Rand & Ors and Liquidator, S Pty Ltd
[2010] FamCA 1010
•29 October 2010
FAMILY COURT OF AUSTRALIA
| RAND AND ORS & LIQUIDATOR, S PTY LTD | [2010] FamCA 1010 |
FAMILY LAW – PRACTICE AND PROCEDURE – STAY
| APPLICANT: | Mr Rand |
| APPLICANT: | Ms Rand |
| APPLICANT: | C Pty Ltd |
| RESPONDENT: | Liquidator of S Pty Limited (in liquidation) |
| FILE NUMBER: | SYF | 2153 | of | 2001 |
| DATE DELIVERED: | 29 October 2010 |
| PLACE DELIVERED: | Sydney |
| PLACE HEARD: | Sydney |
| JUDGMENT OF: | The Hon. Justice Cohen |
| HEARING DATE: | 18 October 2010 |
REPRESENTATION
| COUNSEL FOR THE APPLICANTS: | Mr Feller SC and Mr Milanovic |
| SOLICITOR FOR THE APPLICANTS: | Cadmus Lawyers |
| COUNSEL FOR THE RESPONDENT: | Mr Cotman SC and Mr Tobin |
| SOLICITOR FOR THE RESPONDENT: | Brown & Partners |
Orders
That the Application in a Case filed on 18 October 2010 by Mr Rand and Ms Rand for orders 1 and 2 therein is hereby dismissed.
That the Application in a Case filed on 18 October 2010 by C Pty Limited for order 1 therein is hereby dismissed.
Costs are reserved.
IT IS NOTED that publication of this judgment under the pseudonym Rand and Ors & Liquidator, S Pty Ltd is approved pursuant to s 121(9)(g) of the Family Law Act 1975 (Cth).
| FAMILY COURT OF AUSTRALIA AT SYDNEY |
FILE NUMBER: SYF 2153 of 2001
| MR RAND |
Applicant
| MS RAND |
Applicant
| C PTY LTD |
Applicant
And
| LIQUIDATOR OF S PTY LIMITED (IN LIQUIDATION) |
Respondent
REASONS FOR JUDGMENT
On 28 July 2010, I made orders in proceedings between the Liquidator of S Pty Limited (in liquidation), who I shall refer to as the Liquidator, on the one hand, and Mr G Rand (Mr Rand) and his wife Mrs N Rand who I shall refer to collectively as the Rands and a company Mr Rand controls, C Pty Limited (C Pty Ltd). The Liquidator succeeded in all aspects of the proceedings which were decided. The Rands and C Pty Ltd have appealed. By their Applications in a Case filed 18 October 2010, the Rands seek a stay of orders (1), (3) and (4) and C Pty Ltd seeks a stay of orders (2) and (5) of my orders pending applications for leave to appeal and, if they are granted, pending the appeals. However, when the stay applications were argued by Mr Feller SC, he appropriately limited the applications for stay to orders (4) and (5). These orders require C Pty Ltd to file and serve points of claim within 21 days, and Mr Rand and his wife to file and serve points of defence within 21 days, failing which C Pty Ltd’s application will be dismissed and judgment will be entered against Mr & Mrs Rand in the Liquidator’s claim against them.
Jennings Construction Ltd v Burgundy Royale Investments Pty Ltd (1986) 161 CLR 681 is a case where a stay was sought pending an application to the High Court of Australia for special leave to appeal to it. In that case, Brennan J emphasises the extraordinary nature of the jurisdiction to grant a stay pending the hearing of an application for special leave to appeal. An application to a single judge of the Family Court for a stay of his interlocutory orders pending an application of the Full Court of the Family Court for leave to appeal is quite analogous to an application such as that which Brennan J was dealing with. A stay is an extraordinary remedy because its grant will take away from the successful party his prima facie entitlement to the benefit of the judgment by which he succeeded as well as undermine the presumption that the judgment is correct (see Re Middle Harbour Investments Ltd (unrep NSW Court of Appeal 15 December 1976) per Mahoney JA with whom the other members of the Court agreed, cited with approval by the Full Court, Federal Court of Australia, in Powerflex Services Pty Ltd & Ors v Data Access Corporate (1996) 67 FCR 65. The latter case is authority for the proposition, which I accept as correct, that for the Court to grant a stay, special circumstances do not have to be shown. It is enough for the applicant for a stay to prove, on balance, that his is an appropriate case for a stay; that is, a sufficient case for the exercise of the Court’s discretion to be exercised in favour of an applicant. There are matters which have to be considered in determining whether a stay is appropriate. The first, according to Brennan J at p.685, appears to create a threshold. It is that a stay will only be granted if it is “required to preserve the subject matter of the litigation”. His Honour referred to 4 relevant considerations which must then be undertaken in deciding whether to grant a stay once it has been held that a stay is necessary to preserve the subject of the dispute. The 4 considerations are:
(1)Whether there is a substantial prospect that special leave to appeal will be granted. – In this case the analogy would be to consider whether there is a substantial prospect that leave to appeal will be granted. In considering this prospect, one must consider the prospects of success of the appeal if leave is granted because leave will not be granted if the appeal does not have reasonable prospects of success.
(2)Whether the applicant has failed to take whatever steps are necessary to seek a stay from the Court in which the matter is pending. – Here the applications for leave to appeal were made in time, the applications for stays were reasonably prompt and to the judge from whose judgment leave to appeal is sought. Rule 22.11 provides that an appeal does not operate as a stay but if a party has appealed or applied for leave to appeal any party may apply for a stay.
It appears to me to be germane to note that rule 22.11(3) provides that the stay application “must…be heard by the Judge… who made the order under appeal”. It was suggested in the stay application I heard that findings I made which were, in part, the bases for the orders I made and which are sought to be appealed from, may be a ground to disqualify myself from hearing the stay application because of apprehended bias. Such a ground which would exist in every stay application. Successful parties do not appeal and, usually, do not ask for a stay of orders pending appeal. The rules and Brennan J’s requirement that an application for a stay first be made to the Court which made the order sought to be appealed from put such a suggestion it its true light. Counsel did not ask me to disqualify myself on that ground.
(3)Whether the grant of a stay will cause loss to the respondent to the application for a stay. – This consideration is to be undertaken on the assumption that refusal of the stay will result in the subject matter of the litigation being lost to the applicant for it because the threshold issue itself must create that assumption for the additional considerations to be enlivened. This appears to be the reason his Honour does not refer specifically in these considerations to whether refusal of a stay will take from the applicant for it the benefit of a successful appeal; that is, render a successful appeal nugatory.
(4)Where the balance of convenience lies. – This really involves consideration of the relative hardships which will result from refusal of grant of a stay including the extent and effect of delay.
The applicant’s submissions are quite straightforward. He says that, on balance after considering all but the threshold factor I have referred to above, the Applicants have demonstrated that this is an appropriate case for the exercise of the Court’s discretion in favour of his clients. He did not refer to the threshold factor which I regard as critical. It is critical because it is the basis for determining whether the grant of such an exceptional order as a stay ought to be further considered rather than refused.
The reasons given by Mr Feller for his basic submissions are:
a)There has been an appeal against all the orders I made. – In fact there has not been such an appeal. There has been an application for leave to appeal which should not be confused with an appeal. Entrenched in the concept of the requirement of leave is the principle that because the interlocutory proceedings do not finally decide the real issues or the subject of the litigation, there is ordinarily no inherent or irreversible ultimate detriment to a party who fails in an interlocutory application. Here, to avoid all detriment pending appeal, all that the Applicants need to do is file their points of defence or points of claim within the time to avoid any disadvantage pending hearing of the leave application.
b)The refusal of a stay will render the appeal “abortive in so far as it relates to the orders in respect of which the stays are sought”. It is said that the orders appealed from “would result in a judgment against the Applicants notwithstanding that the core of the Appeals is a challenge to the jurisdiction of the Court”. – The refusal of a stay will not render an appeal abortive. The Applicants’ own conduct in failing to file their points of claim and points of defence in time could. If these are filed in time and leave is granted, the appeal will be able to deal with the jurisdictional issue, the transfer issue and the security for costs issue. My orders including the self-executing orders which will result from failure to file the pleadings in time can be overturned if the Full Court sees fit and the Applicants will be able to get the full benefit of any success they have on appeal. To the extent they are successful, they will avoid what is said to be “judgment” against them. Of course, if they file their points of claim and points of defence, they will also prima facie avoid “judgment” against them in the interim between now and the hearing of the leave application and, if leave is granted, the determination of the appeal. If the Court has no jurisdiction, there cannot be any actual determination or “judgment” against the Applicants.
c)There is no detriment to the Liquidator by the grant of a stay because, it is said, the matter cannot proceed further until the issues of jurisdiction and appropriateness of the Court to hear the principal matters is decided. - I do not accept that a stay will cause the Liquidator no detriment. It would result in the Liquidator not learning of the basis for C Pty Ltd’s claim against him and of the Rands’ defence to his claim. The claim and defence must be about facts which occurred some years ago. The Liquidator cannot complete the liquidation and pay creditors until the Applicants’ cases are determined. The creditors whose claims are not in dispute are entitled to be paid and should not have to wait longer than necessary. The shareholders of S Pty Ltd, including the wife, are entitled to be paid out. I do not know, and nor does the Liquidator, what evidence he might need in response to the points of defence and points of claim. I do know that the more time elapses before the Liquidator can commence gathering the evidence he feels he needs, the more difficult it will be to obtain. Memories fade, witnesses move on and records are lost. The refusal of a stay should result in the Liquidator promptly learning of the cases he has to meet or not having to meet one or both cases.
Although I allowed only 21 days to file and serve the points of defence and points of claim, the stay application was made orally on 16 August 2010. The time for service and filing of the defence and claim did not expire until 18 October 2010 as a consequence of various extensions of time I gave the Applicants. If I refuse to grant stays from 18 October, I shall order, because it is proper to do so pending determination of the stay application, that the time for filing and serving the defence and claim be extended for a reasonable time after I have determined the stay application. To do otherwise would be unfair to each party. It would be unfair to the Applicants because the only reason why the stay application has not been determined before the time for filing and service, thereby giving the Applicants time to meet my orders if a stay is refused, is entirely to do with the management and availability of Court time. To refuse to extend time for complying with my orders would be quite unfair to the Liquidator because it would give the Applicants better cases than they would otherwise have for stays because by the time the Court would get to be consider the applications, the consequences of refusal would be theoretically more serious because the time to comply with my orders of 28 July 2010 as extended would have passed. The consequences of failure to file points of defence and points of claim would be entrenched pending the outcome of the leave application and an appeal if leave is granted.
There is something to be gained from refusal of a stay. Contrary to Mr Feller’s submission, the matter should proceed to the stage where the Liquidator is informed of the cases he must meet before it is considered by the Full Court even if it is ultimately held that this court is not the appropriate court to decide the issues involved in the claim by C Pty Ltd and the defence of the Rands. In the situation where the proceedings have not been objected to by the Applicants for more than a year before the objection was taken and C Pty Ltd actually commenced its application in this court, it is appropriate for the Liquidator to learn of the cases he will have to meet in whichever court the matter is heard forthwith. The additional cost of filing and serving points of claim and points of defence in this court is relatively insignificant even if, ultimately, the pleadings have to be repeated in the Supreme Court of NSW. The pleadings will, in substance, be identical. There will be little additional cost for drafting for the sake of filing in the Supreme Court.
d)Mr Feller’s final two written submissions involve essentially the same point. He says that the Applicants will be subjected to inordinate prejudice if a stay is not ordered; prejudice which should not be forced on them before the appeals; really the applications for leave, are heard and that the Applicants would “suffer hardship which could not be adequately compensated for if the appeal is successful”. The same two answers to each of these submissions are warranted.
Firstly, there is no evidence of any actual facts which would support a finding of “inordinate prejudice” or “hardship which cannot be adequately compensated for”. The onus is on the Applicants to supply such evidence and in this respect they have wholly failed to prove their case. Theoretical prejudice or hardship which in theory could be applied can actually only be applied if the facts are proven. I am not prepared to regard as sufficient unspecified theoretical possibilities in the absence of easily led evidence to, prima facie, prove the existence of such prejudice or hardship.
However, the first answer is not really necessary because the hardship and inordinate prejudice relied on do not arise until the time for filing and service of the points of defence and points of claim has passed without such filing and service. Until that time, the worst consequence of refusal of a stay is the need to file and serve the pleadings and to meet what I regard as the relatively insignificant cost of doing so, costs which will largely avoid the cost of drafting for the Supreme Court if the appeals ultimately succeed. That the Applicants also face the prospect of what are in effect judgments against them in this Court if they fail to file and serve their pleadings is irrelevant because there is nothing on the evidence to stop them from doing so. There is no evidence to suggest that they could not file and serve pleadings within a reasonable time considering the time I have already allowed on 28 July 2010 and the evidence before me then that Mr Rand would be back in Australia at the end of the summer unless he decides Lebanese legal proceedings prevent him from returning. There is no evidence of an up to date nature, no suggestion he has not returned or, if he has not, that he could not have returned to Australia to give instructions then return to Lebanon to attend to his business and court case there or that he cannot be contacted by telephone or email and has not been so contacted. The deficit of evidence where common sense would have it that it must have been readily available raises suspicion that the stance taken by the Applicants is a ploy to delay the service and filing of points of defence and points of claim for no more than tactical reasons.
The Liquidator, through Mr Cotman SC, has made the point that the Applicants have had plenty of time to file their points of claim and points of defence. Although orders were originally made by consent for this on 29 March 2010 and required the Rands to file and serve their points of defence by 20 April 2010 and C Pty Ltd to file its points of claim by 12 April (see Exhibit “XY” Orders 2 and 6) none have yet been filed and no satisfactory excuse for failing to file them has been provided to the Court. Of course, part of the delay was permitted by the Court which, from time to time, extended the time for filing. On 24 May 2010, at the readiness hearing, Mr Grieve QC informed the Court that he would be in a position to file the documents in a fortnight (TS p2.30 and p5.5). I gave the Rands and C Pty Ltd an extension of time for filing and serving their relevant pleadings until 7 June.
At about the time when the time for filing expired and Mr Elias, the solicitor for the Applicants, must have known there was not going to be compliance and the hearing of the issues involving both matters was fixed for 5 days starting on 5 July, I was asked by the solicitor for the Applicants to grant leave to issue a subpoena. He said nothing about the failure to file the pleadings and did not ask to extend time to do so despite the subpoena being for the purpose of preparing for the hearing on 5 July.
The matter next came before the Court on 24 June 2010. Mr Feller SC appeared with Mr Milanovic for the Applicants and applied to me to disqualify myself in the matter now before the Court (not the Z Firm dispute) on the ground that I had given the Liquidator more leeway or time when setting a timetable and making directions for preparation of the hearing than I had given the Applicants. Uncharacteristically, there was no appeal against my decision not to disqualify myself. Mr Feller also informed me he wished to argue the matters dealt with in my judgment which is sought to be stayed, so I vacated 4 of the days which had been set for hearing, adjourned the argument to 5th July and suspended the timetable for filing of documents until further order.
The relevant timetable was resurrected by my judgment of 28 July. Included in the orders of 28 July was that I stood the matter over for mention for further directions to 16 August. On 16 August I extended the time for the filing and service of the pleadings by the Applicants to 31 August. On 30 August I vacated the 31 August date in chambers and extended the time for compliance with the orders made on 28 July for filing of pleadings by the Applicants to 18 October 2010 and set the matter I am now considering for hearing on 18 October.
Thus, the Applicants have had plenty of time to prepare their pleadings both during the periods when there was no excuse not to and during periods when it must have been known that although there were applications which might avoid the need to file and serve them immediately, the Applicants might, as they did, fail and the pleadings would need to be filed and served. At the least by 18 October when the stay applications were argued, there was ample opportunity, if there is any excuse for failing to have the pleadings ready in the event that they might be needed, to put evidence before the Court of that excuse and of the pleading which would be relied on if required. There has been no such evidence.
Mr Cotman’s written submissions were not in my opinion unfairly overstating what has occurred and the current situation when this was said:
“15. The [Rand] Applicants are seeking to avoid having to file pleadings in these proceedings. On the basis of the evidence and submissions relied upon by the [Rand] Applicants in their jurisdiction applications, there was and has been no suggestion that different substantive claims will be run in the Supreme Court if leave to appeal is granted by the Full Court and the appeal is successful. The same claims will simply be litigated in a different forum. The gist of the [Rand] Applicant’s objection seems to be that they want to start afresh in the Supreme Court without having identified their case in the Family Court, if they are successful on appeal. But this ignores the fact that proceedings in relation to these claims are already underway in this Court and having been for some time. The deliberate refusal to comply with this Court’s orders, which borders on contempt, leave the nature of the issues to be determined obscured – and this remarkably includes a claim that one of the Applicants, [C Pty Ltd], is trying to prosecute.”
Mr Cotman distilled the distinction between the merits of granting stays and refusing them in the circumstances here to these propositions:
a)The major consideration is relative prejudice.
b)The Applicants will have to file pleadings eventually, so why not now. There is no evidence of prejudice to them to be required to file them now.
c)Mr Grieve QC told the Court on 24 May that draft pleadings could be prepared by 31 May 2010 and consented to filing pleadings by 7 June. The inference from failure to file them until now is that the Applicants are attempting to avoid determination of the Liquidator’s claim and C Pty Ltd’s own claim. Indeterminate delay will be occasioned by the application for leave and, if it succeeds, the decision on the appeal.
d)The other shareholders and unpaid creditors of S Pty Ltd are being prejudiced by the delay in the Liquidator being able to wind up S Pty Ltd. If the Applicants are required to file and serve their pleadings, at least, the Liquidator will be given a proper opportunity to assess the merits of the Applicants’ claims and make applications for summary dismissal if he sees fit thereby permitting the Liquidator to determine whether any further distributions to creditors can take place. Mr Cotman makes a point which to me seems to be a substantial one. It is that without the pleadings being disclosed the Court cannot come to any conclusion on the issue of the merits of the leave application because its merits cannot be assessed without knowing more than merely the merits of the appeal from my judgment. One needs to know the ultimate merits of the Rands’ defence and C Pty Ltd’s claim against the Liquidator.
e)The proceedings are not being run for the convenience of the Applicants. S Pty Ltd’s creditors and shareholders are entitled to a timely resolution of the dispute between the Applicants and the Liquidator and timely resolution of other claims. Courts are reluctant to stay proceedings where there is an appeal against an interlocutory order where the stay prevents the substantial proceedings from progressing: Partnership Pacific Ltd v Killen (NSW Court of Appeal per Moffit P, Reynolds and Hutley JJA, 10 April 1979 unrep) cited in Blue Mountains Conservation Society Inc v Delta Electricity (No. 2) [2009] NSWLEC 193. per Pain J who said at [32]:
“The success of the appeal cannot be assumed. It is therefore desirable that the proceedings should be placed on a footing as between the parties [which] are known in the near future… It is appropriate that a defence be filed so that the issues between the parties can be clarified. In the event the appeal is unsuccessful and the matter proceeds with the protective costs order in place, future progress of the matter will be less delayed if the parties are clear as to what issues lie between them.”
Mr Feller said in response to Mr Cotman’s submissions that the Liquidator had waited 4 years after his appointment before taking any positive steps against the Rands and that by comparison the delay occasioned by a stay would not be great. I do not regard this as a proper consideration in the light of the absence of any suggestion that the delay in taking action by the Liquidator was undue. There is no evidence to suggest it has been. The nature of the litigation and associated matters is such that there is no reason to believe that the Liquidator acted other than properly. In any event, prior undue delay is not an excuse for further undue delay. If anything, it warrants efforts by the Court to prevent further undue delay.
Mr Feller’s other oral argument is that there should be no requirement to file pleadings pending appeal because the orders to do so made on 28 July are the subject of his clients’ appeal. I do not regard this argument as valid because, in the proceedings in the Supreme Court, pleadings with the same substance will have to be filed if the appeal succeeds. A costs order can compensate the Applicants for any significant loss associated with the need to file proceedings in the Family Court and the pleadings themselves will have no effect except to give the Liquidator notice which by now he is entitled to have of the defence to his claim and case against him; notice he would ultimately gain in any event. The only benefit to the Applicants of not filing their pleadings forthwith is really nothing more than possible additional delay in the resolution of the dispute and the keeping of the Liquidator ignorant of the Applicants’ cases for longer; benefits which, if they are benefits, can only be of a tactical nature, thereby leading to the inference which I regard as warranted that the stay applications are in essence no more than delaying tactics, especially by C Pty Ltd which commenced its proceedings in the Family Court then waited a year to seek to have them heard elsewhere.
I am of the view that leave to appeal is more likely than not to be refused but that, if it is granted, the appeals are also weak. The applications for leave are remarkable for their lack of specificity. The essential grounds allege errors by the Court but do not, as they should, specify them. They allege that any findings are against the weight of evidence or that there is no evidence to support them but do not specify which findings. The grounds of appeal if leave is granted to appeal appear to be largely fanciful and profoundly general, some relating to matters which did not determine the outcome of the proceedings but which were in the nature of background information which would permit one to understand the situation involving the issues. The grounds of appeal allege judicial bias and prejudice rather than apprehended bias without specifying what it is. The grounds seem to be an attempt to challenge every finding I made. This in itself is a manifestation of their weakness.
I am of the view for reasons I have canvassed above that a stay is not required to preserve the subject matter of the litigation. Filing the pleadings in time will do that if I permit a small amount of further time for this as I should. Thus, I do not have to consider the other arguments for and against the granting of stays and conclude that there is no basis for upholding the applications filed in Court on 18 October 2010 for stays which I should therefore dismiss.
If I am in error in finding that there is a threshold point based on the need to preserve the subject matter of the litigation, or in not finding there is a need to preserve the subject matter of the litigation, on weighing all the arguments of the parties, not only am I satisfied that the grounds for application for leave and grounds for appeal are weak, I am also not satisfied that the balance of convenience favours a stay and mention particularly that there are substantial grounds for regarding the application as a delaying tactic and a tactic to avoid allowing the Liquidator to know what C Pty Ltd’s case against them is and that the Applicants will suffer no particular inconvenience by refusal of a stay whereas the Liquidator will probably suffer no loss by the granting of stays, he and the other creditors and shareholders of S Pty Ltd will be disadvantaged and inconvenienced by the grant of them and the creditors will probably suffer loss. The Applicants will also suffer no significant loss by the refusal of a stay.
It is of particular concern that no evidence has been given about the true nature of C Pty Ltd’s claim and the Rands’ defence or of the evidence in support. There is, in the circumstances, the raising of an apprehension that these are being kept from the Liquidator for a purpose, especially the claim by C Pty Ltd, a claim which seems to have been commenced in this Court in response to the Liquidator’s threatened claim against the Rands. The Liquidator is entitled to know if both the claims by C Pty Ltd and the defence of the Rands have substance, irrespective of the Court in which they will ultimately be decided. Refusal of a stay is likely to achieve enlightenment for the Liquidator. I should for these reasons too, exercise my discretion to refuse the applications and dismiss them.
I shall order accordingly.
I certify that the preceding eighteen (18) paragraphs are a true copy of the reasons for judgment of the Honourable Justice Cohen delivered on 29 October 2010.
Associate:
Date: 29 October 2010
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