New South Wales Court of Appeal CITATION: KATION PTY LTD v LAMRU PTY LTD; LEWIS v NORTEX PTY LTD (In liq) (No 3) [2009] NSWCA 438 HEARING DATE(S): 23 December 2009 JUDGMENT OF: Basten JA at 1 EX TEMPORE JUDGMENT DATE: 23 December 2009 On the undertaking of Mr Lewis, in the terms set out in a handwritten document, signed by Mr Lewis, handed to the Court, which I will initial and date and put with the papers, and on the further undertaking of Mr Lewis, given through counsel in Court, that he will not seek to lift the stay, which is presently enforced in respect of the registration of a New Zealand judgment, in a matter identified as matter number 10911 of 2004, I order: (1) In respect of the orders of this Court found in the judgment, delivered on 12 June 2009, and in the subsequent judgment of 21 December 2009, there be a stay of enforcement of payment of amounts due either to Lamru Pty Limited, or to the liquidator on behalf of Nortex Pty Limited, pending determination of the proposed special leave application, including, if necessary, any application for extension of time to seek leave to appeal from those judgments to the High Court. DECISION: (2) The notice of motion filed by the applicants on 21 December 2009 be otherwise dismissed. (3) The parties shall have liberty to apply in respect of a determination or variation of the stay on three days' notice. (4) No order as to costs of the motion. CATCHWORDS: PRACTICE & PROCEDURE – judgments and orders – stay of orders – proposed application for special leave to appeal – whether prospects of success warrant granting of stay – existence of other proceedings – judgment debt in other proceedings in favour of judgment debtor in current proceedings – extent to which outcome of other proceedings is relevant to assessment of balance of convenience – undertaking not to dispose of assets – whether prejudice resulting from granting of stay CATEGORY: Procedural and other rulings Matter No. 40366/06: Kation Pty Ltd (Appellant and First Cross-respondent) Peter Lawrence Lewis (Second Appellant and Second Cross-respondent) Lamru Pty Ltd (First Respondent and First Cross-appellant) PARTIES: Russell William Lamb (Second Respondent and Second Cross-appellant) Nortex Pty Ltd (In liq) (Third Respondent and Third Cross-Respondent) Brian Raymond Silvia (Fourth Cross-respondent) Matter No. 40523/06: Peter Lawrence Lewis (Applicant) Nortex Pty Ltd (In liq) (Respondent) FILE NUMBER(S): CA 40366/06; 40523/06 T S Hale SC/J Baird (Kation, Peter Lawrence Lewis) COUNSEL: S J Motbey (Lamru, Russell William Lamb) V R Gray (Nortex, Brian Raymond Silvia) Kemp Strang Lawyers (Kation, Peter Lawrence Lewis) SOLICITORS: Lyons & Lyons Solicitors (Lamru, Russell William Lamb) Somerset Ryckmans (Nortex, Brian Raymond Silvia) LOWER COURT JURISDICTION: Supreme Court LOWER COURT FILE NUMBER(S): SC 3081/1977 LOWER COURT JUDICIAL OFFICER: Young CJ in Eq; Hamilton J; Palmer J LOWER COURT DATE OF DECISION: 22 June 2001; 19 July 2001; 19 April 2002; 9 December 2002; 20 December 2002; 29 April 2003; 20 June 2003 (Tcpt 2689); 20 June 2003 (Tcpt 2692); 26 June 2003; 2 March 2004; 29 November 2004; 19 May 2005; 13 October 2005; 23 May 2006; 27 July 2006 LOWER COURT MEDIUM NEUTRAL CITATION: [2001] NSWSC 511; [2001] NSWSC 610; [2002] NSWSC 337; [2002] NSWSC 1192; [2002] NSWSC 1245; [2003] NSWSC 354; [2003] NSWSC 581; [2004] NSWSC 121; [2004] NSWSC 1143; [2005] NSWSC 482; [2005] NSWSC 1062; [2006] NSWSC 480; [2006] NSWSC 768 IN THE SUPREME COURT OF NEW SOUTH WALES COURT OF APPEAL CA 40366/06 CA 40523/06 SC 3081/97 SC 1750/02 SC 3354/02 BASTEN JA 23 December 2009 KATION PTY LTD v LAMRU PTY LTD; LEWIS v NORTEX PTY LTD (In liq) [NO 3] Judgment 1 BASTEN JA: In this matter Kation Pty Limited and Mr Peter Lewis ask for a stay of the orders of this Court, pending the determination of an application for special leave to appeal to the High Court, and on other grounds. 2 The basis for the application is in part to be found in an affidavit of their solicitor, Mr Harrison, of 21 December 2009, in which Mr Harrison sets out other litigation between the parties to which I will refer shortly. In part, the application for a stay is based on the fact that there are other proceedings between various parties, which have been stayed or not proceeded with, pending the appeal to this Court against the judgment of Justice Hamilton. 3 This Court handed down its principal judgment on the appeal on 12 June this year. Orders were made on that occasion, but the entry of the orders was stayed, pending an opportunity for the parties to make submissions on quite limited bases with respect to any failure to address issues, which had been raised on the appeal or cross-appeal, but not addressed, and any failure of the orders to accord with the reasons for judgment. Following that leave, further submissions were made to the Court, resulting in a further judgment of this Court, delivered on 21 December last. 4 The basis upon which the application for special leave to appeal to the High Court is to proceed has not been reduced to the form of the special leave application with grounds. The fact that this has not happened casts some doubt upon the seriousness of the applicants in terms of an intention to proceed with the application. The issues which were outlined by counsel before me today arise, as might be expected, from the judgment of 12 June. Whether an application for special leave would now be several months out of time is not a matter I intend to consider. I do, however, take into account the fact that the judgment, on which leave would be sought, and the bases on which leave would be sought, are to be found in the judgment of 12 June. In any event, senior counsel for the applicant contended that there were two matters which would constitute the bases of the special leave application. 5 One concerned the manner in which this Court dealt with the defence of unclean hands, by which they sought to resist orders for relief with respect to what have been compendiously described as the stock frauds. Whether or not such grounds would appeal to the High Court is difficult to predict in the absence of some further consideration of the way in which they are formulated, or to be formulated. 6 In this Court I held that a defence based on the equitable principle was not available. The majority of the Court held that it was available, but could be dealt with by moulding relief by reference to the particular uncleanliness relied upon. It is presumably against that more limited acceptance of the principle that special leave is to be sought. I cannot say that grounds based on that matter would be unarguable, although it might be thought that they had limited prospects of success. 7 The second matter concerned the manner in which this Court dealt with a challenge to the severance of a question by Justice Hamilton relating to claims against Mr Mark Lewis, which also gave rise to claims for relief against Mr Lewis Senior and Kation. That matter was dealt with in the first judgment of this Court at [91]-[101]. 8 No attempt was made to identify a matter of general public importance which arose from that issue, or the manner in which it was dealt with in this Court. Indeed, perhaps attempting to deal with the matter discreetly, senior counsel for the applicants did not identify with precision where the error lay in the judgment of this Court. Although no doubt one cannot dismiss the matter as entirely unarguable, I do not intend to take into account the possibility that a special leave application will include such an issue. I am conscious of the fact that both of the issues raised, taken in whole, challenge the orders of this Court, which give rise to further payments to be made by Kation and Mr Lewis Senior either to Lamru Pty Limited, or to the liquidator on behalf of Nortex Pty Limited. 9 I accept that the issues raised have relevance to the present stay application, as seen in that light. I intend to take account of the fact that there is a challenge to the manner in which this Court dealt with the stock fraud payments. 10 The other matter which I intend to take into account is a matter raised in the affidavit of Mr Harrison, relating to an outstanding judgment in favour of Mr Peter Lewis against Mr Lamb, the principal of Lamru, in New Zealand, which judgment has been registered in this Court, but in respect of which there is a stay preventing Mr Lewis from enforcing the judgment. 11 The judgment as registered in April of 2008 is for an amount of something in excess of $NZ418,000. Counsel suggested, and it was not challenged, that that would constitute a judgment of approximately $A360,000. There is also presumably some amount of interest which has accrued on that judgment since the date of its registration. 12 Apart from the stock fraud payments, which amount to approximately $144,000 in favour of Lamru, and approximately $216,000 in favour of Nortex, the other payments required under the judgment of this Court related to bonuses accounted for in favour of Mr Mark Lewis for three years, interests which, in the case of Lamru, total a little under $123,000. In addition, there is a calculation of interest in an amount of approximately $290,000, giving rise to a total entitlement of a figure in the order of $413,000. 13 In my view it is appropriate that some account be taken in relation to the Mark Lewis bonus payments of the outstanding New Zealand judgment. I take into account that the New Zealand judgment is in a matter between Mr Lewis Senior and Mr Lamb. Mr Lamb is not party to these proceedings, although as a principal of Lamru, he no doubt stands to benefit from any amount which is received by Lamru. 14 If a stay is to be granted in relation to the payments due to Lamru, then it should be granted on the basis that Mr Peter Lewis undertake, in addition to other undertakings, not to lift the stay or otherwise seek to enforce the New Zealand judgment debt whilst any stay ordered by this Court remains in force. 15 On the basis that an arguable point arises in respect of the stock fraud which may be dealt with on the special leave application, I intend to grant a stay in respect of the debt payable to Lamru for the following reasons. 16 First, the proceedings have been on foot for a considerable period of time and I do not think that Lamru will suffer significant additional prejudice by being held out of its money for a period, which will include the consideration of the special leave application. 17 Secondly, Mr Lewis has proffered an undertaking, which should be accepted, in effect, not to dispose of assets either of himself or of Kation, pending the determination of the stay. 18 Thirdly, I take into account that although there are other proceedings between the parties which have been stayed, the amounts involved are claims, some of which may not be made good, but some of which may. The amount of those claims which may be made good cannot be accurately quantified, but it is a factor which I take into account in considering the balance of convenience with respect to a proposed stay of the orders of this Court. 19 Accordingly in relation to Lamru, I propose to grant the stay on the terms I have indicated. 20 In relation to Nortex, the situation is somewhat different. There is no outstanding issue between Nortex and the Kation interests, which would give rise to any set off of the kind which might be thought to arise from the New Zealand judgment in relation to Lamru. Nevertheless, Nortex is the trustee of the unit trust and one of the results of these proceedings has been to identify the sums payable by Nortex to both Kation and Lamru in respect of their entitlements under the trust. 21 On any view the amounts payable are significant. On the estimate given by Lamru this morning, the amount payable to Kation is an amount in excess of $630,000. The amount payable to Lamru is an amount which may be in the order of $1.2 million. Accordingly, Nortex itself has no immediate interest in recovering moneys from Kation or Mr Lewis. 22 It became apparent during the course of the hearing that the liquidator's interest in these proceedings would ultimately be in recovering moneys, which would go to payment of his own costs and expenses. They, like those of the claims of Lamru, have been outstanding for some significant time. On the basis that there is no change likely to occur in the status quo which has been in place for many years, I do not think it appropriate to require Kation or Mr Lewis to pay the liquidator's claims, pending the outcome of the special leave application. 23 Again, it is a delay which will occur for a matter of months, an insignificant time in the unfortunate saga of this litigation, and it will arise in circumstances where Mr Lewis has given undertakings, both on his own behalf, and as controller of Kation, not to dispose of the assets either of himself or Kation, which undertakings I apprehend apply equally to the liquidator, as to the other party in the proceedings. 24 Accordingly, I will grant the stay which has been sought by Kation and Mr Peter Lewis, and make the following orders: On the undertaking of Mr Lewis, in the terms set out in a handwritten document, signed by Mr Lewis, handed to the Court, which I will initial and date and put with the papers, and on the further undertaking of Mr Lewis, given through counsel in Court, that he will not seek to lift the stay, which is presently enforced in respect of the registration of a New Zealand judgment, in a matter identified as matter number 10911 of 2004, I order: (1) In respect of the orders of this Court found in the judgment, delivered on 12 June 2009, and in the subsequent judgment of 21 December 2009, there be a stay of enforcement of payment of amounts due either to Lamru Pty Limited, or to the liquidator on behalf of Nortex Pty Limited, pending determination of the proposed special leave application, including, if necessary, any application for extension of time to seek leave to appeal from those judgments to the High Court. (2) The notice of motion filed by the applicants on 21 December 2009 be otherwise dismissed. (3) The parties shall have liberty to apply in respect of a determination or variation of the stay on three days' notice. (4) No order as to costs of the motion. 25 Perhaps I should add, the intention of granting liberty to apply is that if there is any failure to file on application for leave to appeal in a timely manner, or pursue the application expeditiously, no doubt the matter will come back before me. ********** 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.