IOOF Building Society Pty Ltd v Foxeden Pty Ltd

[2006] VSCA 202

SUPREME COURT OF VICTORIA

COURT OF APPEAL

No. 2078 of 2000
No. 2085 of 2000

IOOF BUILDING SOCIETY PTY LTD (formerly IOOF Building Society Ltd)	Appellant/Applicant
v.
FOXEDEN PTY LTD	Respondent
IOOF BUILDING SOCIETY PTY LTD (formerly IOOF Building Society Ltd)	Appellant/Applicant
v.
KENNETH TAYLOR and JANET TAYLOR	Respondents

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APPLICATIONS ON SUMMONS

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JUDGES:	MAXWELL, P. and NEAVE, JJ.A.
WHERE HELD:	MELBOURNE
DATE OF HEARING:	4 September 2006
DATE OF JUDGMENT:	4 September 2006
MEDIUM NEUTRAL CITATION:	[2006] VSCA 202

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Appeal – Stay of execution – Stay only granted in exceptional circumstances – Undertaking to court by director of respondent company to guarantee repayment of judgment sum if appeal succeeds – Applications dismissed.

APPEARANCES:	Counsel	Solicitors
For the Appellant	Mr C.C. Macaulay, S.C. with Mr D. Gurvich	Phillips Fox
For the Respondents	Mr A.T. Broadfoot	Mallesons Stephen Jaques

MAXWELL, P.:

1. These are two applications brought by the appellant, IOOF Building Society Pty Ltd.  IOOF is the appellant in two appeals, the respondents being respectively Foxeden Pty Ltd (appeal No. 2078 of 2000) and Kenneth and Janet Taylor (appeal No. 2085 of 2000.)  In each case IOOF seeks a stay of the orders made by the trial judge, awarding damages and interest to the respondent.

1. An appeal does not operate as a stay of execution.  It is long established, in this Court and elsewhere, that an applicant for a stay of execution pending appeal must show special or exceptional circumstances.  In Federal Commissioner of Taxation v. Myer Emporium (No.1)[1], Dawson J said (of a High Court rule which for practical purposes is the same as rule 64.25 of the Supreme Court Rules): 

"It is well-established by authority that the discretion which [the rule] confers to order a stay of proceedings is only to be exercised where special circumstances exist which justify departure from the ordinary rule that a successful litigant is entitled to the fruits of his litigation pending the determination of any appeal.  Special circumstances justifying a stay will exist where it is necessary to prevent the appeal, if successful, from being nugatory."

The applicant also refers to what was said by Ormiston, J. in Ninety-Fourth Highwire Pty Ltd v. State Electricity Commission of Victoria[2].

[1](1986) 160 CLR 220 at 222.

[2](Unreported, Supreme Court of Victoria, Ormiston J, 31 August 1991).

1. In relation to Foxeden, IOOF submits that the Court should be satisfied that there is no reasonable prospect of the moneys ordered to be paid to Foxeden being recovered by IOOF if it succeeds in its appeal.  So to formulate the test serves to highlight what a stringent test it is.  What makes the disposal of this application relatively straightforward, in my opinion, is that Mr Hawksworth - who is effectively the controller of Foxeden and, together with his wife, a director of it and of all of the other companies in the Hawksworth Group - has offered, and Foxeden's counsel has instructions to give on his behalf, an undertaking to the Court. 

1. The terms of the undertaking are set out in his affidavit of 11 August 2006, as follows:

"In order to counter any concerns about the ability of the respondent to repay the judgment sum to the appellant in the event that its appeal is successful, I undertake to this honourable Court that I will personally pay the appellant any sum which becomes due to the appellant as a result of any variation by this honourable Court of the orders of Justice Habersberger made on 17 February 2006 and 8 June 2006 in this proceeding, in the event that the respondent fails to do so within seven days of any such amount becoming due and payable to the appellant."

1. It seems to me that the giving of an undertaking to the Court gives a party in the position of IOOF a very high degree of assurance that it will not be out of pocket if it wins the appeal.  There is no such thing as absolute certainty, but Mr Hawksworth, advised as he is by experienced litigation solicitors, Messrs Mallesons, will have been left in no doubt, before giving instructions that that undertaking be given, as to the very drastic consequences which would flow for him in the event that undertaking was called upon but was dishonoured.  It is, of course, theoretically possible that Mr Hawksworth would decide to dishonour the undertaking but, having read Mr Hawksworth's affidavit, I regard that as most unlikely. 

1. Mr Hawksworth describes himself, in terms which have not been challenged, as a person who operates a successful financial advisory business through a group of companies under his control, of which one is Foxeden.  He also says: 

"I have substantial business and personal assets and a good level of income.  In my opinion as a qualified financial planner I would face no difficulty paying to the appellant the amount of the judgment sum awarded to Foxeden by Justice Habersberger in the event that the appeal is successful and I was required to honour the undertaking proffered in paragraph 5 above." 

1. The fact that this statement is made by somebody who is, according to his own sworn statement, an experienced financial planner gives the Court a good deal more comfort than if we were dealing with a person with no financial experience, in which case there might be grounds to be sceptical about assertions such as those.  There having been no challenge to what Mr Hawksworth says of himself and his business and his expertise, his statement about his capacity to pay reinforces the very high degree of assurance furnished by the giving of the undertaking. 

1. In the course of argument I drew the parallel with the undertaking as to damages which is required as a condition of the grant of an interlocutory injunction.  Those undertakings are routinely asked for and given.  While it is always possible that such an undertaking will not be honoured, the Court proceeds, as it must, on the assumption that those who give undertakings to the Court fully appreciate the seriousness of what they are doing.  The giving of the undertaking is a statement of intention to comply if called on to do so.  Mr Hawksworth is in no different position in that regard. 

1. That being so, it is quite unnecessary to investigate – even if it were possible to do so on an interlocutory application like this – the financial position of the Hawksworth Group.  Mr Hawksworth has exhibited consolidated financial statements for the Group, which he says were prepared by his accountant.  Those financial statements show net income for the group for the financial year 2005-06 of more than $371,000, and net assets of the group as at 30 June 2006 of more than $660,000.  Mr Macaulay challenges aspects of the balance sheet, suggesting that the Group’s position may not be as strong as the accounts show.  But Mr Hawksworth has produced the financial statements and  sworn to his belief that they are accurate.  In the absence of clear contradictory evidence, I think the financial statements must be taken at face value. 

1. It may be that, in a full-scale investigation of the financial position of the Group, there might be identified some qualification or another, but the jurisdiction to grant a stay of execution  is to be exercised in exceptional circumstances only.  The fact that a close investigation of the financial position was necessary would demonstrate, almost beyond argument, that the case was not exceptional.

1. As I have said, the giving of the undertaking renders such an investigation wholly unnecessary.  It follows that I would dismiss the application in relation to Foxeden. 

1. Mr Macaulay conceded - in my opinion, correctly - that the application as against the Taylors was not as strong as the application against Foxeden.  The Taylors have gone on affidavit about their financial position.  I could not remotely be satisfied on that material that the stringent test for a stay was satisfied.   That is, I could not be satisfied that IOOF has no reasonable prospect of reimbursement in the event that it wins against the Taylors.  It follows that I would also dismiss that application also.

NEAVE, J.A.:

1. I would also dismiss both applications, for the reasons given by the President.

(Discussion ensued concerning costs.)

MAXWELL, P.: 

1. The respondents have sought the costs of the applications.  Mr Macaulay for the applicant argues that his client ought not be ordered to pay the costs of the applications.  He makes reference to what is said in some of the cases about the shifting of the onus to the respondent.  Those remarks of course reflect the fact that - and it is true of security for costs applications as well - the applicant knows much less about the other party's financial position than that party knows.  In that sense it might be said that IOOF did all that it could do.  In the case of Foxeden, for example, IOOF carried out a search and ascertained that it was a $2 company with no evidence of assets. 

1. But both sets of respondents did assume the burden of establishing their financial position, and have filed extensive affidavit material.   At that point, IOOF should have realised that the applications were hopeless, since the material  would not come near to satisfying the stringent test of “no reasonable prospect of reimbursement.”   But the applications were pressed and they have now failed, precisely because of what the affidavit material contains.  These applications are thus no different from any other application where a respondent files material before the matter comes on in court.  Where the applicant nevertheless decides to press the application in court, and fails, it pays the costs.

1. Accordingly, each application will be dismissed with costs.

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