FEDERAL COURT OF AUSTRALIA

Australian Securities and Investments Commission v ActiveSuper Pty Ltd (No 3) [2013] FCA 248

THE COURT ORDERS THAT:

1.    The oral application by the twelfth defendant for a stay of paragraphs 1, 2 and 3 of the Order made in respect of the appointment of provisional liquidators to the twelfth defendant on 19 March 2013 is dismissed.

Note:    Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011 (Cth).

REASONS FOR JUDGMENT

1    On 19 March 2013, Orders were made appointing provisional liquidators to the 12th defendant, MOGS Pty Ltd (ACN 136 499 360) (MOGS): Australian Securities and Investments Commission v ActiveSuper Pty Ltd (No 2) [2013] FCA 234 (the PL Judgment). In addition to the appointment of the provisional liquidators, additional powers were granted to the provisional liquidators and, consistent with those powers, the provisional liquidators were directed to report to the court identifying a numbers of matters, including identification of the assets and liabilities of MOGS and an opinion as to the solvency of MOGS. In the PL Judgment, the Court acknowledged the drastic nature of such an order and set out the reasons for that order having being made.

2    Counsel for MOGS now seek a stay of paragraphs 1, 2 and 3 of the orders made on 19 March 2013 up to and including 4:00 pm on Friday, 22 March 2013 to enable it to apply for leave to appeal under s 24(1)(a) of the Federal Court of Australia Act 1976 (Cth).

3    The principles governing an application for stay pending appeal were not in dispute: see, by way of example, Australian Executive Trustees Limited v Provident Capital Limited (No 2) [2012] FCA 754. It was also common ground that an application for a stay, pending appeal, involves an exercise of the court’s discretion, weighing considerations which include the balance of convenience, the competing rights of the parties, whether there would be prejudice to either party, including rendering any appeal nugatory, caused by the reason of the granting of the stay or withholding the stay.

4    In the present case, Counsel for MOGS contends that the balance of convenience favours the granting of a stay in order to maintain what he describes as the prejudgment status quo. He proffered two reasons. First, that there was no irremediable prejudice to the Australian Securities and Investments Commission (ASIC), and, secondly, if the judgment is not stayed, any appeal by MOGS would be rendered nugatory.

5    In dealing with the issues to be raised on any application for leave to appeal, Counsel for MOGS contended that there were a number of matters (summarised in their written submissions in support of the application for the stay), which raised doubts about the order having been granted. Those matters included the history of the application, the fact that there was a regime in place prior to the appointment of the provisional liquidators which it contended was sufficient protection of the assets, complaints about the character of ASIC’s pleaded case, and a risk of prejudice to the ongoing business activities of MOGS.

6    ASIC opposed the application for stay. ASIC referred to the decisions in Attalex Pty Ltd v Brian Cassidy Electrical Industries Pty Ltd (No 2) (1984) 9 ACLR 148 at 149 and Reuters Australia Pty Ltd v The Credit Connection Pty Ltd (2000) NSWSC 221, in particular at [47]-[49]. In Reuters Australia Pty Ltd, Young J outlined two important considerations that are relevant in these circumstances. The first is that courts must avoid situations where any successful appeal would be rendered nugatory but, in doing so, distinctions have to be drawn between the nature of the appeals. In that case, his Honour drew a distinction between an appeal against an assessment of damages and an appeal against an order made, even partially made, in the public interest, to preserve property. The present case is not an assessment of damages. In the latter sort of case (an order made in the public interest) his Honour said that if a stay is granted it may well mean that the order at first instance, which is prima facie correct, will be frustrated and that was a weighty matter to take into account. But, in his usual pragmatic manner, his Honour went on to state that so long as there was a satisfactory way of keeping the status quo and the judgment at first instance was not frustrated by granting the stay, then the grant of a stay may be appropriate.

7    As the PL Judgment explains (especially between [40]-[54]), this case falls into the category of one in which it is in the public interest to seek to preserve property. That is, it is one of those cases in which, prima facie, it will mean that the order at first instance will be frustrated, or likely to be frustrated, if the appointment of provisional liquidators - or the order for the appointment of provisional liquidators - is stayed. The question is not prejudice to ASIC, but prejudice to apparently innocent third parties.

8    That leads me to the second consideration, whether or not there is some other satisfactory way of keeping the status quo at first instance without frustrating the order that was made, by the granting of the stay. In the circumstances, and for the various reasons set out in paragraphs [40]-[54] of the PL Judgment, I am not satisfied that can occur.

9    The application for the stay is refused.

Associate:

Dated:    20 March 2013