Classic Gourmet Sausages Pty Ltd v Leda Commercial Properties Pty Ltd [2000] FCA 149

FEDERAL COURT OF AUSTRALIA

Classic Gourmet Sausages Pty Ltd v Leda Commercial Properties Pty Ltd

[2000] FCA 149

PRACTICE – appeal – stay of execution – principles governing grant of stay – appeal unlikely to succeed The Commissioner of Taxation (Cth) v The Myer Emporium Ltd [No 1] (1986) 160 CLR 220 applied Gerah Imports Pty Ltd v The Duke Group Ltd (in liq) (1994) 68 ALJR 196 applied Rahme v Commonwealth Bank of Australia (1993) 68 ALJR 53 applied Wilson v Church (No. 2) (1879) 12 Ch D 454 applied CLASSIC GOURMET SAUSAGES PTY LTD v LEDA COMMERCIAL PROPERTIES PTY LTD A 8 of 2000 JUDGE: FINKELSTEIN J DATE: 17 FEBRUARY 2000 PLACE: CANBERRA

IN THE FEDERAL COURT OF AUSTRALIA

AUSTRALIAN CAPITAL TERRITORY DISTRICT REGISTRY V8 of 2000

BETWEEN: CLASSIC GOURMET SAUSAGES PTY LTD

Appellant

AND: LEDA COMMERCIAL PROPERTIES PTY LTD

Respondent

JUDGE: FINKELSTEIN J

DATE OF ORDER: 17 FEBRUARY 2000

WHERE MADE: CANBERRA

THE COURT ORDERS THAT: 1. The Motion dated 11 February 2000 be dismissed. 2. The Appellant to pay the Respondent's taxed costs of the Motion. Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.

IN THE FEDERAL COURT OF AUSTRALIA

AUSTRALIAN CAPITAL TERRITORY DISTRICT REGISTRY V8 of 2000

BETWEEN: CLASSIC GOURMET SAUSAGES PTY LTD

Appellant

AND: LEDA COMMERCIAL PROPERTIES PTY LTD

Respondent

JUDGE: FINKELSTEIN J

DATE: 17 FEBRUARY 2000

PLACE: CANBERRA

REASONS FOR JUDGMENT 1 The appellant was the tenant of shop premises at the Tuggeranong Hyperdrome, under a lease dated 7 December 1994. The respondent was its landlord. In 1997 the appellant fell behind in its rent, apparently not for the first time. In March 1998 the respondent re-entered the premises and evicted the appellant. 2 Shortly before the respondent re-entered the premises, Mr Turner, a director of the appellant, and his wife, trading as Classic Gourmet Sausages, applied to the Tenancy Tribunal for an order restraining the respondent from taking action to terminate the lease. The application was premised on the assumption that Mr and Mrs Turner were the tenants although it appears that the appellant was the party to the lease. 3 In their application to the Tribunal Mr and Mrs Turner alleged that taking possession of the premises was harsh, oppressive and unconscionable having regard, in particular, to the fact that Mr and Mrs Turner were willing and had offered to pay the arrears of rent on terms similar to those which the respondent had granted to other tenants at the shopping centre. 4 An application for interim relief was refused. Thereafter the respondent applied to have the application dismissed as disclosing no reasonable cause of action and on the ground that it was frivolous or vexatious. After hearing evidence the Tribunal did dismiss the application. It referred to the "sorry relationship" between the parties. It found that not only was rent in arrears, and on occasion quite substantially so, but Mr and Mrs Turner had failed to supply a bank guarantee to cover the unpaid rent. It seems that this was an obligation imposed upon the tenant by the terms of the lease. 5 Mr and Mrs Turner complained that the respondent had re-entered the premises without adequate warning. The Tribunal rejected this allegation. It said that there had been previous warnings that Mr and Mrs Turner would be evicted from the shop because of their failure to pay rent. 6 In the result the Tribunal held that the application made by Mr and Mrs Turner was without merit and ordered that it be dismissed. From that decision an appeal was taken to the Supreme Court. That appeal was dismissed. Mr and Mrs Turner then appealed to the Full Court of the Federal Court. The hearing of that appeal has taken place and judgment is reserved. 7 In the meantime the respondent served upon the appellant a statutory demand under s 459E of the Corporations Law. The demand was founded upon a judgment debt obtained in the Magistrates' Court for unpaid rent in the amount of $17,150.02 plus interest of $87.34. 8 The appellant brought an application to set aside the statutory demand. Two grounds were relied upon viz: (a) that there was a genuine dispute about the existence of the debt and (b) that the appellant had a cross-claim against the respondent which reduced the claimed debt to less than the statutory minimum. 9 The application to set aside the statutory demand was heard by the Chief Justice of the Supreme Court of the Australian Capital Territory. He dismissed the application with costs. 10 It seems from his Honour's reasons for decision that the judgment given in the Magistrates' Court had been obtained on the written consent of the appellant's solicitor. At the hearing of the application to set aside the demand, the appellant denied that its solicitor had authority to consent to judgment. Evidence was taken on the point including evidence from the solicitor. The Chief Justice found that Mr Turner had authorised the appellant's solicitor to consent to judgment notwithstanding his, Mr Turner's, protestation to the contrary. 11 The appellant also relied upon its claim in the Tenancy Tribunal to show that there was a serious question to be tried that it had an offsetting claim. As to this, the Chief Justice noted the history of the proceeding which at that time had not been heard by the Full Court. His Honour mentioned that in the Tribunal proceeding the applicants were Mr and Mrs Turner and not the appellant. More importantly, for present purposes, is his Honour's comment that "[t]he subject matter of the dispute is not one which on the face of it gives rise to liability, monetary or otherwise, on the part of the respondent". Accordingly, his Honour found that there was no genuine offsetting claim. 12 The appellant has brought an appeal from the dismissal of the application to set aside the demand. It seeks a stay of the orders made by the Chief Justice pending the hearing of that appeal. 13 In reality a stay of the orders will not assist the appellant. The order dismissing the application is not one which requires any party to do or refrain from doing an act. Speaking strictly, that is not an order the operation of which can be stayed, although such an order could be made on the obligation to pay costs. 14 The substance of what the appellant seeks is an injunction pending the hearing of the appeal restraining the respondent from acting upon the statutory demand. There is no doubt that the court has power to grant that relief. The principles to be applied in determining whether an injunction should be granted are in my opinion the same as those applicable to the grant of a stay. 15 It is not necessary for me to set out in any detail the matters to be taken into account on a stay application. They are well established. It will be sufficient if I indicate, in summary form, the basis upon which I propose to act: 1. The power to grant a stay is an extraordinary jurisdiction. 2. Generally speaking, the power will only be exercised in special circumstances, although it is now accepted that there is a general discretion to grant the relief. 3. A stay will often be granted where a party seeks to appeal a decision and the appeal will be rendered nugatory unless a stay is granted in the meantime. If the position were otherwise the right to appeal would be a barren right. 4. When a stay is sought pending appeal it is not sufficient merely to show that there is on foot some process that seeks to have the impugned order set aside. Usually it is necessary to show some prospect of success on the appeal. See generally Wilson v Church (No. 2) (1879) 12 Ch D 454 at 458; The Commissioner of Taxation (Cth) v The Myer Emporium Ltd [No 1] (1986) 160 CLR 220 at 222; Rahme v Commonwealth Bank of Australia (1993) 68 ALJR 53 at 54-55; Gerah Imports Pty Ltd v The Duke Group Ltd (in liq) (1994) 68 ALJR 196 at 196-197. 16 Mr Turner has sworn an affidavit in support of his application. It does not deal with the merits of the claim for rent nor does it deal with the dispute before the Tenancy Tribunal save to mention the orders that were made by the Tribunal and by the Supreme Court, and the fact that an appeal has been taken from the decision of the Supreme Court. 17 The only matters that are put concerning the merits of the appeal are the following assertions: 1. The appellant has reasonable prospects of succeeding in the appeal that has been heard by the Full Court. 2. If the appellant does succeed and the matter goes back to the Tribunal, the appellant has reasonable prospects of succeeding in a claim for damages against the respondent for wrongful termination of the lease, of course after the application has been amended to include a money claim. 3. The damages the appellant will recover are likely to exceed the sum that is due to the respondent under the Magistrates' Court judgment. 4. The trial judge failed to take the above matters into account. 18 The true question that arises here is not whether the appellant will succeed in the other appeal, but whether it has shown that the Chief Justice may have fallen into error. Relevantly, that requires the appellant to show that the Chief Justice was arguably wrong in his conclusion that the appellant had not made out a satisfactory case that it had an offsetting claim within the meaning of s 459H. 19 The difficulty confronting the appellant is that it placed no material before the Chief Justice from which it could be determined that an offsetting claim did or was likely to exist. Merely referring to the existence of the Tribunal proceedings and the subsequent appeals was not sufficient. If the appellant was to raise an arguable case for an offsetting claim it was required to lead evidence to establish that claim. However, no such evidence was led and in its absence the Chief Justice was never in a position where he could find in favour of the appellant. I am left with the firm impression that the appellant has not shown any real prospect of success on its appeal from the decision of the Chief Justice. 20 I should also mention that I have not been told what activities, if any, the appellant is currently engaged in. I do not know whether it has any ongoing commitments. I do not know whether it is deriving any income. Mr Turner has not pointed to any harm that will be suffered if the company is wound up. 21 All of this leads me to the conclusion that no order should be made to prevent the respondent taking steps to wind up the appellant if it is so advised. As I have said on another occasion, in the case of a winding up the interests of creditors must be taken into account. These interests will not be protected if the processes of winding up are interfered with in this case. 22 There are two final matters that I should mention. First, although the appellant has not been able to set aside the statutory demand or obtain an order that prevents it from being acted upon, it may be possible for the appellant to resist a winding up order by reason of the existence of its alleged claim against the respondent. Of course it would have to satisfy the requirements of s 459S of the Corporations Law to raise the point. Second, if the appellant is wound up before the appeal from the Chief Justice is heard and determined it is not impossible, although I can see it might be very difficult, to stay the winding up order in the event that the appeal is successful. 23 The motion will be dismissed with costs. I certify that the preceding twenty-three (23) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Finkelstein.