FEDERAL COURT OF AUSTRALIA
Nolten v Groeneveld Australia Pty Ltd [2011] FCA 1494
Citation: Nolten v Groeneveld Australia Pty Ltd [2011] FCA 1494 Appeal from: Groeneveld Australia Pty Ltd v Nolten [2011] FMCA 975 Parties: WOUTER NOLTEN v GROENEVELD AUSTRALIA PTY LTD File number: VID 1438 of 2011 Judge: KENNY J Date of judgment: 21 December 2011 Catchwords: PRACTICE AND PROCEDURE – application for a stay under Rule 36.08 of the Federal Court Rules 2011 (Cth) and s 52(3) of the Bankruptcy Act 1966 (Cth) – consideration of relevant principles – arguable point – balance of convenience – bankrupt able to prosecute appeal – appeals in the Supreme Court – position of successful petitioning creditor – balance of convenience not supportive of a stay – stay application dismissed Legislation: Bankruptcy Act 1966 (Cth)
Federal Court Rules 2011 (Cth)
Federal Court of Australia Act 1976 (Cth)Cases cited: Freeman v National Australia Bank Ltd [2002] FCA 427
Coleman v Lazy Days Investments Pty Ltd (1994) 55 FCR 297
Menzies v Paccar Financial Pty Ltd [2010] FCA 692
Powerflex Services Pty Ltd v Data Access Corporation (1996) 67 FCR 65
Alexander v Cambridge Credit Corporation Ltd (1985) 2 NSWLR 685
Beames v Rigby [2002] FCA 806
Kellow v Dudzinski [2003] FCA 238
Shirreff v Beck Legal Pty Ltd [2010] FCA 1407, (2010) 119 ALD 284
Cummings v Claremont Petroleum NL (1995) 185 CLR 124
Jury v Westpac Banking Corporation [1997] FCA 1277
Starbourne Holdings Pty Ltd v Radferry Pty Ltd [1998] FCA 548
Adamopoulos v Olympic Airways SA (1990) 95 ALR 525
Cook’s Construction Proprietary Limited v Stork Food Systems Australasia Pty Ltd [2008] 2 Qd R 453
Citrus Queensland Pty Ltd v Sunshine Orchards Pty Ltd [2008] FCA 1867Date of hearing: 15 December 2011 Date of last submissions: 15 December 2011 Place: Melbourne Division: GENERAL DIVISION Category: Catchwords Number of paragraphs: 47 Counsel for the Appellant/Applicant: Mr Ehrlich Solicitor for the Appellant/Applicant: Willocks Lawyers Solicitor for the Respondent: Mr Leggatt of DLA Piper
IN THE FEDERAL COURT OF AUSTRALIA
VICTORIA DISTRICT REGISTRY
GENERAL DIVISION
VID 1438 of 2011
ON APPEAL FROM THE FEDERAL MAGISTRATES COURT OF AUSTRALIA
BETWEEN: WOUTER NOLTEN
AppellantAND: GROENEVELD AUSTRALIA PTY LTD
Respondent
JUDGE:
KENNY J
DATE OF ORDER:
21 DECEMBER 2011
WHERE MADE:
MELBOURNE
THE COURT ORDERS THAT:
1.The application for a stay pending the hearing of an appeal from the judgment of the Federal Magistrate delivered on 9 December 2011 is refused.
2.On or before 4 pm on 23 December 2011, the parties file short submissions on costs, if so advised.
Note:Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.
IN THE FEDERAL COURT OF AUSTRALIA
VICTORIA DISTRICT REGISTRY
GENERAL DIVISION
VID 1438 of 2011
ON APPEAL FROM THE FEDERAL MAGISTRATES COURT OF AUSTRALIA
BETWEEN: WOUTER NOLTEN
AppellantAND: GROENEVELD AUSTRALIA PTY LTD
Respondent
JUDGE:
KENNY J
DATE:
21 DECEMBER 2011
PLACE:
MELBOURNE
REASONS FOR JUDGMENT
INTRODUCTION
Wouter Nolten has made an urgent application for an interim…
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Details
- Case
- [2011] FCA 1494
- Decision Date
CaseChat Overview and Summary
In the matter of Nolten v Groeneveld Australia Pty Ltd, Groeneveld Australia Pty Ltd sought a sequestration order against the estate of Mr Nolten, pursuant to a creditor’s petition dated 17 February 2011. Mr Nolten applied for an adjournment of the hearing of the petition, which the Federal Magistrate dismissed. The Federal Magistrate also refused Mr Nolten’s application for a stay pending appeal. Mr Nolten sought a stay of the proceedings on the sequestration order until the hearing of the appeal. The court was required to consider the principles governing the grant of a stay under Rule 36.08 of the Federal Court Rules 2011 (Cth) and section 52(3) of the Bankruptcy Act 1966 (Cth). The court needed to determine whether there was an arguable point on appeal and whether the balance of convenience favoured a stay. The court also needed to consider the position of the successful petitioning creditor, Groeneveld Australia Pty Ltd.
The court found that Mr Nolten had an arguable point on appeal, as the grounds of appeal challenged the failure of the Federal Magistrate not to uphold his objection to the admissibility of the opinion set out in paragraph [21] of Mr Leggatt’s affidavit. However, the court found that the balance of convenience did not favour a stay. The court noted that Mr Nolten was unable to prosecute an appeal in the Supreme Court due to his inability to pay the costs of the appeal, and that Groeneveld Australia Pty Ltd, as the successful petitioning creditor, would be prejudiced by a stay. The court also noted that Mr Nolten had no real assets and was likely to remain insolvent even if he were successful in his appeal. Therefore, the court dismissed the application for a stay.
The court ordered that the application for a stay pending the hearing of an appeal from the judgment of the Federal Magistrate delivered on 9 December 2011 is refused. The parties were also required to file short submissions on costs, if so advised, on or before 4 pm on 23 December 2011. Entry of orders was dealt with in Rule 39.32 of the Federal Court Rules 2011.
The court found that Mr Nolten had an arguable point on appeal, as the grounds of appeal challenged the failure of the Federal Magistrate not to uphold his objection to the admissibility of the opinion set out in paragraph [21] of Mr Leggatt’s affidavit. However, the court found that the balance of convenience did not favour a stay. The court noted that Mr Nolten was unable to prosecute an appeal in the Supreme Court due to his inability to pay the costs of the appeal, and that Groeneveld Australia Pty Ltd, as the successful petitioning creditor, would be prejudiced by a stay. The court also noted that Mr Nolten had no real assets and was likely to remain insolvent even if he were successful in his appeal. Therefore, the court dismissed the application for a stay.
The court ordered that the application for a stay pending the hearing of an appeal from the judgment of the Federal Magistrate delivered on 9 December 2011 is refused. The parties were also required to file short submissions on costs, if so advised, on or before 4 pm on 23 December 2011. Entry of orders was dealt with in Rule 39.32 of the Federal Court Rules 2011.
Orders
Orders of the court
1. The application for a stay pending the hearing of an appeal from the judgment of the Federal Magistrate delivered on 9 December 2011 is refused.
2. On or before 4 pm on 23 December 2011, the parties file short submissions on costs, if so advised.
Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.
Background
Background to the litigation
The question now is whether the Court ought to make an order staying proceedings on the sequestration order until the hearing of the appeal. A notice of appeal dated 13 December 2011 was filed on 13 December 2011. It is therefore competent for the Court to stay proceedings under Rule 36.08 of the Rules: see Rule 36.08; see also Freeman v National Australia Bank Ltd [2002] FCA 427 (“Freeman”) at [3] and the authorities there cited; Coleman v Lazy Days Investments Pty Ltd (1994) 55 FCR 297 (“Coleman”) at 300-1; and Menzies v Paccar Financial Pty Ltd [2010] FCA 692 at [10]. BACKGROUND Groeneveld Australia Pty Ltd (“Groeneveld”) sought a sequestration order against Mr Nolten’s estate, pursuant to a creditor’s petition dated 17 February 2011. Mr Nolten applied to adjourn the hearing of the petition. A debtor subject to a creditor’s petition based on a judgment debt is ordinarily entitled to an adjournment if the judgment is subject to a genuine and arguable appeal, and if that appeal would leave the debtor solvent. The circumstances in which the learned Federal Magistrate made her decisions adverse to Mr Nolten are complex. These circumstances appeared from the affidavits placed before her, including the affidavit of David Thomas Leggatt sworn on 10 November 2011 (to which I was also referred). Mr Nolten has apparently been directly or indirectly involved in litigation at least since 2009. Mr Nolten was formerly managing director of Groeneveld. In July 2009, Groeneveld dismissed him for alleged breaches of duties as a director and employee. Also in July 2009, proceedings issued in the Supreme Court of Victoria in connection with these allegations. On 22 November 2010, in the Supreme Court, Davies J delivered judgment in proceeding 07564 of 2009, holding that the plaintiffs, Groeneveld and others, were entitled to judgment on all claims against the defendants, Wouter Nolten and companies associated with him. Essentially, the successful claims related to breaches of fiduciary duty on Mr Nolten’s part. On 1 December 2010, the plaintiffs obtained orders for the taking of accounts; and accounts were taken and profits determined. Various other orders were also made on that day, including that Mr Nolten pay Groeneveld the sum of $214,325; and that:The Defendants [subject to certain exclusions not presently relevant] shall pay the Plaintiffs’ costs of the proceeding, including the costs of the counterclaim and any reserved costs, and the First Defendant shall pay the costs of proceeding number S Cl 2009 07585, including any reserved costs. Mr Nolten was the First Defendant. Proceeding number S Cl 2009 07585A was in respect of a search order. Also on 1 December 2010, a counterclaim relating to an agreement concerning certain put and call options over shares in Groeneveld was dismissed. After the taking of accounts in the Supreme Court, Davies J was asked to determine two further issues: (1) whether the Court had ruled on whether Mr Nolten was jointly liable to account for the profits made by the other corporate defendants as the result of his breaches of duty; and (2) if not, whether Mr Nolten was in fact jointly liable to account for these profits as the result of his breaches of duty. On 13 October 2011, Davies J concluded that the issue of joint liability was res judicata and that Mr Nolten was, therefore, estopped from the claim that he should not be made jointly liable for the profits.
Evidence
Evidence Before The Court
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Decision
Reasons for decision
Examination of the grounds of appeal set out below shows that Mr Nolten challenges the failure of the Federal Magistrate not to uphold his objection to the admissibility of the opinion set out in paragraph [21] of Mr Leggatt’s affidavit.Federal Magistrate’s Decision As appears from the affidavit and exhibits, on 9 December 2011, the Federal Magistrate dismissed Mr Nolten’s application for an adjournment of a creditor’s petition and made a sequestration order against his estate. The Federal Magistrate also refused Mr Nolten’s application for a stay pending appeal. The Federal Magistrate stated the essential circumstances as follows:4.Davies J found in favour of the Applicant on their claim and also found against the Respondent on the counterclaim. The Respondent was ordered to pay the Applicant the sum of $214,325.00. In addition, the Court ordered that various accounts be taken in relation to profits made by the Respondent or the companies described by Davies J as his corporate alter egos. Orders were subsequently made for the Respondent to pay $975,965.43 arising from those proceedings. 5.The Respondent was also ordered to pay “costs of the proceedings, including the costs of the counterclaim and any reserved costs . . . and the costs of proceedings SCI2009 07585 including any reserved costs”. Proceedings SCI 2009 07585 were proceedings, at an earlier stage in the litigation, when search orders were obtained by the Applicant against the Respondent. 6.The Respondent has not appealed against the judgment debt nor sought a stay of the orders. He has appealed against the dismissal of the counterclaim. There is a dispute between the parties, which remains unresolved concerning whether the Respondent requires special leave to appeal against the costs order made in relation to the search order proceedings. 7.A second Creditor’s Petition has been served by the Applicant with respect to the debt arising out of the proceedings in relation to the accounting for profits. An appeal was also lodged against that decision but is currently deemed abandoned because of a failure to comply with the relevant rules. A summons seeking an order that the second appeal not be deemed abandoned has been filed and is due to be heard on 16 December 2011. 8.The Respondent concedes that he has no real assets and states that he has no liabilities due and payable aside from the judgment debts owed to the Applicant. 9.The Applicant contends that costs in the principal proceedings and search order proceedings would together amount to some $850,000.00. The counterclaim is valued at $474,242.00 and if the Respondent was successful, it would also reduce the judgment debt by some $70,216.00. The case for Groeneveld was that, if Mr Nolten successfully appealed dismissal of his counterclaim and aspects of the judgment debts, it was likely that the debtor would still be insolvent by reason of the costs arising from the appeals. Mr Nolten argued to the contrary – that he would not be insolvent if he were successful.
Ratio Decidendi
Legal Principle Established
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