Eclipse Resources Pty Ltd v The Minister for Environment
[2016] WASCA 110
•1 JULY 2016
ECLIPSE RESOURCES PTY LTD -v- THE MINISTER FOR ENVIRONMENT [2016] WASCA 110
| SUPREME COURT OF WESTERN AUSTRALIA | Citation No: | [2016] WASCA 110 | |
| THE COURT OF APPEAL (WA) | |||
| Case No: | CACV:16/2016 | 7 JUNE 2016 | |
| Coram: | BUSS JA NEWNES JA | 1/07/16 | |
| 11 | Judgment Part: | 1 of 1 | |
| Result: | Applications dismissed | ||
| B | |||
| PDF Version |
| Parties: | ECLIPSE RESOURCES PTY LTD (ACN 062 212 140) THE MINISTER FOR ENVIRONMENT THE STATE OF WESTERN AUSTRALIA THE CHIEF EXECUTIVE OFFICER OF THE DEPARTMENT OF ENVIRONMENT REGULATION |
Catchwords: | Practice and procedure Applications for orders suspending enforcement of judgments Whether threat of winding up proceedings by judgment creditor sufficient to justify suspension orders Whether balance of convenience favoured suspension orders |
Legislation: | Civil Judgments Enforcement Act 2004 (WA), s 15 |
Case References: | Bresam Investments Pty Ltd v Shmee Pty Ltd [2008] VSCA 251 Cook's Construction Pty Ltd v Stork Food Systems Australasia Pty Ltd [2008] QCA 322; [2008] 2 Qd R 453 Eastland Technology Australia Pty Ltd v Whisson [2003] WASCA 307; (2003) 28 WAR 308 Ladang Jalong (Australia) Pty Ltd v Callander [2005] WASCA 203 Tradesman Technologies Pty Ltd v Ameduri [2012] WASCA 168 |
JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA TITLE OF COURT : THE COURT OF APPEAL (WA) CITATION : ECLIPSE RESOURCES PTY LTD -v- THE MINISTER FOR ENVIRONMENT [2016] WASCA 110 CORAM : BUSS JA
- NEWNES JA
- Appellant
AND
THE MINISTER FOR ENVIRONMENT
Respondent
- Appellant
AND
THE STATE OF WESTERN AUSTRALIA
First Respondent
THE CHIEF EXECUTIVE OFFICER OF THE DEPARTMENT OF ENVIRONMENT REGULATION
Second Respondent
THE MINISTER FOR ENVIRONMENT
Third Respondent
ON APPEAL FROM:
For File No : CACV 16 of 2016
Jurisdiction : SUPREME COURT OF WESTERN AUSTRALIA
Coram : BEECH J
Citation : ECLIPSE RESOURCES PTY LTD -v- THE STATE OF WESTERN AUSTRALIA [No 4] [2016] WASC 62
File No : CIV 2385 of 2013
For File No : CACV 18 of 2016
Jurisdiction : SUPREME COURT OF WESTERN AUSTRALIA
Coram : BEECH J
Citation : ECLIPSE RESOURCES PTY LTD -v- THE STATE OF WESTERN AUSTRALIA [No 4] [2016] WASC 62
File No : CIV 1364 of 2009
Catchwords:
Practice and procedure - Applications for orders suspending enforcement of judgments - Whether threat of winding up proceedings by judgment creditor sufficient to justify suspension orders - Whether balance of convenience favoured suspension orders
Legislation:
Civil Judgments Enforcement Act 2004 (WA), s 15
Result:
Applications dismissed
Category: B
Representation:
CACV 16 of 2016
Counsel:
Appellant : Mr S Penglis
Respondent : Mr P D Evans & Ms J E Shaw
Solicitors:
Appellant : Fletcher Law
Respondent : State Solicitor for Western Australia
CACV 18 of 2016
Counsel:
Appellant : Mr S Penglis
First Respondent : Mr P D Evans & Ms J E Shaw
Second Respondent : Mr P D Evans & Ms J E Shaw
Third Respondent : Mr P D Evans & Ms J E Shaw
Solicitors:
Appellant : Fletcher Law
First Respondent : State Solicitor for Western Australia
Second Respondent : State Solicitor for Western Australia
Third Respondent : State Solicitor for Western Australia
Case(s) referred to in judgment(s):
Bresam Investments Pty Ltd v Shmee Pty Ltd [2008] VSCA 251
Cook's Construction Pty Ltd v Stork Food Systems Australasia Pty Ltd [2008] QCA 322; [2008] 2 Qd R 453
Eastland Technology Australia Pty Ltd v Whisson [2003] WASCA 307; (2003) 28 WAR 308
Ladang Jalong (Australia) Pty Ltd v Callander [2005] WASCA 203
Tradesman Technologies Pty Ltd v Ameduri [2012] WASCA 168
1 JUDGMENT OF THE COURT: The appellant has applied for orders, pursuant to s 15 of the Civil Judgments Enforcement Act 2004 (WA) (the Act), suspending the enforcement of judgments of Beech J in which his Honour found against the appellant in a total sum of $21,495,160.46.
2 The judgments, which were delivered on 9 March 2016, were in:
1. CIV 1364 of 2009, in which the appellant was ordered to pay the respondents in both appeals the sum of $12,630,808.80; and
2. CIV 2385 of 2013, in which the appellant was ordered to pay to the Minister for Environment (the respondent in CACV 16 of 2016) the sum of $8,864,351.66.
3 On 11 March 2016, the appellant filed notices of appeal in respect of each decision, those appeals being CACV 18 of 2016 and CACV 16 of 2016 respectively.
4 On 17 March 2016, the Minister for Environment caused a statutory demand to be served on the appellant requiring payment of the total judgment sum of $21,495,160.46 within 21 days. An application has been filed by the appellant in the Federal Court seeking to set aside the statutory demand.
5 The respondents accepted for the purposes of this application that the appeals were reasonably arguable. It is therefore unnecessary to canvass the proceedings below in any detail. The following summary is taken largely from the summary provided by the primary judge in his reasons.
6 The appellant carried out resource recovery operations at three sites in the metropolitan region between 1 July 2008 and 30 September 2014. The sites were referred to in his Honour's reasons as the 'Abercrombie Road Site', the 'Flynn Drive Site' and the 'Wanneroo Road Site'. Each site had been quarried, resulting in a void in the ground at the site. As part of its operations at each site, the appellant received materials from third parties and progressively deposited and compacted some of those materials in the void.
7 The substantive issue in the actions was whether the appellant was liable to pay a waste levy in respect of the materials from 1 July 2008 to 30 September 2014. The determination of that question involved the proper construction of a legislative regime that, in essence, imposes a levy when waste is accepted for burial at premises and disposed of to landfill.
8 The appellant denied that it was liable to pay the levy. It contended, in substance, that:
(1) the materials it received from third parties were not waste;
(2) if they were, the appellant did not accept them for burial; and
(3) the materials that the appellant deposited and compacted in the void were not waste disposed of to landfill.
9 In the alternative, the appellant argued that the levy was unconstitutional because it amounted to an excise and was invalid as contrary to s 90 of the Commonwealth Constitution.
10 The primary judge resolved the issues of construction adversely to the appellant and found that the levy regime applied to its operations at the three sites. His Honour also found that in its application to the appellant's sites, the levy was not an excise and the legislation was not unconstitutional.
11 In its appeals to this court, the appellant challenges each of those findings. In the meantime, it seeks orders suspending the enforcement of the judgments pending the determination of the appeals.
12 An order suspending the enforcement of a judgment may be made under s 15 of the Act if there are 'special circumstances that justify doing so' or, alternatively, the court has power under its rules to grant an interim order in the form of a stay of execution pending the hearing of the appeal. There are no hard and fast rules applicable to an application under s 15 of the Act but the relevant general principles are those described in Eastland Technology Australia Pty Ltd v Whisson [2003] WASCA 307; (2003) 28 WAR 308: see Ladang Jalong (Australia) Pty Ltd v Callander [2005] WASCA 203 [3]. The general principles relevant to an application for a stay under the rules are not materially different. While the present applications were framed in terms of s 15 of the Act, it is appropriate to consider both forms of interim relief. For present purposes, the general principles applicable to both can be sufficiently stated as follows:
• Ordinarily a successful litigant is entitled to enforce a judgment pending the determination of any appeal. It is for the applicant to persuade the court that there are special circumstances that justify the suspension of enforcement of the judgment.
• Generally that will require the applicant to establish that the suspension of enforcement is necessary to prevent the right of appeal being rendered nugatory or to avoid practical difficulties in respect of the relief which may be granted on appeal.
• Even if that is made out, the suspension of enforcement will generally be refused unless the court is satisfied that the appeal has reasonable prospects of success.
• And it may still be refused where it appears that the balance of convenience does not lie in favour of the applicant; where, for example, the suspension of enforcement will occasion hardship to the respondent which may not be alleviated by the terms upon which the stay may be granted.
13 The appellant submitted that 'special circumstances' arose in two ways. First, the appellant is unable to pay the amount of the judgment debts and may be wound up before the appeals are heard. Second, various defences that the appellant had pleaded in the actions resulted in legislation being passed by parliament to validate retrospectively the regulations relied upon by the respondents, as a result of which those defences, which would have been a complete answer to the respondents' claims, fell away. Further, the appellant submitted that the second of those circumstances fortified the first; that is, that the Minister for Environment is seeking to wind up the appellant in respect of judgment debts that the appellant cannot pay which were obtained as a result of retrospective legislation passed to overcome valid defences the appellant had to the claims.
14 The appellant submitted that the balance of convenience was in its favour, there being no prejudice to the respondents if enforcement of the judgments was suspended, apart from the general prejudice of being unable to enforce the judgments until the appeals are determined - a right of enforcement in this case against a party who is unable to pay the judgment sums.
15 The main issue between the parties centred round the 'special circumstances' advanced by the appellant.
16 As to the first of those special circumstances, we are unable to see the relevance of the appellant's contention that its liability for the levy came about only as a result of retrospective legislation that validated the regulations on which the respondents relied for the claims. The validity of the legislation is not contested and it is not in issue that at least by the time they came to be considered by the primary judge the regulations were valid. Whether or not the effect of the validating legislation was to do an injustice to the appellant is not a matter that is relevant on these applications. However, even if it was a relevant matter, it should not be given much weight.
17 Nor, in the circumstances of this case, are we persuaded that the risk that the Minister for Environment may seek to have the appellant wound up in insolvency constitutes, either of itself or in combination with other factors, a special circumstance that would justify suspending or staying enforcement of the judgments.
18 The financial position of the appellant is dealt with in an affidavit of 6 April 2016 of Mr Rodney Hansen, a director of the appellant. In the affidavit, Mr Hansen says that the appellant ceased trading on 10 March 2016 and another company in the 'Marford Group', of which the appellant is a member, has commenced to carry on those activities previously carried on by the appellant which do not attract the levy.
19 According to Mr Hansen, the appellant does not have sufficient assets from which to pay the judgment sums and, indeed, as a result of the judgment debts its liabilities substantially exceed its assets. Annexed to the affidavit is a draft balance sheet of the appellant as at 31 March 2016. The balance sheet shows assets of $1,469,224.91, consisting of current assets of $942,277.02 (of which all but $20,000 are cash and debtors), and non-current assets of $526,947.89 (made up very largely of intercompany loans). The liabilities total $23,394,667.87, of which current liabilities total $864,073.49 and non-current liabilities total $22,530,594.38 (consisting of an intercompany loan by Bayardo of $1,035,433.92 and the judgment debts).
20 The solicitor for the respondents, Mr Brendyn Nelson, swore an affidavit in opposition to the application. Attached to the affidavit were various land title searches which revealed that, on 24 February 2012, the appellant transferred two properties that it owned to associated companies. The properties constituted two of the three sites that were the subject of the litigation. They were the 'Abercrombie Road Site', which the appellant transferred to Bayardo Pty Ltd for no consideration, and the 'Flynn Drive Site', which the appellant transferred to Man O War Resources Pty Ltd, also for no consideration. The transfer of land forms lodged at Landgate described the transfers as being made pursuant to 'a corporate restructure'. Both transfers were exempt from stamp duty as transactions occurring between 'family' entities under ch 6 of the Duties Act 2008 (WA).
21 ASIC searches attached to Mr Nelson's affidavit show that the appellant, Bayardo and Man O War Resources are wholly owned subsidiaries of PRM Pty Ltd, which in turn is a wholly owned subsidiary of Marford Group Pty Ltd. The sole shareholders of Marford Group Pty Ltd are Mr Trevor Delroy and his wife.
22 It appears from Mr Nelson's affidavit that the properties had substantial value. The 'Flynn Drive Site' was said to have a dutiable value of $45 million and the 'Abercrombie Road Site' to have a dutiable value of $10 million. A pre-transaction decision request form, dated 21 December 2011, lodged by the appellant at the Office of State Revenue pursuant to s 261 of the Duties Act, also estimated the market value of the 'Abercrombie Road Site' at $10 million. The respondents pointed out that the transfers of the properties had occurred after the appellant had commenced CIV 1364/2009, in which it challenged its liability to pay the levy.
23 In an affidavit of 13 May 2016, Mr Hansen said (at [4]) that he was informed in 2004 when he joined the Marford Group of companies that it was a goal of Marford Group Pty Ltd, the ultimate holding company, to restructure the group entities to separate operational companies from landholding and land development companies to manage risk within the group. The restructure in 2011 came about because advice had then been received that the law permitted the restructure without incurring a liability for stamp duty.
24 On the hearing of these applications there was an issue between the parties as to whether the land transfers were, as the appellant maintained, simply part of a bona fide corporate restructure or whether, as the respondents contended, they were specifically designed to minimise the risk to assets of the Marford Group in the event that the appellant was found liable for the levy. The respondents say that prima facie the property transfers were uncommercial transactions of no benefit to the appellant.
25 It is not possible, and nor is it necessary, to attempt to finally resolve those issues on these applications. What is apparent, however, is that in large measure as a consequence of its participation in those transactions, in which it disposed of its major assets for no consideration, the appellant no longer has assets that it can liquidate, or against which it can borrow, to pay or secure the judgment debts. Whatever might have been thought to be the benefits of those transactions to the Marford Group as a whole, the effect is that the appellant now faces the threat of proceedings by the Minister for Environment to wind it up.
26 That threat, however, is not of itself necessarily sufficient to justify the suspension of the enforcement of the judgments. Whether the threat of an application by a judgment creditor to wind up a judgment debtor that is appealing against the judgment justifies a suspension order will depend upon the circumstances of the particular case: see Tradesman Technologies Pty Ltd v Ameduri [2012] WASCA 168 [26] - [27]; Bresam Investments Pty Ltd v Shmee Pty Ltd [2008] VSCA 251 [48] - [49]; Cook's Construction Pty Ltd v Stork Food Systems Australasia Pty Ltd [2008] QCA 322; [2008] 2 Qd R 453 [16]. Where, for instance, a winding up would bring an existing business to an end or significantly reduce the value of the appellant's assets, or would have the practical effect that the appeal could not be pursued, the threat of a winding up order may well be sufficient to justify a suspension order.
27 But nothing of that kind has been made out in the present case. The appellant is no longer carrying on any business and its assets consist almost entirely of debtors and an inter-company loan. Nor does it appear that a winding up order would prevent the prosecution of the appeals. It would be open to a liquidator to elect to prosecute the appeals, subject to his or her assessment of the prospects of success and the availability of adequate funding. There is no direct evidence as to funding being available, but the property transactions indicate that in practical terms the assets of companies within the Marford Group are treated as group assets rather than assets of the individual entities. And in light of the appellant's current financial position, it is to be inferred that the appeals are currently being funded by other entities within the Marford Group - indeed, we were informed (without objection) that one of those companies, PRM, has offered to provide security for the respondents' costs of the appeals. We note that the appellant's financial circumstances did not prevent it from prosecuting its case in the primary proceedings. There would appear to be no reason why funding of the appeals would not be made available to a liquidator by entities within the Marford Group, particularly in circumstances where Bayardo, which is owed $1,035,433.92 by the appellant, has an interest in the successful prosecution of the appeals.
28 As we have said, the appellant's case for suspension orders was also put on the basis, in effect, that the circumstances of the appellant's inability to pay the judgment debts and the threat of liquidation were fortified by the circumstances in which the judgments were obtained, namely, through validating legislation which it is claimed deprived the appellant of valid defences that it would otherwise have had. However, we do not think that contention adds anything. For the reasons explained above we do not consider the validating legislation to be a relevant consideration. In any event, it should not be given much weight.
29 The balance of convenience does not favour granting the relief sought by the appellant. In particular:
(a) The making of suspension orders would deprive the respondents of the immediate benefit of the judgments entered in their favour after trial, including the appointment of a liquidator immediately with a view to the liquidator investigating whether any transactions entered into by the appellant may be set aside under the Corporations Act 2001 (Cth).
(b) The amount of the judgment debts has become progressively owing and payable since 29 July 2008.
(c) Since 29 July 2008, the appellant has had the benefit of the moneys it should have paid by way of levy and it has been able to use those moneys in pursuit of its business interests.
(d) The appellant's prospects of success do not appear, at this stage, to be compelling.
(e) The appellant's current financial position is a consequence of its own decisions and actions. The appellant has always known that a legislative prescribed penalty of 20% per annum applied to amounts unpaid by way of levy. The appellant decided not to collect the levy from its customers and not to pay the levy under protest while contesting in the primary proceedings its legal liability to pay. The appellant decided to transfer its legal and beneficial interest in properties of substantial value to related companies in February 2012, for no consideration, and while the primary proceedings were pending. The appellant's vulnerability to be wound up is a direct result of commercial arrangements which it deliberately entered into after the primary proceedings were commenced.
(f) There is a recognised public interest in the winding up of insolvent corporations.
(g) The appellant has not offered to provide the respondents with any security for the judgment sums (either wholly or partly) or proposed that any suspension orders granted in its favour be subject to conditions requiring it to provide the respondents with such security.
(h) The appellant has directors, shareholders and creditors who have an interest in preventing it from being wound up.
(i) It was not suggested, and it could not reasonably have been suggested, that if the respondents were paid some or all of the judgment sums or otherwise provided with security for the judgment sums (wholly or partly), the subject matter of the litigation (or some part of it) would be irretrievably lost.
30 We are not persuaded that the appellant has established special circumstances that would justify suspending enforcement of the judgments. We would dismiss the applications.
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