FEDERAL COURT OF AUSTRALIA

Hughes trading as Beesley and Hughes Lawyers v Hill [2019] FCA 1234

ORDERS

THE COURT ORDERS THAT:

1.    Pursuant to s 29 of the Federal Court of Australia Act 1976 (Cth) and Rule 36.08(2) of the Federal Court Rules 2011 (Cth), the Orders of Judge Vasta of the Federal Circuit Court of Australia at Brisbane in proceedings BRG1161/2017 made 24 May 2019 be stayed until the appeal is heard and determined.

2.    The stay the subject of Order 1 of these orders is subject to the following conditions. First, the appellant pay into Court an amount of $10,000 within 14 days or, alternatively, an amount of $10,000 be paid into an account to be established by agreement between the appellant and the respondent by their advisers, within 14 days of such agreement, but failing agreement being reached within three days of these orders as to the account and any other necessary arrangements concerning it, the amount of $10,000 is to be paid into Court within 14 days of these orders. Second, the appellant give an undertaking to the Court, in writing, that he will not encumber or cause to be encumbered by way of mortgage or charge or in any other way, the property located at 16 Byron Street, Bangalow in the State of New South Wales without the consent of the respondent first had and received or alternatively, without the leave of the Court first had and received.

3.    The costs of the appellant’s interlocutory application are costs in the appeal.

4.    Pursuant to s 23 and s 37P of the Federal Court of Australia Act 1976 (Cth), rule 1.32 and rule 1.36 of the Federal Court Rules 2011, these orders and the reasons for judgment in support of these orders are made and published from Chambers.

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

REASONS FOR JUDGMENT

GREENWOOD J:

1    These proceedings are concerned with an interlocutory application in which four orders are sought by Mr Owen Hughes as the applicant/appellant.

2    As to the first order, the appellant seeks an extension of time within which to institute an appeal from the orders of Judge Vasta made in the Federal Circuit Court of Australia on 24 May 2019. That order is not opposed and accordingly, an order to that effect is to be made today.

3    As to the second order, the appellant seeks leave to amend the grounds of appeal. That order is not opposed and accordingly, leave is granted to amend the notice of appeal in terms of the proposed amended notice of appeal.

4    As to the third order, the appellant seeks a stay of the orders made by the primary judge on 24 May 2019 until the appeal is heard and determined.

5    The fourth order is not pressed today and accordingly will not be made.

6    On 24 May 2019, the primary judge gave judgment in proceedings commenced by Ms Catherine Mia Hill (the present respondent to the appeal) in which Ms Hill contended that conduct of the respondent constituted “conduct of a sexual nature” for the purposes of s 28A of the Sex Discrimination Act 1984 (Cth) (the “Act”). Ms Hill sought relief in respect of the contended contravening conduct. On 24 May 2019, the primary judge made orders that the appellant pay Ms Hill damages in the sum of $170,000 by way of compensation for loss and damage suffered “because of the conduct of the Respondent”. Mr Hughes was ordered to pay Ms Hill’s costs in relation to the proceeding. The amount of $170,000 is made up of an award of general damages in an amount of $120,000 and an award of aggravated damages in an amount of $50,000.

7    By the amended notice of appeal, the appellant contends that the primary judge erred in concluding that the conduct the subject of the proceeding was: a sexual advance or sexual advances; conduct of a sexual nature; sexual harassment; conduct for the purposes of s 28A of the Act (ground 1A, amended notice of appeal).

8    By grounds 1 and 2 of the amended notice of appeal, the appellant says that the primary judge’s award of general damages of $120,000 was manifestly excessive and outside the range of damages open having regard to the evidence, and an award which failed to take into account, as a matter of law, the application of the observations of this Court in Richardson v Oracle Corporation Australia Pty Ltd (2014) 223 FCR 334.

9    By ground 3 of the amended notice of appeal, the appellant says that the primary judge’s award of aggravated damages in an amount of $50,000 was manifestly excessive and outside the range of damages open having regard to the evidence. The appellant also says that the primary judge erred by having regard to paras 75 and 76 of the appellant’s affidavit being paragraphs which were not in evidence before the primary judge.

10    On 28 June 2019, a bankruptcy notice was issued by the Official Receiver on the application of Ms Hill based upon the orders of the primary judge of 24 May 2019. That bankruptcy notice was served on the appellant on 28 June 2019. Mr Hughes was required to pay the amount claimed in the notice ($170,000) within 21 days of 28 June 2019. He did not do so. Moreover, he did not make any application to the Court in relation to the bankruptcy notice under s 41 of the Bankruptcy Act 1966 (Cth). Accordingly, the appellant committed an act of bankruptcy for the purposes of s 40(1) of the Bankruptcy Act. The solicitor for the respondent says that he holds no instructions, at present, to file an application for a sequestration order in reliance upon the act of bankruptcy established by the appellant’s failure to either comply with the bankruptcy notice or otherwise make an application in relation to it. The appellant brings this application to seek a stay of the orders of the primary judge pending the appeal. Should the Court determine that a stay is appropriate, it would also be appropriate to make orders in relation to any possible application or petition by Ms Hill for a sequestration order at least based on the orders of the primary judge.

11    As to the question of a stay of the orders of the primary judge, the applicant/appellant and the respondent are in agreement about the principles to be applied in the exercise of the discretion arising under s 29 of the Federal Court of Australia Act 1976 (Cth). That section provides that where an appeal to this Court is instituted from an order of the Federal Circuit Court of Australia, the Court or a judge may order, on such conditions (if any), as it or he or she thinks fit, a stay of all or any proceedings under the judgment appealed from. The applicant must demonstrate “a reason or an appropriate case” to warrant the exercise of the discretion in favour of a stay: Powerflex Services Pty Ltd v Data Access Corp (1996) 67 FCR 65 at 66; Stratton v Bowles [2014] FCA 1180. Two questions arise in determining whether a “reason” is made out or the case is an “appropriate” one for the grant of a stay. The first is whether an arguable point arises on the proposed appeal, that is, whether an arguable ground is advanced: Freeman v National Australia Bank Limited [2002] FCA 427 at [4]; Boumelhem v Commonwealth Bank of Australia (2008) 171 FCR 462 at [23]; Reynolds v Aluma-Lite Products Pty Ltd [2010] FCA 322 at [10]; Watts v Bendigo and Adelaide Bank Limited [2010] FCA 1013 at [11]. The second question is whether the balance of convenience favours the grant of a stay. That balance involves taking into account the question said to be arguable and whether there is a real risk of irreparable harm if the stay is not granted.

12    As to the question of whether the amended notice of appeal raises an arguable question, that matter involves the issue of whether there is an arguable question in relation to the asserted errors on the part of the primary judge concerning the conduct findings and whether there is error in relation to the assessment of general damages and aggravated damages. As to the conduct matters, the appellant says that the 43 examples of conduct addressed by the primary judge and the subject of findings that the conduct was conduct concerning a sexual advance or sexual advances; conduct of a sexual nature; sexual harassment; and conduct falling within s 28A of the Act, are not supported by the evidence. The respondent accepts that there is, at the very least, an arguable question about that matter although the question is said to be barely arguable. For the purposes of this application only, I accept that the question of error in relation to the findings of contravention is weak. It may be that the strength of the appellant’s contentions about this ground of appeal is greater than that assessment, once all of the evidence is examined. The appellant contends that the evidence does not support the findings made by the primary judge.

13    As to the second question of the primary judge’s assessment of general damages and aggravated damages, I accept that the question is more strongly arguable.

14    The question that then arises is whether prejudice or irreparable harm arises should the Court not order a stay. This question is also affected by the issue of the bankruptcy notice and the potential for a petition by which Ms Hill might seek a sequestration order of the appellant’s estate. Although there is no present suggestion that Ms Hill intends to take that course, the Court needs to take into account the circumstance of the service on 28 June 2019 of the bankruptcy notice on Mr Hughes, on the application of Ms Hill.

15    In Ahern v Deputy Commissioner of Taxation (Qld) (1987) 76 ALR 137 at 148, the Full Court (Davies, Lockhart and Neaves JJ) observed that bankruptcy is not merely inter partes litigation. It involves a change of status and has quasi-penal consequences. Their Honours also observed that it is also well established that, in general, a court exercising jurisdiction in bankruptcy should not proceed to sequestrate the estate of a debtor where an appeal is pending against the judgment relied on as the foundation of the bankruptcy proceedings provided that the appeal is based on genuine and arguable grounds. The Court here, of course, is not exercising jurisdiction in bankruptcy (so far as the application is presented framed) but is considering whether the discretion under s 29 of the Federal Court of Australia Act ought to be exercised in favour of a stay pending the determination of the appeal. Nevertheless, the steps taken under the Bankruptcy Act remain contextually relevant to the circumstances confronting the appellant should no stay of the orders of the primary judge occur.

16    As to the circumstances of the appellant, Mr Hughes relies on his affidavit of 10 July 2019 and oral evidence he gave today. In his affidavit, he sets out a schedule of assets and liabilities which reveals net assets of $104,257. The amount of those net assets is determined after having taken into account a debt owing to a self-managed superannuation fund, O M Hughes Pty Ltd as Trustee for the Hughes Superannuation Fund, of $240,000. The statement of assets and liabilities reveals money held in bank accounts amounting to $40,857 as at 10 July 2019. Mr Hughes is a solicitor. However, Mr Hughes says that he is presently unfit to work due to a medical condition and he is receiving professional support from a consultant psychiatrist, Dr Stephen Huntsman. Mr Hughes is taking time from work until 21 September 2019 as part of addressing his medical condition. He is presently not practising as a solicitor and has vacated his office. He intends to review his health and his ability to return to paid employment as a solicitor, or to practice on his own account again, after having taken further professional advice from Dr Huntsman. He has advised the Law Society of New South Wales of these arrangements and also of arrangements he has made for the transfer of files to another firm, Adamson Legal & Conveyancing. Mr Hughes believes that he will not be fit for work for six months. Mr Hughes deposes to other matters relating to his family and children which are not necessary to mention in these reasons.

17    In his affidavit, Mr Hughes says that he has recently sold and settled a contract of sale for a property at 2 Stewarts Road, Clunes. This sale was the subject of oral evidence from Mr Hughes. It seems that the sale occurred on 4 July 2019 in an amount of $770,000 resulting in net proceeds of sale after discharging the mortgage of $212,000. Mr Hughes used the net proceedings to pay amounts owing on credit cards of $60,000 and an amount payable to the Australian Taxation Office of $143,000. Other expenses were paid resulting in a balance available of $33,000. Mr Hughes is presently residing in very low cost accommodation to try and save money.

18    These matters are relevant because the respondent to the appeal contends that if a stay is to be granted, the discretion ought to be exercised on the footing that a condition is imposed to the effect that the appellant pay into Court security for the appeal in an amount of $40,000 (or that that sum be paid into a secure account pending the determination of the appeal). The respondent also seeks an undertaking that the appellant not sell, encumber or otherwise deal with his remaining assets without either the leave of the Court or the consent of the respondent.

19    The solicitor for the respondent, Mr Nathan Job, has sworn an affidavit dated 5 August 2019 which refers to a sequence of correspondence and emails by which he has been trying to obtain information about the assets and liabilities of Mr Hughes having regard to the judgment debt payable to the respondent. That correspondence also refers to the steps taken by the respondent under the Bankruptcy Act to try and recover the amount of the debt due under the orders of the primary judge. In particular, I have had the benefit of reading the letters of Mr Job dated 18 July 2019 and 22 July 2019. In those letters, Mr Job presses for details about the sale of the property at 2 Stewarts Road, Clunes. Mr Job also expresses concern about these matters in the context of the act of bankruptcy in failing to comply with the bankruptcy notice (or otherwise take steps in relation to it). Mr Job says in his letters and in the application today that he has made a request under s 167 of the Evidence Act 1995 (Cth) in terms of the definition of “request” in s 166 of that Act and in light of non-compliance with the request an order is sought under s 169 of that Act. Those sections fall within Div 1 of Pt 4.6 of Ch 4 of the Act. Chapter 4 deals with “Proof” in relation to proceedings and Pt 4.6 deals with “Ancillary provisions”. Division 1 of Pt 4.6 addresses “Requests to produce documents or call witnesses”. It is not entirely clear that these provisions apply in the immediately present circumstances having regard to the purposes those provisions, the Division and the Chapter serve. In view of the orders to be made, it is not necessary to take those matters any further.

20    The appellant says that in the event that a stay is not granted, his financial position will become “irreversible” as a consequence of the enforcement of the orders of Judge Vasta of 24 May 2019 and that he will be “seriously and irretrievably prejudiced”. The appellant says that, on the other hand, the respondent will suffer no prejudice should a stay be granted because all that will occur is that enforcement of the orders will be delayed, should the appeal be unsuccessful.

21    I am satisfied that the balance of convenience warrants granting a stay of the orders of the primary judge. I accept that the stay ought to be on conditions and a measure of protection should be afforded to the respondent who has the benefit of the present judgment albeit under challenge by way of an appeal. The stay will be conditioned upon terms, first, that the appellant pay $10,000 into Court or into an account to be established by the parties with monies held accumulating interest pending the determination of the appeal and, second, that the appellant give an undertaking to the Court that he will not encumber or cause to be encumbered by way of mortgage or charge or in any other way, the property located at 16 Byron Street, Bangalow in the State of New South Wales without the consent of the respondent or alternatively, without leave of the Court. The amount of $10,000 to be paid as described earlier is determined having regard to the apparent cash available to the appellant of $40,857 plus residual cash from the proceeds of sale of the property at Clunes of about $33,000 amounting to approximately $73,000 in all. Of course, the appellant is receiving medical attention and is unable to work. He does not expect to be earning an income for about six months and the only income would appear to be the rental from the lease described at para 18 of his affidavit which seems to suggest a monthly rental income of $4,166. This seems to me to strike the appropriate balance.

22    The costs of the application will be costs in the appeal.

Associate:

Dated:    7 August 2019