Henderson v Amadio Pty Ltd (No 3)
[1996] FCA 309
•2 MAY 1996
CATCHWORDS
PRACTICE AND PROCEDURE - stay pending appeal - applicable principles - whether "special" or "exceptional" circumstances need to be shown - whether power to grant a stay in favour of some respondents but not others - undertakings on behalf of corporate applicants - misleading evidence at trial as to identity of respondent - whether conduct disentitling stay
Federal Court Rules O 52 r 17(1)
Alexander v Cambridge Credit Corporation Ltd (1985) 2 NSWLR 685
Andrews v John Fairfax & Sons Ltd [1979] 2 NSWLR 184
Australian Federation of Consumer Organisations Incorporated v Tobacco Institute of Australia Limited (1991) ATPR 41-138
Bridges v Australian Consolidated Press Ltd (NSW Court of Appeal, unreported, 16 June 1970)
Cellante v G Kallis Industries Pty Ltd [1991] 2 VR 653
Lagarna Pty Ltd v Bridge Wholesale Acceptance Corporation (Australia) Ltd [1995] 1 VR 150
Lipov v Alexander Fraser & Son Ltd (1978) 24 ALR 616
Ninety-fourth Highwire Pty Ltd v State Electricity Commission of Victoria (Supreme Court of Victoria, Ormiston J, 30 August 1991, unreported)
Re Middle Harbour Investment Ltd (in Liquidation) (NSW Court of Appeal, unreported, 15 December 1976)
Re Sterling (1980) 30 ALR 77
Scarborough v Lew's Junction Stores Pty Ltd [1963] VR 129
Westaflex (Aust) Pty Ltd v Wood (1990) AIPC 90-666
Wilson v Church (No.2) (1879) 12 ChD 454
Russell Fraser Henderson & Ors v Amadio Pty Ltd & Ors
(No. VG 260 of 1993) (No. 4)
Judge: Heerey J
Date: 2 May 1996
Place: Melbourne
IN THE FEDERAL COURT OF AUSTRALIA )
)
VICTORIA DISTRICT REGISTRY ) No. VG 260 of 1993
)
GENERAL DIVISION )
B E T W E E N:
RUSSELL FRASER HENDERSON AND ORS
Applicants
- and -
AMADIO PTY LTD AND ORS
Respondents
JUDGE: Heerey J
DATE: 2 May 1996
PLACE: Melbourne
MINUTES OF ORDERS
The Court orders that:
Upon Amadio and Hudson Conway by their counsel undertaking that they will pay all rates, taxes, insurance premiums and other costs and outgoings in connection with the upkeep of the Coles Myer building, order that the orders contained in paras 1(a) and (b) of the orders made 2 April 1996 be stayed pending hearing and determination of all appeals against such orders to the Full Court of this Court.
That orders against the Nevett Ford parties, insofar as the same require payment in excess of $431,775, be stayed pending hearing and determination of all appeals against such orders to the Full Court of this Court.
That orders against the Huntley McArdle & Glass parties be stayed pending hearing and determination of all appeals against such orders to the Full Court of this Court.
That all stays are conditional upon the respective respondents prosecuting their appeals with diligence.
That upon the undertakings as to repayment of monies being given by counsel on behalf of Ronald Frederick Trengove, William Stanley Dean, Harold Francis Dean, Gary Leslie Turner, Daryl Wayne Turner, Ivan Douglas Phelps, Gavan Phelps and Clifford Phelps in the terms referred to in the reasons for judgment delivered this day, all applications for stays, including stays on orders on cross-claims and orders for the taxation and payment of costs, are otherwise dismissed.
Liberty to apply on two clear days notice reserved.
The costs of the applicants, the Walkers, Metzke & Allan, Amadio and Hudson Conway, Nevett Ford and Huntley McArdle & Glass in relation to the stay applications are to be costs in the appeals.
NOTE: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules
IN THE FEDERAL COURT OF AUSTRALIA )
)
VICTORIA DISTRICT REGISTRY ) No. VG 260 of 1993
)
GENERAL DIVISION )
B E T W E E N:
RUSSELL FRASER HENDERSON AND ORS
Applicants
- and -
AMADIO PTY LTD AND ORS
Respondents
JUDGE: Heerey J
DATE: 2 May 1966
PLACE: Melbourne
REASONS FOR JUDGMENT
XXXI
STAYS PENDING APPEAL
All respondents other than Bird Cameron and SGIO have sought stays pending appeal against the orders made on 2 April 1996. Argument on the stay applications was heard on 22 April.
Applicable Principles
Jurisdiction is conferred by O 52 r 17(1) which provides:
An appeal to the Court shall not:
(a)operate as a stay of execution or of proceedings under the judgment appealed from; or
(b)invalidate any intermediate act or proceedings;
except so far as the Court or a Judge or the court below may direct.
On its face the discretion to grant a stay is unfettered. In Alexander v Cambridge Credit Corporation Ltd (1985) 2 NSWLR 685 at 694 the New South Wales Court of Appeal held that it was not necessary for the grant of a stay that "special" or "exceptional" circumstances be made out. The Court said that it was
... sufficient that the applicant for the stay demonstrates a reason or an appropriate case to warrant the exercise of discretion in his favour.
The Court referred with approval to a statement of Mahony JA in Re Middle Harbour Investment Ltd (in Liquidation) (NSW Court of Appeal, unreported, 15 December 1976). With the concurrence of the other members of the Court Mahony JA there said:
Where an application is made for a stay of proceedings, it is necessary that the applicant demonstrate an appropriate case. Prima facie, a successful party is entitled to the benefit of the judgment obtained by him and is entitled to commence with the presumption that the judgment is correct. These are not matters of rigid principle and a court asked to grant a stay will consider each case upon its merits, but where an applicant for a stay has not demonstrated an appropriate case but has left the
situation in the state of speculation or of mere argument, weight must be given to the fact that the judgment below has been in favour of the other party.
In Victoria where the rules of the Supreme Court provide for a similarly wide discretion, a number of Full Court decisions hold that the power to order a stay pending appeal is to be exercised only in special or exceptional circumstances: Cellante v G Kallis Industries Pty Ltd [1991] 2 VR 653 and the cases there cited, Lagarna Pty Ltd v Bridge Wholesale Acceptance Corporation (Australia) Ltd [1995] 1 VR 150. However, single judges in the Federal Court have applied the Cambridge Credit test: see Westaflex (Aust) Pty Ltd v Wood (1990) AIPC 90-666 at 36,228 (Gray J) and Australian Federation of Consumer Organisations Incorporated v Tobacco Institute of Australia Limited (1991) ATPR 41-138 at 52, 992 (Morling J).
The difference may be more apparent than real since on any approach the party seeking a stay needs to show some reason why the stay should be granted. I do not think however the circumstances need to be "special" or "exceptional" in the sense of being unusual or rare. For example, where the judgment sought to be stayed is for payment of a money sum and costs, as is the case here, the appellant will often be concerned with the prospect that without a stay the proceeds of the judgment may be dissipated or seized by other creditors or for some other reason be impossible or very difficult to recover. In such a case the appellant has to show there would be no reasonable probability of getting back monies paid under the judgment if the appeal
succeeds: see Andrews v John Fairfax & Sons Ltd [1979] 2 NSWLR 184 at 189 citing Bridges v Australian Consolidated Press Ltd (NSW Court of Appeal, unreported, 16 June 1970). However this could hardly be considered a special, exceptional, rare or unusual situation. It is an everyday occurrence for appeals to be brought against judgments in favour of parties who have little in the way of assets, especially in personal injury litigation. The Victorian cases erect as a precondition for the exercise of the discretion a criterion which does not appear in the language of the rule. In my respectful opinion, the Cambridge Credit approach is preferable and I shall follow it.
Another relevant consideration is whether the proposed appeal is genuine and based on reasonably arguable grounds: Andrews at 188-189. In the present case, the time for appeal was extended to 28 days. At the time argument was heard no notices of appeal had been filed. However this case was an extremely complex one and, while I think my decision was correct, it would be verging on hubris to suggest there were not reasonably arguable grounds of appeal. The applicants did not argue the contrary.
Because of the multitude of parties, the present case raises a question which does not seem to have been the subject of any authority. What if the circumstances justify a stay, or a partial stay, in respect of one respondent but not others? Some of the respondents in the present case contended that it should be "one in all in". They argued that there would otherwise be unfairness because a respondent who did not obtain a stay would be limited in pursuing its rights of contribution against a respondent who did. I do not accept that argument. As counsel for the applicants pointed out, there would be as much logic in arguing "one out all out", that is to say, if some respondents could not make out a case for a stay, none should get a stay. In my view, each respondent seeking a stay is entitled to have its own particular circumstances considered. The effect of granting a stay to that respondent, but not to others, may be to diminish contribution rights of those other respondents. That may be a relevant consideration but it is not necessarily a conclusive one. The practical efficacy of rights of contribution is always subject to the inherent hazards of litigation.
The respondent who fails to obtain a stay may win the appeal and not need to recover contribution at all. (It is assumed that such a respondent has not been able to demonstrate (i) a reasonable probability of non-recovery back of monies paid or (ii) irreversible damage if the judgment is enforced; were this not so a stay would have been granted.) Or the stay-obtaining respondent may win and not be liable to make contribution. Or both respondents may lose and the stay-obtaining respondent will then have to make contribution - no doubt with interest. At worst there is delay and inconvenience arising from the loss of use of money until the substantive rights are established on appeal. But it is of the essence of the stay jurisdiction - analogous in this respect to the grant of an interlocutory injunction - that a judge has to deal with a temporary situation
and make orders which achieve a practical solution but of necessity something less than perfect justice.
Applicants' Evidence
The only direct evidence tendered by the applicants concerned the financial position of those applicants who are corporate bodies, namely Garkat Pty Ltd, Lonihire Pty Ltd, Bactbuild Pty Ltd, Marican Pty Ltd and Ackina Pty Ltd. All except Garkat are trustees of trusts.
Garkat's balance sheet as at 16 April 1996 showed net assets of $234,715 constituted as follows:
Current assets and cash $ 1,715
Receivables 315,000
Total current assets $316,715
Current liabilities, creditors and
borrowings 82,000
Net assets $234,715
Notes to the accounts indicate that receivables relate entirely to anticipated proceeds from the present case. In the case of the remaining companies their balance sheet typically shows shareholders' funds of $2, their liabilities being otherwise balanced by their right of indemnity from the trust assets. I shall therefore direct attention to the trust balance sheets.
As to Lonihire, the Stan Dean Family Trust as at 17 April 1996 had net assets of $742,743. The principal assets are loans to Stan Dean $600,000 and Dean Management Trust $56,431. Investments
include a further loan to T Charles and M Dean $67,00 and life insurance policies $35,780. The Bactbuild accounts show a similar picture for the Frank Dean Family Trust. Net assets are $515,662. The principal asset is a loan to Frank Dean for $600,000. There are liabilities for loans totalling $880,466. With Marican the Trengove Family Trust as at 29 February 1996 had net liabilities of $121,087.58. A provision for shortfall in the Coles Myer investment has been taken into the accounts at $197,195. The major assets are plant and equipment at cost less depreciation - $74,026.76. Ackina is the trustee of the Phelps Brothers Trust. The balance sheet of the trust as at 31 March 1996 shows net assets of $253,639. The main asset is "Investments W R Phelps & Sons $2,621,021.70". Borrowings from each of the three Phelps Bros Family Trusts total $2,392,492.41.
Respondents' Evidence
(a)Hudson Conway.
Hudson Conway and Amadio did not tender any evidence other than a letter from their solicitors to the applicants' solicitors dated 15 April 1996 stating that the corporate applicants appeared from ASC returns either to own no assets beneficially or to be insolvent. The letter sought in respect of the corporate applicants "an acceptable guarantee or other security in order to secure repayments to Amadio and/or Hudson Conway in the event of a successful appeal". Annual returns for 1995 obtained from the ASC were also tendered.
(b)Gray & Winter
None of the Gray & Winter parties swore an affidavit. Instead there was filed on their behalf an affidavit sworn by Mr Tim Millership, a solicitor employed by Garrick Gray & Co. The firm of Gray & Winter has now been dissolved and Mr Garrick Gray carries on practice on his own account.
Mr Millership deposes that to the best of his information Mr Garrick Gray has suffered from complications from prostate cancer which is apparently in remission at the moment. He deposes to the existence of a dispute with Gray & Winter's insurers, the Solicitors Liability Committee. Indemnity was refused and the SLC was originally joined as a cross-respondent in the present proceeding. The claim was settled for $600,000 inclusive of costs. The applicants brought proceedings in the Supreme Court to restrain payment of the settlement amount to Gray & Winter. An injunction was obtained by the applicants and a trial took place before Eames J on 17, 18 and 21 August 1995. On 20 October his Honour dismissed the application but granted a stay pending appeal to the Court of Appeal. The monies were paid into court. Finally the appeal was settled on the basis that sums totalling approximately $50,000 be paid to counsel who originally appeared for Gray & Winter in the present proceeding, the applicants receive $100,000 and the balance of some $450,000 be paid to Gray & Winter. Out of the balance Gray & Winter paid the costs incurred in defending the Supreme Court proceeding which Mr Millership refers to as "substantial" although no figure is given.
Mr Millership says there is another Supreme Court proceeding against the SLC over denial of indemnity in a Supreme Court action which was cross-vested to the Federal Court becoming No VG 479 of 1993. As a result of that action the Gray & Winter parties have suffered losses in excess of $1 million and are claiming same from the SLC. That proceeding will be heard in the Supreme Court on 13 May 1996.
He deposes that all of the applicants
would appear to be substantially wealthy persons who in 1990 required the syndicated property investment which gave taxation benefits. It took the applicants three years to bring this proceeding and this proceeding has now continued for approximately three more years. There appears to be no financial hardship to the applicants by [sic] the granting of a stay.
He further deposes that the present proceeding, together with the actions of the SLC in connection with this case and the other Federal Court case have
caused severe financial hardship to Gray & Winter. This financial hardship has put severe strain on the financial operation of Gray & Winter as a firm. This hardship has caused the firm to be unable to continue to operate as it had before.
Having deposed that Mr Garrick Gray and Mr Winter are no longer in partnership, Mr Millership deposes:
The future conduct of these proceedings and the other Federal Court proceedings against the SLC are necessary to enable the firm to continue to operate and employ its staff. This proceeding together with the Supreme Court proceeding and separate Federal Court proceeding has drained and debilitated the Gray & Winter parties from any income earning activities and the non-granting of a stay on the execution of judgment against them would prevent any further income producing activities on their behalf.
A stay would enable the Gray & Winter parties to prosecute the appeal they intended to lodge in this matter against the orders made on 2 April 1996. Any refusal to grant the stay would not
only cause hardship to the Gray & Winter parties but would cause any appeal to be nugatory given the disbursal of funds and/or real property between the respondents and the applicants herein.
(c)Nevett Ford
Of all the respondents, Nevett Ford tendered by far the most detailed evidence in support of an application for a stay. Nevett Ford is insured and its insurers have to date conducted the defence on its behalf. There is no suggestion of denial of indemnity. However, the cover was for only $1 million inclusive of costs with a deductible of $31,500. Costs paid or incurred to date in the defence of the claim are approximately $536,725 therefore cover of approximately $431,775 remains. The estimated costs of an appeal are $150,000.
The firm was created in 1989 as a merger of the Ballarat firm Nevett Coutts & Wilson which can trace its history back to 1864 and Ford & Co of Melbourne which goes back to the 1880s. The firm conducts its practice from offices in Melbourne and Ballarat. The Melbourne office is in leased premises in the Rialto building. The Ballarat premises are owned by a partnership of family trusts of some present partners and some former partners. There is a mortgage of about $650,000 owed to Citibank. It is unlikely that the property would realise sufficient to pay that debt. The firm has facilities with the National Australia Bank as follows:
Overdraft $100,000
Commercial Bill 648,000
$748,000
The facilities were due to expire on 30 April 1996 at which time the firm intended to negotiate reinstatement. The bank has required progressive repayment of principal. Since the merger the firm has been able to achieve this, bringing the debt down from $1.5 million approximately at 30 June 1990 to the present figure.
The firm uses a service trust called CWV Nominees Management Trust, the trustee of which is CWV Nominees Pty Ltd (CWV). CWV owns the plant and equipment used by the firm, leases the offices at Melbourne and Ballarat, and employs non-professional staff. It then provides services to the firm for which it charges a service fee. The firm conducts the legal practice, employs professional staff and pays a service fee to CWV. The unit holders of the service trust are family trusts associated with the respective partners.
The furniture, plant and equipment owned by CWV includes the usual office furniture and equipment. This would have little value on a resale basis. Computer hardware and software is leased. The older hardware and software is obsolete and would have little if any value. The main assets in the books of the firm are goodwill $1.12 million and work in progress $600,000. It is said, and I accept, that if the firm were to cease to operate, any value attributed to goodwill would dissipate and there would be little payable for work and progress since a purchaser would have to repeat much of the work. The firm and
CWV employ 20 professional and non-professional staff, some of whom have been in their jobs for many years.
Those liable under the judgment include seven present partners who were also partners in 1990 and two former partners, one of whom carries on practice as a solicitor on his own account. The other is a member of the Victorian Bar.
Of those who are present partners details supplied show net after tax income mostly in the low to mid $40,000s with one $50,000 and one $65,000. Those figures include income via the partners' family trusts from CWV. The two former partners have significantly less by way of income. Income in most cases is fully taken up, if not exceeded, by living expenses, home mortgage payments, education expenses and the like. Apart from family homes, there is little in the way of significant personal assets and in most cases the homes are subject to substantial mortgages.
(d)Bird Cameron
The Bird Cameron parties have not applied for a stay.
(e) Huntley McArdle & Glass
The defence of the Huntley McArdle & Glass parties was conducted by their insurer without prejudice to its rights to deny liability at any time. Indemnity has now been denied.
Mr Glass swore an affidavit deposing to his own asset position which showed a deficiency as at 19 April 1996 of $39,181.00. Apart from cash at bank amounting to under $2,000 the only assets of substance were a motor vehicle of $19,000, half-share of household assets of $10,000 and one ordinary share in a company called Tanderra Hotham Pty Ltd $6,000. The other two partners in the firm are Mr McArdle and Mr Huntley who have personal deficiencies of $35,825 and $91,400 respectively. The company which carried on the practice in 1990 was Huntley McArdle & Glass Pty and that entity was sued. I was told that that entity ceased to exist on 21 October 1991. Mr Glass deposed as to the assets of a company called Huntley McArdle & Glass Pty Ltd as at 19 April 1996 which had a net tangible asset deficiency of $3,674. The main assets were trade debtors after provision for doubtful debts $210,851, work in progress $100,000 and a loan to a company called Scriba Holdings Pty Ltd $20,000. Current liabilities consist of trade creditors, tax and bank overdraft $187,373 and a bank term loan $150,000, making total liabilities $337,373.
(f) Richard Ellis
The company which was engaged by Hudson Conway to sell the Coles Myer building was the company ACN 005 001 632 then known as Richard Ellis (Victoria) Pty Ltd. It was that company which was sued by the applicants. During the trial of this proceeding Mr Anthony Chiminello and Mr Roger Scrivener both testified in terms which clearly conveyed the impression that they were, at the time of giving evidence, directors of a company called Richard Ellis (Vic) Pty Ltd which was the same company that had engaged in the transactions of 1990. For example, Mr Chiminello swore that he had been a director of Richard Ellis (Vic) Pty Ltd since 1989, that Richard Ellis (Vic) Pty Ltd was an independent company which conducted its own estate agency valuation business in Victoria and that it received a brief from Hudson Conway Ltd in about January 1990. Mr Scrivener swore that he was the effective working head of the Melbourne valuation department of Richard Ellis (Vic) Pty Ltd and that
that company, is a leading estate agent, property consultant and valuer ... is one of the leading Melbourne City commercial estate agents and property consultants, and has one of the largest commercial property valuation practices in Victoria.
In fact the true position, which was only discovered by the applicants' solicitors by searches at the ASC on 18 April 1996, was as follows. On 29 June 1994 the company ACN 005 001 632 (hereafter "ACN 005") changed its name to Dunyack Pty Ltd and a company ACN 009 231 232 previously known as Dunyack Pty Ltd ("ACN 009") changed its name to Richard Ellis (Victoria) Pty Ltd. Messrs Scrivener and Chiminello both resigned as directors of ACN 005 on 1 July 1994 and were appointed as directors of ACN 009 on the same day. ACN 005 had for the year ended 30 June 1994 sales revenue in excess of $14 million. In 1995 it had sales revenue of nil. The trading figures went from a profit of approximately $2.4 million in 1994 to a loss of $3,852 in 1995. In the 1995 annual return its principal activities were described as "dormant". The 1995 return of ACN 005 shows shareholders equity reduced to $122,547 as against $3,825,151 for 1994.
I stress that none of this information was volunteered by Richard Ellis. In an affidavit sworn on 24 April 1996 Mr Howard Travis Scott, the secretary of ACN 005 and a director of ACN 009, deposes that in about March 1993 the directors of the then holding company of the Richard Ellis Group, Richard Ellis Holdings Ltd, decided to restructure the group "to simplify its structure for accounting and tax reasons". ACN 009 obtained a real estate licence and, by a sale of business agreement dated 29 June 1994 (which was not produced), the "non trading assets" of ACN 005 (which included the business) were sold to ACN 009. It was a term of this agreement that the two companies would swap names. He further deposes that since 1 July 1994 ACN 005 has been a dormant corporation and has not traded. Consideration for the sale of its business to ACN 009 ("approximately $2 million") was used to pay dividends so that its only assets at the date of swearing his affidavit consisted of a loan to ACN 009 of approximately $194,602. Net assets of ACN 005 as at 30 June 1995 were "noted at $122,547". He further deposes
Further, ACN 005 does not have sufficient assets to satisfy the judgment against it in the absence of its insurance cover. At this stage indemnity has been granted to the companies in the Richard Ellis Group, subject to the rights of the insurer to withdraw that cover after fully considering matters in the reasons for judgment.
I became aware during the trial of this proceeding that the 23rd respondent was in fact ACN 005. However, as the relevant indemnity insurance extends to all companies within the Richard Ellis group I did not consider it to be an issue.
He also deposes that he has spoken to Messrs Chiminello and Scrivener and
am informed by both and believe that they did not associate the restructure with this proceeding, and were unaware that ACN 005 is the
23rd Respondent in this proceeding, rather than ACN 009. At all relevant times both were directors of the entities known at separate times as "Richard Ellis (Victoria) Pty Ltd".
He "categorically" denies that the change of names was to avoid or confuse execution of judgment in this proceeding.
(g)SGIO
SGIO did not file a notice of motion seeking a stay.
Orders Affecting the Property
It is clear that if the Coles Myer building were to be transferred to Amadio and the appeal succeeded, with the consequence that Amadio had to transfer it back to the applicants, there would be substantial wasted expense on stamp duty and also some adverse consequences for Amadio's liability to capital gains tax. On the other hand, if Amadio remains in possession of the property as mortgagee and gives, as it has proffered through its counsel, undertakings to pay rates and taxes, insurance premiums and other costs and outgoings in connection with the upkeep of the property, no prejudice will be suffered to the applicants. I think therefore that upon Hudson Conway and Amadio giving such an undertaking it is appropriate to order a stay pending appeal of the orders for transfer in para 1(b) and associated declaration (para 1(a)). Such a stay was not opposed by the applicants. However it does not follow that there should necessarily be a stay on the orders for payment of money and costs. If the appeal succeeds and money paid under the judgment can be recovered back, Hudson Conway and Amadio will be
in the same position as they would have been had the proceeding not been commenced. For the purposes of stay applications, the orders for transfer of the property and the orders relating to payment of money are not an unbreakable package.
Stays Against Individual Applicants
In the case of the applicants who are individuals as distinct from corporate entities, the onus is on the respondents to show that, in the absence of a stay, money paid under the judgment could not be recovered back if the appeal succeeds. There was no attempt to make out such a case. The most that was said was that I should be "entitled to infer that the monies paid were likely to be disbursed and that there was no undertaking to secure repayment". In the case of some respondents the argument seemed to assert the reverse position and seek some comfort from the supposed affluence of the applicants. Thus it was said on behalf of Gray & Winter that the applicants "would appear to be substantially wealthy persons" and that there appeared to be "no financial hardship" to them in the granting of a stay. Likewise Hudson Conway argued that there was no evidence that the applicants needed money for defending the appeal. Huntley McArdle & Glass similarly argued that the "financial ability of the applicants to bear the stay" was greater.
The respondents failed to adduce any evidence at all which might lead to a conclusion that, as a matter of probability, monies paid to the individual applicants would not be recovered. Indeed, the circumstances point the other way. When they gave evidence in 1995 all the applicants were living in the same town and carrying on the same trade or profession as they had in 1990. Their total net assets at the time of the investment totalled some $31 million. I do not draw the inference that the applicants' assets are still the same as they were in 1990. For all I know they may be more. However the marked stability in point of residence and occupation weighs against the drawing of any inference in favour of the respondents that there is no reasonable probability of getting back money paid under the judgment should the appeal succeed. The applicants' position contrasts with that of the 900 holders of Bolivian bearer bonds spread throughout Europe and South America considered in Wilson v Church (No.2) (1879) 12 ChD 454 and the retired US Navy pensioner about to return to his homeland (Scarborough v Lew's Junction Stores Pty Ltd [1963] VR 129).
In the case of Amadio there is the further feature that if it succeeds in the appeal it will hold a valid mortgage and guarantee under which all applicants are jointly and severally liable.
Stays against Corporate Applicants
The fact that a party is a corporate entity which is a trustee with no right except by way of indemnification or exoneration to the trust assets would normally weigh in favour of a stay: see Ninety-fourth Highwire Pty Ltd v State Electricity Commission of Victoria (Supreme Court of Victoria, Ormiston J, 30 August 1991, unreported). In the present case however undertakings have been proffered by the individuals connected with the respective corporate applicants in the following terms, taking Marican as an example,
Upon Ronald Frederick Trengove undertaking that in the event that Marican Pty Ltd be ordered to repay any or all of monies received by it in satisfaction of any of the judgments in favour of it in this proceeding, he will personally repay such monies ordered to be repaid in the event that Marican fails to do so within 28 days of such order
Like undertakings were proffered on behalf of the following applicants in relation to the following respective corporate applicants:
(a)Bactbuild - William Stanley Dean
(b)Lonihire - Harold Francis Dean
(c)Garkat - Gary Lesley Turner
- Daryl Wayne Turner
(d)Ackina - Ivan Douglas Phelps
- Gavan Phelps
- Clifford Phelps
In my opinion those undertakings are satisfactory. The respondents will be in no worse position in relation to the corporate applicants than they are in relation to individual applicants.
During the course of argument I raised the possibility of a regime which would restrict applicants, either all applicants or alternatively corporate applicants, dealing with their assets pending determination of the appeal. I suggested that such a restriction might take the form either of an injunction or a notification requirement leaving it up to the respondents to seek injunctive relief, with in either case the restriction being limited to assets over a fairly substantial value, say $100,000, with liberty also to dispose of assets in the ordinary course of a business. As I have said, these detailed proposals were something raised by me and were not put forward by the respondents.
Having considered the matter further, I have come to the conclusion that it would not be appropriate to impose any such restrictions. Once the undertakings are taken into account, the fact remains that the respondents have not shown a probability that monies paid could not be recovered in the event of a successful appeal. The applicants are prima facie entitled to the fruits of their judgment, which is not a provisional determination awaiting confirmation by a Full Court. They do not have to show any particular need for the money. The respondents do not have a prima facie right to security for the proceeds of a successful appeal. I do not think it would be reasonable in the circumstances to impose a restriction on the way the various applicants carry on their business. Some of them have large scale farming operations involving no doubt disposal of stock and crops of substantial value in the ordinary course of business, together with refinancing transactions and the like. Thus any restrictive regime would in any case have to be subject to very extensive exemptions bringing further complications.
I have therefore reached the position that, apart from the orders affecting the property, and subject to the undertakings mentioned in relation to the corporate applicants, there should be no stay of execution unless particular circumstances exist in the case
of an individual respondent. I now turn to consider the position of the various respondents.
Hudson Conway
For the reasons already mentioned, Amadio will have, should its appeal succeed, more than adequate security in the form of a mortgage over the property itself coupled with joint and several guarantees of all applicants. No other special considerations are raised.
Gray & Winter
As has been seen from the paragraphs of Mr Millership's affidavit already quoted, there is a total lack of specificity in financial detail in the material advanced by Gray & Winter. Moreover, none of the Gray & Winter parties themselves swore an affidavit. As the New South Wales Court of Appeal pointed out in Cambridge Credit (1985) 2 NSWLR at 697 it is usually desirable that parties seeking the benefit of a stay place material as to assets and liabilities before the court in direct form. I remarked in the course of argument as to this lack of specificity and by the time argument ended all that counsel for Gray & Winter could say was that he would seek instructions as to whether more material might be provided. I simply do not think there has been satisfactory material placed before the Court to warrant what would be a substantial exercise of discretion in favour of Gray & Winter.
Mr Gray's illness is of course a matter for sympathy but it has not been related to any relevant matter such as the ability to meet a judgment without a stay. Nor is the litigation with the SLC something which has been shown to affect the Gray & Winter's party's capacity to pay, other than in the most vague and general terms.
Nevett Ford
On the figures provided the Nevett Ford parties would have something to fear from bankruptcy proceedings. However the lodgment of a genuine arguable appeal against the judgment on which any bankruptcy proceedings were based would almost certainly entitle the Nevett Ford parties to the extension of time for compliance with a bankruptcy notice or the adjournment of a petition: Lipov v Alexander Fraser & Son Ltd (1978) 24 ALR 616 at 620, Re Sterling (1980) 30 ALR 77 at 84. As already noted, I have accepted (indeed the contrary was not argued) that the respondents, including Nevett Ford, have a genuine arguable appeal.
Nevertheless execution otherwise than by bankruptcy proceedings would probably provoke severe disruption and irreversible destruction of or damage to Nevett Ford's practice with, amongst other things, loss of employment. Its bankers might exercise their rights of calling in all banking facilities.
A reasonable solution is to stay execution against Nevett Ford beyond the amount remaining available under its insurance cover, namely $431,775. But I do not think it fair to give protection to $150,000 earmarked for the appeal. In effect that would be requiring the applicants to finance an appeal against their own judgment: Australian Federation of Consumer Organisations Inc v Tobacco Institute of Australia Ltd (1991) ATPR 41-138 at 52,992.
10.Huntley McArdle & Glass
Huntley McArdle & Glass now have indemnity denied and the material provided on their behalf is sufficient to draw the inference that execution would result in the disappearance of their practice beyond hope of reinstatement should the appeal succeed.
I think a general stay is appropriate.
11.Richard Ellis
The conduct of the Richard Ellis Group in relation to the change of entities behind the Richard Ellis (Victoria) name is quite unsatisfactory. Had it not been for the enquiries of the applicants' solicitors, these matters would never have been disclosed to the Court. No explanation has been proffered as to why Mr Stott, a gentleman hitherto totally unconnected with this case, has been chosen to swear the explanatory and exculpatory affidavit rather than Messrs Chiminello and Scrivener, whose evidence it was that misled the Court. Moreover, Mr Stott's affidavit is notable for the absence of any undertaking that the Richard Ellis Group will treat any liability of ACN 005 under the judgment as a liability of the Group, should insurance cover become unavailable. I can only infer that, if needs be, the
Richard Ellis Group will seek to take such advantage as it can from the way the identity of its members and their assets has been misrepresented to the Court, to the prejudice of the applicants and the benefit of the Group.
I find this conduct sufficient to disentitle Richard Ellis to a stay.
12.Metzke & Allan
All other respondents sought a stay against the costs order in favour of Metzke & Allan, although not a stay on the taxation of those costs. In my opinion no ground has been made out. There is no evidence at all as to the capacity of Metzke & Allan to repay any amounts paid.
13.Orders
Subject to the undertaking by Hudson Conway and Amadio mentioned above, there will be a stay on the orders for transfer of the property and associated declarations. There will be a stay in favour of the Nevett Ford parties beyond the amount now available under its insurance cover ($431,775), but disregarding any funding of their appeal. There will be a stay generally for the Huntley McArdle and Glass parties. Subject to an undertaking by individual applicants associated with corporate applicants to pay any liabilities of the corporate applicants should the appeals succeed, all other applications for stays are dismissed.
Rather than seek undertakings I shall impose a term in respect of each stay that appeals are prosecuted with diligence by the respective party having the benefit of the stay.
The applicants, the Walkers and Metzke & Allan have been substantially successful on most of the stay applications. Their costs should be costs in the appeal, as should those of Nevett Ford and Huntley McArdle & Glass. Amadio and Hudson Conway sought prior to the hearing a stay concerning the transfer of the property, and also guarantees by the individual applicants, all of which they have achieved. However they failed at the hearing in obtaining a general stay. Their costs should also be costs in the appeal.
I certify that this and the preceding twenty-five (25) pages are a true copy of the reasons for judgment of his Honour Justice Heerey.
Dated:
Associate
Appearances are as stated in the judgment of 20 February 1996, except:
Counsel for the applicants: Mr B J Shaw QC with Mr R H Smith
Counsel for the Walkers: Mr P E L'Estrange
Counsel for Gray & Winter: Mr A N Bristow
Counsel for Huntley McArdle & Mr J D Elliott
Glass:
Counsel for Richard Ellis Pty Mr M C Hines
Ltd:
Counsel for SGIO Mr C M Caleo
Key Legal Topics
Areas of Law
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Civil Litigation & Procedure
Legal Concepts
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Stay of Proceedings
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Indemnity
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Insurance Coverage
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