Sopov v Kane Constructions Pty Ltd
[2009] VSCA 216
•25 September 2009
SUPREME COURT OF VICTORIA
COURT OF APPEAL
No A6897 of 2001
| COLE SOPOV & ORS |
| v |
| KANE CONSTRUCTIONS PTY LTD |
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| JUDGES | Mandie JA and Beach AJA |
| WHERE HELD | MELBOURNE |
| DATE OF HEARING | 18 September 2009 |
| DATE OF JUDGMENT | 25 September 2009 |
| MEDIUM NEUTRAL CITATION | [2009] VSCA 216 |
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PRACTICE AND PROCEDURE – application for stay of execution – whether exceptional or special circumstances – whether application for special leave to appeal would be rendered nugatory in absence of stay – application for freezing order – whether intent to dissipate or diminish assets made out.
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| Appearances: | Counsel | Solicitors |
| For the Appellants | Mr C Young | Pilley McKellar Pty Ltd |
| For Euro Superannuation Pty Ltd, Sculpture Atelier Pty Ltd and Sabina Sopov | Mr C Young | Pilley McKellar Pty Ltd |
| For the Respondent | Mr J Digby QC with Mr M J Stirling | Deacons |
MANDIE JA
BEACH AJA:
By summons filed 4 August 2009, the appellants (Cole Sopov and Norma Walker and their development company Stacks Properties Pty Ltd) sought a stay of execution on a judgment of the Court of Appeal resulting from a decision handed down on 15 June 2009. In fact the formal judgment was made on 6 August 2009 when the Court ordered that the defendants (appellants) pay the plaintiff (respondent) the sum of $2,900,658.70 plus certain costs of a VCAT proceeding and the costs of the appeal. On the same day, the Court (constituted by the President) made a number of orders including an order that the summons be adjourned to a date to be fixed by the Registrar and that there be a stay on execution of the judgment entered that day in favour of the respondent against the appellants until further order.
By summons filed 14 July 2009, the respondent sought a freezing order pursuant to r37A of the Supreme Court (General Civil Procedure) Rules 2005 restraining the appellants and two other companies (Euro Superannuation Pty Ltd – ‘Euro’ – and Sculpture Atelier Pty Ltd – ‘Sculpture’) from removing, disposing of, dealing with or diminishing the value of any of their assets and a further freezing order restraining Sabrina (hereafter ‘Sabina’) Sopov from disposing of or alienating or transferring her shares or interests in Euro and/or Sculpture. The summons sought a further order that the appellants, Euro, Sculpture and Sabina Sopov file and serve an affidavit disclosing and fully particularising the nature, value and location of their assets and of any securities or encumbrances over them. The order made by the President on 6 August 2009 also adjourned that summons to a date to be fixed and until further order, except with the written consent of the respondent, restrained the appellants, Euro and Sculpture from dealing with their assets in various ways other than for the payment of ordinary living and legal expenses and a further order was made against Sabina Sopov in relation to her shares in Euro and Sculpture (also until further order).
Both of the above summonses now come before this Court.
The background to these applications is as follows. The respondent was engaged by the appellants[1] pursuant to a contract to carry out building works at a disused industrial building at 158-172 Oxford St, Collingwood (‘the Boilerhouse’). The works included the redevelopment and extension of the existing building to create 14 new residential units together with a gallery, office, restaurant, studio and basement carparking. Disputes arose and the respondent alleged that the appellants had repudiated the building contract and purported to accept their repudiation and terminate the contract. The respondent sued upon that basis and claimed on a quantum meruit. A long trial ensued after which the trial judge found that the contract had been terminated by the respondent’s acceptance of the appellants’ repudiation and that the respondent was entitled to recover on a quantum meruit. Judgment was given in favour of the respondent in the amount of $910,578.64.
[1]It is convenient to refer to Sopov, Walker and Stacks Properties as ‘the appellants’ although they would currently be more accurately described as applicants on one summons and respondents on the other.
On 24 March 2006 the Court of Appeal refused a stay of execution on that judgment. On 29 March 2006 a Master refused the appellants’ application for an instalment order in relation to the judgment. On 4 May 2006 the appellants paid the judgment debt (inclusive of interest) in the sum of $934,178.84 by personal cheque in the joint names of the appellants Sopov and Walker. Despite earlier affidavit material, the family home in Charnwood Avenue, St Kilda and the daughter’s (Sabina’s) residence (Units 4 and 5 of the Boilerhouse) were not sold in order to provide these funds.
On 20 July 2006 the appellants paid $20,600 being the agreed costs ordered to be paid as a result of the refusal of the stay application.
On 6 February 2007, Wood AsJ ordered by consent that the appellants pay the respondent’s costs of the proceeding in the sum of $1,500,000.
The appellants then applied to the Court of Appeal for a stay in respect of the costs order, alleging that they were unable to pay the costs awarded and would become bankrupt and not be able to proceed with their appeal if the order were enforced. On 7 March 2007 that application was dismissed.
On 28 May 2007, the appellants paid to the respondent the costs (including interest) in the sum of $1,554,739.73. This amount was paid without the appellants becoming bankrupt or liquidated as the case may be.
The appellants appealed against the judgment, challenging the trial judge’s finding that the contract was terminated and challenging the assessment of the quantum meruit claim. The respondent cross-appealed contesting the assessment by the trial judge of the quantum meruit claim.
The Court of Appeal first heard the appellants’ appeal on the issue of liability. On 22 November 2007 the Court dismissed the appellants’ appeal, thus upholding the finding of the trial judge that the contract had been duly terminated by the respondent’s acceptance of the appellants’ repudiation thereof.
The issues relating to the assessment on the quantum meruit were referred to mediation.
On 20 December 2007, the appellants lodged an application for special leave to appeal with the High Court. On 23 May 2008, the High Court dismissed the application for special leave to appeal.
The mediation was unsuccessful and the appellants also added some grounds to their notice of appeal in relation to the quantum meruit aspect. That final aspect of the appeal was heard by the Court of Appeal in December 2008. On 15 June 2009 reasons for judgment were delivered and the Court dismissed the appellants’ appeal but allowed the respondent’s cross-appeal.[2]
[2]Cole Sopov & anor v Kane Constructions Pty Ltd (No. 2) [2009] VSCA 141.
The appellants attacked the quantum meruit findings on 4 bases. First, they submitted that the only remedy was contractual damages and that the respondent was not entitled to elect to claim on a quantum meruit. Second, alternatively the amount recoverable on a quantum meruit was limited to the contract price (pro rata). It is not necessary to mention the other alternative bases which were relied upon by the appellants.
As to the first basis, the Court of Appeal said that the respondent’s entitlement, in the circumstances, to sue on a quantum meruit rather than for contract damages was supported by high authority of long standing which was detailed. However, the Court pointed to the fact that there had been a growing chorus of judicial and academic criticism of the availability of quantum meruit as an alternative to contract damages where a repudiation was accepted. In short, the Court said that the criticism had arisen because the authorities were based on the ‘rescission fallacy’, namely, that the acceptance of a repudiation had the effect of rescinding the contract ab initio rather than from the time of termination. The Court considered that these criticisms were ‘very powerful’ but that the existing law could only be overturned by the High Court.
It is important to note here that the Court then went on to say that there was another reason why the appellants’ arguments had to be rejected – because they were raised too late. The issue was not raised on the pleadings. The respondent’s only pleaded claim for termination of the contract was on a quantum meruit and it conducted its case on that footing. The appellants did not put in issue the respondent’s entitlement to elect to claim on that basis (assuming the contract to have been validly terminated). The respondent had therefore, said the Court, never endeavoured to establish an alternative case for contractual damages. The Court said that in those circumstances the appellants could not be permitted to raise the matter on appeal.
The Court of Appeal, however, disagreed with the trial judge’s conclusion that the contract had a ‘continuing influence’ when the value of work was being assessed on a quantum meruit and referred to high authority in that regard. Accordingly the Court concluded that the contract price did not impose a ceiling on the amount recoverable and the proper approach to assessment of the quantum meruit claim was simply the ascertainment of the fair and reasonable value of the work performed prior to termination of the contract – that was the value of the benefit conferred on the party which received it (nor was the contract price the best evidence of the value of the benefit conferred).
After dealing with certain other issues the Court decided that the appeal should be dismissed and the cross-appeal allowed and indicated that the amount payable by the appellants had to be recalculated in accordance with the reasons for judgment. That recalculation is embodied in the order made by the Court of Appeal on 6 August 2009 in the sum of $2,900,658.70 plus costs.
The foregoing is the background to the two summonses now before the Court.
The affidavits that have been filed relate both to the stay application by the appellants and the freezing order application by the respondent. It is convenient to refer to the affidavits in the order in which they were filed. However, before doing so, it is convenient here to mention that on 2 September 2009 the appellants filed an application with the High Court for special leave to appeal from the second judgment of the Court of Appeal, that is, the one dealing with the quantum meruit issues. There are four grounds of appeal stated in the application for special leave to appeal. The first ground relied upon is that the Court of Appeal erred in holding that the respondent was entitled to be paid on a quantum meruit and in failing to hold that the respondent’s only remedy was contractual damages. The second ground relied upon is that, if the respondent was entitled to be paid on a quantum meruit, the Court of Appeal erred in failing to hold that its entitlement was governed by and limited to the contractual terms and the contract price. The third ground is that the Court of Appeal erred in holding that, when the value of the work is being assessed on a quantum meruit the contractual terms agreed between the parties are of no continuing influence, are irrelevant and are of no evidentiary value. The fourth ground is that the Court of Appeal erred in its assessment of the quantum meruit claim by holding that the respondent was entitled to have a 10 per cent ‘margin’ added to its claim when the respondent’s evidence demonstrated that indirect expenses amounting to 10 per cent of revenues had already been included in the claim.
The principal affidavit in support of the freezing order application is by Megan Lisbeth Calder affirmed on 13 July 2009. Calder deposed that:
· Mr Sopov and Ms Walker have by transfers registered on 11 June 2009 transferred two properties to Euro, a company of which they and their daughter are the sole directors and shareholders, for what would appear to be below market consideration
· Mr Sopov and Ms Walker sold Units 4 and 5 of the Boilerhouse in September 2008 for the amount of $1.2M but it is unclear what has happened to the proceeds.
· Mr Sopov and Ms Walker have since 1 July 2009 diluted their interests in Euro and Sculpture and their daughter’s (Sabina’s) shareholding has increased 23 fold in Euro and has increased from 0 to 98 shares in Sculpture.
· A fixed and floating charge was first registered over the assets of Sculpture in favour of the NAB on 2 July 2009.
In her affidavit, Calder referred to the fact that the appellants in their stay application in 2006 had stated that they could not immediately pay the judgment sum because of a lack of liquidity in the assets they owned and that the properties they were more readily able to sell (their family home and their daughter’s residence) would only go to pay off the existing bank mortgage facility and there would be little if any moneys left to satisfy the judgment sum. A similar statement was made in support of the application for an instalment order. Despite that, the judgment debt was paid and the properties were not sold.
In her affidavit, Calder referred to the further stay application made by the appellants in February 2007 in which they stated their inability to pay the costs ordered to be paid and said that it was ‘inevitable’ that the individuals would be bankrupted and the company liquidated if the respondent were to commence execution proceedings in respect thereof and the deponent refers to a number of other statements made on behalf of the appellants in that application. Despite that, the appellants paid the whole of the costs ordered to be paid, there was no bankruptcy or liquidation and Mr Sopov and Ms Walker remain the registered proprietor of 4 properties of which properties in Charnwood Avenue St Kilda had been valued in March 2007 at between $2 to $2.5M on a ‘roadside valuation’.
By her affidavit Calder produced evidence showing that:
·Ms Sopov and Ms Walker were the registered proprietors of the following properties:
a)11A and 11B Charnwood Road, St Kilda (Charnwood residence);
b)‘The studio’ at the Boilerhouse (Lot 1A on the plan of subdivision);
c)‘The gallery’ at the Boilerhouse (Lot 1C on the plan of subdivision); and
d)An allocation in the basement of the Boilerhouse (Lot 1T on the plan of subdivision).
· On 11 June 2009 (4 days before judgment was delivered) transfers to Euro were first registered on the Certificates of Title in respect of the following properties which have been owned by Mr Sopov and Ms Walker since 29 January 2001:
a) ‘The restaurant’ at the Boilerhouse (Lot 1B on the plan of subdivision) – for the consideration of ‘being entitled in equity’ and $67,320;
b) Basement space at the Boilerhouse (Lot 1S on the plan of subdivision) – for the consideration of $22,000.
· Mr Sopov and Ms Walker and their daughter Sabina are the directors and shareholders of Euro.
Calder said that a roadside valuation of the restaurant in March 2007 was in the sum of between $250,000 to $300,000.
Calder further deposed that, in about September 2008, Sopov and Walker had disposed of Units 4 and 5 in the Boilerhouse for $1.2M and that she was concerned that this sum had been used to satisfy an alleged debt of Sopov and Walker to Euro.
Calder next referred to a facility held by Sopov and Walker secured by a mortgage over their assets and, referring to earlier material filed by them, set out their substantial interest liabilities thereunder. Calder referred to an undertaking proffered by Sopov and Walker not to deal in or further encumber any real property held in their names and noted that this undertaking was limited to real property and did not extend to their daughter or any of the 3 companies.
Two answering affidavits were filed of Cole Sopov sworn 30 July 2009.
One affidavit was filed on behalf of Euro, Sculpture and Sabina. In that affidavit, Mr Sopov deposed that Euro is the trustee of a Superannuation Fund under a deed dated 28 June 2001 and that the members of the fund are himself, his wife (Ms Walker) and his daughter Sabina. He deposed that it was decided that he and his wife should contribute $450,000 to this Superannuation Fund in the financial year ending 30 June 2009 (representing a contribution of $150,000 per annum over a three year period) and that as they had no available cash it was decided in April 2009 to transfer in specie to the Fund that proportion of the property at Lot 1B (the restaurant or ‘Café Shell’) equating to an amount of $149,400 each (thus totalling $298,900 (sic)). He produced a valuation of Lot 1B at $360,000 – thus the contribution represented 83% of the value of the ‘café’. Accordingly he deposed that the directors resolved on 12 May 2009 to transfer 83 of 100 undivided parts or shares in Lot 1B to Euro and the transfer was executed the same day and registered on 11 June 2009. Mr Sopov further deposed that on 12 May 2009 he and his wife sold to Euro the remaining 17 undivided parts of shares in Lot 1B for the sum of $61,200, representing 17% of $360,000 and that Euro paid this amount and that he and his wife applied it to reduction of their liability to the bank.
Mr Sopov further deposed that on 12 May 2009 he and his wife sold Lot 1S to Euro for $20,000 (in accordance with a valuation that he produced) and that the proceeds of this were also paid to the bank by them.
Mr Sopov further deposed that Sculpture was incorporated on 1 October 1970 and that he and his wife became directors thereof on 3 December 1982 when the company, being a shelf company, was purchased by their accountant and that Sabina became a director on 4 February 2006. Mr Sopov deposed that Sculpture has been since December 1982 and is the trustee of The Atelier De Art Trust and that the Trust is a standard form family trust (a copy of the deed is produced by him). Mr Sopov deposed that Sculpture purchased a property at 17-17A Wellington Street, St Kilda in January 1984 and that in May 1999 the bank took a mortgage over it as collateral security for the facilities granted by the bank to himself and his wife to develop the Boilerhouse project. At this time, the bank also took a first ranking debenture over the assets of Sculpture. The Wellington Street property is currently leased, providing rental income of about $62,700 per annum.
Mr Sopov deposed that in April 2006 the bank approved a loan to Sculpture for an amount of $875,000 secured by the existing mortgage and a guarantee and indemnity from himself and his wife and that this loan was obtained for the purpose of on-lending to his wife and himself in order pay out the original judgment of $910,578.64. The funds were lent by the bank and, in turn, Sculpture lent the sum of $1M to him and his wife secured by a charge given by them to Sculpture over all of their property, and that Sculpture had lodged caveats to protect its interest under the loan agreement and charge over properties owned by him and his wife at 160 Oxford Street, Collingwood, 11 Stanley Street, Collingwood and their residence in Charnwood Road, St Kilda.
Mr Sopov deposed that the Atelier de Art Trust of which Sculpture is trustee had assets primarily constituted by the Wellington Street property ($1.25M) and the secured loan to himself and his wife ($1.37M) and liabilities primarily constituted by a secured loan from the bank ($858,558) and unsecured loans from related parties ($445,784).
Finally Mr Sopov said that the shareholdings in Euro and Sculpture were immaterial as those companies were acting solely as trustees.
The second affidavit of Mr Sopov was filed on behalf of the appellants. It repeated much of the material contained in the affidavit referred to earlier above. In addition, Mr Sopov deposed that, after their application to stay the costs order for $1.5M, he and his wife procured a loan from Liberty Financial Pty Ltd for $1.75M secured over Lots 1A, 1B and 1C of the Boilerhouse, the bank having released those Lots from its security. That loan was granted in late April 2007 for a period of 12 months with interest at 8.45% per annum paid in advance along with costs. On 28 May 2007 the Liberty loan was drawn down in the net sum of $1,578,711.25, thus enabling him and his wife to pay the respondent the sum of $1,554,793.73.
Mr Sopov further deposed that on 20 May 2008 the NAB offered him and his wife a facility in the sum of $1.9M secured over all property then registered in their names, namely the residence in Charnwood Road, the properties at Stanely Street and Oxford Street, Collingwood and a property in Wellington Street, St Kilda. The proceeds of this facility were applied to repayment of the Liberty loan. One of the properties secured to the bank (Lot 1H, 170 Oxford Street, Collingwood) was subdivided into two units and the two units (apartments) were sold at auction in May and July 2008. The proceeds (in excess of $1.1M) were paid to the bank in reduction of its loan with the result that the amount due by him and his wife to the bank has been reduced to approximately $900,000.
Mr Sopov further deposed that he and his wife were indebted to the NAB for an advance secured by first mortgage over the Charnwood Road residence in the sum of $1.52M, so that their total indebtedness to the bank in respect of all facilities granted to them and guarantees given by them amounted to $3.395M.
Mr Sopov deposed that the properties forming the Boilerhouse project had either been sold to third parties in arms length transactions or sold to Euro at the current market value. All proceeds had been paid to the bank in reduction of the bank’s facilities. All actions by him and his wife had been taken with the sole purpose of paying out their creditors including the bank and the respondent and there had been no attempt to dissipate any assets.
Among the exhibits to Mr Sopov’s affidavits is an extract from the ASIC database relating to Sculpture. Among other things the extract shows that the date of birth of Mr Sopov is 28 November 1938 (thus indicating that he is now 70 years of age) and that the date of birth of his wife, Norma Rose Walker, is 28 October 1945 (thus indicating that she is now 63 years of age). In addition, there is a statement of financial position of the Euro Superannuation Fund showing that the value of the net assets available to pay benefits, as at 30 June 2009, amounted to the sum of $2,070,609. The statement shows that the assets lying behind that valuation are primarily constituted by land and buildings valued at $1,734,651 and cash in the sum of $259,853.
Mr Sopov made another affidavit on 4 August 2009 in which he stated that it was not possible for him and his wife to obtain additional loan facilities nor was it lawfully possible for him to borrow from Euro in its capacity as trustee of the Superannuation fund nor was additional finance possible from Sculpture. Mr Sopov deposed to his belief that if the orders made by the Court of Appeal were enforced then he would have no resources available to him to prosecute an application for special leave to appeal to the High Court.
Mr Sopov made a further affidavit on 17 August 2009 in which he set out further details of the financial position of him and his wife. The shares and personal assets therein disclosed are of relative insignificance in the context of these applications. He also referred to a loan from his late brother that was settled with his estate by payment of an amount less than $10,000.
Graham Collard, the long-time accountant for Mr Sopov and Ms Walker made an affidavit on 4 August 2009. Mr Collard deposed as to their assets and liabilities as at 30 July 2009 and the affidavit shows that their liabilities exceed their assets. Mr Collard deposed that the monthly interest bill to the NAB was approximately $11,600 which was then capitalised and the interest bill on the loan provided by Sculpture was accruing at $9,730 per month. The bank was relying on the sale of properties to reduce the level of debt and the interest commitment. Mr Collard expressed the opinion that it would be very difficult for them to demonstrate to prospective lenders how they would repay any additional borrowed funds and the additional interest thereon and that he believed that they would be unable to obtain further loans.
Mr Collard deposed that he was of the opinion that they could not pay the judgment debt and if the properties were sold and the debt to NAB discharged there would be little if anything available to pay the judgment debt and that it seemed inevitable that Sopov and Walker would be faced with bankruptcy.
In initial written submissions, the appellants queried whether special or exceptional circumstances are required for the grant of a stay by an intermediate appellate Court pending an application for special leave to appeal to the High Court. The appellants submit that in any event there are special or exceptional circumstances because they do not have and cannot obtain the resources to pay the judgment debt and their accountant says that it is inevitable that they would face bankruptcy if the orders were enforced. They would thus be deprived of the means of prosecuting an appeal to the High Court.
The appellants further submit that there is a substantial prospect that special leave to appeal will be granted or at least that the application is not hopeless and, further, substantial moneys have already been paid to the respondent.
In relation to the freezing order, the appellants submit that there is no evidence of any attempt to dissipate assets and no satisfaction of any of the stringent conditions required for a freezing order.
On the other hand, in relation to the stay application, the respondent submits that impecuniosity is not a ground for a stay and that, in any event, the appellants have created their own dire financial circumstances. The respondent submits that special or exceptional circumstances are required to depart from the rule that a successful party is entitled to the fruits of its judgment. It questions the valuations of the appellants’ assets and points to assertions in earlier affidavits of dire consequences that never ensued and otherwise attacks the credit of the appellants and points to deficiencies in their material.
The respondent submits that there would be prejudice to it by the grant of a stay arising from the delay and various risks attendant thereon.
The respondent further submits that the application for special leave to appeal does not identify any question of general importance that would be likely to attract leave.
In relation to the freezing order, the respondent criticises the absence of financial statements and the appellants’ failure to explain a number of matters relating to their financial positions or to disclose their current sources of income. The respondent submits that the Court can be satisfied that there is a danger that the assets of the judgment debtors are being disposed of or diminished in value.
In relation to the application for a stay, the well-established rule applied by the Court has been that there must be special or exceptional circumstances existing to justify an order staying the execution of a judgment and that such circumstances will exist where there is a real risk that the appeal if successful will prove abortive if the applicant were not granted a stay.[3] The case cited by the appellants, Carter v Geoff Layton & Co Pty Ltd,[4] suggests that no different principle applies pending the hearing of an application for special leave to appeal. In that case, Cooper J[5] said that the Court would not stay proceedings pending the hearing of an application for special leave to appeal unless satisfied that a stay was required to preserve the subject matter of the litigation or to otherwise ensure that any right to appeal was not rendered nugatory eg where execution would deprive an appellant of the means of prosecuting the appeal. The court would also consider whether there was a substantial prospect of leave being granted, whether the stay would cause loss to the respondent and the balance of convenience.
[3]See Cellante v G. Kallis Industries Pty Ltd [1991] 2 VR 653, 656-657 per Young CJ.
[4](1993) 43 FCR 392 (Federal Court, Cooper J).
[5](1993) 43 FCR 392, 394.
In Palmer v Permanent Custodians Ltd,[6] on an application in this Court for a stay of execution pending an application for special leave to appeal to the High Court, the Court[7] expressed the view that, in its inherent jurisdiction as well as under the rules, the traditional test of special or exceptional circumstances remained applicable to such an application.
[6][2009] VSCA 164.
[7]Dodds-Streeton JA and Beach AJA.
A number of cases in this Court have taken into account the prospect of bankruptcy or liquidation in deciding whether special or exceptional circumstances exist.
In Orrong Strategies Pty Ltd v Village Roadshow Ltd,[8] the appellants could not satisfy the judgment and had been served with a creditor’s statutory demand in the case of the corporate appellants and a bankruptcy notice in the case of the individual appellant. The Court said that it was inevitable that, unless a stay was granted, the companies would be wound up and the individual bankrupted. The Court referred to the adverse impact of the individual becoming a bankrupt and that such prejudice was likely to be irreversible even if he won his appeal. The Court found that exceptional circumstances existed.
[8][2007] VSCA 320 (Maxwell P and Ashley JA).
In Narain v Euroasia (Pacific) Pty Ltd,[9] a bankruptcy notice had been served on Mrs Narain (Mr Narain had already been made bankrupt). The appellant submitted that an appeal having arguable prospects of success would be rendered nugatory if a stay was not granted. The Court said that 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 – nor would the Court discount the appellant’s prospect of success on the appeal. A stay was granted.
[9][2008] VSCA 195 (Maxwell P and Ashley JA).
In Li v The Herald and Weekly Times Pty Ltd,[10] a bankruptcy notice had been served on the appellant and an unsuccessful application had been made by her to extend the time for compliance therewith. The Court said that it regarded the prospect of a sequestration order as constituting special circumstances justifying a stay of execution where the respondents were not prepared to undertake not to proceed with a creditor’s petition pending the appeal.
[10][2008] VSCA 201 (Maxwell P and Ashley JA).
In McMahon v National Foods Milk Ltd,[11] the Court was satisfied that, unless a stay was granted, the judgment creditor intended to and would proceed to have the appellant individual made bankrupt and the appellant company placed into liquidation. It appeared that the appellants had no means to pay the judgment debt. The same approach was taken as in the cases cited above and a stay was granted.
[11][2008] VSCA 237 (Maxwell P and Buchanan JA).
In Bresam Investments Pty Ltd v Shmee Pty Ltd,[12] the Court was not persuaded that the appeal would be rendered nugatory despite the fact that bankruptcy and winding up proceedings against the appellants appeared likely. The Court said that a threat of liquidation or bankruptcy was not a decisive factor in every case and the weight to be accorded to it might vary. A liquidator or trustee in bankruptcy might elect to prosecute the appeal. As regards bankruptcy, the adverse effect thereof on reputation might vary according to the circumstances of the particular case. Also an extension of time for compliance with any bankruptcy notice, when served, could be sought. In addition, the evidence suggested that the appellants had deliberately divested themselves of assets or diverted them to related parties and those resources might be availed of. A stay was refused.
[12][2008] VSCA 251 (Kellam and Dodds-Streeton JJA).
In Sami v Roads Corporation,[13] the Court noted that the prospect of an appellant’s bankruptcy had been held to constitute special circumstances but that 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 was likely to prevent an appeal and constitute the requisite special circumstances. The Court said there was insufficient information concerning the applicants’ financial situation and insufficient evidence to support the assertion that they would be bankrupted in the absence of a stay. The Court added that, if the likelihood of bankruptcy had been established, it would have been appropriate to consider whether the applicants at least had an arguable case in the appeal. A stay was refused.
[13][2009] VSCA 44 (Redlich JA and Williams AJA).
In the present case, there are a number of weaknesses in the appellants’ application for a stay. The first is that the material does not, it seems to us, establish that the absence of a stay will or is likely to lead to the appellants being unable to prosecute their application for special leave or, if leave is granted, their appeal. That is because the appellants appear to have substantial superannuation entitlements upon which, given their age, they can probably draw. At any rate, we are not satisfied on the material that these entitlements are not available to them. Further, it seems to us that it is premature to grant a stay on the basis of threatened bankruptcy or liquidation. No bankruptcy notices have been served on Sopov or Walker and no statutory demand has been served on the company. Were that to occur and were extensions of time then sought and refused, a different situation might emerge depending, perhaps, on what might then be established in relation to their superannuation entitlements.
Irrespective of that, it seems to us, with respect, that there is little if any prospect of the appellants obtaining a grant of special leave. We accept for the sake of the argument that it is an important question of law whether a party is entitled to be paid on a quantum meruit after termination of a contract for breach or repudiation or whether such party is confined to a remedy in contractual damages. Nevertheless it is apparent from the judgment of the Court of Appeal in this matter that the proceeding can hardly be regarded as a suitable vehicle for determination of that question when the issue was not raised at trial and the respondent was denied the opportunity to avoid the consequences of the argument by running an alternative claim for contractual damages. The appellants submitted that the findings of the trial judge were such that the respondent would not be prejudiced by the appellants raising this question of law. In other words, damages could still be calculated without the necessity for a further hearing. However the respondent disputed this and, clearly, the Court of Appeal did not regard that as being the position. In relation to the other proposed grounds of appeal, the second and third grounds may be regarded as barely arguable and the fourth ground to be not of any general or public importance.
In all those circumstances, we do not think that special or exceptional circumstances are established and we consider that a stay should be refused.
Turning to the application for a freezing order, it seems to us that the appellants have now broadly explained their financial position and generally rebutted any allegation of threatened dissipation of assets. The respondent endeavoured to cast suspicion on the substantial contribution of the appellants made to their self-managed superannuation fund but this contribution was made prior to the handing down of the Court of Appeal’s judgment on 15 June 2009. The respondent contended that it should be inferred that the contributions were made with a view to avoiding a threatened impending judgment but we think that the Court is entitled to take judicial notice of the fact that Commonwealth legislative arrangements relating to superannuation permitted a contribution of up to $450,000 prior to 30 June 2009 by persons in relevant age groups (representing three years’ contributions in advance or partly in advance of $150,000 per annum). The facts disclosed do not we think of themselves give rise to an inference at all, or at least of sufficient strength, to justify the making of a freezing order.
For the foregoing reasons, we consider that the application by the appellants for a stay of execution should be dismissed and that the application by the respondent for a freezing order should also be dismissed. It seems inappropriate to make cross-orders for costs and the appropriate order, in our opinion, subject to anything counsel may wish to say, is that all parties bear their own costs of the applications.
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