Industrial Relations Commission of New South Wales in Court Session CITATION : Green v Brown [2000] NSWIRComm 222 APPELLANTS Alan Myer Green and others PARTIES : RESPONDENTS Charlotte Anne Brown and another FILE NUMBER: IRC 4613 of 2000 CORAM: Wright J President Practice and procedure - Stay - Appeal - Principles to be applied - Circumstances in which stay is to be granted - Prejudice - Respective positions of parties - Stay granted on terms. CATCHWORDS : Appeal - Application for stay - Principles to be applied - Circumstances in which stay is to be granted - Prejudice - Respective positions of parties - Stay granted on terms. LEGISLATION CITED : Industrial Relations Act 1996 s 190 Abboud v The State of New South Wales (Department of School Education) (1999) 92 IR 32 Alexander v Cambridge Credit Corporation Ltd (Receivers Appointed) (1985) 2 NSWLR 685 Bunning v Cross (1978) 141 CLR 54 CASES CITED : Crowley v Glissan (1905) 2 CLR 402 Fightvision v Tszyu [2000] NSWSC 899 State Rail Authority of New South Wales v Earthline Constructions Pty Ltd (in liq) (1999) 160 ALR 588 The Commissioner of Taxation of the Commonwealth of Australia v The Myer Emporium Limited [No 1] (1986) 160 CLR 220 Water Industry Salaried Officers' Union v Professional Officers' Association (NSW) (1987) 22 IR 178 HEARING DATES: 09/28/2000; 10/06/2000; 10/11/2000 DATE OF JUDGMENT: 11/24/2000 APPELLANTS Mr A R Moses of Counsel Solicitor: Ms K L Davies Henry Davis York LEGAL REPRESENTATIVES: RESPONDENTS Mr S C Rothman SC Solicitor: Mr C G Roth Charles G Roth & Co JUDGMENT: INDUSTRIAL RELATIONS COMMISSION OF NEW SOUTH WALES IN COURT SESSION CORAM: WRIGHT J, President Friday 24 November 2000 Matter No IRC 4613 of 2000 ALAN MYER GREEN AND OTHERS v CHARLOTTE ANNE BROWN AND ANOTHER Application for leave to appeal and appeal from decisions and orders of Justice Schmidt given or made on 2 December 1998, 7 June 2000, 1 September 2000 and 8 September 2000 in Matter No CT95/1166 and application for stay. JUDGMENT [2000] NSWIRComm 222 1 On 14 September 2000 Alan Myer Green, Image Clothing Pty Limited and Ecroblack Pty Limited lodged an application for leave to appeal and appeal against an interlocutory judgment, judgments and orders delivered or made by Schmidt J on 2 December 1998, 7 June 2000, 1 September 2000 and 8 September 2000 which resulted in orders in favour of Charlotte Anne Brown and Charlie Brown Pty Limited. I shall refer to the first three parties as the appellants and to the other two parties as the respondents. This judgment concerns an application made by the appellants for a stay of the orders, or of the execution of the orders, made by her Honour on 8 September 2000, pursuant to s 190 of the Industrial Relations Act 1996. 2 The proceedings were heard by the Court on 28 September, 6 and 11 October 2000. The appellants were represented by Mr A R Moses of Counsel and the respondents by Mr S C Rothman of Senior Counsel. Mr Moses moved on affidavits of the first appellant sworn on 26 September and 28 September 2000. The grounds upon which he moved are shortly stated in paragraph 17 of the former affidavit in the following terms: 17 Based on my review of the documents annexed to this affidavit and the letter from Hugh Taylor referred to in paragraph 16 above, it is my honest belief that if execution of the orders made in these proceedings on 8 September 2000 was not stayed pending an appeal: (a) AAGG would have no assets available to meet a judgment against it and would be wound up; (b) Ecroblack Pty Limited would have no assets available to meet a judgment against it and would be wound up; (c) I would have to declare myself bankrupt, and (d) the Palm Beach and Clyde properties referred to in the Summary would have to be sold. 3 In order to understand the significance of the matters set out in that paragraph reference should be made to a number of documents annexed to the first appellant's affidavit relating to his financial affairs, those of the other appellants and certain associated companies, persons and trusts. The reference to the letter from Hugh Taylor is a reference to a letter from Mr Taylor of the accounting firm Young Barnsdall Services Pty Limited who prepared the summary of the relevant financial affairs. The reference to "AAGG" is a reference to the second appellant which changed its name in approximately June 1988 from Image Clothing Pty Limited to Apparel Group Pty Limited and on 23 December 1999 to AAGG Pty Limited. The references to the Palm Beach and Clyde properties are references to properties owned by, in the first case, the first appellant and his wife, and in the second case by a unit trust associated with the appellants. 4 The first affidavit contains detailed financial information as to the appellants and associated companies, trusts and individuals. The second affidavit provides further detail as to matters either set out in the first affidavit or as to documents attached to it. 5 In support of the stay application, Mr Moses submits that the proper application of the relevant principles would require that a stay be granted. He relies particularly upon the judgment of the Court of Appeal in Alexander v Cambridge Credit Corporation Ltd (Receivers Appointed) (1985) 2 NSWLR 685, as adopted by the Industrial Commission of New South Wales in Court Session in Water Industry Salaried Officers' Union v Professional Officers' Association (NSW) (1987) 22 IR 178. Counsel also relies upon the judgment of Dawson J in the High Court in Commissioner of Taxation of the Commonwealth of Australia v The Myer Emporium Limited [No 1] (1986) 160 CLR 220. In particular, counsel relies upon the holding of the Court of Appeal in the Cambridge Credit case that special circumstances are not required for the grant of the stay, and it is sufficient that the applicant demonstrates a reason or an appropriate case to warrant the relevant exercise of discretion. Further, by reference to the judgment of Dawson J, it is submitted that relevant circumstances include the situations where failure to grant a stay, if the appeal were successful, may render it nugatory or where, for whatever reason, there is a real risk that it will not be possible for a successful appellant to be restored substantially to its former position if the judgment is executed. 6 It is then submitted that the factual circumstances elaborated and summarised in the first appellant's affidavit show a proper basis to find that the appellants will not be able to proceed with the appeal unless a stay is granted because of their financial difficulties which will result in insolvency or bankruptcy of the corporate and individual appellants. Further, that failure to grant a stay would at the very least require the appellants to liquidate assets in a significant way such that if the appeal were successful, they could not be restored to their former situation as to those assets. 7 It is pertinent to refer briefly here to the nature and threefold effect of the orders made by her Honour at first instance. First, they involve a verdict for the respondents in a sum which the parties agree approximates $1,250,000. They also involve orders that the appellants indemnify the respondents as to certain proceedings in the Supreme Court between the respective parties which also involve other parties. Thirdly, her Honour ordered the appellants to pay the respondents' costs of the proceedings at first instance. The Court was not given any firm estimate of those costs although a general reference was made to the overall effect of her Honour's monetary orders (that is, other than the orders for indemnification) being in the order of $1,500,000 or $1,600,000. The first appellant's affidavit indicates a current indebtedness to his former solicitors who acted for him in those proceedings of $350,000. Presumably the costs orders in favour of the respondents would approximate that amount. 8 Counsel for the appellants indicated that, notwithstanding the difficulties his clients have in relation to their current asset situation, they were prepared to use their best endeavours with certain family members to obtain a small amount of funds which would be either paid into Court or, subject to a particular condition, paid to the respondents as part of the terms upon which a stay should be granted. The particular condition was that payment to the respondents would depend upon evidence being presented to the Court showing that the first respondent would be in a position to repay any such monies. It may be interpolated that evidence was subsequently filed by the first respondent which the appellants accepted demonstrated that she was in a position to provide the relevant undertaking as to any monies which the Court ordered be paid to her as a term or condition of any stay granted. That aspect need not be considered further. 9 Counsel indicated that his clients were prepared to pay into Court or to the respondents a sum as one of the terms for granting the stay. At the commencement of the proceedings the sum proffered in that respect was $170,000 and that sum was subsequently increased to $250,000. No basis was put as to appropriateness or basis of assessment of the respective sum other than that it was all the appellants could assemble from family members. 10 Counsel for the appellants accepted that it was appropriate to place before the Court submissions to demonstrate that his clients had a reasonably arguable case on the appeal. The commencement point of this submission was section G of the Notice of Appeal which usually sets out the reasons why leave to appeal should be granted. The appellants have inserted in that section of the appeal the following: Leave to appeal is not required by the Appellant: see GIO v. O'Donnell (1996) 70 IR 1; Re Solicitors (State) Award (1996) 72 IR 213 and Vision Publishing Pty Limited v. PK Lane Holdings Pty Limited (1998) 84 IR 277. 11 The second basis submitted as showing an arguable appeal is that her Honour erred in refusing to stay the proceedings as an abuse of process on the basis of what is commonly referred to as Anshun estoppel. Penultimately, it is submitted that her Honour erred in relation to the making of certain orders that the appellants indemnify the respondents in relation to a number of proceedings in the Supreme Court arising out of the break down of their commercial relationship. It is submitted that the approach adopted by her Honour is contrary to that of Hunter J of the Supreme Court in Fightvision v Tszyu [2000] NSWSC 899, a judgment which is the subject of an appeal to the Court of Appeal. Lastly, it is submitted that her Honour's judgment is flawed because her Honour made significant credit findings against the appellants and in particular against the first appellant and that those credit findings are impeachable in terms of the principles laid down in Abboud v. The State of NSW (1999) 92 IR 32 and State Rail Authority of New South Wales v Earthline Constructions Pty Ltd (in liq) (1999) 160 ALR 588. 12 Before referring to the submissions of senior counsel for the respondents it is appropriate to observe that, should a stay be granted, the matters relied upon by the appellants immediately raise some questions of prejudice to the respondents which arise in this way. If the evidence of the first appellant is accepted then the financial position of the appellants either considered separately or cumulatively is one which verges on insolvency and that, if the respondents' ability to obtain the fruits of the litigation before her Honour is postponed and they are successful in the appeal, there is real doubt that they will receive any significant amounts from the litigation. 13 Senior counsel for the respondents submits that there is no substantial basis to consider that the appeal would be successful. For example, it will be a serious issue between the parties as to whether leave to appeal is required. He submits that a proper consideration of her Honour's judgment raises considerable doubt as to whether the attack on her Honour's judgment based on the principles in Abboud and Earthline would be successful. It is submitted that the appeal is based essentially on factual findings which were reasonably open to her Honour and in any event correct. The reliance upon the judgment of Hunter J is entirely misplaced; alternatively, any relevance is limited only to the indemnity orders and not to the verdict of approximately $1,250,000. It therefore does not provide any basis to grant a stay of the monetary orders. 14 That financial situation of the appellants referred to in, for example, paragraph [12] is relied upon heavily by senior counsel on the basis that, if accepted, it provides a significant factual and discretionary basis against the stay being granted. However, his submissions on that issue proceed much further. He submits that the Court should have considerable doubts as to the substance of the matters relied upon by the appellants and whether it should accept at face value the matters set out in the first appellant's affidavit. Senior counsel made detailed submissions as to the way in which the relevant accounting documents attached to the affidavit of 26 September should be considered. He also tendered a number of documents which he submitted demonstrated that the Court had not been provided with full and complete information as to the appellants' financial situation. The documents were searches of Australian Securities and Investments Commission and Land Titles Office of New South Wales registers. The first document shows that the first appellant became a director of a company named Quality Products and Systems Pty Ltd on 15 February 1999, the date the company was registered, and in respect of which a charge was registered on 29 April 1999 in favour of Westpac Banking Corporation. Senior counsel submits the fact of that charge indicates the corporation is one with at least some assets. The second document showed that Kendall Nominees Pty Ltd (a company referred to in the appellants' evidence as one of their associated companies) was the registered proprietor of real property in Gundagai which was the subject of a mortgage to the National Australia Bank. Neither of these matters were referred to in the appellants' evidence. I do not consider it appropriate to make detailed findings as to these matters, nor do I consider it necessary or appropriate to set out in greater detail than has already occurred the financial arrangements of the appellants or for that matter the respondents. However, I make the following findings for the purposes only of the stay application. I find on the balance of probabilities that, first, the first appellant's affidavits do not place before the Court a full and complete picture of the financial affairs of the appellants and those associated with them. Second, that in assessing the question of prejudice which might be suffered by the respondents should the stay be granted in the terms proffered, it is not possible to act on any basis other than the material in the affidavits filed by the appellants. There is no basis upon which tangibly to assess prejudice to the respondents except by reference to that material. On that basis, the Court finds that a stay granted on the terms proffered by the appellants would involve significant prejudice to the respondents. 15 At the conclusion of the proceedings on 6 October last, the Court ruled that it would grant a stay generally in terms put forward in the alternative submissions of the respondents and embodied in short minutes contained in the document which became exhibit 3, with reasons to be subsequently provided. However, it was determined that the basis upon which the stay would be granted was that by 14 November 2000 the appellants should pay to the respondents the sum of $600,000. The reasons why that figure was specified related to the question of prejudice which the Court has earlier indicated it considers will be imposed upon the respondents should the stay be granted; and the fact the final sum proposed by the appellant neither adequately met that prejudice nor appeared to have been assessed to do so. The sum has been assessed in a very broad way but, whilst it is accepted that it would be most unfortunate in the circumstances if the appellants could not have the significant judgments and orders of her Honour tested on appeal, particularly in circumstances where they may not need leave to appeal, nevertheless the period required for the hearing and determination of the appeal may well result in significant prejudice to the respondents should they be successful in the appeal. In those circumstances, and particularly bearing in mind the evidence before the Court which the parties accept demonstrates that the respondents are able to repay any monies now paid to them and also the significant prejudice which might be suffered by the respondents, it was considered that an appropriate basis upon which to grant the stay is that the payment of that sum being somewhat less than half of the verdict of her Honour without taking into account the significant costs ordered. Absent a payment of that order, there is real doubt that the prejudice otherwise imposed on the respondents could be justified. 16 The principles to be applied are those set out the judgments earlier referred to, that is the judgment of the Court of Appeal in Alexander v Cambridge Credit Corporation Ltd (Receivers Appointed) and also the judgment of Dawson J in Commissioner of Taxation of the Commonwealth of Australia v The Myer Emporium Ltd [No 1] . However, matters for determination at this stage involve a fairly close consideration of the detail of the principles set out in the judgment of the Court of Appeal in the former case in the following terms (at 694 - 695): There are other principles to be kept in mind. The onus is upon the applicant to demonstrate a proper basis for a stay that will be fair to all parties: Trlin v Marac Finance Australia Ltd (unreported, Court of Appeal, 4 March 1985). The mere filing of an appeal will not, of itself, provide a reason or demonstrate an appropriate case, nor will it discharge the onus which the applicant bears: see Supreme Court Rules , Pt 51, r 10; Waller v Todorovic (unreported, Court of Appeal, 21 December 1979). 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: Attorney-General v Emerson (1889) 24 QBD 56. Where there is a risk that if a stay is granted, the assets of the applicant will be disposed of, the court may, in the exercise of its discretion, refuse to grant a stay: cf Clyne v Deputy Commissioner of Taxation (1982) 56 ALJR 857. Sometimes as a condition of the grant of a stay, where funds are available, a court will impose on the applicant the payment of the whole, or part, to the judgment creditor: Andrews v John Fairfax & Sons Ltd [1979] 2 NSWLR 184 … 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 … Secondly, although courts approaching applications for a stay will not generally speculate about the appellant's prospects of success, given that argument concerning the substance of the appeal is typically and necessarily attenuated, this does not prevent them considering the specific terms of the stay that will be appropriate fairly to adjust the interest of the parties, from making some preliminary assessment about whether the appellant has an arguable case. This consideration is protective of the position of a judgment creditor where it may be plain that an appeal, which does not require leave, has been lodged without any real prospect of success and simply in the hope of gaining a respite against immediate execution upon the judgment. 17 Although it is a matter for the Court as to the appropriate exercise of discretion nevertheless the exercise of that discretion should be guided considerably by the judgment of the Court of Appeal and the carefully crafted set of principles in it. The way in which the discretion in this matter should be exercised depends upon a number of particular factors or matters which arise directly from the nature of the material before the Court and the way in which counsel presented their submissions in relation to the stay application. In referring to the matters last mentioned I should make it clear that the Court was considerably assisted by the detailed yet succinct submissions made by both counsel in a difficult matter and where the respective interests of the clients were obviously such that the Court needed to be acutely aware of the detail of the respective legal principles relied upon and the effect of the relevant financial circumstances which the Court had to consider. 18 Notwithstanding the reservations as to the appellants' evidence, I am prepared to find that without at least a partial stay there is a real possibility the appellants' right of appeal could be rendered nugatory. It is considered that the questions which need to be carefully assessed having thus made that finding are, at the relevant level, what preliminary assessment should be made as to whether the appellants have an "arguable case". Secondly, given that argument concerning the substance of the appeal is "typically and necessarily attenuated", what are the "specific terms of the stay that will be appropriate fairly to adjust the interest[s] of the parties". 19 As to the first of those matters, I am prepared to assume that the appellants have an argument of substance that they do not require leave to appeal. Secondly, that there is an argument as to the appropriate approach that should be taken in relation to whether and to what extent orders should be made in granting relief under s 106 as to costs and expenses which arose in proceedings in another court even if it is accepted, as senior counsel for the respondents submitted, that the judgment in Fightvision is clearly distinguishable. However, as to that aspect it should be acknowledged that this argument at its highest does not affect the monetary orders made by her Honour but rather the questions as to the indemnity orders and perhaps the costs orders. It should also be acknowledged that her Honour dealt with the issues between the parties, including the making of relevant credit findings, in a very detailed and considered judgment. The submissions made by the appellants based on the principles in Abboud and Earthline are therefore not without some difficulty. Although counsel for the appellants submitted that there will be an amended notice of appeal filed, it is appropriate to proceed on the basis that, to the extent that the credit findings made by her Honour will be sought to be impeached, the Court can only consider those matters on the basis of the notice of appeal presently filed. It is also relevant that appellate intervention of the kind which occurred in Earthline is exceptional. 20 The Court is prepared to accept also that the appellants have an arguable case that their appeal as to her Honour's interlocutory judgment delivered in 1998 is not out of time, notwithstanding the respondents' contrary submissions (see, for example, Crowley v Glissan (1905) 2 CLR 402 at 402 - 403 and Bunning v Cross (1978) 141 CLR 54 at 82). As to the abuse of process ground, I am prepared to accept that it is not unarguable. It is, however, relevant that her Honour's judgment on that matter was not the subject of appeal until the proceedings concluded more than a year after it was delivered and the proceedings were concluded decisively against the appellants. 21 It is appropriate to consider the issue as to the terms of the stay on the basis of those findings as to the apparent strength of the appeal filed by the appellants. Taking those matters into account and the matters of prejudice earlier found, the Court considered that a fair adjustment of the respective interests of the parties, notwithstanding the possible financial difficulties that the appellants are presently experiencing, should lead to the grant of a stay in favour of the appellants coupled with an order for the payment of monies to the respondents subject to two other considerations. Firstly, that the appellants be given some short amount of time to ascertain whether they can assemble the relevant amount and to take relevant steps to do so. Secondly, limitations on the appellants dealing with their assets except for living expenses and to the extent it might be necessary to raise monies for the payment of the $600,000, and also to undertake steps necessary to prepare and to argue the appeal. 22 The foregoing sets out the reasons why the Court ruled on 6 October 2000 that it would grant the stay and indicated the broad terms upon which the stay would be granted and also the basis on which the Court on 11 October made orders which were, subject to the rulings of the Court on 6 October and some other rulings on ancillary or minor matters on that day, otherwise by consent. The orders are set out in the annexure to this judgment. ____________________ Annexure BEFORE THE INDUSTRIAL RELATIONS COMMISSION OF NEW SOUTH WALES IN COURT SESSION The Court orders that: 1. The Appellants jointly and severally pay to the First Respondent the sum of $600,000 on or before 14 November 2000. 2. Subject to compliance with Order 1, the execution of the Orders made by this Court on 8 September 2000 in proceedings 1166 of 1995 ("the Orders") be stayed until final determination of the Appeal the subject of these proceedings on the conditions set forth hereunder. 3. Subject to any further order of the Court, the Appellants and/or Applicants for Leave to Appeal whether by themselves, their employees, agents, attorneys or otherwise, be restrained until further Order: (a) From disposing of or dealing with or further encumbering in any manner whatsoever any of their assets whether such assets are present or future assets or be within or outside the jurisdiction; and (b) In the case of any such assets within jurisdiction, from removing such assets from the jurisdiction. 4. PROVIDED that Order 3: (a) Shall not prevent the first, second and third appellants paying costs reasonably incurred in these proceedings up to an amount of seventy thousand dollars ($70,000). (b) Shall not prevent the first, second and third appellants paying or causing to be paid, between 11 October 2000 and 11 April 2001, debts which were incurred by the appellants up until the date the second and third appellants ceased trading provided that: (i) documentation evidencing the debt to be repaid is submitted to the solicitors for the respondents or approval before repayment of the debt; (ii) if the respondents do not provide approval for repayment of a debt and agreement cannot be reached, the appellants have leave to restore the matter to the list to seek a variation of these orders by the Court. (c) Shall not prevent the first and second appellants, Kendall Nominees Pty Limited as trustee of the Image Unit Trust and M & A Green Properties Pty Limited to sell or otherwise dispose of the following properties: (i) 8 Kendall Street, Granville NSW 2142; and (ii) 1113 Barrenjoey Road, Palm Beach NSW 2108; in order to comply with Order 1. (d) Shall not prevent the first appellant and Mrs Green from selling the property situated at 3/153A The Grove, Woollahra, provided that the proceeds of the said sale are utilised solely for the satisfaction of debts secured by way of mortgage thereon to St George Bank which satisfaction is required by St George Bank. (e) Shall not prevent any bank from exercising any rights of set-off which it may in respect of any facilities afforded by it to the first and second appellants or either of them prior to the date of this order provided that upon the appellants or any of their employees or agents becoming aware of the fact that a bank intends to exercise a right of set-off, the appellants will immediately: (i) request the bank or its employees or agents to take no further steps in relation to its right of set-off until the solicitors for the respondent have had 48 hours notice of what the bank intends to do so as to allow the respondents to approach the Commission or another Court for appropriate orders, or (ii) notify the solicitors for the respondents of the fact that the bank intends to exercise its right of set-off. AND FURTHER THE COMMISSION IN COURT SESSION NOTES THE FOLLOWING UNDERTAKINGS TO THE COMMISSION IN COURT SESSION: 5. The appellants, Kendall Nominees Pty Limited as trustee of the Image Unit Trust and M & A Green Properties Pty Limited undertake not to object to the lodging and maintaining of caveats on any and all properties other than that situated at 3/153A The Grove, Woollahra. 6. The first respondent undertakes that if the appeal the subject of these proceedings is successful or successful to an extent that less than $600,000 (inclusive of costs) would be payable by the appellants to the respondents in respect of revised orders, the first respondent will: (a) Be in a position to repay any and all amounts payable together with interest thereon, and (b) Repay any amount ordered by the Commission to be repaid including any and all interest payable thereon in accordance with the Orders made on appeal. DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated.