FEDERAL COURT OF AUSTRALIA

Nyoni v Beadle in her Capacity as Trustee of the Bankrupt Estate of Emson Clever Nyoni [2019] FCA 1116

ORDERS

THE COURT ORDERS THAT:

1.    The appellants' interlocutory application dated 12 July is dismissed insofar as it seeks the orders at paragraphs 1 to 7, 13, 14 and 18 of the application.

2.    The balance of the interlocutory application is listed to be heard at the same time as the appeal.

3.    The costs of the interlocutory application are reserved.

4.    Pursuant to r 36.08 of the Federal Court Rules 2011 (Cth), execution of the whole of the Federal Circuit Court of Australia's judgment in proceedings PEG 663 of 2018, delivered on 20 June 2019, and all proceedings under that judgment, are stayed.

5.    The stay has effect until 5.00 pm on the day on which orders allowing or dismissing the appeal are made, as the case may be.

6.    The parties have liberty to apply on 3 days' written notice.

7.    The costs of the appellants' application for a stay of the judgment are costs in the appeal.

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

REASONS FOR JUDGMENT

JACKSON J:

1    These are my reasons for orders made on 18 July 2019 staying the execution of a judgment of the Federal Circuit Court of Australia, pending the resolution of an appeal from that judgment to this court.

2    Emson Nyoni has been a party to numerous sets of proceedings in this court and in other courts. On 17 February 2017, on the petition of creditors, the Federal Circuit Court ordered that a sequestration order issue against his estate, rendering him bankrupt. Helen Joyce of the firm Hall Chadwick was appointed as his trustee in bankruptcy.

3    On 15 February 2019, Ms Joyce notified creditors of her resignation as trustee in bankruptcy and from Hall Chadwick and on 5 March 2019 the respondent, Kristen Beadle, became the trustee in bankruptcy.

4    On 20 June 2019 the Federal Circuit Court made orders declaring that Mr Nyoni and his wife, Amira Nyoni, were the beneficial owners as tenants in common in equal shares of a property in Bedford Street, Kellerberrin, Western Australia, and requiring them to deliver up vacant possession of the property to the trustee. The court also made orders ancillary to the delivery up of the property, facilitating its sale by the trustee. The trustee was given sole conduct of that sale, to the exclusion of Mrs Nyoni. One of the orders required that after payment of selling costs and discharging encumbrances against the title, half of the remaining proceeds were to be paid to Mrs Nyoni and the other half to the trustee. The orders were framed in such a way that, in effect, the requirement to deliver up vacant possession, and the trustee's ability to sell the property, did not take effect for 30 days, a period that expired on Saturday 20 July 2019.

5    Mr and Mrs Nyoni have appealed from those orders to this court. Among the orders sought in the notice of appeal was an order pursuant to r 36.08 of the Federal Court Rules 2011 (Cth) for a stay of execution of the judgment.

6    The appellants also raised a number of preliminary and procedural issues by way of an interlocutory application. On 18 July 2019, I dismissed the application in relation to several of the orders, and listed others for the hearing of the appeal. In view of the orders I made staying the appeal, there is no need for me to give detailed reasons for the dismissal of aspects of the interlocutory application. The orders I have declined to make all, in different ways, sought to either disturb orders programming the hearing of the stay application, or to achieve the result of a stay by way of different procedural devices which were misconceived. Since a stay pursuant to r 36.08 has been granted, any need for those orders on the part of the appellants has fallen away.

Principles governing a stay application

7    In considering a stay application the court has a broad discretion to stay the enforcement of the judgment appealed from pending the hearing and determination of an appeal: Powerflex Services Pty Ltd v Data Access Corporation (1996) 67 FCR 65 at 66 (a decision under the previous court rules, which has been frequently applied in relation to r 36.08 of the Federal Court Rules 2011).

8    The provisions permitting the court to grant a stay pending the determination of an appeal exist to prevent possible injustice arising from the enforcement of a judgment which might subsequently be overturned: Stefanovski v Digital Central Australia (Assets) Pty Ltd [2017] FCA 1121 at [4(b)] (Derrington J).

9    As Powerflex established for the purposes of stay applications in this court, it is not necessary for an applicant to show special circumstances. What the applicant has to show is an appropriate case to warrant the exercise of discretion in his or her favour: Powerflex at 66 applying Alexander v Cambridge Credit Corporation Ltd (Receivers Appointed) (1985) 2 NSWLR 685 at 694. The applicant for a stay must necessarily provide sound reasons to justify a suspension of the successful party's right to recover judgment: McBride v Sandland (No 2) (1918) 25 CLR 369 at 374.

10    While, prima facie, a successful party is entitled to the benefit of the judgment and has the benefit of a presumption that the judgment is correct, these are not matters of rigid principle and each case must be considered on its merits: Powerflex at 66 applying Re Middle Harbour Investments Ltd (in liq) (unreported, NSWCA, 15 December 1976).

11    An applicant for a stay will need to establish that the appeal has some merit. It is not necessary to demonstrate that the appeal will be successful, or that success is more probable than not. The degree of confidence which a court needs to have in the appeal’s prospects will vary with all of the circumstances of the case, including the potential prejudice that might be suffered by the parties as the result of the granting or refusal of the stay. Necessarily, the views that the court expresses on a stay application as to the prospects of the appeal will be preliminary only: Stefanovski at [4(e)], [6].

12    A significant factor is whether there is a real risk that a successful appellant would be deprived of the fruits of the appeal if a stay is not granted, including a real risk that it will not be possible for the successful appellant to be substantially restored to his or her former position if judgment is executed against him: Stefanovski at [4(g)].

The merits of the appeal

13    Applying the principles I have set out, it is necessary to make a preliminary assessment of the strength of the appeal.

14    The primary judge's published reasons were very brief; they run to five paragraphs. One is introductory, three concern his Honour's dismissal of an application for the adjournment of the hearing on 20 June 2019, and the remaining paragraph is as follows:

Affidavit evidence has been read identifying the title of the applicant as a result of the vesting of property upon bankruptcy in the applicant in respect of the relevant property. The Court is satisfied this is an appropriate matter in which to make orders to assist the trustee in recovering the property vested in the trustee for the benefit of the creditors. The orders proposed made appropriate provision for preserving the first respondent’s interests in the proceeds of sale. The Court is satisfied it is appropriate to make the orders in a form substantially in the nature of that identified in the application and it is also appropriate to make appropriate orders to ensure compliance with the Court’s orders.

15    The notice of appeal does not presently raise any issue about the adequacy of the reasons. It appears that they were delivered orally on 20 June 2019, and were only made available to the parties in written form on the evening before, or the morning of, the hearing of the stay application. Nevertheless, at the stay hearing the appellants did complain about the brevity of the reasons. Since there is a real prospect that the appellants will obtain leave to amend the notice of appeal to incorporate that complaint, and in the absence of objection from the respondent, I have considered whether the reasons may be inadequate in a way amounting to appealable error.

16    Mere brevity of reasons, or the fact that they are delivered ex tempore, does not of itself indicate a failure to give adequate reasons: CAQ18 v Minister for Home Affairs [2019] FCA 603 at [49]. However, in DAO16 v Minister for Immigration and Border Protection [2018] FCAFC 2; (2018) 353 ALR 641 at [47]-[48] the Full Court made the following observations:

The requirement to give reasons is an incident of the judicial process and reasons ought to be given in any case in which an appeal lies from the decision in order to allow that right of appeal to be exercised: Public Service Board (NSW) v Osmond (1986) 159 CLR 656 at 667; 63 ALR 559 at 566; 9 ALN 85 at n 89 (Gibbs CJ). As Mahoney JA stated in Soulemezis v Dudley (Holdings) Pty Ltd (1987) 10 NSWLR 247 at 273:

Where, in the decision of an ordinary dispute, reasons are necessary, they are necessary because of the expectation that, being a judicial decision, a sufficient explanation will be given of why the order was made. And, in my opinion, it will ordinarily be sufficient if … by his [or her] reasons the judge apprises the parties of the broad outline and constituent facts of the reasoning on which he [or she] has acted.

However, the reasoning on the basis of which the primary judge reached his decision in this case is not revealed by his reasons. The primary judge addressed the grounds of judicial review by stating his conclusion for rejecting each ground at such a high level of generality that the basis for the conclusion is not exposed; nor do the reasons disclose that the primary judge considered fundamental aspects of the appellant’s case such as, for example, the challenge to the dismissal by the AAT of the evidence of the 16 witnesses. To find, for example, that adverse findings were open and cannot be said to lack an evident and intelligible justification is merely to assert a conclusion…

17    While these observations were made in the context of applications for judicial review in relation to migration decisions, there is no reason to deny them more general application.

18    Here, my necessarily provisional view is that there is a real prospect that the primary judge fell into error because he did not give adequate reasons for the orders he made. Perhaps detailed reasons were not necessary in relation to aspects of the matter that were straightforward. It may be that, prima facie, what had been the joint tenancy of the appellants was severed into tenancies in common as a result of the sequestration order, that Mr Nyoni's share vested in the trustee, and that the trustee was entitled to orders enabling her to deal with that share. But the orders also affected Mrs Nyoni, who is not bankrupt. The trustee has, in effect, been given power to sell Mrs Nyoni's share in the property, regardless of Mrs Nyoni's wishes. The primary judge has not articulated, even in broad outline, why that was necessary or appropriate.

19    For example, one of the statutory bases for the orders was s 126 of the Property Law Act 1969 (WA). The reasons do not identify which sub-section of that provision applied here, but assuming it was s 126(1), that reads:

Where in an action for partition the party or parties interested, individually or collectively, to the extent of a half share or upwards in the land to which the action relates request the Court to direct a sale of the land and a distribution of the proceeds, instead of a division of the land between or among the parties interested, the Court shall, unless it sees good reason to the contrary, direct a sale accordingly.

20    So any requirement that the court direct a sale of the land and a distribution of the proceeds would only arise if the court did not see 'good reason to the contrary'. The primary judge's reasons display little engagement with whether any such reason existed here. The most he said was that the orders proposed made appropriate provision for preserving Mrs Nyoni's interests in the proceeds of sale. That does not address the obvious question of why it was appropriate to permit the forcible conversion into money of her interest in the land.

21    I emphasise I have reached no view that it was not appropriate. It may be that after fuller consideration a court hearing the present appeal will identify a satisfactory answer to that question. But I cannot, in view of the brevity of the primary judge's reasons, have confidence that this will be so.

22    Turning to the grounds that are raised in the notice of appeal, as a matter of form there are two, each supported by a number of particulars. However as a matter of substance some of the particulars do not support the putative grounds, and are more properly treated as separate grounds in themselves. Other particulars are irrelevant and scandalous. The substantive grounds, as distinct from particulars, which require consideration and which can be extracted from the notice are:

(a)    The primary judge denied procedural fairness to the appellants.

(b)    The primary judge was biased against the appellants and in favour of the trustee and made orders in favour of 'other respondents' without legal foundation.

(c)    The primary judge erred in law by failing to recognise that the proceedings before him were 'misconceived because the complex matrix underlying the bankruptcy has not yet been determined'.

(d)    The primary judge erred by relying on the evidence of Ms Joyce, the former trustee, as if it was the affidavit of the current trustee, Ms Beadle.

(e)    None of the documents in the Federal Circuit Court proceedings were served properly on the appellants.

23    Mr Nyoni filed an affidavit dated 12 July 2019 in support of the interlocutory application which contains evidence that is conceivably relevant to the first and second of these grounds. It complains of the primary judge's decision to proceed with the hearing on 20 June 2019 when the appellants had asked for an adjournment of one month to avoid a clash with 'the Appellant's' university exams. As I have said, the primary judge dealt with that in his reasons. He disposed of it on the basis that: orders had earlier been made giving the respondents (appellants here) ample opportunity to put on evidence; in view of that, nothing Mr Nyoni had said identified any proper basis on which the proceedings should be adjourned; proceedings in bankruptcy were by their nature required to be dealt with expeditiously; and no relevant further material had been identified that would be produced if an adjournment were granted. The power to adjourn proceedings is discretionary and an appeal court is reluctant to disturb its exercise by a court of first instance: Meggitt Overseas Ltd v Grdovic (1998) 43 NSWLR 527 at 528. My view, necessarily provisional at this preliminary stage, is that the prospects of the appellants succeeding on any appeal based on the refusal of the adjournment are weak.

24    The affidavit also makes other broad claims about the primary judge's conduct of the hearing. But in the absence of transcript, I have placed little weight on them for the purposes of the stay application, and therefore little weight on the first two grounds identified above.

25    The third ground, relying on the claim that 'the complex matrix underlying the bankruptcy has not yet been determined' is difficult to understand. At the hearing on 18 July 2019, and conscious that the appellants are self-represented, I tried to elicit from them an explanation of the ground which would permit me to understand and consider the point they are seeking to make. As best I could tell, it is an attempt to re-agitate concerns about the genesis of the many disputes before this and other courts in which they have been involved. I approach the ground on the basis that it does not raise any real prospect of success.

26    The fourth ground presently appears to me to be misconceived. For the purpose of relying on Ms Joyce's affidavit as evidence, nothing turns on whether she held the office of trustee of Mr Nyoni's bankrupt estate at the time of the hearing on 20 June 2019. I approach the fourth ground on the basis that it does not raise a ground of appeal which has any real prospect of success.

27    It is also doubtful that the fifth ground can succeed. The record of the Federal Circuit Court shows that orders for substituted service were made, that the appellants filed a notice of appearance and other documents in the proceedings, and that Mr Nyoni appeared at the hearing on 20 June 2019. In those circumstances, and once again in a necessarily provisional way, I proceed on the basis that this final ground does not raise any real prospect of success.

28    In summary, I consider that there is a reasonable chance that the appeal will succeed on the question of the adequacy of the primary judge's reasons, but I am presently unpersuaded that the other grounds identified above have any real prospects of success.

Risks of injustice if a stay is granted or not granted

29    I also need to consider the potential prejudice which might be suffered by the parties as the result of granting a stay or refusing a stay.

30    From the bar table Mr and Mrs Nyoni said a few things that were relevant to this issue. I invited counsel for the respondent to object if she wished one or both of the appellants to be sworn in to give evidence, and to cross-examine them. Counsel (with respect, sensibly) declined to object.

31    On that basis, and for the purposes of this stay application only, I take into account the following matters.

(a)    Mr and Mrs Nyoni claim that the Kellerberrin property is their home. Even though they presently live in rented accommodation in Cockburn Central, Western Australia, they say that is temporary, because the house in Kellerberrin needs costly repairs.

(b)    They do not know where they will live if the Kellerberrin property is sold, and they have nowhere else to go.

(c)    In order to pay the rent, they rely on benefits received from Centrelink, as well as income from a part-time job which their daughter has. They have another child, a son, who is at high school.

(d)    A title search annexed to Ms Joyce's affidavit in the Federal Circuit Court did not show any mortgage on the Kellerberrin property, although it did show some caveats as encumbrances. This suggests that the appellants' outgoings will be lower if they can live in the house (with no mortgage), rather than pay rent.

(e)    It is also open to infer that if the appellants are required to deliver up vacant possession of the Kellerberrin property, then the risk that they will be unable to afford to continue to pay rent, and so be rendered homeless, is materially higher than the risk of homelessness if they can keep living in the property.

32    Counsel for the trustee identified the following countervailing considerations relevant to the question of injustice to her client and the creditors of Mr Nyoni's bankrupt estate.

(a)    The trustee has an obligation to administer the estate for the benefit of the creditors.

(b)    The sequestration order was made on 17 February 2017. The bankruptcy has therefore been on foot for some time. A stay will mean further delay.

(c)    The creditors of the bankrupt estate are owed a substantial amount of money. Mr Nyoni's total debt is also substantial compared to the likely value of the property.

(d)    Some creditors have not been involved in the bankruptcy proceedings, and therefore have not been the object of various allegations of misconduct that the appellants have made.

(e)    The appellants' evidence from the bar table that the property is in disrepair causes concern, as it suggests that the value of the property may deteriorate if there is further delay in realising the property. The trustee did not, however, submit that market conditions gave rise to any similar concern.

33    Counsel for the trustee accepted that the diminishment of the value of the property due to its disrepair was the only specific prejudice she could point to, as distinct from the general undesirability of further delay in realising the assets and paying a dividend to creditors. I accept that there is a risk of further diminishment in the value of the property. However it is necessarily difficult to assess how high that risk is, and how much the value is likely to diminish, given the general nature of the evidence (of Mr Nyoni, received from the bar table) on which that is based.

34    Counsel also confirmed that if no stay is granted the trustee will act as contemplated in the orders of the primary judge and will proceed to sell the property and distribute the proceeds. She was not able to predict whether or when that might be achieved.

35    In my view, the risk of injustice to Mr and Mrs Nyoni if a stay is not granted outweighs the risk of injustice to the trustee in bankruptcy if a stay is granted. On the one side, there is at least a real possibility that the appellants and their two children will be left without a permanent home. That would obviously be a prejudicial outcome for any individuals. On the other side there is a possibility of delay in realising the assets of the bankrupt estate. That delay might lead to some deterioration of the value of those assets, and some diminishment in the dividend paid to creditors. While I do not discount the importance of those matters, I can only conclude that they are outweighed by the potential impact on the appellants if the property is sold. There is a further risk that if it is sold, and half the net proceeds are distributed to a number of creditors, at least some of the proceeds will not be recovered if the appeal is successful.

Conclusion

36    I am conscious that the starting point is that the trustee, having been successful before the Federal Circuit Court, is entitled to the benefit of the judgment. I am also conscious that in taking that benefit, she will be exercising her statutory duty for the benefit of creditors. But for the reasons I have given there is a real chance that the judgment is incorrect. If it is, the impact on the appellants and their children, as individuals, of their residential property being sold pursuant to orders of the court which ought not to have been made, outweighs the potential impact on the trustee of further delay.

37    I am, however, concerned about that delay, especially in the context of what has already been a complex web of ongoing litigation involving the appellants, the trustee and other parties. In my view the appeal should be case managed to a hearing as soon as practicable.

38    It is important for the appellants to understand that nothing said in these reasons is a conclusion about the merits of any aspect of the appeal, or any indication that the appeal is likely to succeed. To the extent that claims of prejudice to the appellants which have been canvassed for the purposes of this stay application bear on the merits of the primary judge's orders, it may not be possible to consider those claims for the purposes of the appeal itself. That is because, usually, the evidence that can be taken into account on an appeal is confined by reference to the evidence that was admitted below.

Associate:

Dated:    22 July 2019