FEDERAL COURT OF AUSTRALIA

Mitolo Wines Aust Pty Ltd v Vito Mitolo & Son Pty Ltd (No 3) [2019] FCA 2116

ORDERS

THE COURT ORDERS THAT:

1.    The operation of paragraphs 16–21 inclusive of the orders of the Court made on 25 July 2019 be suspended until further order.

2.    The respondents’ interlocutory application dated 8 November 2019 be otherwise dismissed.

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

REASONS FOR JUDGMENT

BESANKO J:

Introduction

1    On 8 November 2019, the respondents to this proceeding filed an interlocutory application in which they seek an order for a stay of orders made by the Court on 25 July 2019 and 10 October 2019 pursuant to r 36.08 of the Federal Court Rules 2011 (Cth) (the stay application). The respondents seek a stay pending the hearing and determination of an appeal by them to the Full Court of this Court.

2    The substantive proceeding involved a claim by the applicants against the respondents for relief in relation to trade mark infringement, contraventions of the Australian Consumer Law (Sch 2 to the Competition and Consumer Act 2010 (Cth) (ACL)) and the tort of passing off. The proceeding also involved a cross-claim by the respondents alleging an estoppel and a contravention of the ACL by the applicants. Prior to trial, I made an order that issues of liability be heard and determined before issues of quantum.

3    On 13 June 2019, I delivered reasons for judgment in relation to the question of liability (Mitolo Wines Aust Pty Ltd v Vito Mitolo & Son Pty Ltd [2019] FCA 902 (substantive reasons)). The applicants were successful.

4    On 25 July 2019, I made a number of orders and declarations to give effect to the conclusions set out in the substantive reasons (the final orders) and delivered reasons for those orders (Mitolo Wines Aust Pty Ltd v Vito Mitolo & Son Pty Ltd (No 2) [2019] FCA 1140). I also made orders with respect to the costs of the trial and with respect to the categories of discovery relevant to, and the filing of non-expert and expert evidence in relation to, the question of an account of profits.

5    The respondents sought to appeal. On 4 July 2019, prior to the making of the final orders, they filed a Notice of Appeal. They filed a Second Notice of Appeal on 24 September 2019. The appeal is to be heard in May 2020.

6    In the stay application, the respondents seek a stay of the following orders:

12.    The respondents pay the applicants’ costs of and incidental to the trial pursuant to order 4 made 16 May 2017 as varied by order 1 made 7 August 2018, to be taxed if not agreed.

…

16.    If some or all categories are not agreed, then on or before 30 August 2019, the applicants make such application discovery as they may be advised.

17.    Any interlocutory application for discovery be listed for argument on a date to be fixed.

18.    On or before 11 October 2019 the applicants file and serve affidavits comprising any further evidence-in-chief upon which they seek to rely in relation to the question of an account of profits.

19.    On or before 25 October 2019 the respondents file and serve affidavits comprising any further evidence-in-chief upon which they seek to rely in relation to the question of an account of profits.

20.    On or before 15 November 2019, the applicants serve on the respondent[s] any expert reports upon which they seek to rely on the question of an account of profits.

21.    On or before 29 November 2019 the respondents serve on the applicants any expert reports upon which they seek to rely on the question of an account of profits.

I will refer to order 12 as the Costs Order and orders 16 to 21 inclusive as the Programming Orders.

7    The respondents also seek a stay of an order made on 10 October 2019. That order, which I will refer to as the Second Costs Order, relates to the costs of an interlocutory application for discovery and production filed by the applicants on 2 October 2019. The order is in the following terms:

5.    The respondents pay the applicants’ costs of the interlocutory application dated 2 October 2019.

8    The stay application is opposed by the applicants.

9    In these reasons, I will refer to the parties by reference to their status at trial and I will describe the respondents in the same way as I did in the substantive reasons.

Relevant legal principles

10    The principles which are relevant to an application for a stay of the enforcement of a judgment pending an appeal are well-established: see Alexander v Cambridge Credit Corp Ltd (1985) 2 NSWLR 685; (1985) 10 ACLR 42 per Kirby P, Hope and McHugh JJ; Powerflex Services Pty Ltd v Data Access Corp (1996) 67 FCR 65; (1996) 137 ALR 498 per Burchett, Heerey and Whitlam JJ; Maher v Commonwealth Bank of Australia [2008] VSCA 122 per Redlich and Dodds-Streeton JJA. They were not in dispute on this application.

11    An applicant for a stay bears the onus of demonstrating that the stay should be granted. However, there is no need for the applicant to demonstrate “special” or “exceptional” circumstances. The applicant need only demonstrate that it is appropriate for the Court to exercise its discretion in favour of granting a stay. Nevertheless, the applicant must establish that there is at least an arguable ground of appeal.

12    A party that is successful at trial has a prima facie entitlement to the full benefit of their judgment and the presumption that that judgment is correct. Where there is a real risk that the successful party may be deprived of the full benefit of their judgment if a stay is granted and the appeal is ultimately unsuccessful, this is a strong reason for not granting a stay.

13    Conversely, where there is a real risk that a successful appellant would be deprived of the fruits of their appeal if a stay is not granted such that the appeal is rendered nugatory, this is a strong reason for granting a stay. This includes circumstances in which there is a real risk that the enforcement of the judgment below would result in the successful appellant being unable to be substantially restored to its former position.

The Evidence

14    The respondents relied on the following evidence in support of their application:

(1)    the first affidavit of Vito sworn on 8 November 2019;

(2)    the affidavit of Tony Mitolo sworn on 14 November 2019;

(3)    the affidavit of Nathan Lee Marshall sworn on 14 November 2019; and

(4)    the second affidavit of Vito sworn on 25 November 2019.

Vito

15    In his first affidavit, Vito gives evidence about the financial position of the first respondent and his own financial position.

16    Vito produces a copy of the first respondent’s balance sheet as at 30 June 2019 and a profit and loss statement for the period from 1 July 2018 to 30 June 2019. These documents indicate that as at 30 June 2019, the first respondent had net assets of negative $11,046.33 and that for the year ended 30 June 2019, the first respondent made a loss of $1,710.15. Vito also produces a copy of the first respondent’s balance sheet as at 30 September 2019 and a profit and loss statement for the period from 1 July 2019 to 30 September 2019. These documents indicate that as at 30 September 2019, the first respondent had net assets of negative $18,614.85 and that for the period 1 July 2019 to 30 September 2019, the first respondent made a loss of $7,568.52.

17    Vito states in his affidavit that if the orders sought in the stay application are not made, and the Costs Order is enforced, “it is likely that the first respondent will need to be liquidated and wound up”. He also states that given the assets of the first respondent, he is concerned that a liquidator would not continue with the first respondent’s “portion” of the appeal.

18    Vito states that if the orders sought in the stay application are not made, “it is likely that I will sustain non-financial prejudice”. He states that he is the registered proprietor of 135 Oakley Road, McLaren Vale and that if the Costs Order is enforced, he will need to sell the property in order to comply with the order. He states that, in the event that the appeal is successful and the Costs Order is overturned, then he will have sold the property with no realistic prospect of being able to re-purchase it. The Oakley Road property is referred to extensively in the substantive reasons (beginning at [84]).

19    Vito also states that the continued litigation in this proceeding, being the claim for an account of profits, will result in financial resources being expended by the respondents which, if the appeal is successful, will be wasted costs for both the applicants and the respondents.

20    In his second affidavit, Vito gives evidence in response to various matters raised in the affidavit of Ms Kathryn Ann White sworn on 21 November 2019. I will return to this when I consider her evidence.

Tony

21    In his affidavit, Tony gives evidence of his own financial position.

22    Tony states that if the orders sought in the stay application are not made and the appellants are successful on appeal, “it is likely that I will sustain financial and non-financial prejudice”.

23    Tony states that he has approximately $3,000 in savings. He does not have any liabilities in his name, other than for legal expenses, and he is not the registered proprietor of any real property.

24    Tony has shareholdings in the following companies:

(1)    Pagnolo Pty Ltd, which has a paid up share capital of $1.00 and is the trustee of the Pagnolo Family Trust which owns the land at 319 Chalk Hill Road, McLaren Vale;

(2)    Vera Pizza Oztalia Pty Ltd, which has a paid up share capital of $50.00. This company conducts a catering/food business and is the trustee of the Mitolo VPO Trust, which is a discretionary trust;

(3)    Madre Lievito Pty Ltd, which has a paid share capital of $50.00. This company conducts a restaurant business at 57 Gilbert Street, Adelaide and is the trustee of the Mitolo VPO Trust, which is a discretionary trust;

(4)    Voucho Pty Ltd, which has a paid up share capital of $1.00 and does not trade; and

(5)    Swissco Disco Pty Ltd, of which Tony owns half the shares and which does not trade.

25    Tony states that all other shareholdings he holds are held as trustee for the Tony Mitolo Family Trust, which is a discretionary trust.

26    Tony states that he is informed by his solicitor, Mr Marshall, and verily believes, that the applicants assert that they are entitled to costs in excess of $400,000 pursuant to the Costs Order. He states that he does not have the financial resources to fund compliance with the order in this amount, “or any other substantial sum” and that if the order is enforced, “it is likely that I will need to file for bankruptcy”.

27    Tony states that in the event the appeal is successful and the Costs Order is overturned, he would have been placed into bankruptcy, which he understands will have consequences in terms of obtaining future credit and would cause him to incur wasted costs to reinstate his business structures. He also states that if a trustee in bankruptcy is appointed, he is concerned that the trustee will not prosecute the appeal brought by all of the respondents.

28    Tony also states that the continued litigation in this proceeding, being the claim for an account of profits, will result in financial resources being expended by the respondents which, if the appeal is successful, will be wasted costs for both the applicants and the respondents. This statement by Tony is identical to that made by Vito in paragraph 17 of his first affidavit.

Nathan Lee Marshall

29    Mr Marshall is the sole director of Georgiadis Lawyers Pty Ltd. He has the care and conduct of this matter on behalf of the respondents.

30    Mr Marshall gives the following evidence in order to explain the events which led to the application for the stay being brought by the respondents on 8 November 2019 rather than at an earlier time:

(1)    between 6 August 2019 and 4 September 2019, Vito was overseas and, as a result, it was more difficult during this period to obtain instructions in relation to all aspects of the proceeding and the appeal;

(2)    between July 2019 and August 2019, Mr Marshall was liaising with Tony in relation to compliance with order 10 of the final orders and, during this period, the respondents’ efforts were focused upon compliance with the injunctive orders;

(3)    between 29 August 2019 and 30 August 2019, Mr Marshall was liaising with Ms White in relation to an inspection of Pizzateca’s premises, which ultimately did not go ahead;

(4)    thereafter, the respondents’ attention turned to marshalling the documents they were required to discover, with some material to come from the first respondent’s accountant;

(5)    Tony was married on 5 October 2019 and returned to Australia from his honeymoon overseas on 18 October 2019;

(6)    on 23 October 2019, the respondents filed documents relevant to the question of an account of profits;

(7)    on 4 November 2019, copies of the discovered documents were provided to the applicants’ solicitors by way of a Dropbox link and the production of discovered documents was slightly delayed due to difficulties in obtaining Microsoft Excel extracts from the cloud based accounting software program, Xero; and

(8)    the respondents have also been prosecuting the appeal.

31    Mr Marshall gives evidence in relation to the respondents’ Notice of Appeal. He states that the Notice of Appeal was filed on 4 July 2019 and, although at that time there were no orders which gave effect to the substantive reasons, the respondents held the view that, out of an abundance of caution, they should proceed as though the time limit within which to commence an appeal in this matter had commenced on 13 June 2019 (the date on which the substantive reasons were delivered). He states that by 1 August 2019, senior counsel for the respondents considered it necessary to file and serve an amended Notice of Appeal in order to capture the final orders. The respondents filed and served the Second Notice of Appeal on 24 September 2019.

32    Mr Marshall also gives evidence in relation to the listing of the hearing of the appeal in May 2020 rather than earlier. He states that in October 2019, he drafted proposed minutes of order which sought a listing in May 2020. He states that he provided those minutes to the solicitor for the applicants, Ms White, who replied confirming that the applicants consented to the proposed orders and took no position with respect to whether the appeal should be listed in February or May 2020, but sought an explanation as to why the May 2020 was nominated by the respondents. Mr Marshall states that he did not respond to Ms White’s request for an explanation due to the need for the minutes to be provided to the Court and the fact that Ms White confirmed that the respondents consented to the proposed orders in any event. He states that such an explanation would have been “cumbersome” and would not have progressed the matter. Nevertheless, he gives the following reasons in his affidavit for the respondents seeking a listing of the appeal in May 2020:

38.1    As the applicants in this matter had wanted a longer than normal time in which to consider the Respondent’s [sic] Outline of Submissions, the preparation and filing of those submissions on behalf of the Respondents’ would have needed to occur between 23 December [2019] (if the matter was listed on 3 February 2010 [sic]) to 17 January 2020 (if the matter was listed on 28 February 2020). This would have resulted in some of the extended time which the Applicants had sought to have to consider the Respondents’ appeal submissions would have been [sic] consumed by the Christmas/New Year closure period.

38.2    Georgiadis Lawyers will be closed between 20 December 2019 and 6 January 2020.

38.3    At the time of the orders being made to list the appeal, the Respondents’ senior counsel had prior commitments for most of December 2019, was going to be away on leave for January 2020, and was not available for much of February 2020, which would have made a February 2020 appeal not feasible.

33    The applicants relied on the following evidence in response to the application:

(1)    the affidavit of Ms White sworn on 21 November 2019; and

(2)    part of the affidavit of Tony sworn on 31 January 2018.

Ms White

34    Ms White gives evidence that she was instructed to oppose the respondents’ stay application for the following reasons:

(1)    the delay in bringing the stay application and the substantial work undertaken on behalf of the applicants since the relevant orders were made;

(2)    the delay (instigated by the respondents) in the hearing of the appeal;

(3)    the respondents’ failure to disclose their intention to seek a stay when proposing a May 2020 listing for the hearing of the appeal;

(4)    the failure by the respondents to comply with existing procedural orders and, most significantly, orders for discovery of financial documents; and

(5)    the lack of any meaningful response to Ms White’s inquiries in relation to the financial position of the first respondent coupled with the second respondent’s conduct in disposing of real property owned by him.

35    Ms White states that prior to 8 November 2019, to the best of her recollection, the only reference to a stay by the respondents was made on 11 July 2019. That reference arose in the following way. On 9 July 2019, she wrote to Mr Marshall raising the applicants’ concern about the first respondent’s ability to meet an adverse costs order on appeal. In that letter she stated that it appeared from the limited financial information provided in the matter up to that date that the first respondent was not in a position to meet an adverse costs order on appeal. She also invited the respondents’ solicitor to urgently provide current financial accounts in respect of the first respondent, an undertaking from Vito to personally pay any costs order made against the first respondent, and an undertaking from Tony to personally pay any costs order made against the first respondent. On 11 July 2019, Mr Marshall responded and referred to the possibility of the respondents seeking a stay on the basis of the substantive reasons:

As you are aware, our clients have filed and served a Notice of Appeal from the Reasons. Accordingly, this response, and the actions taken by our client in good faith to comply with the spirit of the Reasons, in the absence of formal orders, is done so without prejudice to its rights on appeal, and to our client subsequently seeking any stay of orders ultimately made by the Court on the basis of the Reasons.

(Emphasis added).

36    I am satisfied on the basis of the evidence of Ms White and Mr Marshall that no other reference to seeking a stay was made until the respondents filed the stay application on 8 November 2019.

37    With respect to the delay in the hearing of the appeal, Ms White received draft minutes of orders from Mr Marshall on 22 October 2019 proposing an order that the appeal be listed in May 2020. On 23 October 2019, she responded by email as follows:

…

I am not aware of the basis upon which your client has nominated the month of May for the appeal. I would have anticipated that the appeal would be listed in February or March. Is there a reason why your clients are not in a position to proceed sooner?

I am not instructed to oppose the proposed order 2 as drafted. It is of course, your clients’ appeal and my client does not take a position in relation to the time frame within which it should be heard. I simply seek an explanation at this stage.

…

38    Ms White gives evidence that at the time of this email, she believed that there was no prejudice to the applicants arising out of any delay in the listing of the appeal because the applicants were able to continue to progress the matters towards a trial for an account of profits and to pursue the existing costs orders in this proceeding. She adds that the suggestion of an application for a stay of orders in this proceeding had been made on 11 July 2019 and had not been raised with her again. She states that she understood from this that the respondents had considered that issue and elected not to pursue it.

39    Ms White states that she is informed by Frank Mitolo on behalf of the applicants, and verily believes, that:

(1)    the instructions from the applicants to take no position in relation to the request for a May 2020 listing of the appeal were “directly consequent” upon the understanding held by the applicants that the account of profits and the enforcement of the costs orders could be progressed prior to the hearing or determination of the appeal; and

(2)    had the respondents disclosed to the applicants an intention to apply for a stay of the existing orders in the proceeding, it is likely that the applicants would have pressed for the appeal to be listed at the earliest available hearing date convenient to the Full Court.

40    Ms White also states that on 11 September 2019, the applicants engaged Mr Tim Cogan to commence work on costs recovery in relation to the trial on liability.

41    Ms White also gives evidence concerning Vito’s real property.

42    On 14 November 2019, Ms White undertook a search of real property owned by Vito. That search revealed that Vito is the sole registered proprietor of 135 Oakley Road, McLaren Vale and has an interest as registered proprietor of 22 Vagnoni Avenue, Paradise, together with Francesco Mitolo, Alba Herde, Josephine Bew and others.

43    The search also indicated that on 10 October 2019, Vito transferred his interest in 7 Langman Drive, Teringie. Prior to 10 October 2019, Vito had been the sole registered proprietor of that property. Ms White said that the applicants were not given any notice of the transaction.

44    Vito responds to this evidence in his second affidavit.

45    Vito states that the registered proprietors of the property at 22 Vagnoni Avenue, Paradise, are himself, his brother, his sisters and his mother as tenants in common. He said that his sister resides at the property pursuant to a family agreement in order to take care of his mother who resides next door. Vito also states that he placed the property at Langham Drive, Teringie, on the market to be sold prior to the delivery of the substantive reasons in order to consolidate his financial affairs. He produces a Residential Sales Agency Agreement dated 12 April 2019 to establish this fact. He also said that after paying out the mortgagee, he used the remaining surplus to satisfy “legal fee liabilities”.

Tony

46    In his affidavit sworn on 31 January 2018, Tony gives evidence that Pizzateca is owned by him (85%) and Tim Anderson (15%).

Analysis

47    The first relevant matter is the merits of the appeal.

48    As I have said, the respondents filed a Second Notice of Appeal on 24 September 2019. I do not propose to set out the grounds of appeal and the particulars. The respondents submit that the Second Notice of Appeal raises a number of grounds of error in the substantive reasons which they contend have merit.

49    At the commencement of the hearing of this application, I raised with the parties whether it would be appropriate for me to refer the stay application to another judge on the basis that I may be placed in a position where I would have to form an opinion as to the strength or otherwise of an appeal against my own judgment. Counsel for the respondents indicated that he would not be making any submissions as to the strength or lack thereof or otherwise of the appeal and that he was proposing to proceed on the basis that the appeal is arguable. Counsel for the applicants indicated that he would not be making a submission that the appeal is so manifestly hopeless such that this was a reason to refuse the stay in and of itself, but that he did intend to make a submission that the respondents’ Second Notice of Appeal is in such general terms that it does not permit any assessment of the strength or otherwise of the appeal. He indicated that the applicants did not consider that this was a reason for me to refer the application to another judge.

50    I decided that I could deal with the application. I proceed on the assumed basis that there are grounds of appeal which are arguable, no more or no less.

51    Counsel for the respondents summarised the central issue raised by this application in the following way. If the appeal is arguable, which is accepted, the issue becomes one of balancing the prejudice suffered by each of the parties depending on the outcome of the appeal. If the appeal is successful, then the respondents ought not to be put in a position where they cannot be returned to their current position. Conversely, if the appeal is unsuccessful, then the applicants ought not to be precluded from obtaining the full benefit of the judgment. The respondents’ case is that if the stay is not granted and the appeal is successful, the respondents will suffer prejudice that cannot be remedied by an order of the Full Court.

52    The respondents’ submissions relevant to prejudice appeared to be directed primarily at the Costs Order.

53    The respondents contended that the “real thrust” of the prejudice was that if the Costs Order is not stayed, the following would occur if it transpires that the appeal was ultimately successful:

(1)    the first respondent is likely to be liquidated and wound up and is unlikely to be able to be restored to a non-liquidated state;

(2)    Tony is likely to need to file for bankruptcy and is unlikely to be able to be restored entirely to his pre-bankruptcy state; and

(3)    Vito will be required to sell real estate in order to meet the costs orders in circumstances in which there is no prospect of re-purchasing the property.

The respondents characterised this prejudice as of a “non-financial” nature.

54    For their part, the applicants submitted with respect to the first respondent and Tony, that the possible insolvency or bankruptcy of an appellant is not ordinarily a reason of itself to grant a stay. They referred to Wealthsure Pty Ltd v Selig [2013] FCA 628 at [24] in support of this submission.

55    While this proposition may be accepted, I note that, in any event, counsel for the respondents accepted that, collectively, the respondents had sufficient assets to satisfy the Costs Order. He also acknowledged that the Costs Order involved a joint and several liability and may be enforced against any of the three respondents.

56    It is therefore unnecessary to decide whether the stay should or should not be granted by reason of the possibility or likelihood of insolvency of the first respondent and Tony. As the Costs Order involved a joint and several liability, and there are sufficient assets between the respondents to satisfy the Costs Order, the likelihood of the first respondent and Tony facing winding up and bankruptcy respectively due to enforcement of the Costs Order is, in fact, very low, if not non-existent. It follows that the respondents will suffer no “non-financial” prejudice beyond the possible prejudice to Vito due to sale of real property. Counsel for the respondents appeared to accept this conclusion when he submitted that compliance with the Costs Order would “at the very least” require Vito to sell real property.

57    The respondents submitted that the sale of real property by Vito would give rise to real and substantial prejudice because the property in question, being 135 Oakley Road, McLaren Vale, is the source of the grapes used by the first respondent for its business venture. They contend that, as far as the sale of wine by the first respondent is concerned, the sale of the property would create a circumstance in which the respondents would be required, as an interim measure, to forego their ability to source grapes from their own vineyard in McLaren Vale. They contend that even if the appeal is successful, this “ongoing prejudice” could not be cured by an order of the Full Court overturning the Costs Order and requiring repayment of an amount for costs.

58    The applicants respond to this contention by submitting that, although it may be accepted that Vito may not be able to recover the property in question, there is no evidence either way about the ability of Vito to find other land of the same value in McLaren Vale if he is successful on appeal.

59    In any event, it seems to me that the problem faced by the respondents is that they have not offered security in relation to the property as a condition of the stay. When I asked counsel for the respondents about this, he said that he had not obtained instructions to do so. The applicants contend that I should have regard to this fact and that it is a significant matter in the exercise of the discretion.

60    In my view, as far as the Costs Order and the Second Costs Order are concerned, the failure by the respondents to offer security in any form is decisive for the purposes of this application. If it is accepted, as the respondents contend, that the respondents ought not be put in a position where they cannot be returned to their original position, then offering security in some form as a condition of the stay would prevent, or go some way towards preventing, this circumstance. Moreover, the applicants are, as the successful party in the proceeding, entitled to the fruits of the judgment which has been entered. Although the respondents sought to suggest otherwise by reference to the limited nature of the stay sought, the Costs Order represents a substantial part of those fruits. As the applicants contend, it is undoubtedly a form of prejudice for a party that is entitled to very significant costs orders to be held out of those funds for a prolonged period. This is particularly so where there is a real prospect that the effect of the stay would be to allow the respondents to dissipate their assets on the costs of the appeal such that if the applicants are successful on appeal, there will either be less funds available or no funds available to satisfy the existing Costs Order (see Citrus Queensland Pty Ltd v Sunstate Orchards Pty Ltd [2008] FCA 1867 at [39] per Greenwood J).

61    I note the submission by counsel for the respondents that it is uncertain whether funds could be raised on the security of the property owned by Vito. Despite this, he ultimately accepted that he could not, on the evidence before the Court on this application, make a submission as to whether that could or could not be done.

62    The respondents raised another form of non-financial prejudice which they contend would be suffered by them in the event that the stay was not granted. They submitted that if the first respondent is unable to comply with the Costs Order and the Second Costs Order and is wound up, there is a genuine concern that a liquidator would not pursue the appeal. They submitted that this would render the appeal nugatory given that the first respondent is the party alleged to be primarily liable. Similarly, the respondents submitted that if Tony was unable to comply with the Costs Order and was required to file for bankruptcy, there is a genuine concern that any trustee in bankruptcy would not pursue the appeal.

63    In my view, it is not necessary to consider the prospects of the appeal being rending nugatory by reason of the unwillingness or otherwise of a liquidator or a trustee in bankruptcy to pursue the appeal. This is because the respondents have accepted that there are sufficient assets between them to satisfy the Costs Order. I would add that even if the first respondent was ultimately wound up, and a liquidator declined to pursue the appeal, it is not apparent to me that Vito and Tony would be precluded from pursuing the appeal to the extent that they have been found to be “involved” in the contraventions of the first respondent. The same could be said for Vito if Tony was required to file for bankruptcy.

64    There was a delay of over three months between the making of the final orders on 25 July 2019 and the filing of the stay application on 8 November 2019, and a delay of almost one month between the making of the orders of 10 October 2019 and the filing of the stay application.

65    The respondents submitted that they were first advised of the quantum of the costs claimed by the applicants pursuant to the Costs Order by letter dated 16 September 2019. They submitted that, accordingly, there has not been any significant or substantial delay in seeking a stay of the costs orders. I note that the delay from this date is slightly under two months.

66    The respondents also submitted that no specific prejudice has been identified by the applicants due to the alleged delay because the only matters which have progressed since the orders were made has been further discovery in relation to the account of profits. They submitted that, to the extent that costs have been incurred, they have been incurred disproportionately by the respondents in complying with the required disclosure. They submitted that the lack of specific prejudice to the applicants should not preclude the Court from granting the stay.

67    The applicants on the other hand, submitted that although the stay application was clearly in contemplation in the respondents’ minds by no later than 11 July 2019, there has been no explanation of substance for the delay in bringing the application.

68    In my view, the delay by the respondents in bringing the stay application is a factor to be considered, but it is not decisive. I do not think that the delay, be it three months or less, should alone lead to a refusal of the application.

69    In summary, I do not consider that there should be a stay with respect to the Costs Order or the Second Costs Order. These orders represent liabilities already incurred. While it is true that there is an appeal and I am proceeding on the assumed basis that there are grounds of appeal which are arguable, the general proposition is that an appeal does not operate as a stay of the orders appealed from and the successful party is entitled to the fruits of its success. The respondents have not established that this is an appropriate case for a stay.

70    Vito is able to satisfy the costs orders. He is jointly and severally liable for the costs with the first respondent and Tony. The respondents are effectively Vito and Tony. If Vito satisfies the costs orders, the first respondent and Tony will avoid liquidation and bankruptcy respectively unless Vito immediately seeks contribution. The only reason Vito proffers for not wishing to satisfy the costs orders is that it means he will have to sell the Oakley Road property. I should say in this context that all that has been put before the Court by the respondents is Vito’s statement to that effect. Unlike Tony, Vito has not attempted to disclose to the Court his assets, or at least the vast bulk of his assets. I do not consider that the circumstance that, absent a stay, Vito will have to sell the Oakley Road property and is most unlikely to be able to re-purchase it is sufficient to justify a stay. Even if that is wrong, despite the fact that I raised with counsel at least a couple of times during oral submissions the provision of security to the applicants, there has been no offer by the respondents to provide security. I consider this to be telling. I should say on the other side, that there is no suggestion that the applicants will be unable to repay any costs paid by the respondents should the respondents’ appeal be successful.

71    I consider that different considerations apply to a stay (more accurately, a suspension) of the Programming Orders. The issue here relates to costs to be incurred. Had I been asked promptly to suspend the second stage of the proceeding pending an appeal, I may well have done so on the respondents’ undertaking to prosecute the appeal expeditiously. Whilst the explanation for the delay is not wholly satisfactory, the delay itself and the fact that the appeal will be heard in May 2020 rather than February 2020 is not sufficient to persuade me that the parties should incur costs in relation to an exercise which involves, as I understand it, a closed period. I will suspend the Programming Orders until further order while there is an appeal pending. If circumstances change in a material respect, then the applicants can apply for the orders to be re-engaged.

Conclusion

72    The operation of paragraphs 16–21 inclusive of the orders of the Court made on 25 July 2019 are suspended until further order. The respondents’ interlocutory application dated 8 November 2019 is otherwise dismissed.

Associate:

Dated:    16 December 2019