Donald CAMPBELL-SMITH as executor of the estate of Martin Paul Banning v Graeme Trevor Lean (in his capacity as receiver)
[2018] WASCA 77
•22 MAY 2018
JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
TITLE OF COURT : THE COURT OF APPEAL (WA)
CITATION: DONALD CAMPBELL-SMITH as executor of the estate of MARTIN PAUL BANNING -v- GRAEME TREVOR LEAN (in his capacity as receiver) [2018] WASCA 77
CORAM: MURPHY JA
HEARD: 4 MAY 2018
DELIVERED : 22 MAY 2018
FILE NO/S: CACV 2 of 2017
BETWEEN: DONALD CAMPBELL-SMITH as executor of the estate of MARTIN PAUL BANNING
First Appellant
PROFESSIONAL SERVICES OF AUSTRALIA PTY LTD
Second Appellant
AND
GRAEME TREVOR LEAN (in his capacity as receiver)
Respondent
ON APPEAL FROM:
Jurisdiction : SUPREME COURT OF WESTERN AUSTRALIA
Coram: MASTER SANDERSON
Citation: COMPUTER ACCOUNTING AND TAX PTY LTD (in liq) -v- PROFESSIONAL SERVICES OF AUSTRALIA PTY LTD [No 11] [2016] WASC 365
File Number : CIV 2265 of 2006
Catchwords:
Practice and procedure - Application for stay pending appeal - Appellants likely to be made bankrupt and wound up if no stay ordered - Where appeal would be rendered nugatory - Turns on own facts
Legislation:
Nil
Result:
Application allowed
Category: B
Representation:
Counsel:
| First Appellant | : | Mr T R Stephenson |
| Second Appellant | : | Mr T R Stephenson |
| Respondent | : | Mr A Metaxas |
Solicitors:
| First Appellant | : | Eastwood Law |
| Second Appellant | : | Eastwood Law |
| Respondent | : | Chris Stokes & Associates |
Case(s) referred to in decision(s):
Computer Accounting and Tax Pty Ltd (in liq) v Professional Services of Australia Pty Ltd [No 11] [2016] WASC 365
Donald Campbell‑Smith as executor of the estate of Martin Banning v Graeme Trevor Lean [2017] WASCA 89
Lean v Banning Holdings Pty Ltd [2017] WASC 353
M R & R C Smith Pty Ltd v Wyatt [No 2] [2012] WASCA 110
Professional Services of Australia Pty Ltd v Lean [2018] WASC 28
Tradesman Technologies Pty Ltd v Ameduri [2012] WASCA 168
MURPHY JA:
This is an application filed by the appellants seeking a stay of Master Sanderson's orders of 8 December 2016, pursuant to his decision in Computer Accounting and Tax Pty Ltd (in liq) v Professional Services of Australia Pty Ltd [No 11][1] (primary decision). The relevant background appeared not to be in dispute, and an abbreviated summary is set out below.[2]
[1] Computer Accounting and Tax Pty Ltd (in liq) v Professional Services of Australia Pty Ltd [No 11] [2016] WASC 365.
[2] This summary is largely taken from Donald Campbell‑Smith as executor of the estate of Martin Banning v Graeme Trevor Lean [2017] WASCA 89.
Background
Mr Banning, during his lifetime, held a share in Banning Holdings Pty Ltd (the Banning share). Mr Banning was also associated with a company called Professional Services of Australia Pty Ltd (PSA) (the second appellant).
Mr Banning died, and the Banning share was an asset of his estate.
Mr Campbell‑Smith (the first appellant) is the executor of the estate of the late Mr Banning.
Mr Lean (the respondent to the appeal), is an accountant. In broad terms, he was appointed, in late 2008, as a court‑appointed receiver over the Banning share in order, in effect, to satisfy a judgment debt in favour of Computer Accounting and Tax Pty Ltd (CAT). In this connection, Mr Campbell‑Smith was ordered to, and did, transfer the Banning share to Mr Lean in December 2008.
In August 2009, Mr Campbell‑Smith and PSA applied to discharge Mr Lean from his receivership. He was discharged pursuant to a court order in November 2010 on the basis that he had a lien over the Banning share for his fees as receiver. Despite the discharge from the receivership, Mr Lean continued as the registered holder of the Banning share.
In about 2014, Mr Lean claimed fees in relation to his work as a court‑appointed receiver over the Banning share. Mr Lean's claim for fees was, in effect, resisted by PSA and Mr Campbell‑Smith as executor of Mr Banning's estate. The matter was heard by the master, who delivered the primary decision on 8 December 2016.
Pursuant to the primary decision under appeal, on 8 December 2016, the master ordered that Mr Lean's costs and disbursements as receiver over the Banning share be allowed in the sum of $75,000 with interest. The master also ordered that PSA and Mr Campbell‑Smith pay Mr Lean's costs of the application fixed in the sum of $30,000.
The master stayed the time for payment of the above sums until 5 January 2017.
The appellants contend, in effect, and the respondent does not dispute, that the master's orders were made in the historical context that orders had been made by Simmonds J on 21 November 2008, as amended on 10 November 2010, which provided, in effect, that:[3]
The costs of the Receiver [Mr Lean] including his remuneration, the costs of obtaining his appointment, of completing his security, of passing accounts and of obtaining his discharge shall be taxed unless assessed by the master and shall be primarily payable by the judgment debtor [PSA and Mr Banning] within such time as the Master may allow on taxation or assessment or as otherwise ordered by this Honourable Court.
The COR proceedings
[3] There was no explanation before me as to the basis upon which those orders were made: cf Lightman and Moss on the Law of Administrators and Receivers of Companies (6th ed, 2017) [23‑032] - [29‑033]. It is unnecessary, however, to explore the point here.
On 19 June 2017, Mr Lean commenced proceedings in COR 140 of 2017 to wind‑up Banning Holdings Pty Ltd under s 461(1) of the Corporations Act 2001 (Cth) (Act) on the basis that he, as the registered holder of the Banning share, was a contributory. That application was dismissed: Lean v Banning Holdings Pty Ltd.[4]
[4] Lean v Banning Holdings Pty Ltd [2017] WASC 353.
On 21 June 2017, Mr Lean issued a statutory demand to PSA apparently on the basis of the master's orders of 8 December 2016, referred to in [8] above. The demand was for the sum of $105,000, being the total of $75,000 plus $30,000 in costs. PSA brought proceedings in COR 160 of 2017 to set aside the statutory demand. The proceedings were the subject of Smith AJ's decision in Professional Services of Australia Pty Ltd v Lean.[5] Her Honour ordered that statutory demand would be set aside on the condition that PSA pay into court by 14 February 2018 the sum of $105,000 plus interest.
[5] Professional Services of Australia Pty Ltd v Lean [2018] WASC 28.
PSA failed to pay the money into court.
On 22 February 2018, Mr Lean commenced proceedings, COR 35 of 2018, to wind‑up PSA for failing to comply with the statutory demand.
The bankruptcy proceedings
Also, on 28 November 2017, Mr Lean issued a creditor's petition against Mr Campbell‑Smith as executor of Mr Banning's estate, apparently on the basis that the sum of $105,000 referred to earlier remains unpaid.
The appeal
The appeal in this matter has had a long and tortuous history. There has been an order for security for costs, and there has been a period of some months, pending provision of the security, in which the appeal was effectively stayed. There have been serious delays on both sides, including delays on the part of the respondent over the period between 5 October 2017 to 4 April 2018. Subject to the filing of the appeal books, the appeal is (finally) effectively ready to be listed. The present application was filed on 15 March 2018.
Principles
In Tradesman Technologies Pty Ltd v Ameduri,[6] Pullin JA said that the principles relevant to an application for a stay are as follows:[7]
[6] Tradesman Technologies Pty Ltd v Ameduri [2012] WASCA 168.
[7] Tradesman Technologies [22], [26] - [27].
(a)The successful litigant is ordinarily entitled to enforce a judgment pending the determination of any appeal.
(b)It is for the applicant for a stay to move the court to a favourable exercise of its discretion. Under s 15(3) [of the Civil Judgments Enforcement Act 2004 (WA)] this court may only make a suspension order if there are 'special circumstances' that justify doing so and in an application for a stay under the rules this is also a usual requirement.
(c)The central issue will be whether the grant of a stay is perceived to be necessary to preserve the subject matter or the integrity of the litigation or whether a refusal of a stay could create practical difficulties in respect of the relief which may be granted on appeal. This may shortly be described as requiring the court to consider whether the right of appeal will be rendered nugatory if a stay is not granted.
(d)If it can be demonstrated that the right of appeal will be rendered nugatory if a stay is not granted, the stay will generally still be refused unless it can be established that the appeal has ultimately reasonable prospects of success.
(e)Finally, the stay may still be refused where it appears that the balance of convenience does not lie in favour of the applicant where, for example, the grant of a stay will occasion hardship to the respondent which may not be alleviated by the terms upon which the stay may be granted: Eastland Technology Australia Pty Ltd v Whisson [2003] WASCA 307; (2003) 28 WAR 308.
…
[One] way of demonstrating that an appeal might be rendered nugatory is if the appellant does not have the ability to pay the judgment sum and may be rendered bankrupt or a company may be wound up before the appeal is heard: see for example Orrong Strategies Pty Ltd v Village Roadshow Ltd [2007] VSCA 320 (Maxwell P & Ashley JA); Narain v Euroasia (Pacific) Pty Ltd [2008] VSCA 195 (Maxwell P & Ashley JA); Li v Herald and Weekly Times Pty Ltd [2008] VSCA 201 (Maxwell P & Ashley JA) and McMahon v National Foods Milk Ltd [2008] VSCA 237 (Maxwell P & Buchanan JA).
However, the mere threat of service of a bankruptcy notice is not always, per se, sufficient to demonstrate special circumstances or that the appeal will be rendered nugatory: see Sami v Roads Corporation [2009] VSCA 44; Sopov v Kane Constructions Pty Ltd [2009] VSCA 216.
The parties' arguments
The appellants contend, effectively having regard to my earlier interlocutory decision in this appeal when I ordered security for costs against them, that they do not have the means to pay the $105,000, pending the determination of this appeal.[8] The appellants effectively seek a stay on the basis that they are unable to pay the sum of $105,000, and that, unless a stay is granted, there will likely be a sequestration order against the first appellant and a winding‑up order against the second appellant, with the result that the prosecution of the appeal would be frustrated. They contend that if a liquidator or trustee were appointed, it could not be guaranteed that they would pursue the appeal, particularly without funding arrangements. The appellants also contend that the application for a stay has only recently been required because, until recently, the respondent had not sought to enforce the payment of the sum of $105,000. They also contend that they have a reasonably arguable case. They also say that there is no real prejudice to the respondent if a stay were granted, given the lengthy delays in the respondent first taking any steps to have his costs taxed (for some four years after the relevant orders in 2010), and secondly the delay in taking any steps to enforce Master Sanderson's orders. They also rely on the lengthy delays by the respondent in the appeal itself. They further contend that, relevant to the balance of convenience, the respondent is protected as to his costs by the order for security.
[8] See Campbell‑Smith v Lean [2017] WASCA 89.
The respondent resists the application on the following bases:
1.There has been a delay in the application for a stay. The sum of $105,000 has been owing and payable since 5 January 2017. In the meantime, the respondent has incurred costs in the proceedings referred to earlier.
2.The bankruptcy of the estate of Mr Banning involves no real hardship to anyone. It is unlike 'a litigant being made bankrupt with the consequences that that might have on his ongoing life and business activities'.
3.The appellants have failed to provide any real detailed information about their assets and financial circumstances, or to provide or identify any explanation of the source of funding for their legal representation. Also in that regard, the appellants, as major creditors of CAT, are in a position to set out the current status of the recovery actions by the liquidator of CAT, and the likely prospects of a dividend to creditors, but have failed to do so.
4.In oral submissions, counsel for the respondent contended that 'whoever is funding this action or the conduct of this litigation needs to step forward'.
Disposition
I accept that the appeal is reasonably arguable. I also accept that the appeal will likely be rendered nugatory if a stay is not granted. I note that, in Mr Lean's affidavit of 4 April 2017, there was evidence of a deed of charge given by Ms Banning securing the payment of legal fees to the appellants' solicitors. I do not accept that the appellants' evidence of the inability to pay is inadequate, and nor do I infer that there is some unknown and undisclosed person secretly funding the litigation. Without a stay, there will likely be the bankruptcy of the first appellant and the winding‑up of the second appellant. There is a real risk that a trustee or liquidator would not continue the appeal. The history, context and peculiar circumstances attending this litigation would likely make it difficult for a trustee or liquidator to master, in any timely way at least, the material and obtain appropriate legal advice as to whether to continue the appeal. I also accept that funding would likely be an issue, given its background and the relatively small amount involved. As the master observed, the primary proceedings were 'in the context of [a] long‑running (and perhaps never‑ending) dispute', albeit in 'a sideshow to the main proceedings'. The master continued:[9]
Nonetheless [Mr Lean's application] has raised issues which are factually complex and which on the application of the first and second defendants led to lengthy cross-examination of Mr Lean. Thousands of pages of documents have been filed and over 50 pages of submissions were lodged.
[9] Primary decision [2].
Although the appellants contend that the appeal does not raise challenges to factual findings made by the master,[10] it would be difficult to investigate the matter and make an informed decision as to whether to run the appeal without an eye to, and appreciation of, the broader background.
[10] Appellants' written submissions, filed 28 March 2018, par 16.
Further, I am inclined to the view that the balance of convenience favours the grant of a stay. The sooner this particular chapter of the long‑running litigation in CIV 2265 of 2006 is brought to a close, the better. Not only for the parties, but for the orderly administration of justice. As I have indicated, the point has arrived where the appeal could be listed reasonably quickly. In the meantime, the respondent has an order for security for costs in his favour. I also take into account the fact that the respondent did not bring the application in relation to fees for some four years after the orders referred to in [10] above.
In all the circumstances, including having regard to the matters raised by the respondent, it seems to me that it is in the interests of justice to grant the application for a stay.
Conclusion
Subject to hearing from the parties as to the precise terms of the orders, an order should be made to the effect that the appellants are not required to pay the sums referred to in the two orders made by Master Sanderson on 8 December 2016, referred to in [8] above, until the determination of the appeal or further order.
Since the preparation of these reasons, my attention has been drawn to a document entitled 'supplementary submissions' sought to be filed by the respondent late Friday, 18 May 2018. This was after the court had given notice that judgement would be delivered on Tuesday, 22 May 2018, with an advance copy available to the parties on Monday, 21 May 2018 at 10.00 am. The submissions were not the subject of an application for leave, and ought not be received: M R & R C Smith Pty Ltd v Wyatt [No 2].[11] However, even if an application had been made and granted, the submissions would not alter the conclusion referred to above.
[11] M R & R C Smith Pty Ltd v Wyatt [No 2] [2012] WASCA 110 [55].
I certify that the preceding paragraph(s) comprise the reasons for decision of the Supreme Court of Western Australia.
CL
ASSOCIATE TO THE HONOURABLE JUSTICE MURPHY21 MAY 2018
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