FEDERAL COURT OF AUSTRALIA

Rambaldi v Mullins (No 3) [2016] FCA 1145

ORDERS

THE COURT ORDERS THAT:

1.    The orders of Murphy J made on 22 August 2016 be vacated.

2.    The Second to Eighth Respondents (jointly and severally) pay the Applicants $2,835,304.97 which is comprised of the principal debt of $2,395,000 and interest of $440,304.97 to 19 September 2016.

3.    Orders 1 and 2 of the orders of Murphy J made on 28 March 2014 be vacated.

4.    The undertaking given to the Court by the Applicants on 28 March 2014 is discharged.

5.    The Second to Eighth Respondents pay the Applicants’ costs of the proceedings, including reserved costs, on a party/party basis.

6.    The application for a stay of these orders is refused.

7.    The date by which any Notice of Appeal is to be filed is 21 days from the date of these orders.

8.    The application by the First Respondent made in submissions dated 5 September 2016 is refused.

9.    Liberty to apply.

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

REASONS FOR JUDGMENT

MURPHY J:

1    On 22 August 2016 the Court made orders and declarations in this proceeding and handed down reasons for judgment (“the substantive judgment”). In these reasons the defined names and terms carry the same meaning as in the substantive judgment.

The revised orders for relief

2    In the substantive judgment I expressed a concern that the relief ordered may provide double recovery for the Trustees because it includes orders for the second to eighth respondents to transfer half (in number and value) of the shares in the Operating Companies to the Trustees, as well as to pay the Trustees $2.395 million under the October Deed. In my view, the Trustees’ submissions were not clear as to whether the Trustees intended to elect between these remedies, whether the remedies were in the alternative or whether they were cumulative. I requested that the parties make submissions in this regard and said that I would vary the orders or make further orders, as appropriate.

3    The Court has received written submissions on this issue from the Trustees and the second to eighth respondents. The second to eighth respondents contend that, as the Court has found that the Trustees are entitled to enforce the Bankrupt’s rights under the October Deed, and given the Court’s findings in respect of the consideration given by the Bankrupt to enter into the October Deed, the Trustees cannot have both the shares in the Operating Companies and the consideration for them. The Trustees accept that, having regard to the findings of fact made in the substantive judgment, they have a choice between judgment in respect of their claim to an interest in the Global business and judgment for debt in right of the Bankrupt under the October Deed. The Trustees elect to seek judgment for debt against the second to eighth respondents.

4    The second to eighth respondents and the Trustees agree on the draft minutes of orders to be made in this regard. I have made Orders 1 to 5 as they propose, with the only change being the further days of interest allowed.

The application for a stay

5    The second to eighth respondents seek an order that Order 2 (for payment of the debt plus interest) and Order 5 (for payment of costs) of the orders be stayed until further order of this Court, as they say that they intend to appeal. The Trustees oppose the application.

6    Rule 36.08 of the Federal Court Rules 2011 (Cth) provides that an appeal does not operate as a stay of execution or a stay of any proceedings under the judgment. However, an appellant may apply to the Court for an order to stay the execution of the proceeding until the appeal is heard and determined. Rule 41.03 provides that a party bound by an order of the Court may apply for an order that the judgment or order be stayed, and r 41.11 provides that a party may apply to the Court for a stay of execution of a judgment or order of the Court.

7    The Court has a broad discretion to grant a stay of operation of its judgments or orders. In Alexander v Cambridge Credit Corp Ltd (Receivers Appointed) (1985) 2 NSWLR 685 at 694-5 the New South Wales Court of Appeal reviewed the authorities and identified a number of principles guiding the exercise of discretion in granting a stay. The Court said:

… The onus is upon the applicant to demonstrate a proper basis for a stay that will be fair to all parties: Trlin. 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. 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. Even where no order is made for the payment of part of a verdict, it is not at all unusual for the Court, in the exercise of its discretion, to grant a stay on terms that the appellant give to the judgment creditor security in terms defined by the Court as appropriate to the fair adjustment of the rights of the parties.

…

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: Scarborough v Lew’s Junction Stores Pty Ltd (at 130); applied in Sun Alliance Insurance Ltd v Steiger (Full Court, Supreme Court of Victoria, 22 March, 1985, unreported). 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: Wilson v Church (No 2) (1879) 12 Ch D 454; Re Middle Harbour Investments Ltd (In Liq) (at 2). 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 a 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.

(Emphasis added.)

8    This Court has adopted and applied these principles in numerous decisions: see for example Australian Competition and Consumer Commission v BMW (Aust) Limited (No 2) [2003] FCA 864 at [5] (Finkelstein J); Momentum Productions Pty Ltd v Lewarne [2007] FCA 1988 at [15]-[16] (Graham J); Seafolly Pty Ltd v Madden (No 3) [2013] FCA 316 at [17] (Tracey J).

9    The onus is upon the second to eighth respondents to demonstrate a proper basis for a stay that will be fair to all parties. For the purposes of the application I assume that the second to eighth respondents will be able to identify an arguable appellable error. They have not as yet filed an appeal but, assuming they do, merely doing so would not discharge that onus.

10    I refuse the application for a stay essentially because I consider there is a real risk that, if a stay is granted, the second to eighth respondents will take steps to avoid their obligations to the Trustees. As the Trustees contend, that risk may be inferred from:

(a)    the second to eighth respondents’ involvement in seeking the 22 October 2013 Orders in the NSW Supreme Court which had the effect of divesting the Trustees of their right to payment of $6.2 million plus interest;

(b)    the second to eighth respondents’ participation in the concealment of the Bankrupt’s interest under the March Deeds (including the false characterisation of the payment to the Bankrupt as a defamation payment) and under the October Deed (including the false characterisation of the substance of the agreement as settlement of a further damages claim by Antoun); and

(c)    the second to eighth respondents actions to put the Bankrupt’s interest in the Global business beyond the reach of the Trustees including by removing the ALLPAP security over the Global business; by transferring the ownership shares held in the Operating Companies by Global Human Resources Group (in turn owned by GHR No 3); by liquidating those companies even though undated share transfers in those companies were provided as security under the October Deed; and by the eighth respondent wrongly making declarations as to the solvency of those companies.

11    The Trustees contend, and I accept, that it is important that they can enforce the orders immediately and take steps to prevent any further prejudice to creditors.

12    The second to eighth respondents request 21 days from the date of these orders to file any Notice of Appeal. In my view it is appropriate that they be allowed that time.

the first respondent’s application for judgment

13    The first respondent, Ms Teagan Mullins, has at all times been a party in the proceeding but she put on no evidence or submissions and played no active role. On 22 August 2016 I handed down reasons for judgment and invited submissions from the parties on several discrete issues.

14    On 5 September 2016 the first respondent filed written submissions, on different issues from those upon which I sought submissions. She seeks orders in the following terms:

1    The name of the First Respondent be amended from “Teagan Mullins” to “Teagan Maree Mullens”.

2    Judgment for Teagan Maree Mullens against the Second to Eighth Respondents in the sum of $1,308,832 plus interest.

3    The Second to Eighth Respondents shall transfer the shares:

(a)    held by AR & KH Pty Ltd in the Fifth Respondent, GHR Custodian Pty Ltd (“GHR Custodian”); and

(b)    held by GHR Custodian in the Second and Fourth Respondents, namely Civil Pacific Services Group Pty Ltd and Global Civils Group Pty Ltd respectively,

to the First Respondent within twenty-one (21) days, and shall do all things and sign all documents necessary to give effect to these orders. As directors of AR & KH Pty Ltd the Seventh and Eighth Respondents shall take all steps necessary to transfer to the Trustees half (in number and value) of the shares held by that company in GHR Custodian.

15    The second to eighth respondents and the Trustees oppose these orders.

16    The first respondent seeks these orders in her capacity as the Administrator of the Estate of the late Joseph Antoun and seeks leave to tender Letters of Administration dated 22 February 2016. She did not make a proper application to the Court. The submissions state that “if objection is taken to the lack of formality a proposed Interlocutory Application and Cross-Claim are annexed to these submissions.” The proposed Cross-Claim that is annexed does not contain any grounds. It states that the grounds are set out in an accompanying affidavit but no affidavit has been filed.

17    The first respondent submits that the orders she seeks accord with the essential findings of fact in the substantive judgment. She argues that the basis for the relief ordered for the Trustees was that Antoun entered into the October Deed, in part, as agent for the Bankrupt. She contends that if the Trustees are entitled to relief because Antoun acted as the Bankrupt’s agent in relation to half of the monies payable under the October Deed, it follows that the first respondent (as Administrator of Antoun’s estate) is entitled to relief for the other half. On the first respondent’s submissions Antoun’s estate is entitled to judgment in the sum of $1,308,832 and is also entitled to have the shares in the companies in the Global business transferred to her by virtue of clause 2(c) of the October Deed.

18    In my view the first respondent’s application must be refused. For the reasons I explain, I decline to grant judgment for the first respondent against the second to eighth respondents and I refuse leave to file a Cross-Claim against the second to eighth respondents.

19    I do so, first, because the first respondent has not filed an originating process that clearly defines the issues between her and the second to eighth respondents, and she has not made any proper application to the Court.

20    Second, the submissions seek orders for judgment for the first respondent against the second to eighth respondents without allowing the second to eighth respondents any opportunity to defend that case. The issues between the first respondent and the second to eighth respondents are not necessarily identical to the issues between the Trustees and the second to eighth respondents. It is likely, as the second to eighth respondents’ submit, that if given the opportunity they could have adduced evidence and made submissions relevant to the issues in the proposed Cross-Claim. If the first respondent’s application is allowed they will have been denied an opportunity to defend the Cross-Claim. I also accept the Trustees’ submission that, had the first respondent participated in the substantive proceeding, the Trustees may have conducted their case differently. In such circumstances it would be unjust to give judgment for the first respondent.

21    Third, the first respondent was on notice of the proceeding, remained a party, and chose not to participate. If she had participated in the trial and put on evidence and/or submissions in support of the position that she now puts, the proposed Cross-Claim and the second to eighth respondents’ defence in that regard could have been dealt with in the trial.

22    The first respondent is now out of time to file a Cross-Claim and she must seek leave of the Court before bringing that case. In deciding whether to grant leave, the Court is required to balance the first respondent’s right to bring the Cross-Claim against the injustice to the second to eighth respondents of allowing it to be brought in circumstances where the first respondent’s delay has been gross, the trial has been run and judgment has been delivered. The first respondent has put on nothing to explain her delay.

23    Appropriate limits must be placed upon the first respondent’s right to bring a Cross-Claim. The Court’s obligation was to give her a sufficient opportunity to identify the claims she wished to agitate: see Aon Risk Services Australia Ltd v Australian National University (2009) 239 CLR 175; [2009] HCA 27 (“Aon”) at [112]-[113]. In my view she was given that opportunity and she chose not to take it up.

24    I also take into account that the first respondent’s delay in bringing the Cross-Claim will have a deleterious effect on other litigants seeking resolution of their cases: Aon at [114]. The trial in this matter is complete and the Court has delivered judgment. Granting the first respondent leave to now bring the Cross-Claim will cause a further hearing which will inevitably have an impact on the speed with which other litigants can have their matters heard and dealt with.

25    Fourth, the first respondent’s approach to the Cross-Claim is incompatible with her obligation to act consistently with the overarching purpose in ss 37N and 37M of the Federal Court of Australia Act 1976 (Cth) (“Act”). Section 37M provides that the overarching purpose of the civil practice and procedure provisions of the Act is to facilitate the just resolution of disputes, according to law, as quickly, inexpensively and efficiently as possible. Instead of seeking the resolution of the Cross-Claim consistently with the overarching purpose the first respondent did nothing. She chose not to bring a Cross-Claim and she chose not to adduce evidence or make submissions in support of that claim. It was not until after judgment was delivered that, in effect, she seeks leave to file the Cross-Claim out of time. If the first respondent is successful in that application I presume that she will seek to have the Cross-Claim heard and judgment given. That will require a separate hearing which may give rise to some injustice for the second to eighth respondents and will certainly lead to some wastage of the time and resources of the second to eighth respondents and the Court. In my view, in sleeping on her rights to make a Cross-Claim and now attempting to bring that claim, the first respondent’s approach was far from just, quick or efficient.

26    I refuse the first respondent’s application.

Associate:

Dated:    19 September 2016

SCHEDULE OF PARTIES