Scott and Scott (No 2)

[2018] FamCA 626

FAMILY COURT OF AUSTRALIA

SCOTT & SCOTT (NO 2) [2018] FamCA 626

FAMILY LAW – PRACTICE AND PROCEDURE – Stay – Application by the wife seeking a stay of interlocutory and interim property orders pending the determination of an appeal – Where orders had been made for the sale of a business and the appointment of Receiver and Manager – Consideration of the hardship to each of the parties if the stay is refused and if the stay is granted – Whether the failure to grant a stay would render an appeal nugatory – Application for stay is dismissed.

Family Law Act (Cth) 1975

APPLICANT: Ms Scott

RESPONDENT: Mr Scott

FILE NUMBER: CRC 105 of 2016

DATE DELIVERED: 20 August 2018

PLACE DELIVERED: Newcastle

PLACE HEARD: Newcastle

JUDGMENT OF: Cleary J

HEARING DATE: 2 August 2018

REPRESENTATION

COUNSEL FOR THE APPLICANT: Mr Priestley SC

SOLICITOR FOR THE APPLICANT: Fishburn Watson O’Brien

COUNSEL FOR THE RESPONDENT: Mr Barolan

SOLICITOR FOR THE RESPONDENT: Green & McKay

Orders

1. The application for a stay filed by the wife on 22 May 2018 is dismissed.

Note: The form of the order is subject to the entry of the order in the Court’s records.

IT IS NOTED that publication of this judgment by this Court under the pseudonym Scott & Scott (No. 2) has been approved by the Chief Justice pursuant to s 121(9)(g) of the Family Law Act 1975 (Cth).

Note: This copy of the Court’s Reasons for Judgment may be subject to review to remedy minor typographical or grammatical errors (r 17.02A(b) of the Family Law Rules 2004 (Cth)), or to record a variation to the order pursuant to r 17.02 Family Law Rules 2004 (Cth).

FAMILY COURT OF AUSTRALIA AT NEWCASTLE

FILE NUMBER: CRC 105 of 2016

Ms Scott

Applicant

And

Mr Scott

Respondent

REASONS FOR JUDGMENT

Introduction

1. This is an application for a stay of interlocutory and interim orders made by this Court after hearing on 11 May 2018 (“the 11 May orders”).

2. The applicant for the stay is the applicant in the hearing, Ms Scott, whom I shall refer to as “the wife”. 

3. An appeal, together with an application for leave to appeal, was lodged by the wife on 16 May 2018.  A date for a first appearance before the appeals registrar is yet to be advised. 

4. On 22 May 2018, the application for a stay was filed and made returnable on 2 August 2018.  There was no application to bring that date forward.

Evidence 

1. The documents relied on in these proceedings are as follows:

For the applicant wife:

a)Application in a Case filed 22/05/2018;

b)Affidavit of the wife, Ms Scott, filed 22/05/2018;

c)Affidavit of the wife, Ms Scott, filed 31/07/2018; and

d)Wife’s outline on application for stay of interim orders;

e)Notice of Appeal filed 16/05/2018;

f)Orders and reasons for decision dated 11/05/2018;

For the husband:

g)Response to an Application in a Case filed 24/07/2018;

h)Affidavit of the respondent, Mr Scott, filed 25/07/2018;

i)Affidavit of the husband filed in court on 2/08/2018.

Application by Receivers

1. There was also an application in a case returnable on 2 August 2018 by the receivers appointed to the corporate entities owned by the parties.  That application was supported by an affidavit of one of the receivers, Mr B, filed 1 August 2018.  The report annexed to that affidavit was relied on and referred to in the proceedings.

Nature of Application

1. The application is for a stay of all the 11 May orders including for the sale of a business (KC) on the north coast of New South Wales.

2. Receivers and managers were appointed by the 11 May orders to the family trust and corporate entity which is responsible for running a business, K Centre (“KC”).  The receivers prepared a report to the Court.  That business is managed by the applicant wife.  Previously, the husband had his business there.

3. The application is opposed by the respondent husband, Mr Scott. 

Granting of a Stay

1. A stay is not granted lightly and is at the discretion of the Court.[1]

   [1] Rule 22.11 Family Law Rules 2004

2. The relevant considerations arise from authorities, which highlight the significance of: the merits of an appeal, the entitlement of a party to the fruits of a judgment, whether a stay would render an appeal nugatory, hardship caused to either party by the granting or refusal of the stay and any other relevant matter. 

The merits of the Appeal

1. For the purposes of this stay, it need only be said that the appeal was lodged in a timely way and is at least arguable on some of the 20 grounds put forward.  However, the grounds tend to relate to the contentions which will inform the final trial rather than establishing errors of fact or law.

Hardship

1. Hardship is a consideration here. 

2. If the orders were stayed, one consequence would be that the previous manager of the business, Mr L, could be restored.  The Court was advised that Mr L is said to be willing to return.

3. The background to the appointment of Mr L and the impact and circumstances of the withdrawal of the husband from KC are set out in the reasons for judgment from the 11 May 2018 hearing.[2] 

   [2] Reasons for Judgment dated 11/05/2018, pars 32-43

4. In costs alone, there would be considerable hardship to both parties in switching back to the earlier manager with the obligation, of course, to pay current managers. 

5. However, the reason for change of receivers and managers is of even greater weight. The change related to insolvency, whether KC was able to pay its debts as they fell due. 

6. The attitude of the wife and the manager to this issue had, it seemed to me, been focused on the perceived fault of the husband in depriving the business of his income rather than on the reality that the business was either insolvent or inevitably about to be.

7. It was fairly conceded by counsel for the husband that right at the moment of this application for  stay being heard, the business might be “struggling along”, but although covering its immediate operating costs, it was not generating sufficient funds to pay a number of other liabilities.[3]

   [3] Receiver’s Report dated 27/07/2018, par 4

8. KC does not pay market rent and is drawing on the parties’ personal superannuation funds.  Staff superannuation is not being paid.  There are substantive debts to two banks.  The receivers and managers have strongly recommended sale in their report to the Court.

Will Refusal of the Stay Render the Appeal Nugatory?

1. The argument that the appeal will be rendered nugatory if this asset (KC) is sold must give way to the obligation to preserve the assets of the parties for a final trial or negotiated settlement.

2. KC, as an asset, is diminished. Value is yet to be determined.  The wife is employed in KC as a business manager.  If the business were sold, she may or may not continue to manage it, depending on the attitude of the purchasers.

3. The May 2018 orders provided for each party to have the right to bid when the business was sold.

4. On behalf of the wife, it was submitted that she would have difficulty financing the purchase.  That is likely to be so and was acknowledged in the reasons for judgment.  If it is so, acquiring the business is likely to be unrealistic, nevertheless the opportunity is there.

5. The argument in relation to the appeal being rendered nugatory would carry more weight if the sale of the family home was in contemplation, but this is a business, and the wife has a job there.  Her skills are capable of being applied to another position.

6. I have come to the conclusion that it is not appropriate to grant a stay for the reasons above.

7. Orders are made accordingly.

I certify that the preceding twenty-seven (27) paragraphs are a true copy of the reasons for judgment of the Honourable Justice Cleary delivered on 20 August 2018.

Associate: 

Date:  20 August 2018