Gandega & Fulmali (No 2)
[2023] FedCFamC1F 469
FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA
(DIVISION 1)
Gandega & Fulmali (No 2) [2023] FedCFamC1F 469
File number(s): PAC 4811 of 2016 Judgment of: SCHONELL J Date of judgment: 8 June 2023 Catchwords: FAMILY LAW – PRACTICE AND PROCEDURE – Stay – Where the second respondent sought a stay of orders that are the subject of appeal – Where the second respondent contended that that his appeal would be rendered nugatory if the stay was not granted – Where the Court is not satisfied that the second respondent has discharged the onus that there is a proper basis to stay the orders other than on terms consented to by him – Second respondent’s application dismissed – Costs ordered against the second respondent as agreed or assessed on a party/party basis. Legislation: Evidence Act 1955 (Cth) s 140
Federal Circuit and Family Court of Australia Act 2021 (Cth) s 26
Federal Circuit and Family Court of Australia (Family Law) Rules 2021 (Cth) r 13.12(2)
Cases cited: Aldridge & Keaton (Stay Appeal) [2009] FamCAFC 106
Alexander v Cambridge Credit Corp Ltd (1985) 2 NSWLR 685
Gandega & Fulmali [2023] FedCFamC1F 308
Kelly and Kelly (1981) FLC 91-007; [1980] FamCA 88
Division: Division 1 First Instance Number of paragraphs: 46 Date of hearing: 8 June 2023 Place: Sydney Solicitor for the Applicant: Marsdens Law Group Solicitor for the First Respondent: Cumpton Lawyers Counsel for the Second Respondent: Mr Ford Solicitor for the Second Respondent: David Leamery Solicitor & Barrister ORDERS
PAC 4811 of 2016 FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA (DIVISION 1)
BETWEEN: MS GANDEGA
Applicant
AND: MR FULMALI
First Respondent
MR AKBAR
Second Respondent
order made by:
SCHONELL J
DATE OF ORDER:
8 JUNE 2023
THE COURT ORDERS THAT:
1.The Application in a Proceeding filed by the second respondent Mr Akbar (“the second respondent”) seeking a stay of the orders made by Riethmuller J on 21 April 2023 be dismissed.
2.Any funds paid by the second respondent in accordance with Order 2 of the orders made by Riethmuller J on 21 April 2023 be held in the trust account of the solicitor for the first respondent husband (“the husband”) or, in the event that the parties agree, the monies be invested in an interest bearing deposit account in the names of the parties respective solicitors, pending the determination of the appeal by the second respondent and any subsequent hearing in the event of a successful appeal.
3.The second respondent pay the costs of the husband as agreed or assessed on a party/party basis.
4.The husband file an Application in a Proceeding by 4.00 pm on Wednesday 14 June 2023.
5.The second respondent file a Response to Application in a Proceeding, supporting affidavit and Financial Statement by 4.00 pm on Friday 16 June 2023.
6.The matter is to be listed for hearing on a date to be advised.
Note: The form of the order is subject to the entry in the Court’s records.
Note: This copy of the Court’s Reasons for judgment may be subject to review to remedy minor typographical or grammatical errors (r 10.14(b) Federal Circuit and Family Court of Australia (Family Law) Rules 2021 (Cth)), or to record a variation to the order pursuant to r 10.13 Federal Circuit and Family Court of Australia (Family Law) Rules 2021 (Cth).
Section 121 of the Family Law Act 1975 (Cth) makes it an offence, except in very limited circumstances, to publish proceedings that identify persons, associated persons, or witnesses involved in family law proceedings.
IT IS NOTED that publication of this judgment by this Court under the pseudonym Gandega & Fulmali has been approved pursuant to s 121(9)(g) of the Family Law Act 1975 (Cth).
EX TEMPORE REASONS FOR JUDGMENT
SCHONELL J
By Application in a Proceeding filed 22 May 2023, Mr Akbar (who is the second respondent in the proceedings, but the applicant to this application) (“the second respondent”) seeks a stay of all of the orders made by Riethmuller J (“the primary judge”) in proceedings heard in August 2022, which resulted in the judgment Gandega & Fulmali [2023] FedCFamC1F 308 being delivered on 21 April 2023.
The primary judge is unavailable to hear the stay application and, in circumstances where it is contended there is some urgency, the matter has been listed for hearing before me.
The second respondent relied upon the following documents:
(1)Application in a Proceeding filed 22 May 2023;
(2)Affidavit of second respondent filed 22 May 2023; and
(3)Case Outline document.
The wife (the applicant in the proceedings) has not filed any documents in relation to the stay and indicated to the Court that she neither consented to nor opposed the stay. The husband (the first respondent in the proceedings) relied upon the following documents:
(1)Response to Application in a Proceeding filed 6 June 2023;
(2)Affidavit of husband filed 6 June 2023;
(3)Reasons for judgment of the primary judge delivered 21 April 2023; and
(4)Case Outline document.
BACKGROUND
The proceedings the subject of the judgment under appeal first commenced in 2016.
A significant part of the judgment addresses what are said to be claims by the husband as against the second respondent. In that respect, the primary judge conveniently summarised the claims of the parties as follows:
2.The second respondent is the former business partner of the husband. Together they operated [a] business known as [C Pty Ltd]. The husband transferred his interests in the business to the second respondent in 2016, pursuant to an agreement in writing that provided for the husband receiving half of the profits of various projects and half of the value of the business assets. However, the husband never received such payment from the second respondent. The husband pursues a claim against the second respondent, either pursuant to a sale agreement or in equity. The husband’s claim is supported by the wife, who contends that the husband’s interest in the business is an asset that should form part of the parties’ marital property for the purposes of s 79 of the Family Law Act 1975 (Cth) (“the Act”). The second respondent contends he has no obligation to the husband as a result of their business dealings and denies that there exists any basis for such a claim at common law or equity.
3.There is no claim by the wife that the second respondent has any obligation directly to her. Instead, the wife’s claim is for a property settlement pursuant to s 79 of the Act and, as an incident of that claim, she pursues a case against the second respondent to establish that the husband is entitled to a significant sum as a result of the business dealings between them.
The primary judge identified that in late 2016, the husband and the second respondent signed an agreement “that the husband would transfer his shares in the business to the second respondent in exchange for 50 per cent of the profits of all of the business’ current projects less contingent liabilities, with the accounts to be finalised by nominated accountants” (at [15]).
The primary judge recorded the following:
18.The second respondent ultimately paid nothing to the husband pursuant to their 2016 agreement, alleging that there were no profits. However, the second respondent put in place no accounting arrangements to track the profits of the existing projects separately from any new projects after the date of the agreement, nor did he engage the nominated accountants to prepare the accounts.
19.There is no dispute that the issues between the husband and the second respondent must first be determined in order to determine the husband’s assets for the purpose of the property settlement proceedings between the husband and wife, nor is there any dispute that it is just and equitable to make property settlement orders as between the husband and the wife in the circumstances of this case.
There were a significant number of witnesses called in the case and the primary judge made findings in the relation to the reliability and credibility of each of the parties and the witnesses. In respect of the husband, the primary judge found the husband to be “an impressive witness” (at [44]). In relation to the second respondent, the primary judge described him as being evasive (at [78]), that emails produced by him were contrary to some of his assertions (at [79]), and that some contentions made by him were ultimately conceded to be an exaggeration (at [81]).
The primary judge made a finding as follows:
100.The second respondent was remarkably unimpressive in the manner in which he gave his evidence. I am not persuaded that any reliance can be placed upon any of the second respondent’s evidence, save where it is against his interests. I am comfortably satisfied that the second respondent embarked upon a course of conduct designed to pressure the husband to transfer his interest in the business to him and then to avoid the husband receiving his entitlements under the 2016 agreement.
No ground of appeal is directed to this finding.
Two accountants were engaged; a Mr ZZ as the joint expert and Ms OO who was engaged on behalf of the second respondent. The primary judge ultimately accepted the evidence of the joint expert, Mr ZZ, in circumstances where he had access to both sets of books operated by the business as opposed to Ms OO who only had access to one set of books. The primary judge acknowledged that whilst Mr ZZ conceded he was a not a remuneration expert, the primary judge found that remuneration rates are an aspect of his expertise in valuing businesses.
The primary judge found that judgment should be entered in favour of the husband against the second respondent in relation to the 2016 agreement and that, together with interest and other monies, there should be a payment to the husband by the second respondent in the sum of $2,165,310.
By Notice of Appeal filed 17 May 2023, the second respondent appeals all of the orders.
APPLICABLE LAW
The Court’s power to grant a stay pending an appeal is found in r 13.12(2) of the Federal Circuit and Family Court of Australia (Family Law) Rules 2021 (Cth) (“the Rules”).
Ordinarily, an application for a stay should be heard by the judge who made the order under appeal unless they are unavailable (r 13.12(3)(b)). I am satisfied that the primary judge is reasonably unavailable and that there is some urgency such that it would be contrary to the interests of justice to adjourn the application until the primary judge is available.
A stay is not ordered as a matter of right. The power to order a stay is incidental to the right of appeal.
In order to justify a stay, the party seeking the stay bears the onus to establish that the circumstances warrant a departure from the general rule that a judgment is presumed to be correct and liable to be enforced (see Alexander v Cambridge Credit Corp Ltd (1985) 2 NSWLR 685 at 693–694).
A court should not deprive a successful litigant of the fruits of litigation without just cause (see Kelly and Kelly (1981) FLC 91-007).
The principles applicable to a stay in financial proceedings are well settled and are conveniently set out by the Full Court in Aldridge & Keaton (Stay Appeal) [2009] FamCAFC 106 as follows:
18. The principles to be applied in determining an application for a stay of orders both in the general law and in respect of parenting proceedings are also well known (see The Commissioner of Taxation of the Commonwealth of Australia v Myer Emporium Limited [No.1] [1986] HCA 13; (1986) 160 CLR 220 at 222; Alexander v Cambridge Credit Corporation (1985) 2 NSW LR 685; Jennings Construction Limited v Burgundy Royale Investments Pty Limited [1986] HCA 84; (1986) 161 CLR 681; Clemett & Clemett [1980] FamCA 90; (1981) FLC 91-013; JRN & KEN v IEG & BLG [1998] HCATrans 263; (1998) 72 ALJR 1329 at 1332). The authorities stress the discretionary nature of the application which should be determined on its merits. Principles relevant to this matter include the following:
•the onus to establish a proper basis for the stay is on the applicant for the stay. However it is not necessary for the applicant to demonstrate any “special” or “exceptional” circumstances;
•a person who has obtained a judgment is entitled to the benefit of that judgment;
•a person who has obtained a judgment is entitled to presume the judgment is correct;
•the mere filing of an appeal is insufficient to grant a stay;
•the bona fides of the applicant;
•a stay may be granted on terms that are fair to all parties - this may involve a court weighing the balance of convenience and the competing rights of the parties;
•a weighing of the risk that an appeal may be rendered nugatory if a stay is not granted – this will be a substantial factor in determining whether it will be appropriate to grant a stay;
•some preliminary assessment of the strength of the proposed appeal – whether the appellant has an arguable case.
…
There are other relevant considerations which include whether the stay has been brought promptly and is not merely a delaying tactic as well as the period of time during which the stay will be in place.
DISCUSSION
I acknowledge that the onus falls upon the second respondent to satisfy the Court that it would be a proper exercise of discretion to order a stay, albeit that the second respondent is not required to establish that there are special or exceptional circumstances.
That said, the wife and husband are entitled to the fruits of the litigation. In that respect, the second respondent in his affidavit makes the following extraordinary statement:
38. The respondents suffer no prejudice in waiting until after the determination of the appeal before enforcing the judgement. These proceedings were commenced in 2016 and the funds held in the solicitor’s trust account have been there since 2017.
I am not so satisfied. Being denied the fruits of the litigation is a clear and continuing prejudice as is the prolonging of the litigation. I also acknowledge that the wife and husband are entitled to rely upon the correctness of the judgment. These are considerations that militate against the relief sought by the second respondent.
Judgment was delivered on 21 April 2023. The Notice of Appeal was filed 17 May 2023 and the application for a stay was filed 22 May 2023. It is apparent that the second respondent has not delayed in the bringing of the application. The husband contends that the second respondent lacks bona fides in the bringing of the appeal. In that respect, in the Case Outline, his counsel submits as follows:
7. Having regard to conduct of the Applicant following the Husband’s incarceration in [Asia], his conduct towards the Husband and the Wife following the Husband’s return to Australia and his conduct during the substantive proceedings, the Husband questions the bona tides of the Applicant in the filing of his Appeal and in seeking the Stay.
8. The Applicant caused [C Pty Ltd] to be placed into liquidation and armed the Liquidator with a series of transactions allegedly undertaken by the Husband “inappropriately” resulting in the Liquidator intervening in the proceedings and commencing proceedings in the Supreme Court to recover the same funds. Each of those claims were ultimately abandoned by the Liquidator and they took no part in the proceedings before the trial Judge. The Husband incurred significant expense in meeting the claims brought by the Liquidator.
9. The Applicant has a demonstrated history of undertaking transactions that have the effect of altering interests in companies and real estate and the Husband asserts that any Stay, if granted as sought by the Applicant, i.e. without conditions, will permit the Applicant with greater opportunity to divest himself of property that may otherwise be available to satisfy any Judgment against him.
10. Consistent with the findings made by the trial Judge, which are not sought to be impugned on Appeal, this Court would not accept the evidence of the Applicant where it conflicted with that of the Husband and/or was not supported by an independent document.
…
12. There is no evidence by the Applicant that he will seek to pursue his Appeal as expeditiously as possible nor that he will ensure that all property in which he has an interest will be maintained pending the determination of the Appeal.
(Footnotes omitted)
Notwithstanding these submissions, I am unable to find that the second respondent lacks bona fides in the filing of his appeal.
The second respondent contends that his appeal would be rendered nugatory in the event that a stay is not granted in that steps have been taken to enforce the judgment. In that respect, he says that “[i]f the judgement is executed against me then most likely I will face [b]ankruptcy” (second respondent’s affidavit, paragraph 37).
I have found the evidence of the second respondent on this aspect opaque. His counsel’s submissions shed no further light. He says in his affidavit, “I own no major assets other than my interest in my superannuation fund” (at paragraph 36).
However, in an earlier part of his affidavit, in responding to steps taken by the other parties to enforce the judgment including the sale of a property at Suburb UU, he says:
11. The first respondent seeks to sell a Real property in which I have no interest in and if he was successful in selling that property, the loss, damage and harm could not be undone if the appeal was successful.
If it be the case that he has no interest in the property, then no prejudice could be occasioned to him by its sale nor for that matter could the other parties execute a judgment against it.
He also says the following in his affidavit:
20. [EE Pty Ltd] is a […] business in the supply of [equipment] to commercial buildings. I own 100% of the shares in the company and I am employed by the company full time. Both my wife and myself receive income from [EE Pty Ltd] in return for our services, the effect of the restraint sought would be that we cannot be paid income for our work.
21. If the company is restrained from continuing in the normal course of business I will become unemployed and suffer a significant loss of my investment in the shares.
22. The company has 10 employees and had a gross turnover for the past 12 months of approximately $2,800,000. It is not generating a profit. I am of the opinion that the business could not be sold as a going concern. I estimate that the company has a negative net worth. If its assets were frozen the company would go into Liquidation.
…
24. [N Pty Ltd] does not trade except it owns 6 motor vehicles which it leases to [EE Pty Ltd] and the rental income is used to pay the financier of the vehicles.
These propositions are irreconcilable with what he says at paragraph 36 of his affidavit. He clearly has major assets other than superannuation, including what he describes at paragraph 21 as a “significant loss of [his] interest in the shares”.
The onus of proof falls to the second respondent to establish that his appeal would be rendered nugatory. Proof is not established by a bald assertion. At its highest, this is what his evidence, such as it is, amounts. Despite the inconsistencies with his evidence, he states that if the judgment were executed then he would likely face bankruptcy. There is no evidence of the intent to file a bankruptcy notice. The second respondent is at liberty to bring any further application he seeks in relation to a stay should there be a change in circumstances to that which currently exists. There is currently no application for enforcement. The solicitor for the husband indicated that any such application, when filed, would be listed before the primary judge when the matter is next before him which is on 11 August 2023. As I said, the onus of proof falls upon the second respondent. I do not find his affidavit compelling in so far as it provides a foundation for the assertion that his appeal would be rendered nugatory.
The Notice of Appeal identifies eight grounds. It is necessary for the second respondent to demonstrate that he has an arguable case. The corollary to that proposition is that it would be of no utility to grant a stay where an appeal demonstrates no arguable case.
Dealing then with the grounds. Ground 1 contends an absence of reasons. No particulars are provided and a reading of the judgment reveals such a ground to be at best aspirational and more likely unsustainable. No greater elucidation transpired during the oral submissions.
Grounds 2 and 3 assert a denial of justice by the refusal to grant an adjournment (Ground 2) and entering “a judgment based upon damages for breach of fiduciary duties” where no such claim had been asserted against the second respondent and he thus had no opportunity to be heard (Ground 3).
In relation to Ground 2, the primary judge identified in the judgment his reasons at [118]. The second respondent does not contend what the primary judge said there was erroneous. Either way, s 26(2)(b) of the Federal Circuit and Family Court of Australia Act 2021 (Cth) presents as an impediment to appellate intervention on this basis.
As to Ground 3, counsel for the second respondent could not identify where the primary judge made such a finding or determination.
Grounds 4 and 6 contend that the proper defendant in respect of the relevant claims was not the second respondent but various corporate entities. The husband in his Case Outline says that this point was not advanced at trial. The second respondent is bound by the case as presented at trial. Counsel for the second respondent who was also counsel at trial frankly conceded, as was proper to do so, that he could not recall if this point was raised before the primary judge.
Ground 5 contends an error in application of s 140 of the Evidence Act 1955 (Cth) in relation to an allegation of theft. The ground provides no particulars nor does the Case Outline. I was not taken to any part of the reasons of the primary judge where he made a finding of “theft”.
Grounds 7 and 8 contend that the primary judge acted contrary to law in relying on the opinions of an expert (Ground 7) and accepting the lay opinion of the husband (Ground 8). The primary judge records his reasons for why he accepted that the expert had the relevant expertise. It was not made clear how his reasons amounted to the primary judge acting contrary to law. As to Ground 8, the foundation for the conclusion appeared to be the evidence recorded at [126]. If there was no challenge to that evidence, then the primary judge could rely upon it. Counsel for the second respondent could not recall if objection had been taken but conceded that if it had not, that would otherwise dispose of that ground.
Whilst I am dubious about the merit of many of the grounds, I am not satisfied that it can be contended that the appeal is completely without merit.
It would have been helpful if the second respondent had set out some evidence as to when the appeal would be heard beyond the mere assertion that it would not be heard in 49 days.
I am also required to weigh the balance of convenience and the competing rights of the parties and can, in doing so, grant a stay on terms and on grounds that are fair to both parties.
Counsel for the second respondent said that he had instructions to consent to Order 2 in the husband’s Response but not otherwise. He contended that the remainder of the relief sought by the husband was not appropriate to be dealt with within the confines of the stay application and either way no undertaking as to damages was provided. I am satisfied that there is some merit to that proposition and will make some directions as to the disposal of the balance of the Response.
I propose to dismiss the application for a stay other than in relation to that part which is the subject of agreement. I am not satisfied that the second respondent has discharged the onus that there is a proper basis for the stay other than on the terms he agreed to. The husband is entitled to the fruits of his litigation and is entitled to rely upon the correctness of the decision. I am not satisfied that the appeal will be rendered nugatory in light of the limited stay consented to and the concession by the husband’s solicitor. In light of the above, the balance of convenience weighing the competing prejudices favours the orders sought by the husband. Accordingly, I will make Orders 1 and 2 in the husband’s Response filed 6 June 2023.
I certify that the preceding forty-six (46) numbered paragraphs are a true copy of the Ex Tempore Reasons for Judgment of the Honourable Justice Schonell. Associate:
Dated: 8 June 2023
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