Ashton v Prentice [1999] FCA 714

FEDERAL COURT OF AUSTRALIA

Ashton v Prentice [1999] FCA 714

IN THE MATTER OF ERIC ABRAHAM JURY; ANDREW CRAIG ASHTON v MAXWELL WILLIAM PRENTICE NG 1406 OF 1998 KATZ J 27 MAY 1999 SYDNEY

IN THE FEDERAL COURT OF AUSTRALIA

NEW SOUTH WALES DISTRICT REGISTRY NG 1406 OF 1998

BETWEEN: ANDREW CRAIG ASHTON

Applicant

AND: MAXWELL WILLIAM PRENTICE

Respondent

JUDGE: KATZ J

DATE OF ORDER: 27 MAY 1999

WHERE MADE: SYDNEY

THE COURT ORDERS THAT:

1. The application for a stay of the orders of the Full Court of the Federal Court made on 21 May 1999 be dismissed. 2. The applicant pay the respondent's costs of the application.

Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.

IN THE FEDERAL COURT OF AUSTRALIA

NEW SOUTH WALES DISTRICT REGISTRY NG 1406 OF 1998

BETWEEN: ANDREW CRAIG ASHTON

Applicant

AND: MAXWELL WILLIAM PRENTICE

Respondent

JUDGE: KATZ J

DATE: 27 MAY 1999

PLACE: SYDNEY

EX TEMPORE REASONS FOR JUDGMENT 1 On 11 December 1998, Hill J gave judgment in the matter of Ashton v Prentice (unreported; 11 December 1998; FCA). His Honour's judgment was appealed to a Full Court of this Court and, pending the hearing of that appeal, there was in place a stay of Hill J's orders. Last Friday, 21 May 1999, a Full Court of this Court, constituted by Ryan and Heerey JJ and myself, gave judgment on the appeal. On that day, the Full Court made orders which varied some of the orders which had been made by Hill J, but left others of them undisturbed. 2 The undisturbed orders of Hill J became operative again once the Full Court generally dismissed the appeal from his Honour's judgment and, in addition to Hill J's original orders, there were also the varying orders of the Full Court. The effect of those two sets of orders together was in substance this: first, that, within seven days, Mr Ashton had to supply Mr Prentice with a registrable transfer of 4 Molloy Avenue, South Coogee, New South Wales, Mr Ashton then being the registered proprietor of that property; and, secondly, that, within thirty days, a number of people who were in possession of the property were required to vacate it, in default of which Mr Prentice might seek a writ of possession in respect of the property. The people who were in possession of the property, or at least some of them, had been respondents to the proceedings before Hill J but, as his Honour himself pointed out, they had all chosen to submit to any order that he might make in the proceedings before him, other, that is, than an order as to costs. 3 Mr Prentice is the trustee in bankruptcy of the sequestrated estate of a Mr Jury. Mr Ashton had acquired 4 Molloy Avenue from Mr Jury before Mr Jury became bankrupt. The people in possession of the property now are Mr Jury and other relatives of his. They were in possession of the property before it was transferred by Mr Jury to Mr Ashton and they leased the property back from Mr Ashton immediately on his having acquired it from Mr Jury. 4 The basis of Mr Prentice's application to the Federal Court, using that term compendiously to include both the single Judge and the Full Court, was s 121 of the Bankruptcy Act 1966 (Cth), which is headed, "Transfers to Defeat Creditors". In effect, the provision is a modern day successor, at least in certain respects, to a sixteenth-century law on fraudulent conveyances. 5 Mr Ashton has filed a notice of motion dated 26 May 1999, in which, in effect, he seeks a stay of the orders for the provision of a transfer of the property and for the vacating of the property. He does so on the basis that he is proposing to make an application to the High Court for special leave to appeal from the decision of the Full Court. 6 Paragraph 25(2)(d) of the Federal Court of Australia Act 1976 (Cth) says that applications to stay an order of a Full Court may be heard and determined by a single Judge or by a Full Court and it is to me, in my capacity simply as an ordinary single Judge of the Court, that this application for a stay has been made. My power in the matter does not depend on the fact that I happen to have been a member of the Full Court which heard the appeal. 7 The principles to be applied in determining whether to grant a stay in circumstances of the present type seem, at least at the modern day, to come in the first instance from the reasons for judgment of Brennan J in Jennings Construction Limited v Burgundy Royale Investments Pty Limited [No 1] (1986) 161 CLR 681. That was an application for a stay pending a special leave application, which stay application was not made to the Court or a member of the Court which had made the decision which was the subject of the proposed special leave application. It was instead a stay application which was made directly to a Justice of the High Court. 8 In one sense, it may be said that I am not bound by the decision, for instance, of Brennan J in Burgundy Royale, because Judges of the Federal Court are not bound by decisions of single Justices of the High Court, but only by decisions of Full Courts of the High Court. However, in a case in which the issue is whether or not a stay should be granted pending an application for special leave to the High Court, whatever may be the strict position so far as precedent is concerned, I would plainly follow the rules that have been laid down by single Justices of the High Court itself in connection with the grant of such stays. 9 As I read Brennan J's reasons for judgment, there are a number of matters which are of fundamental importance on such applications, the first of which is that the jurisdiction to grant a stay to preserve the subject matter of litigation pending an application for special leave to appeal is an extraordinary jurisdiction and exceptional circumstances must be shown before its exercise is warranted (see at 684). 10 I should I think also draw attention to the fact that Brennan J referred (also at 684) to the appropriateness of seeking a stay in the first instance from the Court whose decision was to be the subject of the special leave application. His Honour also said (at 685) that one of the matters to be taken into account where an application of this sort is made to the High Court itself directly is whether or not an application was made to the Court below unsuccessfully. That consideration is plainly included so as to induce applicants for such interlocutory relief to seek such relief, in the first instance at least, from the Court below. 11 If, as I apprehend, Mr Ashton is now to seek from the High Court a stay of the sort which, as I announced immediately before giving these reasons, he has sought unsuccessfully from me, he will plainly not be disadvantaged by that consideration to which Brennan J referred. 12 Brennan J also referred to a number of other matters which are relevant in the exercise of the discretion (see at 685). One of them, in particular, is whether there is a substantial prospect that special leave to appeal will be granted. 13 Perhaps it is convenient to say now I am not aware myself of any case in which a Full Court of the High Court has cast doubt upon the relevance of that consideration as expressed by Brennan J, namely, the consideration whether there is a substantial prospect of success for the special leave application. His Honour does not appear to me to be saying that it is a condition precedent to the grant of interlocutory relief that there be a substantial prospect of success, simply that it is a relevant consideration in the exercise of the discretion. That may explain the decision to which Mr McQuillen, counsel for the applicant, referred me, Pelochovsky v The Registrar of the Court of Appeal (1998) 72 ALJR 711 (Gummow J). That was a case in which, as appears at par 6 of the reasons, his Honour, although not using the exact language used by Brennan J in Burgundy Royale, seems to have taken the view that the prospects for success of a special leave application were not substantial, but nonetheless, by reason of other considerations, was persuaded to grant interlocutory relief. 14 Certainly, the argument before me has revolved, in part at least, around the question of whether or not there are substantial prospects of success for the special leave application. Mr McQuillen acknowledged that it was part of his argument that there were substantial prospects. The basis upon which he proposes to seek special leave from the Full Court's decision have not yet been distilled into a draft application for special leave and draft notice of appeal, but he did hand up to me some brief written submissions in support of his stay application, in which he made plain those points of his which he said he would be putting at the forefront of his special leave application and which, he said, would justify a conclusion that he did have substantial prospects for success on his special leave application. 15 First, he focused on the reasons of the Full Court in connection with the question whether the primary Judge had been disqualified from hearing the matter, either by reason of the primary Judge's direct pecuniary interest in the outcome of the proceeding or, alternatively, because a fair minded observer might reasonably apprehend that the primary judge had prejudged, or at least would prejudge, the matters in issue before him. 16 My assessment of the prospects of a special leave application relying upon those matters is that they are not substantial. To some extent I feel some difficulty about the matter, because, of course, what I am asked to do, in a sense, is to decide whether or not there are substantial prospects for success on points to the contrary of those in which I have joined. However, doing the best I can and recognising that this application might have been made to any other single Judge of the Court but, in the result, was made to me, I can only say that my own assessment is that the correctness of the views expressed by the Full Court is not attended by sufficient doubt to justify the grant of special leave and my assessment is that, in those circumstances, the prospects for success of the application simply cannot be described as substantial. 17 From the reasons of the Full Court it is apparent that the question which it was considering was not a matter of first impression. The matter (when I say "the matter", I mean the matter and related matters) has been considered recently, not only by a Full Court of this Court, but also by the intermediate appellate Courts in both New South Wales and Victoria and it does appear to me that, at least so far as the direct pecuniary interest aspect of the matter is concerned, those Courts have taken a view which is even more adverse to the position that Mr Ashton wishes to uphold than the view which has thus far been taken by this Court on two occasions. 18 While it may be said as to the direct pecuniary interest point that there is some novelty about it, as to the points about a reasonable apprehension of bias, they seem to me to be common garden applications of long standing principles and, for that reason alone, unlikely to attract the High Court's attention as potential special leave points. 19 Mr McQuillen referred in par 7 of his written submissions to the fact that the applicant will also seek to challenge the findings of the Full Court with respect to the lease, in so far as the Court found that there was a merger of interest once the property was transferred to the trustee. 20 The great difficulty which I have in seeing the significance of that point in the context of a special leave application is this: it seems to me that if Mr Ashton is unable to persuade the High Court that it should disturb the conclusion of the Full Court with respect to the initial transfer of the property, the question of the correctness or otherwise of the Full Court's decision about the lease is a matter of little moment. However, in any event, as with the disqualification arguments, my own assessment is that the prospects for success of a special leave application focused on the question to which Mr McQuillen referred to in paragraph 7 of his written submissions is not substantial. 21 On that basis then, I must, taking into account the consideration to which Brennan J referred about the existence or otherwise of substantial prospects, consider Mr Ashton to be behind at this stage, if I may put it in that way. 22 The other matter on which Mr McQuillen focused in particular was the fact that his appeal would be rendered nugatory if he did not get a stay, because the trustee, in the absence of a stay, could sell the property in the meantime and it would be impossible for the property then to be restored to Mr Ashton following a successful appeal. 23 Mr Coles QC, who appeared for the respondent, responded to that submission by focusing on Mr Ashton's evidence before me that, so far as he was concerned, he viewed the property as simply a long term investment about which there was nothing special from his point of view. He said that he was not interested in protecting the Jury family and that he was bringing his proceedings merely in an attempt to protect his own asset. Mr Coles' answer then was that, if it should be the case then that special leave were granted and the appeal were ultimately to succeed, Mr Ashton could be adequately compensated in money terms. I must say that, to my mind, that is a satisfactory answer in the circumstances. 24 Mr Ashton would obviously (that is, on the assumption, of course, that the property had been sold in the intervening period) be entitled to compensation for the lost value of the property and, in so far as there is any question of loss of income from the tenancy arrangements presently in place, no doubt the High Court on the allowance of the appeal would fashion orders, in accordance with, as Mr Coles said, The Commonwealth v McCormack (1984) 155 CLR 273, which compensated Mr Ashton for the loss of the tenancy income as well. 25 The matter was rather presented to me as though the question of whether or not the appeal would be nugatory or not was a consideration to be taken into account in the exercise of my discretion. I must say that that is not how I understand Brennan J, at least, to have approached the matter, his reasons having often been relied on since in these cases. As I understand his Honour's reasoning, the question of whether or not the appeal would be rendered nugatory is in fact a question which has to be answered at the outset, before the question of a discretion to grant a stay even arises. In that connection I draw particular attention to his Honour's statement (at 683) that, "The jurisdiction to grant a stay in the present case depends on whether a stay is necessary to preserve the subject-matter of the litigation. If an application for special leave to appeal would be futile unless a stay is granted, the jurisdiction arises." 26 I have rather dealt with the question of the nugatory aspect as if it were a discretionary question, but, having said what I have said about that aspect of the matter, it may be that the proper approach is simply to say that the judicial discretion is not enlivened here, by reason of the circumstances to which I have just referred. Whatever may be the case and attempting to look at the matter simply from the point of substantial fairness, it does seem to me that the availability of orders providing for appropriate compensation overcomes any suggestion that the application for leave to appeal would be rendered futile or nugatory if a stay were not to be granted. 27 In the end it may be said in a compendious way that, taking into account what Brennan J had to say about the necessity for a showing of exceptional circumstances before the exercise to grant a stay pending a special leave application is warranted, it is my view that exceptional circumstances have not here been shown. For that reason I have decided to refuse the application for a stay. 28 I also order that the applicant pay the respondent's costs of this application. I certify that the preceding twenty-eight (28) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Katz.