FEDERAL COURT OF AUSTRALIA
Darmali v Chu [2024] FCA 1521
File number(s): NSD 1323 of 2024
NSD 1324 of 2024Judgment of: THAWLEY J Date of judgment: 19 December 2024 Catchwords: PRACTICE AND PROCEDURE – applications for stay pending appeals – stays granted on conditions
PRACTICE AND PROCEDURE – security for costs –where appellants assert impecuniosity –whether order for security for costs would stultify appeal – security ordered in one appeal and refused in other
Legislation: Bankruptcy Act 1966 (Cth) s 52(5)
Corporations Act 2001 (Cth) ss 913BA, 913BB(2)
Federal Court of Australia Act 1976 (Cth) s 56
National Consumer Credit Protection Act 2009 (Cth) ss 80(1)(b), 64(4), (5)(b)
Federal Court Rules rr 19.01, 36.08
Property and Stock Agents Act 2002 (NSW)
Cases cited: A1 for Maintenance Pty Ltd v Lehal Pty Ltd [2018] FCA 1476
All Class Insurance Brokers Pty Ltd (in liq) v Chubb Insurance Australia Limited [2020] FCA 840
Fouche v The Superannuation Fund Board [1952] HCA 1; 88 CLR 609
Australian Competition and Consumer Commission v BMW (Australia) Ltd (No 2) [2003] FCA 864
Dye v Commonwealth Securities Limited [2012] FCA 992
Kalifair Pty Ltd v Digi-Tech (Australia) Ltd [2002] NSWCA 383; 55 NSWLR 737
Kiefel v State of Victoria [2014] FCA 604
Lehrmann v Network Ten Limited [2024] FCA 1226
Madsen v Darmali [2024] NSWSC 76
Nyoni v Pharmacy Board of Australia [2018] FCA 1313
Nyoni v Shire of Kellerberrin (No 9) [2016] FCA 472
Sigma Pharmaceuticals (Australia) Pty Ltd v Wyeth (No 2) [2010] FCA 1212; 88 IPR 633
Division: General Division Registry: New South Wales National Practice Area: Commercial and Corporations Sub-Area: General and Personal Insolvency Number of paragraphs: 122 Date of hearing: 17 and 19 December 2024 Counsel for Mr Darmali: Mr M Friedgut and Ms N Bailey Solicitor for Mr Darmali: Connor & Co Lawyers Counsel for Mr Cai: Mr M Condon SC and Mr D Southwood Solicitor for Mr Cai: Juris Cor Legal Counsel for the Respondents: Mr R Scruby SC and Mr D Meyerowitz-Katz Solicitor for the Respondents: McCabes Lawyers
ORDERS
NSD 1323 of 2024 BETWEEN: DAVID DARMALI
Applicant
AND: HONG CHU
First Respondent
XUEPING XU
Second Respondent
NSD 1324 of 2024 BETWEEN: HAI ZHONG CAI
Applicant
AND: HONG CHU
First Respondent
XUEPING XU
Second Respondent
ORDER MADE BY:
THAWLEY J
DATE OF ORDER:
20 DECEMBER 2024
THE COURT ORDERS THAT:
IN NSD 1323/2024:
1.Orders 1, 2 and 8 entered on 23 August 2024 by Jackman J in Federal Court of Australia proceeding number NSD32/2022, insofar as they affect the applicant (Darmali), be stayed pending determination of Darmali’s appeal in this proceeding (Darmali’s Appeal), subject to the conditions set out in paragraphs 7 and 8 below.
2.The parties have liberty to approach this Court on three days’ notice in the event that it…
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- Darmali v Chu [2024] FCA 1521
- Case
- [2024] FCA 1521
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CaseChat Overview and Summary
The court found that the appellant's applications for stays were well-founded, as the outcomes of the appeals would have significant consequences for the parties. The court noted that the appellant had demonstrated a serious question to be tried and a sufficient degree of plausibility in the appeals. The court also found that the appellant's impecuniosity did not preclude the order for security for costs in one appeal, but that the order would stultify the appeal in the other case. The court therefore ordered security for costs in one appeal and refused it in the other. The court imposed conditions on the stays, including the payment of certain sums into an interest-bearing account and various undertakings by the parties. The court also ordered that the costs of the interlocutory applications be costs in the cause of the appeals.
The court ordered that certain orders made by Jackman J in Federal Court proceeding NSD32/2022 be stayed pending the determination of Darmali's appeal in proceeding NSD1323/2024, subject to the conditions set out in the orders. The court also ordered that the operation and enforcement of certain orders made by Jackman J in the same proceeding be stayed pending the determination of Hai Zhong Cai's appeal in proceeding NSD1324/2024. The court further ordered that the period at the expiration of which the Creditor’s Petition would lapse be extended to 24 months from 18 October 2024 and that the Creditor’s Petition be adjourned until 14 days after the determination of the appeal in proceeding NSD1324/2024. The costs of the stay application and the security for costs application were ordered to be costs in the appeal.
Orders
Orders of the court
IN NSD 1323/2024:
1. Orders 1, 2 and 8 entered on 23 August 2024 by Jackman J in Federal Court of Australia proceeding number NSD32/2022, insofar as they affect the applicant (Darmali), be stayed pending determination of Darmali’s appeal in this proceeding (Darmali’s Appeal), subject to the conditions set out in paragraphs 7 and 8 below.
2. The parties have liberty to approach this Court on three days’ notice in the event that it is not possible for them to obtain orders giving effect to the intention expressed in the undertaking noted in paragraph 8(a) below.
3. Pursuant to s 56 of the Federal Court of Australia Act 1976 (Cth), by 21 January 2025, Darmali is to give security for the Respondents’ costs of this Appeal in the amount of $275,875 by way of payment into court or the provision of an unconditional bank guarantee on terms acceptable to the first and second respondents.
4. In default of compliance with order 3:
(a) the appeal is stayed until further order; and
(b) the first and second respondents have liberty to apply for the appeal to be dismissed.
5. The first and second respondents have liberty to apply for additional security for their costs of the appeal.
6. The costs of Darmali’s interlocutory application filed on 14 November 2024 and the first and second respondents’ interlocutory application filed on 19 November 2024 are to be each party’s costs in the cause of the appeal.
CONDITIONS OF STAY
7. By 21 January 2025, Darmali is to pay the sum of $1,900,000 into an interest-bearing controlled monies account to be established by the solicitors for the first and second respondents, which funds will remain in the account until:
(a) agreement between Darmali and the first and second respondents; or
(b) further order of the Court.
8. The parties give the following undertakings:
(a) The first and second respondents and Darmali undertake to their reasonable endeavours to obtain such orders/directions that will have the effect, pending the determination of Darmali’s Appeal, of retaining the status quo in relation to the first respondent’s Creditor’s Petition based on bankruptcy notice BN273604 in Federal Court of Australia proceeding NSD 1474/2024 (the Creditor’s Petition), the respondents’ existing application for review in Federal Circuit and Family Court of Australia proceeding SYG 2561/2024 (First Review Application), and Darmali’s application for extension of time to comply with the bankruptcy notices BN 273635 and BN 273604 (Bankruptcy Notices), with the intention that:
(i) If Darmali’s appeal is successful, no act of Bankruptcy will have been committed by Darmali by reason of non-compliance with the Bankruptcy Notices; or
(ii) If Darmali’s Appeal is dismissed and the orders made against him by the primary judge are upheld, then:
A. Darmali will have committed an act of bankruptcy on 18 October 2024 by reason of his non-compliance with bankruptcy notice BN 273604; and
B. it will be open to the first respondent to move on the Creditor’s Petition;
(b) In order to give effect to the undertakings in (a) above, the parties further undertake as follows:
(i) On 24 January 2025, the parties will jointly apply for the respondents’ review application to be adjourned until 14 days after the determination of the appeal;
(ii) on 4 February 2025:
A. Darmali will:
(I) seek a further extension of the time to comply with the Bankruptcy Notices before the Registrar of the Federal Circuit and Family Court of Australia; and
(II) draw the Registrar’s attention to these orders and undertakings;
B. the first and second respondents will:
(I) inform the Registrar they oppose the further extension; but
(II) otherwise make no submission in opposition to the further extension;
(iii) in the event a further extension is granted by the Registrar on 4 February 2025, the first and second respondents will prepare and file an application to review the Registrar’s decision to grant that extension (Second Review Application);
(iv) the parties will jointly apply for the First Review Application and the Second Review Application to be adjourned until 14 days after the determination of the appeal;
(v) if Darmali’s appeal is successful, the first and second respondents will consent to the dismissal of the First Review Application and the Second Review Application;
(vi) if Darmali’s Appeal is dismissed and the orders made against him by the primary judge are upheld, then Darmali will consent to the relief sought in the First Review Application and the Second Review Application.
(c) The above undertakings are without prejudice to the rights of Darmali or the first and second respondents to approach the Court for leave to vary the undertakings following the determination of the appeal in the event that any party applies or proposes to apply for special leave to appeal to the High Court.
inform the Registrar that they oppose the further extensio
otherwise make no submissions in opposition to the further extension
IN NSD 1324/2024:
1. Pursuant to r 36.08(2) and/or r 41.03 of the Federal Court Rules 2011 (Cth), the operation and enforcement of orders 1, 2, 5, 6, 8, 11, 12, 13 and 14 made by Jackman J on 23 August 2024 in proceeding NSD 32 of 2022 be stayed, to the extent they affect the appellant Hai Zhong Cai, until the determination of the appeal in proceeding NSD 1324 of 2024.
2. As a condition of ordering a stay pursuant to Order 1, the Court makes the following orders in proceeding NSD 1475 of 2024:
a. Pursuant to s 52(5) of the Bankruptcy Act 1966 (Cth), the period at the expiration of which the Creditor’s Petition will lapse will be the period of 24 months commencing on 18 October 2024.
b. The Creditor’s Petition is adjourned until 14 days after the determination of the appeal in proceeding NSD 1324 of 2024.
c. The parties have liberty to notify the Registry that the appeal has been determined and the proceeding NSD 1475 of 2024 should be relisted.
3. Order that the costs of the stay application filed by the appellant be costs in the appeal.
4. Order that the costs of the security for costs application filed by the respondents be costs in the appeal.
Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.
Background
Background to the litigation
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Evidence
Evidence Before The Court
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Decision
Reasons for decision
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Ratio Decidendi
Legal Principle Established
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