common by the orders made on 10 September 2013. Fewin also contended that it was a co-owner of the Bunyula property as it was “an incumbrancer” of the interest of Ljiljana Coshott by reason of it holding the equitable mortgage and was therefore also a co-owner for the purposes of s 66G.
Based upon these matters, it was contended that the Supreme Court of New South Wales alone, and not the Federal Court, had power to make orders under s 66G of the Conveyancing Act 1919 (NSW). Given, therefore, its contention that s 30 of the Bankruptcy Act1966 (Cth) did not confer power on the Federal Court to make the orders, it was said to follow that the Federal Court lacked power to order that the property be vested in the first respondent and to appoint the first respondent as the trustee for sale.
This argument in turn had three limbs.
·First it was contended that the word “Court” in s 66G is defined in s 7(1) of the Conveyancing Act1919 (NSW) as meaning the Supreme Court of New South Wales and that Court alone is therefore authorised to make the orders for which it provides.
·Secondly, it was contended that s 79 of the Judiciary Act does not operate to pick up and apply s 66G of the Conveyancing Act 1919 (NSW) as a federal law so as to empower the Federal Court to make orders in its terms. While no authority was cited, it was said that s 79 could apply only to pick up laws “binding” on a State court which meant laws such as limitations statutes or laws dealing with matters of procedure or evidence, as opposed to laws conferring a power or discretion on a court such as s 66G of the Conveyancing Act 1919 (NSW).
·Thirdly, in any event it was contended that s 66G of the Conveyancing Act 1919 (NSW) requires the appointment of at least two trustees for sale where the trustees are individuals. It does not authorise the appointment of only one individual trustee as occurred in the present case. Section 66G(3) reads as follows:
“(3) (a) Where the entirety of the property is vested at law in co-owners the court may appoint a trust corporation either alone or with one or two individuals (whether or not being co-owners), or two or more individuals, not exceeding four (whether or not including one or more of the co-owners), to be trustees of the property on either of such statutory trusts.
(b)On such appointment the property shall, subject to the provisions of section 78 of the Trustee Act 1925, vest in the trustees.” (emphasis added)
5.2 Consideration of the exercise of discretion to grant the stay sought by the appellant in the Coshott proceedings
In the first instance, success on ground 3A of the further amended notice of appeal turns upon the appellant also succeeding on ground 3 in its contention that the Court lacked power to make the 10 September 2013 orders under the Bankruptcy Act1966 (Cth). As I have earlier explained, it would appear that the Court considered that ground to be reasonably arguable in considering the appellant’s first application for a stay, and there is no cause for me to revisit that aspect of the reasons given on the first stay application. Given the careful reasons of Jarrett FM in Park v Barclay op cit for holding that no such power was conferred by s 30 of the Bankruptcy Act 1966 (Cth) to order sale of a property against a co-owner who is not a bankrupt, I would not be prepared to hold that the ground is unarguable.
While the trustee did not seek in the context of these applications to rely upon s 66G as an alternative source of power to make the orders, it is still necessary for the appellant to establish that the ground of appeal in ground 3A is arguable. Again, given that the power to make an order under s 66G is in terms limited to the Supreme Court of New South Wales, and that the trustee did not make submissions as to the arguability of the point preferring to rely solely on s 30 of the Bankruptcy Act 1966 (Cth). I consider that I cannot exclude the possibility that the ground may ultimately succeed. Furthermore, the issue would not appear to raise any contentious issues of fact, at least insofar as the ground is based upon the fact that Ljiljana is a co-owner for the purposes of s 66G of the Conveyancing Act 1919 (NSW), but to raise a question of law only. As such, it is reasonably arguable that leave may be granted to raise the new ground.
Nonetheless, I refuse to grant the stay now sought having regard to the following considerations.
First, the issue raised by ground 3A of the notice of appeal was not raised at trial, despite the applicant being legally represented. To the contrary, on the first application for a stay, counsel for the appellant conceded the existence of power under s 66G of the Conveyancing Act 1919 (NSW).
It follows that the second application for a stay is not made as a response, for example, to a change in circumstances beyond the appellant’s control. Rather, the first appellant now seeks to rely for a stay upon amendments to the notice of appeal on new grounds as a result of its own endeavours to remedy the basis on which it lost the first stay application. Such conduct is not, in my view, consistent with the conduct of proceedings in accordance with ss 37M and 37N of the Federal Court of Australia Act 1976 (Cth), namely, to facilitate the just resolution of disputes “as quickly, inexpensively and efficiently as possible”.
Secondly, no evidence has been led by the first appellant on such matters as the current state of the Bunyula property, nor as to Ljiljana Coshott’s capacity or the capacity of the other appellant to maintain the property and to pay the relevant rates, taxes and insurance. As such, the submission that the trustee would not suffer any detriment if the orders were stayed has no evidence to support it. Equally, there is no evidence to support the first appellant’s submission that the time which the current orders would allow the trustee to put the property into order to maximise its price for sale in February 2014 is excessive. Nor has evidence been led of detriment or prejudice to Ljiljana Coshott or the other appellant (if indeed any detriment in relation to it is relied upon) in the event that a stay is not granted, despite being on notice of the potential implications of not doing so by the reasons published on 4 October 2013 denying the appellant’s first application for a stay. In this regard, I agree with the observations made by Griffiths J in relation to the first stay application in Coshott v Prentice [2013] FCA 1036 at [46]-[47]. Although it can be said with some force that the loss of the family home is not capable of reparation by payment of moneys, nonetheless it is reasonable to expect that the first appellant would have led evidence as to the residents’ personal and individual financial circumstances, whether alternative accommodation was available and so forth, if weight is to be given to this ground. The difficulty that the failure to lead such evidence gives rise to, in my view, is that the appellant “has not demonstrated an appropriate case but has left the situation in the state of speculation or of mere argument…”: Re Middle Harbour Investment Ltd (In liq) op cit (Mahoney JA).
In the third place, the first appellant has delayed in making the present application and left that delay unexplained by any evidence. While it might be said that this second application for a stay could not have been made prior to the filing of the further amended notice of appeal on 15 October 2013, there is no explanation as to why the further amended notice of appeal was not filed until 11 days after the first stay application was refused on 4 October 2013 or as to why the application for a stay was not made until after the hearing of Fewin’s application for a stay in the Fewin proceedings had commenced on 21 October 2013. While that delay may not in terms appear substantial, it is potentially significant in relative terms when the application for a stay is not made until the afternoon of 21 October 2013 during the course of the hearing of Fewin’s stay application and made on the day before vacant possession was required under the orders sought to be stayed.
Finally, Mr Johnson again confirmed at this hearing, and it was not disputed, that the trustee expects that the auction of the Bunyula property would not take place until at least February 2014. By such time it is likely that the appeal will have been heard and determined.
6. THE APPLICATION FOR AN INTERIM STAY BY FEWIN IN THE FEWIN PROCEEDINGS
The applicant submitted that power to make the interim orders in the Fewin proceedings to stay the orders made by the primary judge in the Coshott proceedings was found in Rule 36.08 of the Federal Court Rules. While sub-rule 36.08(1) provides that an appeal does not operate as a stay of execution of any proceedings under the judgment subject to the appeal, sub-rule (2) provides that:
“However, an appellant or interested person may apply to the Court for an order to stay the execution of the proceeding until the appeal is heard and determined.” (emphasis added)
Fewin submitted that it was entitled to bring these proceedings and seek the relief in question as an “interested person” within sub-rule 36.08(2). Such a person is defined by the Federal Court Rules 2011 (Schedule 1) to include “a person affected by an order of the Court.”
Fewin further submitted that:
“Within the terms of Rule 36.08, the fact that the application is made in a separate proceeding cannot be regarded as a collateral attack upon the judgment of the trial judge. The application accepts the correctness of the judgment (subject to the outcome of the appeal). It does no more than utilise the ordinary procedures of the Court to seek to preserve the status quo until an appeal is determined.”
Fewin then contended that the amended notice of appeal in the Coshott proceedings added grounds that were clearly arguable with reasonable prospects of success.
These submissions reveal the difficulty in my view with the nature of the application that is sought to be made in these proceedings. Fewin makes it clear that ultimately it seeks a stay to preserve the status quo pending the appeal. Such an application could be sought, in my view, under Rule 36.08 only within the actual appeal proceeding itself but not by way of a separate proceeding as occurred here. There is nothing in Rule 36.08, or that the applicant was otherwise able to point to, that suggested that such an application could properly be made in separate proceedings.
In any event, for the reasons that I set out below in relation to Fewin’s application for a stay in the Coshott proceedings, I would not have exercised my discretion to grant the stay sought in the Fewin proceedings even if that application were competent.
7. THE APPLICATION FOR AN INTERIM STAY BY FEWIN IN THE COSHOTT PROCEEDINGS
7.1 The evidence of Ronald Coshott in support of the application
In his affidavit sworn on 16 October 2013, Ronald Coshott gives evidence that between 16 May 2012 and 11 October 2013, Fewin at his behest advanced substantial sums of money to Ljiljana, James and Michael Coshott. Ronald Coshott further alleges that these amounts were secured by a mortgage given by Ljiljana Coshott on 10 July 2013 to the extent of her interest in the Bunyula property. He also gives evidence that he took possession of the Bunyula property pursuant to that mortgage on 3 July 2013 and remains in possession.
Specifically, Ronald Coshott’s evidence is to the following effect.
·On 10 July 2012:
o a Deed of Loan was entered into between Ljiljana Coshott together with James and Michael, purportedly in their capacity as trustees of the Coshott Family Trust (the ‘Borrowers’) and Fewin (‘the Lender’), with James and Michael Coshott acting in their own right as guarantors; and
o Ljiljana Coshott as Mortgagor mortgaged all of her estate and interest in the Bunyula property to Fewin.
The recitals to the mortgage explain that the purpose of the arrangements are to assist Ljiljana Coshott avoid bankruptcy, and to enable her and her sons to continue to reside in the Bunyula property. The terms of the Deed of Loan stated that the principal amount is not to exceed $450,000. However, by this stage, Ronald Coshott had already caused Fewin to make three advances totalling $480,000.00 to Ljiljana, James and Michael Coshott, with the first such payment being made on 16 May 2012.
·On 7 August 2012, Ronald Coshott caused a caveat to be registered against the title of the Bunyula property.
·On 30 August 2012, the Borrowers entered into a Supplementary Deed of Loan (‘First Supplementary Deed of Loan’) with the Lender to increase the maximum principal amount to $550,000.00. By this stage, Ronald Coshott had caused the Lender to advance a total of $525,000.00 to the Borrowers.
·On 17 June 2013 the Borrowers entered into a further Supplementary Deed of Loan (‘Second Supplementary Deed of Loan’) with the Lender to increase the maximum principal amount of the original Deed of Loan to $1,000,000.00. By this stage, Ronald Coshott had caused Fewin to advance a total of $588,870.19 to the Borrowers.
·On 19 June 2013, as no payments had been received from the Borrowers and he was allegedly concerned as to the security position of Fewin, Ronald Coshott hand-delivered a letter to Ljiljana Coshott at the Bunyula property advising that as no payments had been made under the Deed of Loan (as amended by the First and Second Supplementary Deeds of Loan) for almost 12 months, Fewin will be entering into possession of the mortgaged property on 3 July 2013.
·On 3 July 2013, the day after completion of the hearing before the primary judge, Robert Coshott attended at the Bunyula property at about 7pm and spoke with Ljiljana and James Coshott to the following effect
“I said: ‘You know I do not want to do this, but I have to. I am entering into possession of this property on behalf of Fewin Pty Ltd. You can stay on in a caretaking role until things are cleared up.’
James said: ‘I understand Uncle Ron.’
I was handed a set of keys to the property. I left the property. I have been regularly entering the property since 3 July, 2013.”
The mortgage allegedly held by Fewin is an unregistered mortgage over the Bunyula property which is Torrens title land. As such, as the parties were agreed, the mortgage (if bona fide) would be regarded as being in the nature of an equitable mortgage and enforceable in the same way. Fewin contended, and counsel for Mrs Coshott did not refute, that possession was voluntarily relinquished by Ljiljana Coshott on 3 July 2013 absent which Fewin accepted that it could have taken possession only with a court order.
Judgment was subsequently delivered in the Coshott proceedings by the primary judge on 10 September 2013, at which Ronald Coshott was present and obtained a copy. Notwithstanding this, it is also his evidence that subsequently on 11 October 2013, he caused Fewin to advance a further $316,557.84 to Spencer & Co, the solicitors for the appellants, to be paid into the firm’s trust account at the request of James Coshott. As a result, Ronald Coshott alleged that Ljiljana Coshott is now indebted to Fewin in the sum of $905,428.03 plus $48,996.37 in interest, there having been no payments of interest or principal to Fewin.
7.2 Conclusion on Fewin’s application for a stay in the Coshott proceedings
Fewin’s application for a stay pending the determination of the appeal was based upon its contention that ground 3A of the further amended notice of appeal was reasonably arguable. That ground had been inserted by amendments on 15 October 2013 after the first application for a stay by Liljana Coshott had been refused on 4 October 2013 in light of the matters raised in the course of argument on the first application for a stay.
Given that Fewin’s application is made purportedly to protect its interests as mortgagee in possession of the Bunyula property, I accept that Fewin would be a person affected by an order of the Court for the purposes of sub-rule 36.08(2) and therefore has standing to apply for a stay in the Coshott proceedings.
Nonetheless, for the reasons set out below, I refuse Fewin’s application for a stay in the exercise of my discretion even assuming that ground 3A of the further amended notice of appeal is reasonably arguable.
Fewin has delayed unreasonably in taking action to protect its alleged interests in the Bunyula property. Furthermore or in any event, no evidence is given as to the reasons why Fewin failed to take any steps to protect its interests in these proceedings prior to 17 October 2013. The matter is left to mere argument and speculation contrary to the approach approved by the Full Court in Powerflex Services op cit. This Court is being asked to act in circumstances which call for an explanation that, for whatever reason, Fewin has failed to provide. In such circumstances, I consider that Fewin has not to established an appropriate case for the grant of a stay.
In this regard, the parties agreed that it was relevant for me to consider whether, and if so, to what extent, Fewin had delayed in taking steps to protect its interests. However, they were not agreed as to the point in time from which I ought to consider whether Fewin had delayed. I reject the submission made by Fewin that delay should be regarded as only commencing from the date on which judgment was delivered on the appellant’s first stay application, namely, 4 October 2013. I do not accept that until that time, Fewin was entitled to rely upon its knowledge that there was no judgment adverse to it until 10 September 2013 and the appellant’s first stay application was refused or, as it was described by Fewin’s counsel, that it was content to “ride on the coattails” of the appellants’ conduct in the Coshott proceedings. Nor do I accept Fewin’s somewhat circular alternative submission that delay should be calculated only from the date on which judgment was given by the primary judge on the basis that no stay could be applied for until judgment was given. In reaching this view I have had regard to a number of factors.
First, Fewin’s interests as asserted in its various applications were different from, and potentially adverse to, the interests of the cross-respondents in the Coshott proceedings. As such, there is no reason why it should not have taken responsibility for protecting its own interests.
Secondly, by the Further Amended Cross-claim filed in the Coshott proceedings on 8 February 2013, orders were sought that the Bunyula property be vested in the cross-claimant for sale and be sold, and that each of the cross-respondents deliver up vacant possession. Notwithstanding the obligation on Ljiljana Coshott contained in cl 10(2)(j) of the Deed of Loan entered into on 10 July 2012 to notify Fewin “forthwith of any litigation or administrative or other proceedings initiated or threatened against the Borrower or any of the Borrower’s assets”, no evidence is given as to why Fewin failed to take any measures at that time to protect its interest and, in particular, as to why it failed to seek to be joined to the cross-claim in the Coshott proceedings.
To the contrary, Fewin continued thereafter to increase its potential exposure by entering into the Second Supplementary Deed of Loan on 17 June 2013 only a week before the hearing of the Coshott proceedings commenced on 24 June 2013 and took no steps prior to 3 July 2013 to enforce the terms of the Deed of Loan. This is all the more inexplicable in circumstances where at no stage were any payments made in compliance with cl 5 of the Deed of Loan requiring the payment of interest at 8.5% per annum due in equal monthly instalments on the 10th day of each month commencing on 10 August 2012.
Thirdly, Ronald Coshott, who described himself as the “moving mind” of Fewin, failed to raise Fewin’s interest at the hearing before the primary judge in the Coshott proceedings. Notwithstanding that he gave evidence for the cross-respondents and that Mr Coshott was, at the very least, present during the Coshott proceedings “from time to time”. Again no explanation for his failure to act sooner is given in his affidavit sworn 16 October 2013, which indeed fails to make any mention of the fact that he also gave evidence in the Coshott proceedings.
In addition, Fewin offered no explanation as to why it did not seek the protection of a court order following its purported entry into possession of the Bunyula property on 3 July 2013, particularly in circumstances where neither the loans or the mortgage were arms-length transactions and litigation was on foot by the trustee in bankruptcy seeking a vesting of the Bunyula property in it for the purposes of sale.
Fewin also offered no explanation or evidence as to why it did not respond to the letter it received from the trustee for sale on 17 September 2013. In that letter the solicitors for the trustee for sale referred to the orders made by this Court on 10 September 2013 and informed Fewin of the trustee’s intention to take steps to obtain possession and effect sale of the Bunyula property. Relevantly, the letter stated that the trustee intended to take steps to register himself on the title of the property and enclosed a withdrawal of caveat for Fewin to complete. Notwithstanding Fewin’s receipt of clear notice from the trustee of his intention to register his interest and, considering Fewin’s submission at the hearing before me that such registration by the trustee would extinguish Fewin’s equitable interest in the Bunyula property, Fewin nonetheless did not reply to that letter and waited one month to bring its interlocutory application.
The cumulative effect of these matters is that, notwithstanding Ronald Coshott’s state of knowledge, Fewin now seeks to rely upon its own inaction as a ground upon which to stay the orders of the primary judge. Fewin’s own inaction created at least some of the alleged difficulties with the orders of which it now complains. Thus, Fewin contended that the court lacked power to make the vesting orders on the ground that Fewin, as well as Ljiljana Coshott, was a co-owner for the purposes of s 66G of the Conveyancing Act 1919 (NSW) because it was an incumbrancer by reason of its equitable mortgage and should have been enjoinded. In Fewin’s submission, the failure to do so meant that Fewin did not have the opportunity to make submissions as to whether trustees for sale should be appointed and, if so, who the trustees should be, what terms should be imposed on the sale (including as to the priority of the distribution of the proceeds of sale), and whether any work should be carried out first on the property to maximise the sale price.
Moreover, notwithstanding that Ronald Coshott was present when judgment was delivered in the Coshott proceedings on 10 September 2013 and that he obtained a copy of the judgment, a further sum of $316,557.84, being a substantial part of the money which Fewin claims is owed by the appellants and is now relied upon as the basis of Fewin’s financial interest in the Bunyula property, was advanced a week after the first stay application was refused by this Court.
As such, this Court is being asked to protect Fewin’s interests in the Bunyula property against those of the trustee in bankruptcy and in sale in circumstances where Fewin continued to substantially increase its exposure in full knowledge of the orders made by the primary judge adverse to the interests it now asserts and in full knowledge of the fact that those orders has not been stayed pending the appeal. At the very least, such conduct in the face of an application to protect Fewin’s alleged security calls for a fulsome explanation before this Court ought to permit interference by a non-party with the orders in favour of the trustee. No such explanation has been given.
Finally, on the question of the detriment that it would suffer, Fewin submitted that the vesting order, once completed by registration of a dealing under the Real Property Act 1900 (NSW) which as a necessary precursor to sale of the property, would destroy Fewin’s equitable security interest for two reasons:
·first, s 42 of the Real Property Act 1900 (NSW) provides that the registered proprietor of an estate or interest in land holds “absolutely free” of all estates or interests not recorded in the register; and
·in any event, s 66G(1) itself provides that the property vests in trustees “free from incumbrances affecting any undivided shares.”
However, even assuming the correctness of those submissions, Fewin at the hearing submitted (putting it in the colloquial) that the prejudice is ultimately “having to unscramble eggs if the appeal is successful”, that is, in having to restore Fewin’s position in the event that the appeal succeeds. Moreover, I note that upon the sale of the Bunyula property, order 11.1 of the 13 September 2013 orders prioritises the distribution of the proceeds of sale to first “discharge of any valid encumbrance over the title to the [Bunyula] Property”.
8. CONCLUSION
In the circumstances, I refuse the application for a stay made by Fewin in the Fewin and Coshott proceedings. I also refuse the application for a stay by the first appellant, Ljiljana Coshott. I reserve my orders as to costs and will make directions as to a timetable within which the parties are to provide submissions as to costs.
I certify that the preceding eighty (80) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Perry. Associate:
Dated: 31 October 2013
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