Volanne Pty Ltd v International Consulting and Business Management Pty Ltd
[2015] ACTCA 25
•12 June 2015
SUPREME COURT OF THE AUSTRALIAN CAPITAL TERRITORY
COURT OF APPEAL
Case Title: | Volanne Pty Ltd & Ors v International Consulting and Business Management Pty Ltd & Anor |
Citation: | [2015] ACTCA 25 |
Hearing Date: | 3 June 2015 |
DecisionDate: | 12 June 2015 |
Before: | Burns J |
Decision: | See [17]-[18] |
Category: | Interlocutory application |
Catchwords: | CONTRACT – Claim for Debt or Liquidated Demand. APPEAL – Appeal from the Master – interlocutory application – application for a stay of execution of judgment below. |
Legislation Cited: | Court Procedures Rules 2006 (ACT) r 5017, 5301 Supreme Court Act 1933 (ACT) s 37J |
Cases Cited: | Davey v Herbst and Ors [2011] ACTCA 27 Lewincamp v ACP Magazines Ltd (No 3) [2008] ACTSC 81 |
Parties: | Volanne Pty Ltd (First Applicant) John Fragopoulos (Second Applicant) Anthoula Fragopoulos (Third Applicant) International Consulting and Business Management Pty Ltd (First Respondent) Skybase (Vic) Pty Ltd (Second Respondent) |
Representation: | Counsel Mr R Arthur (Applicants) Mr W Sharwood (Respondents) |
| Solicitors Donohue & Co, Solicitors (Applicants) Moray & Agnew Lawyers (Respondents) | |
File Number: | ACTCA 54 of 2014 |
Decision under appeal: | Court/Tribunal: ACT Supreme Court Before: Master Harper Date of Decision: 26 September 2014 Case Title: International Consulting and Business Management & Anor v Volanne Pty Ltd & Ors Citation: [2014] ACTSC 175 |
BURNS J:
Background
By an application dated 19 May 2015, the applicants (who are also the appellants on the appeal against the decision of Master Harper dated 26 September 2014) seek orders:
(a)that, pursuant to r 5301 of the Court Procedures Rules 2006 (ACT) (the Court Procedures Rules), enforcement of the whole of the decision by Master Harper made on 26 September 2014 be stayed until further order of the Court, upon such terms as the Court decides; and
(b)that the first and second respondents pay the costs of this application.
The proceedings before Master Harper were based on an allegation by the first respondent (ICBM) that it lent money to the first appellant, which was subject to personal guarantees by the second and third appellants. ICBM asserted that the loans were subject to conditions concerning repayment and interest. It further asserted that the first appellant had defaulted on the loans and had failed to repay the loans when demanded. It further alleged that the second and third appellants had failed to make payment when a demand was made pursuant to the guarantee. The claim by the second respondent was against the second appellant only, but Master Harper was ultimately satisfied that the parties had previously agreed that any monies owing by the second appellant to the second respondent was to be treated as having been lent by ICBM to the first appellant.
A number of defences were relied upon by the appellants. It is unnecessary to refer to them in detail. It is sufficient for present purposes to note that, on 25 July 2014, Master Harper found in favour of ICBM and directed the parties to calculate the amounts owing in accordance with his reasons. On 26 September 2014, Master Harper ordered that judgment be entered for ICBM against the appellants in the amount of $472,948.48 together with costs.
By a Notice of Appeal dated 24 October 2014, the appellants have appealed against the orders made by Master Harper on the grounds that Master Harper erred in finding that the appellants had agreed to pay compound interest on the money loaned from 1 July 2001 at the Westpac indicator lending rate plus 2 percent, in that he failed to give reasons for his finding that selected terms of the deed of loan dealing with interest formed part of the loan agreement between the first respondent in the first appellant, and in admitting into evidence the deed of loan dated 17 September 2001, when ICBM’s case was pleaded and conducted on the basis of an oral agreement only. As such, the only real issue to be determined on appeal is that of the amount of interest payable by the appellants.
The appeal is currently listed to be heard on 5 August 2015. By a further application dated 28 May 2015, the appellants sought an order that this date be vacated and a new date set for the hearing of the appeal.
Both applications came before me on 3 June 2015. At that time, I refused the application to vacate the hearing date. The reason put forward by the appellants to vacate the hearing date of the appeal was that senior counsel previously briefed on the matter was no longer available on 5 August 2015, and that, if they were required to brief different counsel, they would be subjected to added costs. Senior counsel for the respondents, however, is unavailable during the periods when the Court of Appeal will be sitting later this year after the August sittings, with a consequence that, if the appeal is to be heard expeditiously but not on the allocated date of 5 August 2015, the respondents will be required to brief different senior counsel. As the problem is one which was created by the unavailability of the appellants’ senior counsel, I considered that, if any party was to be subjected to inconvenience and added cost, it should be the appellants. For that reason, I refused the application to vacate the hearing date of the appeal.
The application for a stay
In support of the application for a stay of the orders of Master Harper, the appellants relied upon an affidavit of the second appellant sworn 19 May 2015, and an affidavit of Christopher John Donohue, the solicitor for the appellants, also sworn 19 May 2015. In his affidavit, the second appellant says:
(a)that he has taken $210,000.00 out of his superannuation fund, which is partly available to satisfy part of the judgment entered by Master Harper;
(b)that his wife, the third appellant, has superannuation funds with Retail Employees Superannuation Trust in an amount of approximately $217,000.00, which she is unable to access without suffering a financial disadvantage as she has not yet turned 60;
(c)that he and his wife are the registered owners of four properties in Charnwood, Melba, Karabar and Malua Bay. Those properties were recently valued by the ANZ Bank at a total of approximately $2,280,000.00 and have home loan type mortgages registered against them totalling about $1,150,000.00. In addition, the properties are collateral security to the ANZ Bank for past funds provided to Fishco Pty Ltd to set up a seafood retail and wholesale business in Fyshwick. He and his wife are the only shareholders in that company, and are the guarantors of all loans to it. The amount of the business loans to the company totals approximately $800,000.00. The business at Fyshwick has been subject to adverse trading conditions with the result that little or no profit is derived from that business. The value of the business is therefore presently only the value of its fit out, being about $350,000.00;
(d)that the first appellant is a trading company which operates a retail and wholesale seafood business at the Belconnen Markets in the ACT. That business is the only asset of the first appellant, witha gross value of about $750,000.00. The second appellant and his wife are the only two shareholders of the first appellant. ICBM already holds a registered security over the assets of the first appellant;
(e)that, it would be possible to divert funds from the business of the first appellant to satisfy the judgment, but the effect of this would be to cause a collapse of that business as it would not be able to pay business creditors within its usual trading terms;
(f)that neither he nor the third appellant have any other significant assets available to satisfy the judgment. They have the capacity to obtain loans from members of their own family in order to satisfy the judgment, however this would be likely to cause hardship to those family members;
(g)that, if further payments are made to the respondents in satisfaction of the judgment, he expects that such amount will be paid out to the shareholders and/or directors of those companies leaving no prospect for a refund of any overpayment if the appeal is successful; and
(h)that a forced sale of any of the appellants’ assets would result in them attracting a price less than their real value.
In his affidavit, Mr Donohue refers to payments made by the appellants in part satisfaction of the judgment debt. Annexed to his affidavit is a report prepared by a firm of chartered accountants calculating the amount owing by the appellants to ICBM if they are successful with this appeal. The report calculates the amount owing on two bases; the first being a calculation based upon simple interest, and the second being a calculation based on compound interest. The report indicates that, if the appellants are successful and their indebtedness to ICBM is to be calculated on the basis of simple interest, the amount outstanding is $38,793.00. If the appellants’ indebtedness to ICBM is to be calculated on the basis of compound interest, the amount owing is $47,026.00. Mr Donohue also deposes to the fact that ICBM has commenced enforcement proceedings and has declined to consent to a stay of enforcement proceedings until the appeal is heard.
In their submissions, the respondents argued that the full financial position of the appellants is not disclosed in the affidavit of the second appellant. In particular:
(a)there is no evidence about rental income from the three residential properties not occupied by the second and third appellants or any evidence of the payments being made under the mortgages on those properties;
(b)there are no recent or historical company financial reports, bank statements or loan statements for Fishco Pty Ltd, nor is there any independent valuation of the business or a company search;
(c)there are no recent or historical company financial reports, bank statements or loan statements in relation to the first appellant, nor is there any independent valuation of the business conducted by the first appellant;
(d)the assertions of the second appellant about the collapse of the business if funds were diverted are not supported by any calculation or reasoning; and
(e)there is no evidence of any attempts by the appellants to borrow from ANZ Bank or any other lender.
The respondents accept that the overall financial position of the appellants as revealed in the affidavit of the second appellant appears to be sufficient to pay the full amount of, or a significant sum towards, the judgment debt. In that regard it says:
(a)the shortfall in evidence of the full financial position of the appellants implies that their financial position is better than disclosed;
(b)the sum of $210,000.00 has been withdrawn by the second appellant from a superannuation account;
(c)there is a conceded capacity to borrow, at least, from family; and
(d)there appears to be $1,430,000.00 of equity in Fishco Pty Ltd, the properties owned by the second and third appellants, and in the first appellant collectively, separate to the third appellant’s superannuation.
The respondents also submit that the evidence does not support any contention that the respondents would be unable to repay the judgment if it were paid to them, and the appellants were then successful in the appeal. ICBM was registered in 1997 and has continued in operation since, has been at the same business address for over 15 years and has had the same contact address for nearly 12 years. The second respondent was registered in 1994 and has continued in operation since, has been at the same business address for over 15 years and has had the same contact address for nearly 12 years.
The respondents submit that the appellants have only brought this application following pressure from the respondents to pay the judgment debt. It further notes that a direction was made in March this year by the Deputy Registrar that any application for a stay be made by 15 April 2015, but the present application was not made until 19 May 2015.
Consideration
An appeal from a decision of the Master does not operate as a stay of execution of the judgment unless a stay of the decision is ordered by the Master or the Court: see r 5017 and r 5301 of the Court Procedures Rules. The present application is an application for a stay to the Court of Appeal, which may, for that purpose, be constituted by a single judge: s 37J (1) (d) of the Supreme Court Act1933 (ACT).
It must be accepted that the starting point is that the respondents are entitled to the fruits of their judgment, and, that being so, there must be sound reason demonstrated sufficient to justify the court in suspending that right: McBride v Sandland (No 2) (1918) 25 CLR 369 per Barton J. I note, however, that the proposed appeal in that case was to the Privy Council, which, in 1918, would inevitably have taken a significant time to be heard. In the Australian Capital Territory, it is not necessary for an applicant for a stay to demonstrate special or exceptional circumstances before a stay will be granted; it is sufficient for the applicant to demonstrate a reason or an appropriate case to warrant the exercise of the court’s discretion in its favour. In Davey v Herbst and Ors [2011] ACTCA 27, I set out at [10] the applicable test governing such applications:
I take the applicable test governing the present application to be that set out by the New South Wales Court of Appeal in Alexander & Ors v Cambridge Credit Corporation Ltd (Receivers Appointed) & Anor (1985) 2 NSWLR 685 at 694–5:
... In our opinion it is not necessary for the grant of a stay that special or exceptional circumstances should be made out. It is sufficient that the applicant for the stay demonstrates a reason or appropriate case to warrant the exercise of discretion in his favour.
... The Court has a discretion whether or not to grant the stay and, if so, as to the terms that would be fair. In the exercise of its discretion, the Court will weigh considerations such as the balance of convenience and the competing rights of the parties before it.
... Two further principles can be mentioned. The first is that where there is a risk that the appeal will prove abortive if the appellant succeeds and a stay is not granted, courts will normally exercise their discretion in favour of granting a stay. Thus, where it is apparent that unless a stay is granted an appeal will be rendered nugatory, this will be a substantial factor in favour of the grant of a stay.
(References omitted)
There can be no doubt that, in determining whether to grant a stay, the appellants’ prospects of success on appeal is an important factor. It has not been suggested that the grounds of appeal pleaded by the appellants are not arguable, and I proceed on the basis that the appellants’ appeal is not doomed to fail. I also note that there is now only about eight weeks until the appeal will be heard. On the evidence before me, there is little prospect of the respondents being unable to recover against the judgment of Master Harper if the appeal is unsuccessful. Through their counsel, the appellants have offered to pay a further sum of $100,000.00 into an interest-bearing account as directed by this Court to await the outcome of the appeal. It appears to me that the arguments in favour of a stay are:
(a)the respondents’ position concerning recovery of the judgment sum will not detrimentally change from this point to the date of appeal;
(b)the appeal is listed to be heard in eight weeks;
(c)there is potential for the appellants and the businesses under their control to suffer financial hardship if they are called upon to pay the balance of the judgment sum immediately; and
(d)the appellants have arguable grounds of appeal.
The respondents referred me to the decision of Besanko J in Lewincamp v ACP Magazines Ltd (No 3) [2008] ACTSC 81, where an application for stay was refused in circumstances where it was accepted that the appellant had arguable grounds of appeal, the appeal was likely to come on for hearing within a reasonable time, and the respondent would suffer no hardship if a stay was granted. The difference between that case and the present is that there was no suggestion that the appellant in Lewincamp that his business interests would be detrimentally affected by the appellant being required to pay the judgment sum.
Orders
I am satisfied that the combination of circumstances referred to at [15] above make it appropriate to stay the execution of the judgment of Master Harper, on a condition that the appellant’s pay the sum of $100,000.00 into an account as agreed by the parties. I direct the parties to prepare appropriate orders.
In my opinion, the appropriate costs order is that the cost of this application should be costs in the appeal.
| I certify that the preceding eighteen [18] numbered paragraphs are a true copy of the Reasons for Judgment of his Honour Justice Burns. Associate: Date: 12 June 2015 |
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