Sami v Roads Corporation
[2009] VSCA 44
•20 February 2009
SUPREME COURT OF VICTORIA
COURT OF APPEAL
No 3870 of 2008
| BOB SAMI and ROSHNI SAMI | 1st Applicant |
| 2nd Applicant | |
| v | |
| ROADS CORPORATION | Respondent |
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APPLICATION ON SUMMONS
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JUDGES: | REDLICH JA and WILLIAMS AJA |
WHERE HELD: | MELBOURNE |
DATE OF HEARING: | 20 February 2009 |
DATE OF JUDGMENT: | 20 February 2009 |
MEDIUM NEUTRAL CITATION: | [2009] VSCA 44 |
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PRACTICE AND PROCEDURE – Application for stay of various costs orders that would be unaffected by outcome of appeal – Applicants seek to set off costs orders against possible costs order in their favour if appeal successful – Grant v Banque Franco-Egyptienne [1878] 3 CPD 202 applied – Whether threat of bankruptcy of applicants enough – Insufficient material to establish financial position of applicants – Supreme Court (General Civil Procedure) Rules 2005 (Vic) rr 64.25, 66.16.
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| APPEARANCES: | Counsel | Solicitors |
| For the Applicants | Mr O Bigos | Ravi James & Associates |
| For the Respondent | Mr G G McArthur SC with Ms R M Doyle | DLA Phillips Fox |
REDLICH JA:
I will ask Williams AJA to deliver the first judgment in this matter.
WILLIAMS AJA:
The application
The applicants seek a stay of costs orders made by Master Kings in relation to interlocutory applications in their ultimately unsuccessful proceeding against the respondent. They have given notice of an appeal in that proceeding but have not appealed from the Master's orders.
The application is made under r 64.25 of the Supreme Court (General Civil Procedure) Rules2005 (Vic). The relevant part of the rule is as follows:
64.25
Except so far as the Court of Appeal or a Judge otherwise orders -
(a)an appeal shall not operate as a stay of execution or of proceedings under the decision appealed from;
Counsel for the applicants concedes that the application should have been brought under r 66.16, given that the Master's orders are not the subject of any appeal. Rule 66.16 provides:
66.16
The court may stay execution of a judgment.
The applicants submit that, unless they are granted a stay of the costs orders, they will be bankrupted and prevented from prosecuting their appeal and from investigating or mounting a potential future challenge to what they characterise as a relevant ’decision‘ of an officer of the Commonwealth.
The material
Two affidavits of Mr Selvadurai Raveendran of the applicants’ solicitors have been filed in support of the application. There is no affidavit from either of the applicants. I note, in this regard, that the respondent's 18 February 2009 written submissions opposing the application criticised the applicants' affidavit material, arguing that there was insufficient evidence as to the financial situation of the applicants, neither of whom had gone on oath. That criticism was raised by the Court in the course of counsel for the applicants' oral submissions. Counsel for the applicants stated that the applicants could provide affidavits confirming those of their solicitor, but he did not produce any such material and no adjournment was sought for that purpose, or in order for the applicants to file any further material.
Mr Raveendran's 11 November 2008 affidavit exhibits correspondence between the parties' solicitors. It shows that, on 6 November 2008, the respondent's solicitors wrote seeking payment of the taxed costs ordered by the Master. The letter stated that, if payment were not made by 10 November 2008, the solicitors would 'move immediately to enforce the order against [the applicants] directly'.
The applicants' solicitors responded on 7 November 2008, referring to the appeal and stating their intention to apply for a stay of any costs order in the proceeding. They indicated that they would oppose any enforcement efforts attempted in the meantime as an abuse of process. In that letter, the applicants' solicitors also sought an adjournment of a directions hearing relating to the appeal until after the hearing of the stay application.
The respondent's solicitors replied on 10 November 2008, denying that there was any basis for a stay and seeking immediate payment of the costs. They indicated that they would oppose any adjournment of the directions hearing and asserted that the appeal lacked merit.
Mr Raveendran makes the following assertions as to the consequences of the enforcement of the costs orders in his 11 November 2008 affidavit:
13.I am informed by the Appellants and believe that if the costs orders are enforced against them there is a real risk that they could become bankrupt. If the Appellants are made bankrupt, their appeal will be stayed automatically and the decision whether to proceed with the appeal would, in the absence of the Court's leave, rest with the trustee(s) in bankruptcy and not the Appellants. There may be difficulties in persuading a trustee in bankruptcy to prosecute the appeal. Even if the trustee in bankruptcy prosecuted the appeal successfully, the Appellants would remain in bankruptcy unless the bankruptcy was terminated in accordance with the Bankruptcy Act 1966 (Cth). On the assumption that the appeal is successful and the costs orders below are set aside, in order to terminate the Appellants' bankruptcy it would be necessary, among other things, to pay all of the costs and expenses of the trustee in bankruptcy. I expect that these costs and expenses would be significant.
14.In the circumstances, the Appellants would suffer irremediable prejudice if the stay were not granted and they were unable to prosecute their appeal which could succeed.
15.In light of the above, a stay would not cause the Respondent any relevant prejudice whereas the refusal to grant a stay would cause the Appellants to suffer irremediable prejudice.
Mr Raveendran goes a little further in his 19 February 2009 affidavit when he says:
5.In my previous affidavit I stated that I was informed by the Appellants and believe that if the costs orders are enforced against them, there is a real risk that they could become bankrupt. On 17 February 2009 I made further enquiries with each Appellant and each of them informed me, and I believe, that they are not in a position to pay the sum of the taxed costs orders of $49,328.01.
In his 19 February 2009 affidavit, Mr Raveendran also states that senior counsel has been briefed to provide some advice in relation to the appeal. He asserts that the content of the advice is covered by legal professional privilege but states that it necessitates 'some further work'. In oral submissions, counsel for the applicants informed the Court that 'a new idea’ had emerged in relation to a possible challenge to the decision of the Commonwealth officer and that that idea might lead to a proceeding in the Federal Court with impact in relation to the appeal. He also foreshadowed that the appeal itself might have to be adjourned in the meantime. Beyond that no detail was provided.
Submissions
As has been noted, the applicants' solicitor submits that they would be irremediably prejudiced if the Master's costs orders were not stayed, claiming that his clients are not in a position to pay and the respondent is likely to serve a bankruptcy notice upon them. In that event, he contends that the appeal would not be prosecuted and the applicants would be unable to continue the related investigation or challenge.
Counsel for the applicants also submits that were the appeal to succeed, they might have the additional benefit of being in a position to set off their obligations under the subject orders against any amount of costs ultimately payable to them by the respondent. (I note that there is no suggestion that the respondent would be unable to meet any such costs order.)
Mr Raveendran argues, in effect, that the investigation of what he calls the Commonwealth officer's ’decision‘ (characterised as an advice by the respondent) is important because it was the primary factor upon which the trial judge relied when determining that the claimed declaratory relief sought would be futile. Counsel for the applicants concedes that there are two other factors relied upon by the trial judge when concluding that relief would be futile, but argues that the Commonwealth decision was a significant factor.
Counsel for the respondent submit that Mr Raveendran's statements that the applicants are ’not in a position to pay‘ the taxed costs and that ’there is a real risk that they may go bankrupt‘ if the orders are enforced are not supported by any evidence as to the facts upon which they are based. They rely upon this deficiency in the material, as well as the applicants' own failure to go on oath as to their financial position, to urge the Court not to accept the validity of either proposition.
Counsel for the respondent argue that there is no evidence as to how the applicants have funded steps already taken in the preparation for the appeal. They note such matters as the preparation of the summary, the filing and exchange of outlines of argument and the settling of the content of the appeal book. They also note the engagement of senior counsel to advise in the related matter.
Counsel for the respondent submit that the Court should refuse the application in the absence of proper evidence as to the applicants' financial situation. They cite Gangemi v Osborneand Anor,[1] where an application under r 64.25 was refused when the applicant for a stay had failed to go on oath, in circumstances where his ability to offer some moneys to the respondent and his ownership of property made this failure significant in the view of the Court.
[1][2008] VSCA 221.
Counsel for the respondent submit further that the applicants' prospects of success in the appeal are weak, relying upon the following matters:
(a)That the applicants failed to establish any one of the elements of their alleged cause of action in negligence and, most significantly, failed to persuade the trial judge that they were owed a duty of care. (Senior counsel pointed out in his oral submissions that, in an appeal, the applicants would have to establish that the learned trial judge had been wrong on each of these matters, in order to succeed; that would be very difficult.)
(b)That the applicants' conduct was found by the trial judge to be illegal and a barrier to their claim.
(c)That the declaratory relief the applicants had sought below was refused on the grounds of its futility and that they now sought a different form of declaration in an Amended Notice of Appeal, but had not obtained leave to amend.
(d)That the relief the applicants intend to now seek to make would be similarly futile.
Counsel for the respondent submit that it should be inferred that the purpose of the appeal is to delay the payment of costs and that the stay is sought to fund an investigation which is not part of the appeal process.
The respondent argues that the foreshadowed challenge is contrary to the applicants' position at trial. There, according to its submissions, the applicants led evidence about the effect of the Commonwealth officer's position, relied upon that material as a basis for their argument that vehicle re-shelling should never have been allowed, and failed to cross-examine that officer, Mr Robertson, as to the validity of his ’decision‘. Counsel for the respondent submit that the applicants' desire to investigate the challenge should not lead to a stay.
Counsel for the applicants replies that the question of the validity of Mr Robertson's ’decision‘ is a matter of public importance because of its Australia wide ramifications. He contends that a challenge might attract funding from others affected. Its significance should be taken into account in the exercise of the Court's discretion.
Counsel for the respondent answer that the ’decision‘ has been in place for over four years and the applicants have adduced no evidence as to the existence of any other challenge or any interest in a challenge by an identified third party. The public interest argument has not been made out, according to them.
Relevant legal principles
The Court has an inherent jurisdiction to stay execution. It is required to take into account all the circumstances of the case and is not bound by decisions on other sets of facts.[2]
[2]Joskovitz v Bonnick [1964] VR 654, 656 (Herring CJ).
The starting point in relation to the Court's discretion is that a party who obtains a judgment is entitled to have it enforced without delay.[3] The circumstances justifying a stay are those which go to the enforcement of the judgment and not to its validity or correctness.[4]
[3]State Bank of Victoria v Parry [1989] WAR 240, 244 (Malcolm CJ); Re Middle Harbour Investments Ltd (In Liq) (Unreported, Supreme Court of New South Wales, Court of Appeal, Mahoney JA, 15 December 1976, 2).
[4]TC Trustees Ltd v JS Darwen(Successors) Ltd [1969] 2 QB 295; State Bank of Victoria v Parry [1989] WAR 240, 244 (Malcolm CJ).
Stays under r 66.16 and equivalent provisions have been granted in situations such as those in which determinations of related[5] or third party proceedings[6] were pending.
[5]Reading Entertainment Australia Pty Ltd v Burstone Victoria Pty Ltd (No. 2) [2005] VSC 137.
[6]See State Bank of Victoria v Parry [1989] WAR 240.
The possibility of setting off obligations under a costs order against some future order in favour of an applicant has been proffered as the justification for a stay. This was the case in Grant v Banque Franco-Egyptienne[7] where a stay of costs orders associated with an application was sought on the basis that the amount payable could be set off against costs which might be payable if the applicant were successful in the action. The application was refused, and Jessell MR (with whom Cotton and Thesiger LJJ agreed) said:
It was quite unheard of, in Courts where the practice of several taxations prevailed, that the mere chance of the litigant obtaining costs upon a decision at some subsequent stage of the case was to prevent his paying the costs already ordered to be paid under a separate judgment. Certainly no such rule ever existed in the old Court of Chancery and no such practice has been established under the Judicature Act; it does not seem to me that we ought to establish any such practice and that part of the application ought to fail.[8]
[7][1878] 3 CPD 202.
[8][1878] 3 CPD 202, 205; see also Eastman v Wilson [1938] VLR 83 where Grant was followed.
A similar application was met with a different fate in Re UTSA Pty Ltd (in liquidation),[9] where Chernov J distinguished the facts in Grant from those before the court. His Honour awarded a short stay of an order for costs in favour of liquidators who were obliged to pay costs, yet to be taxed, to the applicant in another proceeding.
[9]Unreported, Supreme Court of Victoria, Chernov J, 26 June 1998.
Chernov J emphasised the width of the Court's discretion to grant a stay under r 66.16 in a proper case.[10] He considered the circumstances of the case, referring to the fact that there was no further step to be taken before the applicant became entitled to the costs ordered in its favour, which were to be taxed within a matter of months only. His Honour cited the lack of material which might reasonably have been expected from the liquidators as to their asserted ability to satisfy their obligations. He granted the stay, having concluded, in all the circumstances of the litigation between the parties, that there was a reasonable basis for the applicant's concern about the liquidators’ ability to meet their obligations and a reasonable risk of prejudice to it if the stay were not granted.
[10]Ibid 2, 4.
If the application were one made under r 64.25 for a stay pending an appeal of the subject orders, the applicants would be required to establish ’special circumstances‘ warranting the grant of a stay.[11] The prospect of an appellant's bankruptcy has been held to constitute such special circumstances.[12]
[11]See: Cellante and ors v G. Kallis Industries Pty Ltd [1991] 2 VR 653, 655 (Young CJ, Brooking J agreeing); Maher and Anor v Commonwealth Bank of Australia and Anor [2008] VSCA 122, [21] (Dodds-Streeton JA, Redlich JA agreeing).
[12]See: McMahon v National Foods Milk Ltd [2008] VSCA 237; Orrong Strategies Pty Ltd and Ors v Village Roadshow Ltd [2007] VSCA 320; Narain v Euroasia (Pacific) Pty Ltd [2008] VSCA 195; Chen v Chan (Unreported, Supreme Court of Victoria, Court of Appeal, Maxwell P and Dodds‑Streeton JA, 21 December 2007) and Li v Herald & Weekly Times Pty Ltd. [2008] VSCA 2001.
In Narain v Euroasia (Pacific) Pty Ltd, Ashley JA explained:
The foreshadowed making of a bankruptcy order, by its effect upon the ability of an appellant to prosecute an appeal, and by its reputational impact, may have the effect of rendering the appeal nugatory and so constitute special circumstances justifying a stay on execution.[13]
[13][2008] VSCA 195.
The Court must, nevertheless, take all the circumstances into account when determining in the exercise of its discretion whether, indeed, the insolvency of an applicant is likely to prevent an appeal and constitute the requisite ’special circumstances‘ for the purpose of an application under r 64.25.
Whilst generally avoiding speculation about the prospects of success, the court considering a stay application in relation to an order the subject of an appeal will make a preliminary assessment as to whether the applicant has an arguable case, in order to protect a judgment debtor from a hopeless appeal designed to delay execution.[14]
[14]Alexander & Ors v Cambridge Credit Corporation Ltd (Receivers appointed) & Anor [1985] 2 NSWLR 685, 695 (Kirby P, Hope and McHugh JJ); see also: Orrong Strategies Pty Ltd and Ors v Village Roadshow Ltd [2007] VSCA 320, [10] (where the Court could not say prospects of appeal were ’near hopeless‘) and Narain v Euroasia (Pacific) Pty Ltd [2008] VSCA 195, [25]-[26] (where the Court considered whether points were arguable).
Conclusions
As counsel for the respondent submit, the applicants have not adduced sufficient evidence to support Mr Raveendran's assertion that they would be bankrupted in the absence of a stay in relation to the costs orders made by the Master. Counsel have pointed out the manifest deficiencies in the material filed in support of the application in this regard. Most significantly, the applicants have not gone on oath, nor have they provided any detailed information as to their financial situation. Furthermore, the applicants have not filed any additional material in response to the criticisms made nor have they sought additional time to do so.
Mr Raveendran's assertion that the applicants are not ’in a position to pay‘ the amount presently sought is uninformative and open to various constructions, not all of which would assist the applicants' case. The materials do not even contain an express assertion that the applicants are and will remain unable to pay that sum. There is, on the other hand, evidence suggesting that legal costs have been incurred in relation to the appeal and in relation to the separate investigation of the challenge to the Commonwealth ’decision‘.
The lack of information about any assets or financial situation of the applicants or as to whether they have access to funds also makes it impossible for the Court to reach any conclusion as to whether their bankruptcy would result in the trustee declining to pursue either the appeal or the mooted challenge.
If the applicants had satisfied the Court of the likelihood of their bankruptcy with the attendant threats, it would have been appropriate to consider whether they had at least an arguable case in the appeal, in order to determine whether they would have indeed sustained any prejudice by reason of any inability to prosecute it.
It should be noted in this regard that the applicants now seek a different form of declaratory relief from that claimed below. As a result, they must surmount the additional hurdle of the need to obtain leave to amend their Notice of Appeal. Any application for leave would also face the problem that the applicants had failed to challenge the validity of the Commonwealth process at trial. The trial judge's finding as to the illegality of their operations is also very problematic for them.
As far as the negligence claim is concerned, the applicants are confronted with the formidable obstacle of the trial judge's conclusion that they had not established any element of the tort and his significant factual finding that loss they sustained before their business ceased operations resulted from them being injuncted from continuing to trade before the impugned guidelines came into operation.
It would appear that the respondent's submissions that the applicants' prospects of success in the appeal are weak at best, is correct.
As far as the merits of the arguments relating to the potential challenge to the Commonwealth ’decision‘ are concerned, the Court has been given insufficient detail of the basis for such a challenge to be able to make any assessment of its prospects or any consequential prejudice to the applicants if they are unable to pursue the matter in the absence of a stay. If the matter does not depend upon any more evidence than that which was before the trial judge, then some outline of the content of legal submissions might have been expected.
The applicants, in any event, have failed to establish that they are likely to be made bankrupt. Accordingly, they have failed to establish the factual underpinning for proof of the claimed resulting prejudice in terms of their asserted inability to prosecute the appeal or to mount the foreshadowed challenge to the Commonwealth ’decision‘.
The application should be dismissed.
REDLICH JA:
For the reasons given by Williams AJA, I agree that the application must be dismissed. I would make the following additional observations.
If the applicants had established on sufficient material that there may have been a real risk of bankruptcy if execution on each of the Master's orders was not stayed, it did not necessarily follow that the application should be granted. First, as the recent decision of this Court in Besan Investments v Schmee[15] illustrates, even where there is a real risk of bankruptcy if execution on a judgment is not stayed, the weight to be accorded to that factor will vary from case to case. In the present case, as Williams AJA explains, no satisfactory material was placed before us as to the applicants' circumstances so as to enable any proper determination to be made as to the significance of any threat of insolvency. During the course of argument by counsel for the applicants, who said all that could be said in support of the applications, he referred to the applicants obtaining funds from some other source which was not disclosed, these funds being used, as Williams AJA points out, to pursue this new line of enquiry. The failure to provide or identify any explanation for this new source of funds engenders further disquiet as to the financial status of the applicants. Second, the absence of such material prevents any meaningful assessment of why the costs orders made by the Master were not paid. Each order is final and will not be affected by the appeal. If, as the respondent surmises, the reason for the application for a stay was that the applicants are using those moneys to fund the present appeal, then the prospects of success of the appeal and of the applicants receiving a sum of money which would exceed the moneys owing under the costs order becomes a more pertinent consideration than might otherwise be the case. Here monies paid in satisfaction of the orders made by the Master are not at risk of being lost in the hands of a judgment creditor. This is not a case where there
is an apparent real prospect of the applicants receiving a sum of money against which the costs orders upon could be set off. The case of UTSA to which Williams AJA has referred, is in that regard, plainly distinguishable. None of these matters were put in issue on the application. Rather, the applicants chose to rely upon the prospect that the declaration which they would now seek from the Court of Appeal, if granted, might produce a costs order in their favour which could be set off against the costs orders the subject of the stay application. Alternatively the applicants now rely on the possibility of new proceedings in the Federal Court which, if successful, might undermine one of the bases upon which the trial judge concluded that it would be futile to grant the declaration sought, if contrary to his primary finding, the relevant guidelines were ultra vires. I agree, for the reasons Williams AJA has given, that neither of these considerations can carry any weight, as we were given no information and heard no argument which would enable this Court to make a meaningful assessment of the merits of these matters.
[15][2008] VSCA 251.
In the light of the material relied upon by the applicants, I agree with Williams AJA that the only appropriate course is that the application should be dismissed.
REDLICH JA:
The orders we shall make will be as follows:
1. By consent, orders 2, 3 and 4 of the Honourable Justice Vickery made 30 September 2008 be stayed until the hearing and determination of the appeal or further order.
2.The application for a stay of the orders made by Master Kings on 31 August 2007, on 10 October 2007 and 22 April 2008 be dismissed.
3.The applicants pay the respondent's costs of this application.
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