Smolarek v McMaster

[2006] WASCA 216

SMOLAREK & ANOR -v- BRIAN KEITH McMASTER AS ADMINISTRATOR OF EZNUT PTY LTD & ANOR [2006] WASCA 216

Jurisdiction:	SUPREME COURT OF WESTERN AUSTRALIA	Citation No:	[2006] WASCA 216
Court:	THE COURT OF APPEAL (WA)
Case No:	CACV:90/2006	Heard:	29 SEPTEMBER 2006
Coram:	BUSS JA	Delivered:	26/10/06
No of pages:	21	Judgment Part:	1 of 1
Result:	Application for interim relief dismissed
Category:	B
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Parties:	HANNA SMOLAREK CHRISTINA SMOLAREK BRIAN KEITH McMASTER AS ADMINISTRATOR OF EZNUT PTY LTD (ACN 102 508 789) OREN ZOHAR AS ADMINISTRATOR OF EZNUT PTY LTD (ACN 102 508 789)
Catchwords:	Appeal Application for interim orders to stay declaration and vacate or stay costs order made by trial Judge Turns on own facts
Legislation:	Civil Judgments Enforcement Act 2004 (WA) s 15 Corporations Act 2001 (Cth), s 447A, s 447C
Case References:	Albarran v Pascoe (2006) 57 ACSR 451 Bunnings Forest Products Pty Ltd v Bullen (1994) 54 FCR 342 Eastland Technology Australia Pty Ltd v Whisson (2003) 28 WAR 308 Hamersley Iron Pty Ltd v Lovell (No 2) (1998) 20 WAR 79 Kwa v Bank of Western Australia [2003] WASCA 163 Ladang Jalong (Australia) Pty Ltd v Callander [2005] WASCA 2003 Smolarek v Liwszyc (2006) 32 WAR 101 Smolarek v Liwszyc (No 2) (2006) 32 WAR 129 Stellar Call Centres Pty Ltd v CPSU, Community & Public Sector Union [1999] FCA 1236 The Roosters Club Inc v The Northern Tavern Pty Ltd (No 2) [2003] SASC 143 Aloridge Pty Ltd (prov liq apptd) v Christianos (1994) 13 ACSR 99 Argyle Art Centre Pty Ltd v Argyle Bond & Free Stores Co Pty Ltd [1976] 1 NSWLR 377 Bailey v Marinoff (1971) 125 CLR 529 Bay Marine Pty Ltd v Clayton Country Properties Pty Ltd (1986) 8 NSWLR 104 Boulting v Association of Cinematograph Television & Allied Tehcnicians [1963] 2 QB 606 Cachia v Hanes (1994) 120 ALR 385 Cadwallader v Bajco Pty Ltd [2002] NSWCA 328 Castanho v Brown & Root (UK) Ltd [1980] 1 WLR 833 Castanho v Brown & Root (UK) Ltd [1981] AC 557 Chu Kheng Lim v Minister for Immigration, Local Government and Ethnic Affairs (1992) 176 CLR 1 Commissioner for Railways (NSW) v Cavanough (1935) 53 CLR 220 D'Emden v Pedder (1904) 1 CLR 91 DJL v Central Authority (2000) 201 CLR 226 Easterday v Western Australia (2005) 30 WAR 122 Foss v Harbottle (1843) 2 Hare 461 Grassby v The Queen (1989) 168 CLR 1 Gundry v Sainsbury [1910] 1 KB 645 Hall v Mercury Information Technology (South Australia) Pty Ltd (2002) 20 ACLC 496 Hunter v Chief Constable of the West Midlands Police [1982] AC 529 Immer (No 145) Pty Ltd v Uniting Church in Australia Property Trust (NSW) (1993) 182 CLR 26 J v L & A Services Pty Ltd [1993] 2 Qd R 380 Jago v District Court of New South Wales (1988) 12 NSWLR 558 Jago v District Court of New South Wales (1989) 168 CLR 23 John Fairfax & Sons Ltd v Police Tribunal of New South Wales (1986) 5 NSWLR 465 Kable v The Director of Public Prosecutions for the State of New South Wales (1996) 189 CLR 51 Kalifair Pty Ltd v Digi-Tech (Aust) Ltd (2002) 55 NSWLR 737 Lange v Australian Broadcasting Corporation (1997) 189 CLR 520 Latoudis v Casey (1990) 170 CLR 534 Leeth v The Commonwealth of Australia (1992) 174 CLR 455 Mabo v Queensland (No 2) (1992) 175 CLR 1 Moevao v Department of Labour [1980] 1 NZLR 464 Musarri v Director of Public Prosecutions [2002] WASCA 28 Packer v Meagher [1984] 3 NSWLR 486 Peninsular and Oriental Steam Navigation Company v Johnson (1938) 60 CLR 189 Production Spray Painting & Panel Beating Pty Ltd v Newnham [No 2] (1992) 27 NSWLR 659 R v Sang [1980] AC 402 Re Nolan; Ex parte Young (1991) 172 CLR 460 Re Septimus Parsonage & Co [1901] 2 Ch 424 Rodger v Comptoir d'Escompte de Paris (1871) LR 3 PC 465 Salgo v Hoffman 521 S.W.2d 922 Tex.Civ.App - Dallas, 1975 Salomon v Salomon & Co Ltd [1897] AC 22 Scott v Scott [1913] AC 417 Secure Parking (WA) Pty Ltd v Wilson [2006] WASCA 135 Sillery v The Queen (1981) 180 CLR 353 Tait v The Queen (1962) 108 CLR 620 The Commissioner of Taxation of the Commonwealth of Australia v The Myer Emporium Ltd (No 1) (1986) 160 CLR 220 The Commonwealth of Australia v McCormack (1984) 155 CLR 273 TJM Products Pty Ltd v A & P Tyres Pty Ltd (1987) 17 FCR 390 Walton v Gardiner (1993) 177 CLR 378 Wynsix Hotels (Oxford St) Pty Ltd v Toomey [2004] NSWSC 236

JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA TITLE OF COURT : THE COURT OF APPEAL (WA) CITATION : SMOLAREK & ANOR -v- BRIAN KEITH McMASTER AS ADMINISTRATOR OF EZNUT PTY LTD & ANOR [2006] WASCA 216 CORAM : BUSS JA HEARD : 29 SEPTEMBER 2006 DELIVERED : 26 OCTOBER 2006 FILE NO/S : CACV 90 of 2006 BETWEEN : HANNA SMOLAREK

First Appellant

CHRISTINA SMOLAREK
Second Appellant

AND

BRIAN KEITH McMASTER AS ADMINISTRATOR OF EZNUT PTY LTD (ACN 102 508 789)
First Respondent

OREN ZOHAR AS ADMINISTRATOR OF EZNUT PTY LTD (ACN 102 508 789)
Second Respondent

ON APPEAL FROM:

Jurisdiction : SUPREME COURT OF WESTERN AUSTRALIA

Coram : SIMMONDS J

Citation : BRIAN KEITH MCMASTER AS ADMINISTRATOR OF EZNUT PTY LTD

(Page 2)

(ADMINISTRATORS APPOINTED) & ANOR -v- EZNUT PTY LTD (ADMINISTRATORS APPOINTED) & ORS [2006] WASC 109

File No : COR 16 of 2006

Catchwords:

Appeal - Application for interim orders to stay declaration and vacate or stay costs order made by trial Judge - Turns on own facts

Legislation:

Civil Judgments Enforcement Act 2004 (WA) s 15

Corporations Act 2001 (Cth), s 447A, s 447C

Result:

Application for interim relief dismissed

Category: B

Representation:

Counsel:

First Appellant : In person
Second Appellant : In person
First Respondent : Mr J C Vaughan
Second Respondent : Mr J C Vaughan

Solicitors:

First Appellant : In person
Second Appellant : In person
First Respondent : Christensen Vaughan
Second Respondent : Christensen Vaughan

(Page 3)

Case(s) referred to in judgment(s):

Albarran v Pascoe (2006) 57 ACSR 451
Bunnings Forest Products Pty Ltd v Bullen (1994) 54 FCR 342
Eastland Technology Australia Pty Ltd v Whisson (2003) 28 WAR 308
Hamersley Iron Pty Ltd v Lovell (No 2) (1998) 20 WAR 79
Kwa v Bank of Western Australia [2003] WASCA 163
Ladang Jalong (Australia) Pty Ltd v Callander [2005] WASCA 2003
Smolarek v Liwszyc (2006) 32 WAR 101
Smolarek v Liwszyc (No 2) (2006) 32 WAR 129
Stellar Call Centres Pty Ltd v CPSU, Community & Public Sector Union [1999] FCA 1236
The Roosters Club Inc v The Northern Tavern Pty Ltd (No 2) [2003] SASC 143

Case(s) also cited:

Aloridge Pty Ltd (prov liq apptd) v Christianos (1994) 13 ACSR 99
Argyle Art Centre Pty Ltd v Argyle Bond & Free Stores Co Pty Ltd [1976] 1 NSWLR 377
Bailey v Marinoff (1971) 125 CLR 529
Bay Marine Pty Ltd v Clayton Country Properties Pty Ltd (1986) 8 NSWLR 104
Boulting v Association of Cinematograph Television & Allied Tehcnicians [1963] 2 QB 606
Cachia v Hanes (1994) 120 ALR 385
Cadwallader v Bajco Pty Ltd [2002] NSWCA 328
Castanho v Brown & Root (UK) Ltd [1980] 1 WLR 833
Castanho v Brown & Root (UK) Ltd [1981] AC 557
Chu Kheng Lim v Minister for Immigration, Local Government and Ethnic Affairs (1992) 176 CLR 1
Commissioner for Railways (NSW) v Cavanough (1935) 53 CLR 220
D'Emden v Pedder (1904) 1 CLR 91
DJL v Central Authority (2000) 201 CLR 226
Easterday v Western Australia (2005) 30 WAR 122
Foss v Harbottle (1843) 2 Hare 461
Grassby v The Queen (1989) 168 CLR 1
Gundry v Sainsbury [1910] 1 KB 645
Hall v Mercury Information Technology (South Australia) Pty Ltd (2002) 20 ACLC 496
Hunter v Chief Constable of the West Midlands Police [1982] AC 529
Immer (No 145) Pty Ltd v Uniting Church in Australia Property Trust (NSW) (1993) 182 CLR 26

(Page 4)

J v L & A Services Pty Ltd [1993] 2 Qd R 380
Jago v District Court of New South Wales (1988) 12 NSWLR 558
Jago v District Court of New South Wales (1989) 168 CLR 23
John Fairfax & Sons Ltd v Police Tribunal of New South Wales (1986) 5 NSWLR 465
Kable v The Director of Public Prosecutions for the State of New South Wales (1996) 189 CLR 51
Kalifair Pty Ltd v Digi-Tech (Aust) Ltd (2002) 55 NSWLR 737
Lange v Australian Broadcasting Corporation (1997) 189 CLR 520
Latoudis v Casey (1990) 170 CLR 534
Leeth v The Commonwealth of Australia (1992) 174 CLR 455
Mabo v Queensland (No 2) (1992) 175 CLR 1
Moevao v Department of Labour [1980] 1 NZLR 464
Musarri v Director of Public Prosecutions [2002] WASCA 28
Packer v Meagher [1984] 3 NSWLR 486
Peninsular and Oriental Steam Navigation Company v Johnson (1938) 60 CLR 189
Production Spray Painting & Panel Beating Pty Ltd v Newnham [No 2] (1992) 27 NSWLR 659
R v Sang [1980] AC 402
Re Nolan; Ex parte Young (1991) 172 CLR 460
Re Septimus Parsonage & Co [1901] 2 Ch 424
Rodger v Comptoir d'Escompte de Paris (1871) LR 3 PC 465
Salgo v Hoffman 521 S.W.2d 922 Tex.Civ.App - Dallas, 1975
Salomon v Salomon & Co Ltd [1897] AC 22
Scott v Scott [1913] AC 417
Secure Parking (WA) Pty Ltd v Wilson [2006] WASCA 135
Sillery v The Queen (1981) 180 CLR 353
Tait v The Queen (1962) 108 CLR 620
The Commissioner of Taxation of the Commonwealth of Australia v The Myer Emporium Ltd (No 1) (1986) 160 CLR 220
The Commonwealth of Australia v McCormack (1984) 155 CLR 273
TJM Products Pty Ltd v A & P Tyres Pty Ltd (1987) 17 FCR 390
Walton v Gardiner (1993) 177 CLR 378
Wynsix Hotels (Oxford St) Pty Ltd v Toomey [2004] NSWSC 236

(Page 5)

1 BUSS JA: This is an application by Hanna Smolarek ("Ms Smolarek") and her daughter, Christina Smolarek, who are the first and second appellants respectively in the present appeal, CACV 90 of 2006. The appeal is against the judgment of Simmonds J in COR 16 of 2006. The proceedings before his Honour were heard on 1 and 2 March 2006. Judgment was delivered on 16 June 2006: (2006) 58 ACSR 199.

2 Simmonds J made orders, relevantly:

(a) declaring that the appointment of the respondents to the present appeal, Mr McMaster and Mr Zohar, as administrators of a company, Eznut Pty Ltd ("Eznut") was valid; and

(b) requiring that Ms Smolarek pay the costs of Mr McMaster and Mr Zohar to be taxed.

3 The present application seeks interim orders, as follows:

(a) A stay of the declaration and the vacating of the costs order;

(b) Alternatively to par (a), a stay of the declaration and the costs order;

(c) An order that Mr McMaster and Mr Zohar pay Ms Smolarek $13,200 in "outstanding salaries".

4 An understanding of the issues in the present application may be assisted by a brief review of some earlier, related, proceedings and the proceedings under appeal.

The earlier, related, proceedings

5 In Smolarek v Liwszyc (2006) 32 WAR 101, Ms Smolarek and Christina Smolarek challenged, on appeal to this Court, several interlocutory orders made by a Judge of the Supreme Court (Hasluck J) in proceedings brought by David Liwszyc and Gheorghe Emil Duta against Ms Smolarek and Christina Smolarek. Eznut was joined as a necessary party to the appeal, but took no part in the proceedings. On 27 January 2006 Eznut went into voluntary administration pursuant to s 436A of the Corporations Act 2001 (Cth) ("the Act"). Leave was granted by this Court, under s 440D of the Act, for the appeal to proceed against Eznut. The orders which were challenged in the proceedings related primarily to the control of Eznut.

(Page 6)

6 At all material times Ms Smolarek has been a director of Eznut. Ms Smolarek and Mr Liwszyc were its founding directors. On 1 July 2003 Mr Duta was appointed as a director. Later, Mr Liwszyc and Mr Duta were purportedly removed as directors. There was a dispute as to whether their purported removal was valid. On 2 September 2005 Hasluck J ordered, relevantly, that Mr Liwszyc and Mr Duta be "reinstated forthwith as directors of Eznut".

7 The appeal against Hasluck J's orders was heard on 21 February 2006 and judgment delivered on 29 March 2006. This Court decided, relevantly for present purposes, that the appeal should be allowed, but only to the extent of setting aside the order made by his Honour for the reinstatement of Mr Duta as a director of Eznut. When the Court's reasons for decision were published, an issue arose as to whether this Court's order, setting aside his Honour's order for the reinstatement of Mr Duta as a director, should take effect from the date of its pronouncement by this Court or from the date of his Honour's order (namely, 2 September 2005). It was decided that the order of this Court, setting aside the order made by his Honour, should take effect from the date on which this Court's order was pronounced. See Smolarek v Liwszyc (No 2) (2006) 32 WAR 129.

The proceedings under appeal

8 Mr McMaster and Mr Zohar were appointed as the administrators of Eznut pursuant to resolutions passed by Mr Liwszyc and Mr Duta at a meeting of the board of directors of Eznut held on 27 January 2006. It appears that Ms Smolarek was not in attendance at the meeting.

9 On 8 February 2006, Mr McMaster and Mr Zohar, in their capacity as administrators of Eznut, commenced proceedings in the Supreme Court (COR 16 of 2006) against Eznut (as first defendant), Ms Smolarek (as second defendant), Christina Smolarek (as third defendant) and Mr Liwszyc and Mr Duta (as fourth defendants). Mr McMaster and Mr Zohar sought relief, as follows:

"A declaration in accordance with s 447C(2) of the Corporations Act 2001 that the plaintiffs were validly appointed as administrators of the first defendant under s 436A of the Corporations Act 2001 on 27 January 2006 despite doubts, on the following specified grounds as raised by the second defendant (a director of the first defendant), about whether the appointment is valid, namely, that the resolution of the first defendant's directors made 27 January 2006 was invalid in that:

(Page 7)

(1) the resolution was outside the powers of the fourth defendants as directors of the first defendant as they were mere caretakers appointed pursuant to an interlocutory order of this Honourable Court made 2 September 2005 in action COR 144 of 2005 which order is the subject of an appeal;

(2) the resolution was not bona fide and genuinely formed;

(3) the resolution was made for an improper purpose;

(4) the second defendant was not given notice of the meeting of the first defendant's directors at which the resolution was passed.

Alternatively, an order in accordance with s 447A(1) of the Corporations Act that Part 5.3A of the Corporations Act 2001 is to operate in relation to the first defendant as if the plaintiffs had been validly appointed as administrators of the first defendant on 27 January 2006 under s 436A of the Corporations Act 2001."

10 I have mentioned that COR 16 of 2006 was tried before Simmonds J on 1 and 2 March 2006 and that his Honour delivered judgment on 16 June 2006: (2006) 58 ACSR 199. His Honour held, relevantly:

(a) The directors of Eznut who voted in favour of the resolution to appoint an administrator to the company had properly formed the opinion described in s 436A(1)(a) of the Act.

(b) The resolution for the appointment of an administrator was not made for an improper purpose in contravention of s 435A of the Act.

(c) In the circumstances, notice of the meeting which occurred on 27 January 2006, provided shortly before the meeting itself, was "reasonable" within s 248C of the Act.

(d) There was no relevant prejudice to any party from the making of the order sought under s 447A(1) of the Act.

11 Simmonds J made orders, relevantly for present purposes, as follows:
(Page 8)

"1. Pursuant to s 447C(2) of the Corporations Act 2001, the appointment of the plaintiffs as administrators of the first defendant on 27 January 2006 by an instrument of appointment dated 27 January 2006 following resolution of the first defendant's directors made 27 January 2006 validly appointed the plaintiffs as administrators of the first defendant under s 436A of the Corporations Act 2001.

2. The second defendant pay the plaintiffs' costs of the application (including all reserved costs), to be taxed and paid forthwith.

…"

12 I should mention that, on 13 April 2006, Ms Smolarek and Christina Smolarek filed an application in the Supreme Court to re-open the proceedings before Simmonds J. The nature of that application was described by his Honour, at 211 [57] - [59], as follows:

" … On 13 April 2006 the second and third defendants filed an application to re-open the proceedings to permit the Court to take account of the decision of the Court of Appeal in Smolarek [Smolarek v Liwszyc (2006) 32 WAR 101], as well as to consider whether the decision would be backdated (which Smolareksupplementary [Smolarek v Liwszyc (No 2) (2006) 32 WAR 129] subsequently resolved in the negative), her claims that minutes of the first creditors meeting had been falsified, and that the administrators had closed out the company's bank account, spending the Eznut company’s money. As a result of a process of conferral between the plaintiffs (the respondents to the application) and the second defendant (the applicant), it was agreed I could deal with that application on the papers, which I understood to consist of the second defendant's application to re-open, her supporting affidavit sworn 13 April 2006, her written submissions, and the written submissions of the plaintiffs.

The plaintiffs consented to the reasons for decision of the Court of Appeal in Smolarek being referred to me, together with a covering letter containing submissions limited to the implications of that decision for COR 16 of 2006. There was no such covering letter sent to me. However, as the written

(Page 9)

submissions of the second defendant addressed the matter of the effect of the decision in Smolarek,I consider the consent of the plaintiffs allowed for me to take account of the reasons for the eventual decision in Smolareksupplementary.

The plaintiffs submitted, however, in opposition to the application to re-open in any other respect, that the matters of the minutes of the first creditor's meeting and the spending of the Eznut Company's money should not be entered into as the second defendant would have me do. Those matters it was submitted had occurred before the hearing before me that began on 1 March 2006. A number of the arguments made in relation to them were ones which were open to the second defendant at that hearing, and indeed, as I will indicate, were gone into at that hearing."

His Honour accepted the submissions made on behalf of Mr McMaster and Mr Zohar, and concluded, at 213 [69]:

" … save to allow for my consideration of the reasons for decision in Smolarek and Smolarek supplementary (which does not require any further appearances or submissions), I do not grant the application to re-open."

The present appeal

13 The present appeal is against both Simmonds J's orders in relation to the substantive application by Mr McMaster and Mr Zohar (see [11] above) and in relation to the application to re-open made by Ms Smolarek and Christina Smolarek (see [12] above).

14 On 25 August 2006 Ms Smolarek and Christina Smolarek attempted to file the "appellant's case" in the present appeal. It was not accepted for filing because it did not comply with r 32 of the Supreme Court (Court of Appeal) Rules 2005. A substitute "appellant's case" was filed on 3 October 2006, after the hearing of the present application.

The present application

15 The present application was filed on 11 August 2006, and is expressed, as follows:

"The applicant applies for orders to -

(Page 10)

1. Vacate the following orders made by Simmonds J on 16/6/06:

• Order 2 in response to the originating process and

• Order 2 of the interlocutory process;


2. Stay order 1 in response to the originating process made by Simmonds J on 16/6/06, pending outcome of the appeal + 28 days:

As an alternative,

3. Stay the following orders made by Simmonds J on 16/6/06, pending outcome of the appeal + 28 days:


• Orders 1-2 in response to the originating process and

• Order 2 of the interlocutory process;


In any event,

4. The Respondents pay the First Applicant 3 out of her outstanding salaries totalling $13,200 within one week from the pronouncement of these orders;

5. Costs of the application be reserved; …"

16 Ms Smolarek and Christina Smolarek rely, in support of the application, on four affidavits sworn by Ms Smolarek. The first affidavit was sworn on 11 August 2006, the second on 29 August 2006, the third on 20 September 2006 and the fourth on 28 September 2006. The respondent objected to the affidavits of 29 August 2006, 20 September 2006 and 28 September 2006 (but not the affidavit of 11 August 2006) on the ground that the matters deposed to were not relevant to any fact in issue in the application. I received those affidavits subject to that objection.

17 The affidavit sworn 11 August 2006 annexes, amongst other things, a letter of demand dated 28 July 2006 from the solicitors for Mr McMaster and Mr Zohar to Ms Smolarek. In that letter demand is made for the payment of the administrators' costs of the proceedings before Simmonds J, and interest on those costs. The costs were taxed before Registrar Johnston on 28 July 2006 and allowed at $27,513.80. The costs carry interest from the date of his Honour's order, namely 16 June 2006, at a daily rate of $4.52. In her affidavit sworn 11 August 2006,

(Page 11)

Ms Smolarek deposes, relevantly, in relation to the demand for the payment of the costs:

" …

7. During taxation, on [28 July 2006] I asked Mr Vaughan if Respondents could wait with debt collection past appeal, so I could concentrate on preparing the Appeal instead of preparing and lodging this application, but he declined;

8. I have no liquid assets that could satisfy the debt, so I believe they will evict me from my home;

9. I believe that I suffered too much injustice since the original action in the Court was filled [sic] a year ago, even without loosing [sic] my home;

… "


Ms Smolarek's affidavit sworn 11 August 2006 also annexes a report dated 29 June 2006 in which Mr McMaster and Mr Zohar state that Eznut is "hopelessly insolvent" and that, in their opinion, it would be in the creditors' interests for the company to be wound up.

18 Ms Smolarek's affidavit sworn 29 August 2006 relates to events shortly before and during a meeting on 7 July 2006 of Eznut's creditors. It appears from the affidavit that the administrators did not accept that Ms Smolarek was a creditor of the company.

19 Ms Smolarek's affidavit sworn 20 September 2006 deposes to various matters, and annexes reports and correspondence, relating to the administration of Eznut and the business and financial affairs of the company, including the status of certain patents. The affidavit also annexes minutes of a meeting of the creditors of Eznut held on 3 February 2006.

20 Ms Smolarek's affidavit sworn 28 September 2006 reveals that on 29 August 2006 the creditors of Eznut resolved, pursuant to s 439C(c) of the Act, that Eznut be wound up, and Mr McMaster and Mr Zohar be the liquidators. In a circular to creditors dated 19 September 2006, a copy of which is annexed to the affidavit, Mr McMaster said, relevantly:

(Page 12)

" …

I have commenced a marketing campaign to realise the Company's intellectual property and plant and equipment. Please note that if you are interested in purchasing the assets of the Company, you must complete and return to me the enclosed tender document by close of business, 9 October 2006, failing which you will be excluded from the sale process. I have also attached a copy of the advertisement which will be placed in The Australian for your information.

Should you know of any other interested parties, please advise them of this sale process and refer them to my office.

…"

21 I consider that the contents of the affidavits of Ms Smolarek, which I have summarised, have some relevance, at least to the exercise of my discretion, as to whether a stay should be granted or not.

22 I have mentioned that on 25 August 2006 the original "appellant's case" was not accepted for filing. Counsel for Mr McMaster and Mr Zohar consented, however, to the grounds of appeal specified in that "appellant's case" being referred to and relied on for the purposes of the application before me. The grounds are in these terms:

"2.1. THE PRIMARY COURT ERRED IN LAW BY MAKING DECISION OUTSIDE OF ITS JURISDICTION.

2.2. THE PRIMARY COURT ERRED IN LAW BY IGNORING THE SEPARATE ENTITY DOCTRINE AND BY FAILING TO IDENTIFY PROPER PARTIES.


(i) The Primary Judge failed to observe the separate entity doctrine.

(ii) The Primary Judge failed to identify proper parties.


2.3. THERE IS NO EVIDENCE TO JUSTIFY THE MAKING OF THE PRIMARY COURT'S DECISION.

(Page 13)

(i) The Primary Judge based the decision on the existence of a particular fact, but that fact did not exist.

(ii) The Primary Judge based the decision on assumption of incorrect, never agreed or proven facts.

2.4. THE PRIMARY COURT ERRED IN LAW BY NOT APPLYING WELL ESTABLISHED PRINCIPLES.

(i) The Primary Judge's order disables the High Court's and the Supreme Court's ability to do the complete justice.

(ii) The Primary Judge's order allows loss of the Subject Matter of litigation in pending proceedings.

(iii) The Primary Judge failed to apply the equitable doctrine of unconscionable dealing.

(iv) The Primary Judge failed to apply well established exception to the separate entity doctrine.


2.5. THE PRIMARY COURT ERRED IN LAW BY DISREGARDING PRINCIPLES OF NATURAL JUSTICE OR PROCEDURAL FAIRNESS.

(ii)[sic] The Primary Judge disregarded fundamental procedural fairness principle Audi alteram partem.

2.6. THE PRIMARY COURT ERRED IN LAW BY IMPROPERLY EXERCISING THE POWER;

(i) The Primary Judge inappropriately ordered first Applicant to finance the Administrators['] court action against the Company."

23 Ms Smolarek and Christina Smolarek filed extensive written submissions in support of the present application. I have read and considered those submissions. It is unnecessary to recount them in detail. It is sufficient to set out the following extracts:
(Page 14)

"1.1 Violation of a common law right to justice, in particular imminent loss of subject matter of the litigation, which constitutes an abuse of process; Depravation [sic] of a possibility of obtaining complete justice;

Fact:

Upon request from fourth Defendants to COR16/2006 the Court summoned innocent Australian citizens and permanently deprived them of their right to pursue business pending determination of the proceedings.

Law:

It is Court's duty to prevent abuse of Court's process in a number of proceedings, including this appeal and the High Court's and preserve subject matter of the litigation

…

1.2 Violation of a fundamental human and common law rights [sic] - Right of self-determination and freedom to pursue economic development; Deprivation of livelihood and means of subsistence, freedom from want and suffering

Facts:

Court's judgment deprived, or is to deprive, innocent Australian citizens of intellectual property of their ownership, their valuable business from which they were earning their living, means of subsistence and basic health care and medications.

Law:

Government has no right to discriminate against Applicants, prevent them from pursuing their business if what th[e]y were doing was not wrong in law, and expropriate their property or to deprive them of means of subsistence and must order payment of at least some of first Applicant's outstanding salaries, so she can survive the crisis

…

(Page 15)

1.3 Improper costs order

Fact:

First Applicant is not in default

Law:

Costs should not have been assigned to a person who is not in default and Court may grant Applicants such sum for costs as will compensate them for expenses necessarily incurred by them

Else

Fact:

Respondents never spent a cent from their pockets for the litigation but were already indemnified by fourth Defendants.

Law:

Parties can only recover indemnity costs

Else

Fact:

First Applicant was pauperised to the degree she cannot afford to pay [for] her own food

Law:

Court may in such situation stay judgment debt

Else

Fact:

As a consequence of directors questioning validity of Respondents' appointment, the Administrators applied to the Court for verification, without which they would proceed at their own financial risk.

Simmonds J ordered their court action to be financed by persons who had no standing in the proceedings.

(Page 16)

Law:

Only judicial power is vested in chapter III courts, chicanery is not an approved tool

…

1.4 Justice must be done or public confidence in courts will be undermined

The High Court often stressed the importance of maintaining public confidence in courts. Kable v Director of Public Prosecutions (1996) 138 ALR 577 is the case, which is all about it. More over [sic] this case is about state law exercised in the state court and still by virtue that the Commonwealth judicial power being vested in such courts, such power was limited to judicial determinations.

Spigelman CJ stated [in] the article 'Public Confidence and the Law' with words,

' … we can go about our daily lives without fear and plan for our future and our family's future with a high degree of certainty. None of this would be possible without a properly functioning legal system'.

So, is NSW a different planet? Drawing from Applicant[']s experience, anybody in WA is a fair game. You want to harm someone who cannot bear litigation costs, just file an action in the matter of a corporation and then exorbitant legal costs can be levied on the opponent, no fault or standing required.

Nota bene: There is no other logical explanation to why COR144/2005 was filed.

…"

Ms Smolarek's extensive oral submissions were to similar effect.

The merits of the present application: the declaratory order

24 The nature of the criteria which are relevant to the exercise of this Court's discretion to grant a stay of orders, pending an appeal, are well-established. The applicable general principles were summarised by

(Page 17)

Murray and Parker JJ in Eastland Technology Australia Pty Ltd v Whisson (2003) 28 WAR 308, at 311 [9]:

"• The successful litigant at first instance will ordinarily be entitled to enforce the judgment pending the determination of any appeal.

• It is for the applicant for a stay to move the court to a favourable exercise of its discretion.

• It will not do so unless special circumstances are shown justifying the departure from the ordinary rule.

• The central issue will be whether the grant of a stay is perceived to be necessary to preserve the subject matter or the integrity of the litigation, or where refusal of a stay could create practical difficulties in respect of the relief which may be granted on appeal. It is often put shortly that it will first and foremost be necessary to establish that without the grant of a stay, the right of appeal, whether upon the grant of leave or special leave or not, will be rendered nugatory.

• If that can be demonstrated, the stay will generally still be refused unless it can be established that the appeal process, whether upon the grant of leave or special leave or not, has ultimately reasonable prospects of success so as to result in the grant of relief to the appellant.

• If that hurdle can be overcome, the stay may still be refused where it appears that the balance of convenience does not lie in favour of the applicant; where, for example, the grant of a stay will occasion hardship to the respondent which may not be alleviated by the terms upon which the stay may be granted."


Also see Hamersley Iron Pty Ltd v Lovell (No 2) (1998) 20 WAR 79 per Ipp J at 81 - 87 and per Anderson J at 89 - 95; Kwa v Bank of Western Australia [2003] WASCA 163 per Murray ACJ and Steytler J at [8] - [9].

25 The declaration in relation to the validity of the appointment of Mr McMaster and Mr Zohar was made pursuant to s 447C(2) of the Act. Section 447C provides:
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"(1) If there is doubt, on a specific ground, about whether a purported appointment of a person as administrator of a company, or of a deed of company arrangement, is valid, the person, the company or any of the company's creditors may apply to the Court for an order under subsection (2).

(2) On an application, the Court may make an order declaring whether or not the purported appointment was valid on the ground specified in the application or on some other ground."

A declaratory order under s 447C(2) is not a curative order. Compare s 447A of the Act and see Albarran v Pascoe (2006) 57 ACSR 451 at 453 - 455 [9] - [19].

26 In Bunnings Forest Products Pty Ltd v Bullen (1994) 54 FCR 342, Carr J held, at 347, that a declaratory order cannot be stayed. His Honour noted, however, also at 347, that a court might, in an appropriate case, stay the exercise of rights which might be declared to exist, pending an appeal which might result in the declaration being set aside. Also see Stellar Call Centres Pty Ltd v CPSU, Community & Public Sector Union [1999] FCA 1236 at [12] - [13].

27 In The Roosters Club Inc v The Northern Tavern Pty Ltd (No 2) [2003] SASC 143, the primary Judge declared that the grant of a gaming machine licence to the appellant with respect to certain premises was void. The Full Court of the Supreme Court of South Australia dismissed an appeal against the decision which resulted in the making of that declaration. The appellant sought special leave to appeal to the High Court. It then applied to the Full Court for an order continuing a stay which had previously been granted on an interim basis. Doyle CJ (with whom Nyland J agreed and Bleby J also agreed, subject to some further observations of his own) said, at [18]:

" … the difficulty that the appellant confronts is that there is no question of any execution of the Court's judgment, of proceedings in respect of the Court's judgment, and no reason to grant an interlocutory judgment. Conceptually, it is difficult to see how the Court can stay what it has already declared, namely, that the grant of the licence is void."

28 In my opinion, even if I have power to stay the declaratory order made by Simmonds J (a point which it is unnecessary to decide), no stay
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should be granted. Also, I consider this is not an appropriate case to grant a stay of any powers exercisable by Mr McMaster and Mr Zohar, in their capacity as liquidators, in relation to Eznut or its property or affairs.

29 The grant of a stay is not necessary to preserve the subject matter or integrity of the present appeal. Also, the refusal of a stay will not create practical difficulties in respect of the relief which may be granted if the appeal is successful. Further, the balance of convenience is against granting a stay. My reasons for those conclusions are as follows.

30 First, Simmonds J's determination of the status of the appointment of Mr McMaster and Mr Zohar, as administrators of Eznut, was not curative. It merely declared, as between the parties and subject to any right of appeal, that their appointment was valid. Secondly, if this Court were to decide in the present appeal that the appointment of the administrators was invalid, it will always have been invalid. Thirdly, if Ms Smolarek and Christina Smolarek, or either of them, have any causes of action for damages or compensation against Mr McMaster, Mr Zohar, Mr Liwszyc and Mr Duta, or any of them, in connection with the appointment or conduct of the administrators, those causes of action will not be prejudiced or lost in consequence of a stay being refused. Fourthly, I am not satisfied, on the evidence before me, that if Ms Smolarek and Christina Smolarek, or either of them, have any causes of action of the kind I have just mentioned, any judgment they may obtain in respect of those causes of action would not be satisfied. Fifthly, the administration of Eznut ended on 29 August 2006 upon the company's creditors resolving under s 439C(c) of the Act that it be wound up. Sixthly, the evidence before me indicates that Eznut is "hopelessly insolvent".

31 It is unnecessary, in consequence of the conclusions set out in [29] above, to express any view as to the appellants' prospects of success in the present appeal.

The merits of the present application: the costs order

32 There is no basis for vacating, on an interim basis, the costs order.

33 It is necessary, however, to consider whether a suspension order should be made in respect of the costs order pursuant to s 15 of the Civil Judgments Enforcement Act 2004 (WA). By s 15(3), a court may only make a suspension order if there are "special circumstances" that justify doing so. The principles which govern the exercise of the discretion under s 15 are not materially different from those which applied to an application for a stay of execution before the introduction of the Act. See

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Ladang Jalong (Australia) Pty Ltd v Callander [2005] WASCA 2003 at [3].

34 In my opinion, a suspension order should not be made in relation to the costs order, for these reasons:

(a) The refusal of a suspension order will not render the appeal nugatory. There is no evidence that Mr McMaster and Mr Zohar would be unable to repay any amounts which they may recover from Ms Smolarek pursuant to that order.

(b) It is true that Mr McMaster and Mr Zohar commenced the proceedings in question in their capacity as administrators of Eznut and that they are respondents to the present appeal purportedly in that capacity. As I have mentioned, the administration has ended and Eznut is in liquidation. Mr McMaster and Mr Zohar have undertaken in writing to this Court that:


(i) to the extent that Ms Smolarek satisfies her liability in respect of the costs order (by payment or otherwise); but

(ii) the present appeal is successful and this Court sets aside the costs order,


they will submit to an order of this Court that they repay to Ms Smolarek the recovered costs, without any limitation as to the assets of Eznut. It is therefore unnecessary to decide whether, in the absence of that undertaking, Mr McMaster and Mr Zohar would be personally liable, without limitation, to satisfy an order of this Court that they repay to Ms Smolarek any amounts recovered pursuant to the costs order.

(c) To the extent that Ms Smolarek argues that there are "special circumstances" in consequence of her alleged inability to satisfy the costs order, the evidence before me does not establish the existence of such circumstances. It appears that Ms Smolarek is the owner of some real property. Her affidavits do not set out particulars of her income, assets and liabilities. There is merely a bald assertion that she has no "liquid assets" to satisfy the

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order and a statement of belief that Mr McMaster and Mr Zohar will "evict" her from her home.

The merits of the present application: the claim for $13,200 in "outstanding salaries"

35 The application for an order that Mr McMaster and Mr Zohar pay Ms Smolarek $13,200 in "outstanding salaries" is not an order which can or should be made on an interim basis in the present appeal. If Ms Smolarek has a cause of action against Mr McMaster and Mr Zohar for the payment of $13,200 (or any other amount) by way of salary, proceedings should be commenced within the original jurisdiction of a court of competent jurisdiction, and not in the appellate jurisdiction of this Court (either on an interim application or at all).

Conclusion

36 The application will be dismissed.