TEXTRALIAN ENTERPRISES PTY LTD v PERPETUAL TRUSTEES (VIC) [1999] NSWCA 30

New South Wales Court of Appeal CITATION : TEXTRALIAN ENTERPRISES PTY LTD v PERPETUAL TRUSTEES (VIC) [1999] NSWCA 30 FILE NUMBER(S) : CA 40843/98 HEARING DATE(S) : 22 February 1999; 25 February 1999 JUDGMENT DATE : 25 February 1999

PARTIES : TEXTRALIAN ENTERPRISES PTY LTD v PERPETUAL TRUSTEE (Vic) LTD & ORS JUDGMENT OF : Mason P

LOWER COURT JURISDICTION : Supreme Court LOWER COURT FILE NUMBER(S) : LOWER COURT JUDICIAL OFFICER : Young J

COUNSEL : E Conditsis (Appellant) H Insall (Defendant) SOLICITORS : Conditsis (Appellant) Freehill Hollingdale & Page CATCHWORDS : DECISION : Stay refused; Security for costs ordered

1 HIS HONOUR: I have before me two notices of motion. One is an application for a stay by the appellants, the other is an application for security for costs by the respondents. 2 A detailed notice of appeal was filed on 28 October 1998 in relation to a judgment given by Young J on 6 October 1998. His Honour granted possession to the plaintiff and ordered the defendants, a company and two guarantors of the company, to pay arrears of rent and damages by way of mesne profits. Apparently about $150,000 remains outstanding with respect to the judgment debt. Possession was given pursuant to the judgment in about late October 1998. 3 The principal matter litigated at trial was a claim brought under the Trade Practices Act by the defendants who relied upon representations allegedly made in about February 1993 prior to the commencement of what was described in the judgment as the first lease granted in October 1993. The representations allegedly were made by a Mr Levin, the plaintiffs' local leasing manager. 4 There was a nine day hearing. Credit was very much in issue and the principal witness for the defendants, Mr Slattery, was found by his Honour to be lacking in credit, in particular due to a very adverse judgment relating to an attempt to deceive the court in relation to a letter that was found to be a forgery. 5 The critical representation, it seems to me, that was relied upon was one to the effect that a cinema complex would be opened very adjacent to the location of the premises in a placed called The Boardwalk at Erina Fair that the defendants were about to occupy. His Honour appears to have concluded that there was discussion relating to this matter, that discussion being to the effect that there was a proposal to that effect, as distinct from the firmer representation relied upon by Mr Slattery. His Honour concluded nevertheless that that representation did not satisfy the claim that was pleaded before him. Having reached that view, he found it unnecessary to consider the issue of falsity of the representation. He also found that there was no evidence of reliance. He did not find it necessary to consider a question of damage. He found that the proceedings before him were statute-barred. 6 Evidence has been placed before me that the plaintiffs incurred costs estimated at $400,000 in relation to the trial proceedings. That evidence has been challenged, at least in submission, and whether or not one discounted it significantly it is obvious that a very substantial sum of costs was incurred in responding to what appears to have been very hard fought litigation. It was apparent to both parties that the issue tendered by the defendants was capable of affecting possible claims by other lessees. 7 The appellants' primary submission was that there should be a stay, if necessary subject to the granting of some security. However, there is nothing to indicate that there is any realistic prospect that the appellants have the capacity to provide security that would secure repayment of the judgment debt arrears, let alone any portion of the outstanding costs of the trial. In any event, I would not be minded to order a stay because of matters to which I will now turn. 8 I think a frank assessment of the appellants' prospects of success in the foreshadowed appeal are that they are quite slender. The appellants lost on a number of independent bases, several of those turning upon an adverse credit assessment that, on my reading of the judgment, will be difficult to displace. I am not prepared however to characterise the prospects as unarguable. I say that, not to give the appellants any encouragement to continue to prosecute an appeal which may well be a waste of everybody's time and money. But there are issues relating to similar fact evidence; and the distinction between the representation as found and the representation as alleged seems to me to be a fine one. I cannot say my present assessment of the appeal would be hopeless, at least on the question of establishing that something was said of a representational nature that was capable of inducing reliance in connection with the possible location of the cinema complex. As I say, there may well be other reasons why that leads nowhere. 9 The prospect of success is not the only matter relevant to a stay. The Court can have regard to the fact that refusal of a stay would render the right of appeal nugatory. However, the Court is concerned to ensure that before a stay is granted, which is by no means an automatic response to the lodgement of an appeal, that fairness can be done to both parties. I am not at all satisfied that a stay would present that fairness. 10 There has been evidence that in the last twelve months assets have been transferred and assets have been encumbered by the appellants. I am not unaware of the reason advanced in evidence for some of the secrecy attending the steps they took. But the fact remains that matters have been put in hand which are capable of defeating the rights of the respondents to the appeal, being rights they presently hold under an existing judgment. The evidence that has been put before me indicates to me that it is likely that the appellants are currently insolvent and are aware of the fact that they are unable to meet their debts as they fall due. I know they say that is a consequence of the enforcement of the judgment. However, that does not have any bearing upon the fact that their present situation means that, as they frankly admit in the affidavit of Mr Slattery, that there is presently an incapacity to pay the judgment debt and such assets as they acknowledge themselves to have are encumbered to the hilt. 11 I have unease about whether the Court has been given a full and frank explanation as to the assets available to the appellants. I do not need to put the matter any higher than that but it is a matter that is relevant to the discretion that rests in me. 12 In these circumstances, I think it would be unfair to the respondents to place an impediment in their way to taking such steps short of shutting down the current business of the appellants as would put them in a position where they can obtain such recovery of the judgment debt as is possible having regard to the assets of the appellants in the event that the appeal is unsuccessful. 13 I have been informed, it may even be in evidence, that bankruptcy proceedings have commenced to the extent that a bankruptcy notice has been filed and served upon at least Mr Slattery. And it is apparent that the judgment creditor wishes to be in a position to present a petition and if possible prosecute that to sequestration as the best means of recovering the judgment from what are perceived to be elusive judgment debtors. 14 It is my understanding that the practice of the Federal Court in relation to the adjournment of a bankruptcy petition pending an appeal challenging the judgment debt upon which it is based is that set out in Ahern v The Deputy Commissioner of Taxation (1987) 76 ALR 137 at 148. It would be impertinent for me to be doing any more than stating that assumption and anything I say in this judgment is not intended to give advice to the Federal Court as to how it exercises its jurisdiction. It will be apparent however, for the reasons I have already given, that I think it would be unjust if the judgment creditors were prevented from going so far down the bankruptcy track as would enable them to present a petition thereby at least stopping time running in relation to such rights as they would have in the event of a sequestration ensuing. The same may be said of any petition against the companies that are judgment debtors. 15 Accordingly, I would refuse the application for a stay. That refusal does not preclude a fresh application being made pursuant to the liberty to apply which I will reserve or indeed pursuant to a fresh application. I would indicate that it is my present intent, on what I have been told and seen in the evidence, that the respondents should be in a position to take such steps by way of execution as would secure their present position against whatever assets are available but not in such a way as to close down the business or realise the assets against which writs of execution might be placed. It is in everybody's interests that the appeal be prosecuted quickly, if the appellants are advised and see fit to do so. 16 Accordingly, I will order expedition of the appeal and direct that there be case management in relation to it before such judge and at such times as may be indicated by communication from the Registrar to the parties. The case management will occur after the appeal books have been filed and I direct the appellants to file and serve the appeal books in aid of the appeal within one month of today's date. 17 On the question of security for costs, I am disposed to order security in the light of the evidence as to the likely inability of the appellants to pay any costs order that may be made in the appeal and in the light of the other matters that I have already mentioned in this judgment. Because there is some uncertainty in my mind as to the extent of the issues involved in the appeal and because I am not satisfied that the costs from the respondent's point of view will be to the extent estimated in the evidence that was put before their cost assessor, the order I would make in relation to security for costs is that costs in the sum of $30,000 be secured in such form as the parties may agree, or the Registrar direct. The appeal is stayed pending the provision of that security but if it is not provided within fourteen days of the Registrar determining what security is appropriate, then there is liberty for the respondent to move for the dismissal of the appeal. 18 I believe I have covered all matters. The costs of these motions will be costs in the appeal. Are there any outstanding matters? [Discussion ensued] 19 By my remarks earlier in this judgment relating to not closing down the business, I intended in no way to suggest any impediment to the prosecution of proceedings in the Federal Court down to and including the presentation of a petition. What I had in mind was execution on goods, garnishment of moneys and the like. If the Federal Court thinks fit to refuse extension of the bankruptcy notices and not set them aside and if the Federal Court thinks fit thereby to enable a petition to be presented, it is not my intention to place any impediment or to suggest any impediment to doing so. [After further discussion, the following orders were made] 20 1. Motion for stay of execution refused. 2. Order appellants to provide security for the costs of the appeal in the sum of $30,000, such security to be in a form agreeable to the respondents, or as determined by the Registrar. 3. Application for security for costs stood into Registrar's list on Monday next, to determine any outstanding issue relating to security. 4. Appeal stayed pending provision of security for costs. If such security is not provided within 14 days of determination of its form, respondents to have leave to move for dismissal of appeal. 5. Liberty to apply, including liberty to seek a particular stay, or to extend the sum for which security is to be provided. 6. Appeal expedited. 7. Direct appellants to file and serve appeal books on or before 26 March 1999. 8. Costs of Motion costs in the appeal; 9. Appeal to be case managed by President. _____________