Cross Country Realty Victoria Pty Ltd v Ubertas 350 William Street Pty Ltd

SUPREME COURT OF VICTORIA

COURT OF APPEAL

S APCI 2015 0079

CROSS COUNTRY REALTY VICTORIA PTY LTD and PARK TRENT PROPERTIES GROUP PTY LTD	Applicants
v
UBERTAS 350 WILLIAM STREET PTY LTD	Respondent

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JUDGES:	KYROU and McLEISH JJA
WHERE HELD:	MELBOURNE
DATE OF HEARING:	11 December 2015
DATE OF JUDGMENT:	11 December 2015
DATE OF REASONS:	16 December 2015
MEDIUM NEUTRAL CITATION:	[2015] VSCA 347
JUDGMENT APPEALED FROM:	Cross Country Realty Victoria Pty Ltd v Ubertas 350 William Street Pty Ltd [2015] VCC 1012 (Judge Lacava)

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PRACTICE AND PROCEDURE – Application for leave to appeal against summary judgments granted by County Court – Applicants were real estate agents – Applicants claimed payment of commission and respondent counterclaimed for repayment of commission based on applicants’ breaches of disclosure provisions in s 49A of Estate Agents Act 1980 – Whether summary judgments inappropriate having regard to principles relating to estoppel, quantum meruit and rectification – Whether judge’s discretion miscarried by granting a shorter adjournment than the applicants had requested to enable them to file affidavit material – Application for leave to appeal granted.

PRACTICE AND PROCEDURE – Application for a stay of execution of judgment – Whether appeal would be rendered nugatory without a stay because of pending winding up proceedings against applicants – Evidence in winding up proceedings of forthcoming finance facility that would enable payment of judgment debts – Application for a stay refused.

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APPEARANCES:	Counsel	Solicitors
For the Applicants	Mr A Panna QC with Mr W H C Forrester	Kalus Kenny Intelex
For the Respondent	Mr D Collins QC with Ms S Cherry	Brand Partners

KYROU JA
McLEISH JA:

Introduction and summary

The applicants, Cross Country Realty Victoria Pty Ltd (‘Cross Country’) and Park Trent Properties Group Pty Ltd (‘Park Trent’) seek:

(a)leave to appeal from judgments entered against them in favour of the respondent, Ubertas 350 William Street Pty Ltd, by Judge Lacava of the County Court on 31 July 2015; and
(b)a stay of execution of those judgments pending the hearing and determination of their application for leave to appeal and, if leave is granted, their appeal.

The judgment sums comprise commission paid by the respondent which the judge found the applicants were not entitled to retain because they had breached certain provisions of the Estate Agents Act 1980 (‘EA Act’), together with interest.

The applicants contend that their appeal has a real prospect of success and would be rendered nugatory if a stay is not granted. This was said to be because the respondent has applied for winding up orders against the applicants following their failure to meet statutory demands seeking payment of the judgment sums. The winding up applications came before Randall AsJ on 19 November 2015 and were adjourned until 18 December 2015. Park Trent also contends that judgment should never have been entered against it because it did not receive any commission from the respondent.

The respondent contends that the prospect of the appeal succeeding is fanciful and opposes the application for a stay for that reason and on the basis of evidence that the applicants adduced before Randall AsJ on 19 November 2015. That evidence was to the effect that the applicants expect loan facilities to be in place by around 16 December 2015 which will enable the judgments to be satisfied.

Since the strength of the proposed appeal was a central point of contention on the stay application, with the consent of the parties, the Court heard the application for leave to appeal at the same time as the stay application.

We concluded that the application for leave to appeal should be granted and the application for a stay should be refused and made orders to that effect on the hearing of the applications. Our reasons for making those orders follow.

Relevant provisions of the Estate Agents Act 1980

Sections 49A and 50 of the EA Act provide:

49A Offence not to give certain information about commission
(1) An estate agent must not obtain, or seek to obtain, any payment from a person in respect of work done by, or on behalf of, the agent or in respect of any outgoings incurred by the agent unless —
…
(b) before obtaining the person's signature to the engagement or appointment, the agent (or an agents' representative employed by the agent) informed the person (or the person's agent or representative) that the commission to be paid to the agent under the engagement or appointment and any money to be paid by the person in respect of outgoings were subject to negotiation; and

(c) the engagement or appointment contains —
…
(ii) if a fee is to be calculated on a percentage basis, a statement of that fee expressed as both a percentage and as the dollar amount that would be payable on the reserve price or any other relevant amount set out in the engagement or appointment; and
(iii) a rebate statement that complies with subsection (4); and
(iv) a statement in a form approved by the Director [of Consumer Affairs Victoria] as to where a complaint concerning any commission or outgoings in the engagement or appointment can be made …

…

Penalty: 100 penalty units.

…

(4) A rebate statement complies with this subsection if it is in a form approved by the Director [of Consumer Affairs Victoria] and it contains —
(a) a statement of whether or not the agent will be, or is likely to be, entitled to any rebate in respect of —
(i) any outgoings; or
(ii) any prepayments made by the person engaging or appointing the agent (the client) in respect of any intended expenditure by the agent on the client's behalf; or
(iii) any payments made by the client to another person in respect of the work; and

(b)       if such an entitlement will, or is likely to, occur, details of —
(i)        the goods or services to which the rebate relates; and
(ii)       the name of the person providing the rebate; and
(iii)the amount of the rebate that will be attributable to the engagement or appointment, or if that amount is not known at the time the statement is made, an estimate (in dollars) of the amount; and

(c) a statement that the agent is not entitled to retain any rebate and must not charge the client an amount for any expenses that is more than the cost of those expenses; and

(d) any other statements or details required by the regulations.

…
50 Commission
(1) An estate agent is not entitled to sue for or recover or retain any commission or money in respect of any outgoings for or in respect of any transaction unless —
(a)at all material times in relation to the transaction he or she is the holder of an estate agent's licence; and
(b)the agent has complied with section 49A(1) with respect to the engagement or appointment to undertake the transaction …

…

…
(4)Any estate agent who … for or in respect of any service or transaction … demands receives or retains from any moneys received by him or her an amount by way of commission or otherwise which is in excess of the amount allowed by the agent's engagement or appointment to act shall be guilty of an offence against this Act; and the Court, in addition to imposing any penalty, may order the agent … to refund any excess or improper amount received or retained by him or her.

Facts and procedural history

Cross Country is a licensed real estate agent operating in Victoria. Cross Country is part of the Park Trent Properties Group (‘PT Group’), which includes an affiliation of licensed real estate agents in New South Wales, Queensland, South Australia, the Australian Capital Territory and Western Australia, all of which use the ‘Park Trent’ trading name. For example, ‘Parktrent Properties Group Victoria’ is a business name registered by Cross Country. Park Trent is not licensed in Victoria, but is a licensed real estate agent operating in New South Wales.

Ronald Cross is a director of the applicants and the sole shareholder of Park Trent.

The respondent is a builder and developer of a multi-unit development at 350 William Street, Melbourne. It undertook developments known as the Art on the Park development and the Singers Lane development at that address.

On 15 February 2010, Cross Country and the respondent entered into an agreement for the sale and marketing of units in the Art on the Park development by Cross Country as agent (‘Art on the Park SMA’), which contained a schedule for payment of commission upon the sale of units.

Between 2010 and 2014, Cross Country carried out the marketing and sale of units in the Art on the Park development. Cross Country received commission from the respondent in respect of that work in the amount of $1,670,889.

On 15 October 2010, Simon Barr — the development director of the respondent — sent a letter to ‘Ms Jennifer Hogan, General Manager, Park Trent Properties Group’ setting out the ‘key agreed terms’ relating to the sale and marketing of units in the Singers Lane development (‘Singers Lane Letter’). Ms Hogan acknowledged agreement to those terms by signing the letter and returning it to the respondent’s office.

Between 2010 and 2013, various units in the Singers Lane development were marketed and sold, in respect of which the respondent paid commission in the amount of $1,413,885.

The applicants commenced the proceeding below by writ on 2 September 2014. By their statement of claim of the same date, they alleged that, pursuant to the Art on the Park SMA, Cross Country was owed a total of $186,455.47 for commission and interest.

In the statement of claim, Park Trent alleged that it had entered into a contract with the respondent for the selling and marketing of units in the Singers Lane development which it referred to as the ‘Singers Lane SMA’. The Singers Lane SMA was said to be partly in writing and partly implied, with the written part contained in the Singers Lane Letter. The applicants pleaded that, pursuant to the Singers Lane SMA, Park Trent was owed a total of $49,355.20 for commission and interest.

On 15 October 2014, the respondent filed a defence and counterclaim by which it denied that any money was owing to either of the applicants. In relation to Cross Country’s Art on the Park claim, at para 8 of the defence, the respondent relevantly pleaded as follows:

The [respondent] says further that if [Cross Country] and [the respondent] entered into a contract as alleged (which is denied) —
a. there was a term of the alleged contract that [Cross Country] had complied with its obligations, including statutory obligations as to disclosure, prior to obtaining the [respondent’s] signature to the Art on the Park [SMA]; and
b. [Cross Country] had not in fact complied with its statutory obligations as to disclosure; and
c.in the premises the alleged contract is void alternatively unenforceable

and whether or not the parties entered into a contract (which is denied), [Cross Country] was and is not entitled to obtain, seek to obtain, sue for, recover or retain any payment in respect of the Art on the Park Development.
Particulars
…
The term is implied by operation of law. The [respondent] relies upon ss 49A(1) and (4) and … 50(1)(b) and (4) [of the EA Act].
As to [Cross Country’s] failures to comply with statutory obligations —
(i) In breach of sub-s 49A(1)(c)(iii) of the [EA] Act, the Art on the Park [SMA] does not contain a rebate statement that complies with subsection 49A(4) or at all;
(ii) In breach of sub-s 49A(1)(c)(iv) of the [EA] Act, the Art on the Park [SMA] does not contain a statement in a form approved by the Director within the meaning of the Australian Consumer Law and Fair Trading Act 2012, or at all, as to where any complaint concerning any commission or outgoings can be made.

In relation to Park Trent’s Singers Lane claim, at para 21 of the defence, the respondent admitted that, on or about 15 October 2010, it sent the Singers Lane Letter, a copy of which was signed on an unknown date by a representative of Park Trent. The respondent otherwise denied that it had entered into the Singers Lane SMA. The respondent then pleaded:

The [respondent] says further that if [Park Trent] and [the respondent] entered into a contract as alleged (which is denied) —
a. there was a term of the alleged contract that [Park Trent] had complied with its obligations, including statutory obligations as to disclosure, prior to obtaining the [respondent’s] signature to the Singers Lane letter; and
b. [Park Trent] had not in fact complied with its statutory obligations as to disclosure; and
c.in the premises the alleged contract is void alternatively unenforceable

and whether or not the parties entered into a contract (which is denied), [Park Trent] was not and is not entitled to obtain, seek to obtain, sue for, recover or retain any payment in respect of the Singers Lane [development].
Particulars
…
The term is implied by operation of law. The [respondent] relies upon ss 49A(1) and (4) and … 50(1)(b) and (4) [of the EA Act].
As to [Park Trent’s] failures to comply with statutory obligations —
(i) In breach of sub-s 49A(1)(b) of the [EA] Act, before obtaining a signature on behalf of the [respondent], [Park Trent] failed to inform the [respondent] or its representative that any commission or outgoings to be paid to [Park Trent] were subject to negotiation;
(ii) In breach of sub-s 49A(1)(c)(ii) of the [EA] Act, the Singers Lane letter refers to a commission to be calculated on a percentage basis but does not contain a statement of the fee expressed as both a percentage and as a dollar amount;
(iii) In breach of sub-s 49A(1)(c)(iii) of the [EA] Act, the Singers Lane letter does not contain a rebate statement that complies with sub-section 49A(4) or at all;
(iv) In breach of sub-s 49A(1)(c)(iv) of the [EA] Act, the Singers Lane letter does not contain a statement in a form approved by the Director within the meaning of the Australian Consumer Law and Fair Trading Act 2012, or at all, as to where any complaint concerning any commission or outgoings can be made.

In reliance on the above pleaded breaches of the EA Act, the respondent alleged that the applicants were obliged to repay the commission they had received from the respondent. It counterclaimed:

(a)against Cross Country in the amount of $1,670,889 (being the commission that the respondent alleged that it had paid to Cross Country between about April 2010 and January 2014 in relation to Cross Country’s sale and marketing of units in the Art on the Park development) plus interest; and
(b)against Park Trent in the amount of $1,413,885 (being the commission that the respondent alleged that it had paid to Park Trent between about December 2010 and October 2013 in relation to Park Trent’s sale and marketing of units in the Singers Lane development) plus interest.

On 14 November 2014, the applicants’ solicitors at the time, Martin & Co Legal, advised the respondent’s solicitors, Brand Partners, that it was likely that the Singers Lane SMA was not between the respondent and Park Trent but rather between the respondent and Cross Country and that, to verify the position, the applicants were investigating which company issued the invoices in relation to the Singers Lane development. Martin & Co Legal stated that ‘assuming our expectation is confirmed, a number of amendments to the current pleadings will be required.’ Accordingly, Martin & Co Legal proposed that the applicants would not file a reply and defence to counterclaim and sought an undertaking from the respondent that it would not seek default judgment against the applicants. On the same day, Brand Partners advised Martin & Co Legal that it would not give such an undertaking.

On 14 November 2014, the applicants filed a reply and defence to counterclaim in which they admitted that:

(a)each of the applicants ‘did not comply strictly with … ss 49A(1) and (4) and … 50(1)(b) and (4) of the [EA] Act’;
(b)the respondent had paid to Cross Country the amount of $1,670,889 between about April 2010 and January 2014 in relation to Cross Country’s sale and marketing of units in the Art on the Park development; and
(c)the respondent had paid to Park Trent the amount of $1,413,885 between about December 2010 and October 2013 in relation to Park Trent’s sale and marketing of units in the Singers Lane development.

The applicants pleaded that, notwithstanding the admitted breaches of the EA Act, both the Art on the Park SMA and the Singers Lane SMA were enforceable because the breaches were de minimis and, alternatively, the respondent was estopped from relying on them. The applicants further pleaded that they were entitled to the amounts paid to them on a quantum meruit basis.

By letter dated 18 November 2014, Brand Partners advised Martin & Co Legal that:

(a)by reason of s 50(1) of the EA Act, the statement of claim did not disclose a cause of action and was amenable to an application for summary dismissal in light of the applicants’ failures to comply with s 49A of the EA Act; and
(b)the applicants’ claims and defences based upon quantum meruit or estoppel made in order to seek to defeat the effect of s 50(1) of the EA Act were not available at law and were amenable to a strike out application.

By letter dated 25 November 2014 to Brand Partners, Martin & Co Legal stated that ‘we accept your client’s position with regards to quantum meruit’ and that the quantum meruit ground would be removed in any amended statement of claim.

By letter dated 5 February 2015 to Brand Partners, Martin & Co Legal sent a proposed amended writ and statement of claim. That document contained the following relevant proposed amendments to the statement of claim:

(a) It removed Park Trent as a plaintiff.
(b)It pleaded: that the Singers Lane SMA was an amendment to the Art on the Park SMA; that the parties to the Singers Lane SMA were Cross Country and the respondent; and that the debt in respect of the Singers Lane SMA was owed to Cross Country.
(c)It added Hall & Wilcox as a defendant and pleaded: that Cross Country retained Hall & Wilcox to prepare a pro forma selling and marketing agreement; that the Art on the Park SMA and the Singers Lane SMA were derived from that pro forma agreement; and that, if Cross Country had breached the EA Act, Hall & Wilcox was liable to Cross Country for breach of contract and negligence.

The 5 February 2015 letter requested the respondent’s consent to the applicants being granted leave to file and serve the proposed amended writ and statement of claim. Martin & Co Legal advised that, if the respondent did not consent, it proposed to file that part of the document which amended the statement of claim against the respondent and would subsequently make an application to join Hall & Wilcox.

On 13 February 2015, Brand Partners advised Martin & Co Legal that the respondent did not consent to the applicants being granted leave to file and serve the proposed amended writ and statement of claim.

In further correspondence between Brand Partners and Martin & Co Legal on 13 February 2015, Martin & Co Legal invited the respondent to revisit its position. By email on that date, Martin & Co Legal referred to ‘internal accounting records showing that the attached invoices in respect to the Singers Lane Development were actually paid by [the respondent] to Cross Country … not Park Trent’. Martin & Co Legal stated that these records had led it to the information that Park Trent was both a company and a business name owned and used in Victoria by Cross Country. Martin & Co Legal also referred to the annexure to the Singers Lane Letter, which it stated referred directly to Cross Country. The email also relevantly attached:

(a)various invoices issued by Cross Country to the respondent in relation to the Singers Lane development;
(b)an ASIC search in relation to Park Trent which stated that Park Trent was registered in New South Wales;
(c)an ASIC search in relation to the business name ‘Parktrent Properties Group Victoria’, which stated that this business name was held by Cross Country; and

(d) the Singers Lane Letter, including its annexure.

The applicants did not bring an application to amend the writ or the statement of claim.

On 30 April 2015, the proceeding came on for directions before Judge Cosgrave. At that hearing, Judge Cosgrave ordered that:

(a)the respondent file and serve any application for judgment and affidavit in support by 11 May 2015, and an outline of submissions by 3 June 2015;
(b)the applicants file and serve any affidavit in response by 25 May 2015 and an outline of submissions by 15 June 2015; and

(c) the application be listed for hearing on 16 June 2015.

On 11 May 2015, the respondent issued a summons seeking:

(a)an order striking out the applicants’ claims and their reply and defence to counterclaim, pursuant to r 23.02 of the County Court Civil Procedure Rules 2008 (‘CC Rules’); and
(b)summary judgment on its counterclaim, pursuant to r 23.03 of the CC Rules or, alternatively, under s 63 of the Civil Procedure Act 2010 (‘CP Act’).

The summons was supported by an affidavit sworn by the respondent’s solicitor, Jeremy Brand, on 11 May 2015. That affidavit exhibited, among other things, the correspondence between Martin & Co Legal and Brand Partners set out at [20] and [23] to [28] above. On 3 June 2015, the respondent filed and served an outline of submissions relating to the summons.

The applicants did not file any affidavit in response to the summons by 25 May 2015 or any outline of submissions by 15 June 2015.

On 16 June 2015, the respondent’s summons came on for hearing before Judge Anderson. At that hearing, counsel for the applicants, Christopher Thomson, filed an outline of submissions. Mr Thomson advised the Court that the applicants intended to amend the reply and defence to counterclaim to plead rectification and sought an indulgence from the Court. On that day, Judge Anderson ordered that:

(a)       the respondent’s summons be adjourned to 20 July 2015; and
(b)      the applicants file and serve by 26 June 2015:
(i)       any proposed amended statement of claim;
(ii)any affidavit by a director or representative of the applicants who was able to directly verify the factual basis for any proposed amendments or which is filed in opposition to the defendant's summons; and
(iii)a summary of any further submissions upon which the applicants intended to rely.

The applicants did not file and serve any proposed amended statement of claim, affidavit or summary of further submissions by 26 June 2015.

On Monday 20 July 2015, the respondent’s summons came on for hearing before Judge Lacava. At the hearing, Mr Thomson appeared and relevantly informed the Court of the following:

(a)After the hearing on 16 June 2015, Mr Thomson had sent a detailed email to the applicants’ solicitors on the record at that time, Leverage Solicitors, as to ‘what had been done that day and what was required and instructions that [he] needed to prepare the material’. Mr Thomson received no response from Leverage Solicitors.
(b)Mr Thomson subsequently went on holidays and Leverage Solicitors did not attend to complying with the order of Judge Anderson dated 16 June 2015.
(c)Mr Thomson returned his brief to Leverage Solicitors and sent them an email stating that he considered himself no longer retained to appear.
(d)On Friday 17 July 2015, Mr Thomson received a telephone call from Sandra Mangan, the commercial administrator of the companies in the PT Group, who informed him that she had no knowledge of the timetable for material to be submitted and had discovered the date of the hearing on the previous day.
(e)Mr Cross was present in Court and Mr Thomson had had a brief conversation with him.
(f)Mr Cross wished to defend the proceeding and would be asking for an indulgence from the Court. Mr Cross intended to retain a new solicitor, Stephen Byrne, who had spoken to Mr Thomson. Mr Byrne had indicated that he was ‘entirely prepared to get involved’ in the matter.

The following exchange between the judge and Mr Thomson then took place:

HIS HONOUR: How long do you need? Bearing in mind that your client has brought this proceeding and you have already put in submissions. It is something that can be sorted out in a day isn't it?
MR [THOMSON]: It would take probably a couple of days to refine the pleadings.
…
HIS HONOUR: I could hear it tomorrow morning.
MR [THOMSON]: Yes, all right, Your Honour. I know [Mr Byrne] is engaged in a matter that is today and tomorrow, but that would be making it difficult for us to get pleadings ready in time to supply to my learned friends in time ready for tomorrow morning and my typing speed is not the best, but a short period of time is really I think substantially what we require to get the pleading in order and for my clients to — and fully engage the solicitor and for us to hear. I had really in mind preferably at least to the end of the week to have the pleadings ready but if that were to be shorter then that's — I can work towards that. I would seek a little bit more time than just tomorrow morning.[1]

[1]Emphasis added.

The respondent opposed the applicants’ application for an adjournment.

The judge ordered that the summons be adjourned until Wednesday 22 July 2015 before him ‘to give the [applicants] time to comply with the order of Judge Anderson made on 16 June’. He ordered that the time be extended to 3 pm on Tuesday 21 July 2015 (that is, the next day) for the applicants to file and serve any proposed amended statement of claim and an affidavit from a director of the applicants verifying the factual basis of any proposed amendments. The judge acknowledged that this timetable ‘might put undue pressure’ on Mr Thomson but he added that he expected his orders ‘to be complied with and for the matter to be able to proceed on Wednesday’.

On Tuesday 21 July 2015, the applicants filed submissions. On 22 July 2015, they filed an affidavit of four paragraphs that was sworn by Mr Cross on that date, which exhibited a documented titled ‘Amended Statement of Claim’ (‘Proposed Amended Statement of Claim’) and a document titled ‘Amended Reply and Defence to Counterclaim’ (‘Proposed Amended Reply and Defence to Counterclaim’) (collectively ‘Proposed Amended Pleadings’). The Proposed Amended Statement of Claim contained the following proposed amendments to the statement of claim:

(a) It removed Park Trent as a plaintiff.
(b)It pleaded facts which were said to establish that the Art on the Park SMA and the Singers Lane SMA mistakenly did not contain all the terms of the agreements and sought rectification of the agreements (‘rectification claim’).
(c)It pleaded that the parties to the Singers Lane SMA were Cross Country and the respondent and that the debt in respect of that agreement was owed to Cross Country.

Paragraph 5A of the Proposed Amended Reply and Defence to Counterclaim sought to withdraw the admissions of breaches of the EA Act in the original reply and defence to counterclaim and to replace them with admissions which applied only if the rectification claim failed.

The Proposed Amended Pleadings did not plead estoppel or a claim based on quantum meruit.

On Wednesday 22 July 2015, the respondent’s summons again came on for hearing before Judge Lacava. At the commencement of that hearing, Mr Thomson informed the Court that he was not instructed by anyone. He stated that the applicants had a ‘new solicitor’, Mr Byrne, but before Mr Byrne could take carriage of the matter, he required the applicants’ file to ‘make an assessment’ and prepare a disclosure agreement. Mr Thomson advised the Court that he understood that the applicants’ file was being transferred to Mr Byrne that day. He stated that, in the circumstances, he considered it ‘appropriate or perhaps preferable’ for him to continue to represent the applicants. He did not apply for an adjournment and the judge proceeded to hear the respondent’s summons.

At the conclusion of the hearing, Mr Thomson agreed to a proposition put by the judge that the Proposed Amended Pleadings represented the applicants’ ‘best case’. He stated, however, that ‘there has been a certain amount of rushing involved’.

On 24 July 2015, pursuant to a direction by the judge, both parties filed further submissions on the issue of illegality, which the judge had raised during the hearing.

Decision of Judge Lacava

Judge Lacava held that, as the applicants had made the admissions set out at [21] above and had not applied to withdraw them, the EA Act required that the amounts paid by the respondent to the applicants be repaid.[2]
[2]Cross Country Realty Victoria Pty Ltd v Ubertas 350 William Street Pty Ltd [2015] VCC 1012 [29]. (‘Reasons’).

The judge stated that argument during the hearing had centred on the applicants’ rectification claim.[3] In relation to that claim, the judge held that:
[3]Reasons [30].

(a)the Proposed Amended Pleadings did not assert a factual basis for finding a common intention of the parties to the Art on the Park SMA and the Singers Lane SMA that would support the rectification claim; [4]

(b) there was no evidence that those parties had such a common intention;[5]
(c)there was no suggestion that there was any ‘outward expression of accord’ by those parties[6] or even a subjective intention ‘of disclosure in accordance with the [EA] Act’ which the parties communicated to each other in some way;[7]
(d)there was no evidence before the Court of any discussions between the parties that might assist the rectification claim except for the Singers Lane Letter, which could ‘play no part in evidencing common intention at the time the [Art on the Park SMA] was entered into’ because ‘that letter was written a long time after [Cross Country] and the [respondent] had entered into [the Art on the Park SMA];[8]
(e)the parties could not have agreed or have had a common intention to avoid the consequences that flowed from the applicants’ failure to comply with the relevant provisions of the EA Act as it was only the applicants who had such an obligation;[9] and
(f)there was no evidence put forward that would show that at trial the rectification claim would have any prospect of success.[10]

[4]Reasons [32], [40], [44].

[5]Reasons [32], [40].

[6]Reasons [33].

[7]Reasons [34].

[8]Reasons [38]. See also at [40].

[9]Reasons [32], [40].

[10]Reasons [44].

The judge also considered the case of Oliver Hume (Australia) Pty Ltd v Land Source Australia Pty Ltd.[11] He observed that in Oliver Hume, the plaintiff, an estate agent, claimed commission and that this was resisted on similar grounds to those relied on by the respondent.[12] He further observed that, in that case, Cameron J permitted an amendment to the writ and statement of claim enabling the plaintiff to plead rectification. However, he held that Oliver Hume was not binding on him because it was an interlocutory decision.[13] Relevantly for the purposes of this application, he referred to a part of Cameron J’s reasons in which she stated that, in analogous cases, courts had held that estate agents could not avoid the requirements of similar legislation by relying upon equitable principles such as estoppel, restitution, quantum meruit and unjust enrichment.[14] He stated that Cameron J’s reasons and the cases she referred to showed how strong the respondent’s claim in its summons was.[15]
[11][2015] VSC 77 (‘Oliver Hume’).
[12]Reasons [41].
[13]Reasons [43].
[14]Reasons [41].
[15]Reasons [43].

Accordingly, he concluded that the applicants’ claims could not succeed and must be dismissed pursuant to r 23.02 of the CC Rules.[16] Similarly, he concluded that the applicants had no defence to the respondent’s counterclaim and there was ‘no reasonable prospect of [the applicants] successfully … defending the counterclaim’.[17] On this basis, he granted the respondent’s applications for summary judgment against the applicants.[18]
[16]Reasons [46].
[17]Reasons [47].
[18]Reasons [47].

On 31 July 2015, the judge made the following orders (‘impugned orders’):

(a) the applicants’ claims be dismissed;
(b)there be judgment for the respondent against Cross Country in the amount of $1,670,889 together with interest in the amount of $136,600.90;
(c)there be judgment for the respondent against Park Trent in the amount of $1,413,885 together with interest in the amount of $115,589.94 (‘Park Trent Judgment Debt’);

(d) the applicants’ application for a stay is refused; and
(e) the applicants pay the respondent’s costs.

We will refer to the cumulative amount of the two judgment debts as ‘the Aggregated Judgment Debt’.

Events after judgment

On or around 7 August 2015, the respondent served statutory demands on Cross Country and Park Trent for payment of their respective judgment debts.

On 28 August 2015, the applicants filed an application for leave to appeal with this Court.

On the same day, the applicants commenced separate proceedings to set aside the statutory demands. They relied on two affidavits affirmed on 28 August 2015 by Katherine Parr, the general manager of Cross Country. In those affidavits, Ms Parr stated that the applicants were solvent, financially viable entities with significant ongoing business interests and assets and that, if necessary, they could pay their respective judgment debts. In Ms Parr’s affidavit, which was filed in the proceeding to set aside the statutory demand that was served on Cross Country (‘Parr Cross Country Affidavit’), Ms Parr purported to exhibit an ASIC search relating to Park Trent rather than Cross Country.

On 16 September 2015, Gardiner AsJ dismissed the applications to set aside the statutory demands.

The applicants did not comply with the statutory demands. On 9 October 2015, the respondent commenced winding up proceedings against each of them.

On 10 November 2015, the applicants filed an application for a stay of the impugned orders, more than three months after those orders were made.

The winding up proceedings were heard on 19 November 2015 by Randall AsJ. During the hearing, the applicants relied on an affidavit affirmed by Ms Mangan on 18 November 2015 (‘Mangan Affidavit’).[19]
[19]As stated at [35(d)] above, Ms Mangan is the commercial administrator of the PT Group.

In her affidavit, Ms Mangan deposed that the PT Group had been seeking to refinance its debts to ensure sufficient funds were available to cover any sum owed to the respondent and stated that she had been instructed that any finance offer obtained for Cross Country would have to be sufficient to discharge the debts of Cross Country and Park Trent. Ms Mangan then deposed that Cross Country had accepted an offer of finance from CC Mortgage Trust (trading as CC Capital) (‘CC Capital’) in the amount of $9.55 million (‘CC Capital Loan’). She stated that the CC Capital Loan was subject only to satisfactory valuations of certain properties held by Rhymney Pty Ltd — a company of which Mr Cross was the sole director and the majority shareholder — and the preparation of relevant loan and security documents. Ms Mangan further stated that she had been told by Cross Country's broker that, subject to the receipt of valuations and the completion of documentation, CC Capital expected to be in a position to settle the CC Capital Loan within four weeks.

Ms Mangan also deposed that:

(a)Cross Country’s rent roll had been valued at $6.42 million and Cross Country would have the means to pay the Aggregated Judgment Debt upon the sale of the rent roll;
(b)Cross Country had entered into agreements in principle to sell most of its rent roll for $5,179,615.61 and parts of the rent roll valued at $795,000 had not yet been sold; and
(c)Cross Country was trading profitably and, aside from the judgment debts, it could pay its debts as and when they fell due.

On 19 November 2015, Randall AsJ made orders adjourning the further hearing of the winding up proceedings until 18 December 2015. Under the heading ‘Other Matters’, the order in the Cross Country winding up proceeding provided:

The Court determined to adjourn the application to 18 December 2015. If by 16 December 2015 [Cross Country] has paid to the solicitors for the [respondent] the sum of $1,807,489.90 (being the amount stated in the [respondent’s] statutory demand dated 7 August 2015) the Court will entertain an application by [Cross Country] for the application to be dismissed. If that sum is not paid by that time, the Court will entertain an application that [Cross Country] be wound up.

A similar statement was included in the order relating to Park Trent.

Proposed grounds of appeal

As we have already stated, on 28 August 2015, the applicants filed an application for leave to appeal. They relied on seven proposed grounds of appeal. At the hearing of the application for leave to appeal, Ground 7 was abandoned. The extant grounds may be summarised as follows:

(a)Ground 1 was that, in granting an adjournment of the hearing on 20 July 2015 to 22 July 2015, Judge Lacava failed to provide the applicants sufficient time to retain a new solicitor who could properly advise the applicants, file necessary affidavits and properly retain and brief counsel.
(b)Ground 2 was that the judge erred in proceeding with the hearing on 22 July 2015. Instead, he ought to have exercised his discretion to adjourn the hearing for a period of time that was sufficient to enable the applicants to retain a new solicitor.
(c)Ground 3 was that the judge misapplied the test for summary judgment under rr 23.02 and 23.03 of the CC Rules and s 63 of the CP Act in finding, in effect, that the applicants had no defence to the respondent’s counterclaim because they had not strictly complied with s 49A(1), (4) and s 50(1) and (4) of the EA Act. The summary judgments were inappropriate because it was arguable that the Court could grant rectification of the relevant agreements which could cure any non-compliance with the EA Act and there were real questions of law regarding the construction of ss 49A(1) and 50(1) of the EA Act — including whether the principles of estoppel and quantum meruit were applicable — which warranted a full hearing on the merits. Even if the judge considered that the applicants’ defences had no real prospect of success, he should have found that the dispute warranted a full hearing on the merits.[20]
(d)Ground 4 was that the judge erred by failing to provide adequate reasons for granting summary judgments in relation to the issue of whether, in accordance with the principles of statutory construction, ss 49A and 50 of the EA Act provide a bar to any claim in equity or for restitution.
(e)Ground 5 was that the judge erred in giving judgment for the respondent against Park Trent. The judge ought to have dismissed the application for summary judgment and allowed the applicants to amend their pleadings so as to allege that the only party that had contracted with the respondent was Cross Country.
(f)Ground 6 was that the judge erred in giving judgment against the applicants by relying solely or substantially on the fact that they had admitted many of the relevant facts in their pleadings. This was so because there was evidence of the applicants’ intention to amend their pleadings and withdraw certain admissions. No formal application had been brought due to the previous solicitor’s inaction rather than through the fault of the applicants. The judge ought to have given the applicants a reasonable time to apply to withdraw the admissions.

[20]See s 64 of the CP Act.

Application for leave to appeal
Submissions in relation to the application for leave to appeal

The applicants’ written case set out submissions in support of each ground, often repeating some of the details in the grounds themselves.

The main thrust of the applicants’ oral submissions may be summarised as follows:

(a)Through the fault of their solicitors, at the hearing scheduled for 20 July 2015, the applicants found themselves in the position of not having an active solicitor on the record and not having prepared amended pleadings, affidavits and submissions to properly pursue their claims and defend the respondent’s counterclaim. Their proposed new solicitor could not assist them because he did not yet have the file. Their erstwhile counsel, Mr Thomson, had not been briefed but was willing to do the best he could to assist them. He informed Judge Lacava that he needed at least a week to prepare the documents required for the hearing but the judge only gave him one and a half days, having initially proposed an even shorter adjournment. By granting an adjournment of only two days on 20 July 2015, the judge’s discretion miscarried because such a short adjournment resulted in serious injustice to the applicants in circumstances where the respondent would not have suffered irreparable prejudice if a longer adjournment had been granted.[21]
(b)Although Mr Thomson did the best he could in the time he was given to prepare for the hearing, the Proposed Amended Pleadings were rushed and inadequate and there was insufficient time for him to prepare a substantive affidavit setting out the evidence required to establish the applicants’ claims and defences. Although no formal application for a further adjournment was made on 22 July 2015, it should have been obvious to the judge that Mr Thomson was not able to properly represent the applicants on that day and needed more time to prepare appropriate material for the Court.
(c)The judge’s rejection of the rectification claim on the basis that there was no evidence that the parties had a common intention[22] was correct but failed to recognise that the reason for this was that, due to the judge’s inappropriately short adjournment, the applicants did not have sufficient time to put that evidence together. Further, the judge’s statement ‘[n]or could there be’ such evidence[23] was without any foundation.
(d)The judge’s statement that the Singers Lane Letter could ‘play no part in evidencing common intention at the time the [Art on the Park SMA] was entered into’ because ‘that letter was written a long time after [Cross Country] and the [respondent] had entered into [the Art on the Park SMA]’[24] was wrong in law. This is because there are circumstances in which post-contractual conduct may be admissible in support of a claim for rectification.[25]
(e)Insofar as the judge decided that it was not possible for a party to adduce relevant evidence in support of a claim to rectify an agreement for the purpose of curing a breach of the EA Act,[26] the judge was wrong.
(f)It followed from (c) to (e) above that, apart from denying the applicants an adequate opportunity to properly advance their rectification claim, the judge rejected that claim on erroneous legal bases.
(g)The applicants’ claims based on estoppel and quantum meruit remained in the statement of claim and, although they did not appear in the Proposed Amended Pleadings, they had not been abandoned. The applicants were given insufficient time to prepare to argue the complex issues that those claims raised and the judge failed to properly deal with them.
(h)There was evidence before the judge — including the Singers Lane Letter, the annexure to that letter and invoices rendered to the respondent by Cross Country — in support of the applicants’ contention that Park Trent was not a proper party. The Proposed Amended Statement of Claim, which removed Park Trent as a plaintiff, also supported that contention. In these circumstances, it was inappropriate for the judge to grant summary judgment against Park Trent.

[21]The applicants relied on Brimbank Automotive Pty Ltd v Murphy [2009] VSC 26 [12]–[13]; SM v The Queen (2011) 33 VR 393, 398 [22]–[23].

[22]Reasons [32].

[23]Reasons [32].

[24]Reasons [38].

[25]The applicants relied on J D Heydon, Cross on Evidence (LexisNexis Butterworths, 9^th ed, 2013) [39290]; Apple and Pear Australia Ltd v Pink Lady America LLC [2015] VSC 617 [94].

[26]See Reasons [40].

The respondent filed a detailed written case in opposition to the application for leave to appeal which dealt with each of the grounds and responded to the applicants’ written case. The respondent also filed a written case in opposition to the granting of a stay which dealt with the merits of the grounds.

In its written cases, the respondent contended that the applicants’ prospects of success on their proposed grounds of appeal were fanciful for the following reasons:

(a)The applicants were granted multiple adjournments to put on their best evidence.
(b)On the date of the hearing, 22 July 2015, Mr Cross swore an affidavit which made no mention of any need for more time nor any concern about the conduct of current or previous legal representatives.
(c)On that date, the County Court did not have any adjournment application before it, nor indeed any application for further time to file additional evidence.
(d)On that date, submissions were made on behalf of the applicants by Mr Thomson of counsel, who had been retained since at least 30 April 2015 when he appeared at the directions hearing discussed at [30] above.

(e) At all times, there were solicitors on the record for the applicants.
(f)The applicants admitted that they failed to comply with mandatory disclosure provisions of the EA Act. That Act contains consumer protection provisions designed to regulate strictly the disclosure obligations imposed upon estate agents.
(g)The applicants had conceded in correspondence that quantum meruit was not available to them as a defence.
(h)Judge Lacava confirmed that there had been no application to withdraw admissions.[27]
(i)The applicants never made an application to amend the statement of claim[28] or to discontinue Park Trent’s claim.
(j)The defence of estoppel was considered by the judge and correctly found to be unavailable.
(k)Mr Cross’s affidavit of 22 July 2015 contained no evidence of any common intention for the purposes of the rectification claim.
(l)The Proposed Amended Pleadings exhibited to Mr Cross’s affidavit omitted quantum meruit and estoppel and Mr Thomson acknowledged that those pleadings represented the applicants’ ‘best case’.
(m)Even now, the applicants had not provided an alternative ‘construction’ of the relevant provisions of the EA Act and had never articulated exactly the ‘rectification’ on which they might seek to rely.
(n)Although the applicants were ‘quick to lay the blame at the feet of their former legal representatives’, the applicants had been represented in the proceeding by seven different legal representatives and no evidence had been filed to demonstrate that any of them had failed to protect the applicants’ interests.
(o)Inconsistent positions had been adopted by the applicants in a New South Wales proceeding as to whether Park Trent had acted as agent for the respondent in the Singers Lane development.[29]

[27]See [46] above.

[28]The respondent states that Mr Thomson made an ‘an unclear oral application in the course of the hearing’ which it says was refused.

[29]See [106] below.

In its oral submissions, the respondent emphasised the following four matters. First, the only application for an adjournment that the applicants made was on 20 July 2015 and the period of the adjournment granted was one to which Mr Thomson agreed. If the applicants required more time, they should have applied for a further adjournment on 22 July 2015. The fact that they did not do so was said to be fatal to their submissions based on inadequate time to prepare for the hearing on 22 July 2015.

Secondly, the applicants did not at any time apply to withdraw their admissions that Park Trent had entered into the Singers Lane SMA and had received payments from the respondent. Had such an application been made, the respondent would have been required to consider its position, including a possible amendment to its counterclaim to seek repayment of all of the commission from Cross Country. In the absence of an application to withdraw the relevant admissions, the judge was correct to grant summary judgment against Park Trent. Even if it were arguable that the judge erred in this respect, leave to appeal should be granted only in favour of Park Trent.

Thirdly, the applicants’ rectification claim was fundamentally flawed because it was not based on a common intention of the parties to have terms in their contracts which differed from, or added to, the existing terms but rather to include a statement to the effect that the provisions of the EA Act were complied with when they were not in fact complied with. As it was conceded by the applicants that the Proposed Amended Pleadings contained their ‘best case’ in relation to the rectification claim, the judge was right in rejecting it. The judge applied the correct legal principles and did not err in finding that the Singers Lane Letter was not capable of providing evidence of a prior common intention.

Finally, the respondent emphasised that the applicants did not make either written or oral submissions on 22 July 2015 in relation to estoppel or quantum meruit and that was why the judge did not make express findings in relation to them. According to the respondent, the authorities that dealt with comparable legislative provisions clearly state that claims in estoppel and quantum meruit are not available and therefore it would not have been inappropriate for the judge to grant summary judgment even if those claims had been in issue at the hearing on 22 July 2015.

Decision on the application for leave to appeal

In Northern Health v Kuipers,[30] this Court considered, without deciding, the question whether an application for leave to appeal from an order of the County Court is governed by:

(a) the ‘real prospect of success’ test in s 14C of the Supreme Court Act 1986; or
(b)the Niemann[31] test, namely, that the decision below is attended by sufficient doubt to justify the grant of leave to appeal and that substantial injustice would be caused if leave were to be refused.[32]

[30][2015] VSCA 172.

[31]Niemann v Electronic Industries Ltd [1978] VR 431 (‘Niemann’).

[32]Niemann [1978] VR 431, 433, 441–2.

We have concluded that the applicants have satisfied both tests. Accordingly, it is not necessary for us to decide the question of which test is applicable.

In our opinion, the appropriateness of the impugned orders is attended by sufficient doubt to warrant the grant of leave to appeal having regard to: the short timeframe that the two day adjournment afforded the applicants to prepare crucial documents; the lack of clarity about whether the hearing proceeded on the basis of the extant pleadings or the Proposed Amended Pleadings; the nature and complexity of the legal issues raised by both sets of pleadings; the absence of direct authority in relation to some of those issues; and the manner in which those issues were dealt with in the judge’s reasons.

Also, although there was no formal application by the applicants to withdraw the admissions relating to Park Trent, there was a live issue before the judge, supported by some evidence, as to whether Park Trent was a proper party and as to whether it was appropriate for summary judgment to be granted against it.

Moreover, it is arguable that the dispute before the judge was of such a nature that only a full hearing on the merits was appropriate for the purposes of s 64 of the CP Act. Section 64 provides:

64Court may allow a matter to proceed to trial

Despite anything to the contrary in this Part or any rules of court, a court may order that a civil proceeding proceed to trial if the court is satisfied that, despite there being no real prospect of success the civil proceeding should not be disposed of summarily because—
(a) it is not in the interests of justice to do so; or
(b)the dispute is of such a nature that only a full hearing on the merits is appropriate.

For these reasons, the impugned orders are attended with sufficient doubt and substantial injustice would result if they were left to stand without leave being granted. We are likewise satisfied that the applicants’ appeal has a real, as distinct from fanciful, prospect of success.

It follows that the applicants should be granted leave to appeal.

Application for a stay
Relevant legal principles for granting a stay

Rule 64.39 of the Supreme Court (General Civil Procedure) Rules 2015 (’SC Rules’) provides:

64.39 Stay of execution
Except so far as the Court of Appeal otherwise orders —
(a) an application for leave to appeal or appeal shall not operate as a stay of execution or of proceedings under the decision appealed from; and

(b) no intermediate act or step shall be invalidated.

Rule 66.16 of the SC Rules provides that the Court ‘may stay execution of a judgment’.

The Court enjoys a wide discretion to grant a stay and, upon an application for such an order, all relevant factors should be considered.[33] However, ordinarily, a successful party is entitled to the benefit of a judgment and the presumption that the judgment is correct. An applicant for a stay therefore bears the onus of demonstrating that a stay is justified.[34]
[33]Saville v Hallmarc Construction Pty Ltd [2015] VSCA 144 [18].
[34]Maher v Commonwealth Bank of Australia [2008] VSCA 122 [20] (‘Maher’).

The power to order a stay of execution is to be exercised only where special or exceptional circumstances exist.[35] Such circumstances will exist where there is a real risk that the appeal, if successful, would be rendered nugatory.[36] Generally this 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 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 or her former position if the judgment is executed.[37]
[35]Cellante v G Kallis Industries Pty Ltd [1991] 2 VR 653, 657.
[36]Neate v Thoroughbred International Marketing Pty Ltd (2012) 34 VR 318, 320 [6] (‘Neate’).
[37]Federal Commissioner of Taxation v The Myer Emporium Ltd [No 1] (1986) 160 CLR 220, 223.

The foreshadowed making of a bankruptcy order, by its effect upon the ability of an appellant to prosecute an appeal, and by its reputational impact, may have the effect of rendering the appeal nugatory.[38]
[38]Narain v Euroasia (Pacific) Pty Ltd [2008] VSCA 195 [21].

A threatened or actual winding up application against a company which is seeking to appeal against a judgment debt may justify the granting of a stay of execution of the judgment debt where the making of a winding up order would render the appeal nugatory. However, New South Wales cases on this issue must be treated with caution in Victoria because they follow from authority in the former State that it is not necessary for the grant of a stay that special or exceptional circumstances be made out.[39]
[39]Challenge Charter Pty Ltd v Curtain Bros (Qld) Pty Ltd (2004) 9 VR 382, 386–7 [16] (‘Challenge’).

In Kalifair Pty Ltd v Digi-Tech (Australia) Ltd,[40] the New South Wales Court of Appeal said as follows:
[40](2002) 55 NSWLR 737 (‘Kalifair’).

In the present cases if stays are refused the judgment creditor would be free to serve statutory demands and proceed to winding-up. The prosecution of the appeals would then be stayed automatically and the stays would continue unless and until the liquidator elected to prosecute the appeals. The directors would lose control of the litigation and the creditors, including the judgment creditor, would have a say in any decision to proceed.
The directors would thus suffer delay and difficulty and incur additional expense in securing a decision from the liquidator to proceed with the appeals.
Three of the four appellants have no assets and in these cases the real purpose of any winding-up proceedings can only be to stop the appeals. However the remaining company, McLean, has assets of $1.7 million and its appeal raises different considerations which will be dealt with later in these reasons.
The judgment creditor and its solicitors evidently believe that the winding-up of the three appellants would be to their advantage. The Court should therefore infer that there is a real risk that the making of winding-up orders would prevent the prosecution of these appeals.
Where the appellants have no assets the judgment creditor, as it has conceded, will not suffer any relevant prejudice if a stay is granted. The loss of its right to proceed to winding-up to prevent the appeals being heard on their merits does not constitute relevant prejudice for present purposes. The appellants may be required to give security for the judgment creditor's costs of these appeals, but the judgment creditor will not otherwise be financially prejudiced if the appeals proceed and fail on their merits.
On the other hand the appellants would suffer irremediable prejudice if they were unable to prosecute appeals which might have succeeded. The prejudice would include not only the loss of the chance of having the adverse judgments set aside, but also the loss of the chance of obtaining money judgments against one or other of the respondents. These losses would be irrecoverable as the appeals are their only avenue of legal redress.
…
A successful party is prima facie entitled to the fruits of his judgment. He is entitled to be protected, as far as practicable, from the risk that if the appeal fails assets which earlier were available to satisfy the judgment will no longer be available for that purpose. The Court will endeavour to see that a stay does not cause that kind of prejudice to a judgment creditor. An appellant may be required to provide appropriate security as the price of a stay which may make the judgment creditor a secured creditor. Otherwise a requirement for security is only intended to protect the status quo, that is the existing value of the judgment and not to improve the position of the judgment creditor by increasing that value. [41]

[41]Kalifair (2002) 55 NSWLR 737, 742–3 [21]–[26], [28].

However, in Challenge Charter Pty Ltd v Curtain Bros (Qld) Pty Ltd,[42] Callaway JA, with whom Chernov JA agreed, stated:

I turn to the threat of liquidation, noting at the outset that there is reason to be cautious in considering the decision of the New South Wales Court of Appeal in Kalifair Pty Ltd v Digi-Tech (Australia) Ltd, on which the appellants relied. Its reasoning is, in part, dependent on Alexander v Cambridge Credit Corporation Ltd and the proposition that it is not necessary for the grant of a stay that special or exceptional circumstances be made out. Even more fundamentally, the decision appears to announce a black and white rule. I say ‘appears’ advisedly and with respect, because the judgment may reflect concessions that were made, including those recorded at [14] and [25].
In my opinion, the relevance of a threat of liquidation and the weight to be given to it vary from case to case. Sometimes it is significant that a winding-up order will bring a company’s business to an end or diminish the value of its assets or both or that the company, regarded as a legal person, will cease to exist when the winding up is completed. Whatever may be said of Timor Star, none of those considerations has much weight in relation to Challenge Charter. It has no significant business or assets other than the Xanadu and the shares in Timor Star. It has only one director and is the wholly-owned subsidiary of another proprietary company. In such a case it is not irrelevant that the liquidator may still pursue the appeal if he or she considers that to be worthwhile. The liquidator would take into account the director’s views and the director would be well placed to assist the liquidator if the appeal proceeded. It is quite wrong to regard it as the director’s appeal. It is the company’s appeal. … I am not persuaded that it would be unfair to Challenge Charter for a liquidator to evaluate the prospects of its appeal. An unpaid creditor is prima facie entitled to use the processes of company law to recover a debt owing to it and there is a public interest in insolvent companies being wound up.[43]

[42](2004) 9 VR 382.

[43]Challenge (2004) 9 VR 382, 386–7 [16]–[17] (citations omitted). See also Bresam Investments Pty Ltd v Shmee Pty Ltd [2008] VSCA 251 [48].

The prospect that the appeal may be rendered nugatory must be balanced against the principle that the successful party is entitled to the fruits of the judgment.[44] Any other specific prejudice to the respondent arising from a stay must also be weighed in the balance.
[44]Maher [2008] VSCA 122 [27].

In Neate v Thoroughbred International Marketing Pty Ltd,[45] this Court stated:

It is true that, even after the threshold of special or exceptional circumstances has been crossed by the applicant, a discretion falls to be exercised. If, despite the special or exceptional circumstances, the grant of a stay would cause serious injustice to the respondent, the court might well refuse a stay. But if refusing a stay would cause even greater injustice to the applicant, the court might decide to grant the stay. … [G]enerally speaking the onus of establishing that a stay should be granted rests with the applicant. However, if special or exceptional circumstances have been demonstrated by the applicant and there is nothing before the court to suggest that a stay will cause injustice to the respondent apart from the ordinary detriment assumed to be involved in being kept out of the fruits of the respondent’s victory for a period, the applicant is not obliged to prove, also, the absence of specific, further injustice. Knowledge of any specific, further injustice will lie particularly with the respondent. For the purposes of the exercise by the court of the residual discretion, the respondent can reasonably be expected to at least raise any matter of specific injustice before the applicant is called upon to counter it.[46]

[45](2012) 34 VR 318.

[46]Neate (2012) 34 VR 318, 322 [11].

The above observations in Neate are only applicable once it is established that special or exceptional circumstances have been made out by an applicant.[47] They do not permit a contention that, once the applicant has given evidence as to the state of the financial position of the respondent, the evidentiary onus passes to the respondent to demonstrate that there is no real risk of the appeal being rendered nugatory.[48] The evidentiary onus remains with the applicant to establish special or exceptional circumstances that justify departing from the position that a successful party is entitled to the full benefit of a judgment at first instance.[49]
[47]Drapac v Wain [2013] VSCA 19 [28] (‘Drapac’).
[48]Drapac [2013] VSCA 19 [25]–[26].
[49]Drapac [2013] VSCA 19 [27].

A stay should not be granted unless there is at least an arguable ground of appeal, although otherwise speculation as to the ultimate prospects of success is usually inappropriate.[50] In a heavy factual case, this Court will usually not have the evidentiary materials necessary to consider the merits of the grounds of appeal in any detail. In those circumstances, unless it appears that there is no arguable ground of appeal or that the appeal is not bona fide, the Court will generally focus on the matters relevant to the enforcement of the judgment in question rather than matters relevant to its validity or correctness.[51]
[50]Maher [2008] VSCA 122 [27]; Nom De Plume Pty Ltd v Fingal Developments Pty Ltd [2015] VSCA 129 [9]; Neate (2012) 34 VR 318, 320 [8]. Cf Seifert v Chaudhary [2012] VSCA 17 [14].
[51]Neate (2012) 34 VR 318, 321 [8].

Submissions in relation to the application for a stay

The applicants sought a stay on two grounds. It is convenient to consider them in reverse order. The second ground, which was common to both applicants, was that if a stay was not granted, it was likely that the applicants would be wound up and that this would render their appeal nugatory. The first ground, which applied only to Park Trent, was that Park Trent was not a proper party to the proceeding and that it did not receive the monies which are the subject of the Park Trent Judgment Debt. For the purposes of this ground, Cross Country conceded that, if Park Trent is not a proper party then Cross Country is the proper party and any judgment must be met by it.

The applicants filed detailed written submissions in support of the application for a stay which are summarised at [93] to [101] below.

In relation to the second ground, the applicants submitted that, if a stay was not granted to give Cross Country sufficient time to sell its rent roll, which is currently on the market, it was likely that their appeal would be rendered nugatory. This was said to be because, in the absence of a stay, the applicants were likely to be wound up. This would have the consequence that: the applicants may be unable to prosecute the appeal; even if the appeal was prosecuted and successful, this would not lead to them being restored to their previous position, as they would no longer be operational; and the value of their rent rolls would be extinguished or severely diminished.

In support of this submission, the applicants relied on an affidavit sworn by Mr Cross on 10 November 2015 in which Mr Cross relevantly deposed as follows:

(a)Cross Country’s rent roll was its only major capital asset and its only real saleable asset. It accounted for approximately 40 per cent of Cross Country’s annual revenue and is valued at approximately $7 million.
(b)On 24 August 2015, Cross Country engaged a broker to prepare documents to facilitate a sale of its rent roll.
(c)Mr Cross believed that Cross Country’s rent roll would be sold for approximately $7 million but that this sale would take approximately 4 months to complete. He stated that this was because it was a significant business asset involving a significant number of landlords and tenants and, accordingly, there would be a degree of time spent by both the purchaser and Cross Country in conducting due diligence, contract negotiation and other usual business sale issues.
(d)Cross Country intended to pay the Aggregated Judgment Debt into court to abide the outcome of its application for leave to appeal. However, to do so, it required time to sell its rent roll.
(e)From June 2015, the respondent expressed interest in purchasing the rent roll for a price in the range of $6.42 million. Negotiations continued until around early October 2015. At around that time, the negotiations unexpectedly ceased.
(f)Negotiations with other parties for the sale of Cross Country’s rent roll did not commence in earnest until after it was clear that the respondent would not be purchasing the rent roll.
(g)Mr Cross believed that it was ‘likely’ that Cross Country would be wound up if no stay was ordered.
(h)The winding up of Cross Country would cause the value of its rent roll to be severely diminished or extinguished. This was because, pursuant to s 22 of the EA Act, Cross Country’s real estate agent licence would be cancelled automatically if it became an externally administered company. This in turn would make it impossible for Cross Country to perform any of its obligations as agent under its various rental management agreements, which require a licensed real estate agent to manage the properties, and would make them susceptible to termination at short notice. In these circumstances, any liquidator appointed to Cross Country would be required to attempt to sell Cross Country’s rent roll expeditiously which, given the nature of the asset, would lead to the probable loss of the entire value of the rent roll.

(i) The applicants were also actively seeking to obtain finance.

The applicants submitted that a similar issue to that described at [0] above arose for Park Trent in relation to the sale of its rent roll. In support of this submission, they relied on the evidence set out at [98] below.

In relation to the first ground, the applicants submitted that the Singers Lane Letter represented a variation to the Art on the Park SMA between Cross Country and the respondent and, accordingly, any agreement for the sale and marketing of units in the Singers Lane development was at all times between Cross Country and the respondent. According to the applicants, Park Trent did not enter into any such agreement with the respondent and did not receive any money from the respondent. The applicants contended that the respondent was on notice that Park Trent claimed not to be a proper party to the proceeding and intended to amend the pleadings to withdraw from the proceeding as a result of communications from Martin & Co Legal to Brand Partners.[52] The applicants contended that, if Park Trent was wound up, it would lose the opportunity to sell its rent roll.
[52]See [25] and [28] above.

In support of these submissions, the applicants relied on a separate affidavit sworn by Mr Cross on 10 November 2015 (‘Park Trent Affidavit’) in which he relevantly deposed as follows:

(a)From about 1 April 2010 to 31 October 2013, Cross Country issued to the respondent over 250 invoices in respect of sales it had achieved at 350 William Street. Mr Cross exhibited copies of the invoices issued to the respondent. Each of those invoices was headed ‘Cross Country Realty’.
(b)The respondent paid the invoices by electronic funds transfer or by cheque to Cross Country's bank account described on the bottom of each tax invoice.
(c)No commission had been paid by the respondent to any bank account held by Park Trent.

Mr Cross also deposed: that Park Trent owned a rent roll in Canberra which was worth approximately $1 million; that Park Trent did not have any major capital assets which it could realise to meet the Park Trent Judgment Debt; and that, if a stay was not granted, Park Trent would be forced immediately to cease its business and it was likely that Park Trent would be wound up, in which case the value of its rent roll would be extinguished or severely diminished for the reasons set out at [0] above.

The applicants did not put into evidence any financial statements or other material bearing on their ability to pay the judgment debts or to resist the winding up applications.

In relation to both grounds of their stay application, the applicants noted that the impugned orders effected a windfall for the respondent. This was said to be because the orders had the effect of placing the respondent in a position whereby it received approximately $3 million of services from Cross Country for free. In these circumstances, it was said that the Court should conclude that the respondent would not be prejudiced in abiding the outcome of the applicants’ application for leave to appeal, particularly as statutory interest would be accruing. Alternatively, it was said that any prejudice the respondent would suffer as a consequence of a stay being granted would be outweighed by the prejudice suffered by the applicants if a stay was not granted.

The applicants relied on the first six paragraphs from Kalifair which are set out at [85] above.

At the hearing of the application for a stay, the applicants made brief oral submissions which we discuss at [110] below.

The respondent contended that the prospect of the applicants’ appeal succeeding was fanciful for the reasons set out at [67] above.

In relation to the second ground, the respondent relied on the events set out at [58] to [61] above, placing emphasis on the statement in the Mangan Affidavit that Cross Country had accepted an offer of finance from CC Capital. The respondent contended that, in the light of these events, the applicants’ submissions and the evidence of Mr Cross set out at [94], [97] and [98] above were no longer relevant and the stay application was now superfluous.

In relation to the first ground, the respondent objected to the material in the Park Trent Affidavit set out at [97] above on the basis that it was new and irrelevant to the stay application. The respondent submitted that, if this material was admitted, this Court should view it with caution for two reasons.

The first reason was that this material was inconsistent with the position adopted by Park Trent in another proceeding. In support of this proposition, the respondent relied on an affidavit sworn by its solicitor, Joel Ruffles, on 27 November 2015. In that affidavit, Mr Ruffles exhibited an amended defence dated 26 March 2015 which was filed by Park Trent in the District Court of New South Wales in a proceeding to which it was a defendant. The amended defence was supported by a verifying affidavit sworn by Mr Cross on 26 March 2015. In the amended defence, Park Trent relevantly pleaded: that it was the respondent’s real estate agent for the sale of property at 350 William Street, Melbourne to the plaintiffs in that proceeding; and that those plaintiffs paid part of the deposit to Park Trent as agent for the respondent.

The second reason was that, according to the respondent, the applicants remained unable clearly to distinguish between themselves. In support of this proposition, the respondent relied on the Parr Cross Country Affidavit which was said to misdescribe an ASIC search in relation to Cross Country as relating to Park Trent.[53]
[53]See [54] above.

The respondent submitted that, having regard to the consumer protection purpose of the mandatory disclosure provisions of the EA Act, the alleged windfall relied upon by the applicants was irrelevant.

The respondent contended that, in all the circumstances, the application for a stay was no more than a litigation tactic.

At the hearing of the application for a stay, senior counsel for the applicants made oral submissions to the effect that the absence of a stay would create a real risk that they would be wound up and that the appeal would be rendered nugatory. The Bench drew counsel’s attention to the Mangan Affidavit[54] which suggested that there were good prospects that the Aggregated Judgment Debt would be paid by around 16 December 2015 and that no winding up orders would be made. In response, counsel conceded that the contents of that affidavit made it difficult for him to make any meaningful submissions about the seriousness of the risk of winding up orders being made.
[54]See [59]–[60] above.

Decision in relation to the application for a stay

In our opinion, the concession made by senior counsel for the applicants was appropriate. The statements in the Mangan Affidavit that the PT Group had accepted an offer of finance in an amount sufficient to discharge the Aggregated Judgment Debt and that settlement was expected by around 16 December 2015 cast serious doubt on the prospect that winding up orders would be made against the applicants. Moreover, the evidence of Ms Parr was that in August 2015, both companies were solvent and, if necessary, could pay the judgment debts. In these circumstances, we cannot be satisfied that the appeal will be rendered nugatory by reason of the winding up of the applicants. As the applicants’ contention that there were special and exceptional circumstances warranting a stay was based on the appeal being rendered nugatory as a result of their being wound up in the absence of a stay, the applicants have failed to establish a proper foundation for a stay. Accordingly, the second ground for a stay is not made out.

The applicants’ submissions in support of the first ground focused on the merits of the proposition that Park Trent was not a proper party to the proceeding. There was no evidence that if Park Trent paid the Park Trent Judgment Debt to the respondent, the respondent would not be able to repay the amount of the debt in the event that Park Trent’s appeal was successful. In the end, the only basis upon which Park Trent contended that, without a stay, its appeal would be rendered nugatory, was that set out in the second ground, namely, the risk of the company being wound up. As we have rejected that ground, the first ground could not in the present case provide an independent basis for granting a stay.

Accordingly, we refused the application for a stay.

We wish to stress that our observations about the prospects of winding up orders being made are based on the evidence and submissions that were before us. The question whether such orders should be made, and when the relevant proceedings will be heard, will be a matter for the Associate Judge who is required to decide those issues in the future on the basis of the evidence and submissions which are then before him or her.

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[2015] VSCA 347

11 December 2015