Merchant v Ernst & Young (a firm)

In the case of Merchant v Ernst & Young (a firm), the plaintiffs, including Mr Merchant, the Merchant Family Trust, the Gordon Merchant Superannuation Fund, and other associated companies, alleged that Ernst & Young and Mr Burgess breached their contractual and common law duties by providing inadequate advice, leading to significant financial losses. The plaintiffs sought damages for these breaches. Ernst & Young applied for a temporary stay of the proceedings pending the final determination of related proceedings in the Federal Court and the Administrative Appeals Tribunal. The plaintiffs opposed the stay, arguing that it was unnecessary and would cause significant delay.

The court considered the principles governing the exercise of discretion to grant a stay. The decision to grant a stay is fundamentally a matter of case management, aimed at ensuring proceedings are managed in a practical and fair manner, informed by the objects of the relevant procedural rules. The court noted that it is not necessary for the proceedings to involve identical parties or issues for a stay to be granted. The court should adopt a practical and common-sense approach to the exercise of the discretion, informed by the objects of the Uniform Civil Procedure Rules.

In exercising its discretion, the court found that a temporary stay was desirable. The overlap between the proceedings was substantial, and the outcomes of the Tax Appeals could materially affect the assessment of risks and the quantum of damages in the current proceeding. The court also noted that the potential impact on the quantum of loss and damage, as well as the elucidation of liability issues, supported the grant of a stay. Additionally, the court considered that expert evidence in the current proceeding would be better informed if the Tax Appeals were resolved first.

Accordingly, the court granted a temporary stay of the proceeding until 40 days after his Honour Justice Thawley delivers his judgments in the Tax Appeals. The parties have liberty to apply for further orders within seven days’ notice once judgment has been delivered in the Tax Appeals.