Federal Court of Australia

Stolyar v Scott (Trustee), in the matter of the bankrupt estate of Stolyar [2024] FCA 796

ORDERS

THE COURT ORDERS THAT:

1.    The application for leave to appeal is dismissed.

2.    The applicant’s interlocutory application dated 15 March 2024 for a stay of Orders 1–15 of the orders made on 1 March 2024 pending the determination of any appeal is dismissed.

3.    The applicant is to pay the respondent’s costs as agreed or taxed.

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

REASONS FOR JUDGMENT

PERRY J:

1.    INTRODUCTION

1    On 31 May 2019, Andrew Scott, in his capacity as the trustee of the bankrupt estates of Ian Stolyar and Beth Ngoc Nguyen, commenced proceedings against Ms Faina Stolyar, Mr Stolyar’s mother and Ms Nguyen’s mother-in-law, and Fanchel Pty Ltd. Ms Stolyar is the sole director and shareholder of Fanchel. The primary judge delivered judgment on 16 June 2022 upholding the trustee’s claims against Ms Stolyar in Scott (Trustee), in the matter of Stolyar (Bankrupt) v Stolyar [2022] FCA 691 (Scott v Stolyar).

2    On 6 September 2022, the primary judge made orders giving effect to the judgment published on 16 June 2022 (the September 2022 orders). Among other things, Ms Stolyar was ordered to pay the Trustee:

(1)    money judgments totalling $5,544,782.46 (the Money Judgments); and

(2)    38.1% of the sale proceeds of a property in Rose Bay, to be quantified by a Registrar, (the Rose Bay Claim) plus interest calculated in accordance with Practice Note GPN-‍INT from 29 April 2020.

3    Execution of these orders was stayed pending the determination of any appeal and the monies have not been paid. The September 2022 orders also declared that Ms Stolyar holds the legal title to the property situated at 3/10 Longworth Avenue, Point Piper, New South Wales (Longworth Avenue), subject to a charge in favour of the trustee securing payment of the Rose Bay Claim (the Charge).

4    On 7 September 2023, the High Court refused Ms Stolyar special leave to appeal from the Full Court’s decision dismissing the appeal from Scott v Stolyar: Stolyar v Scott in his capacity as the Trustee of the bankrupt estates of Ian Stolyar and Beth Ngoc Nguyen [2023] HCASL 129. Ms Stolyar has therefore exhausted her avenues of appeal against the substantive judgment and the stay came to an end.

5    On 27 May 2024, the Registrar issued a certificate certifying the principal amount of the debt the subject of the Rose Bay Claim to be $6,262,434.44. As at 29 May 2024, that secured debt amounted to $7,675,149.33 including interest: affidavit of Stephen Keith Mullette affirmed on 30 May 2024) (second Mullette affidavit) at [11]–[12]. Based upon that quantification, the Trustee calculated that, as at 29 May 2024, Ms Stolyar now owes the Trustee a total of $14,195,143.16 including interest but excluding certain legal costs which have not (yet) been assessed given Ms Stolyar’s financial position: second Mullette affidavit at [4]–[12].

6    Ms Stolyar’s primary remaining asset is Longworth Avenue, subject to the Charge in favour of the Trustee: see Scott (Trustee), in the matter of Stolyar (Bankrupt) v Stolyar (No 5) [2024] FCA 37 at [5], [8]. Longworth Avenue is a prestige waterfront property with an estimated value of between $11 million and $14 million: Stolyar (No 5) at [15], [38]. The trustee is not aware of any way in which Ms Stolyar could pay her debts to the trustee without the sale of Longworth Avenue: Stolyar (No 5) at [13].

7    By an interlocutory application filed on 13 November 2023, the trustee sought orders for the sale of Longworth Avenue. Ms Stolyar opposed those orders and submitted that she should be permitted to sell Longworth Avenue. In support of those orders, Mr Stolyar submitted on Ms Stolyar’s behalf that:

(1)    the renovation of Longworth Avenue was almost complete;

(2)    any orders in relation to the sale of Longworth Avenue should await the accounting exercise before the Registrar and resolution of issues in relation to another property (the Campbell Parade property) which had been sold, so as to crystallise the amount owed to the trustee secured against Longworth Avenue;

(3)    Ms Stolyar is experienced in selling properties and any sale by her would not be subject to trustee fees; and

(4)    if left to sale by the trustee, Longworth Avenue would be sold below value.

(Stolyar (No 5) at [27].)

8    By a judgment delivered on 30 January 2024, the primary judge agreed with the trustee that orders should be made for the sale of Longworth Avenue by way of equitable execution and that the trustee be appointed as receiver to undertake the sale: Stolyar (No 5) at [45]. It is therefore important to emphasise (for reasons that will shortly be apparent) that the judgment did not involve enforcement of the charge over Longworth Avenue. The parties were unable to agree on the form of orders. As a result, the primary judge heard argument as to the form of the orders on 1 March 2024. At this hearing Mr Hall SC appeared for Ms Stolyar. Orders were made at the conclusion of that hearing to give effect to the judgment on 30 January 2024.

9    This is an application for leave to appeal against the decision in Stolyar (No 5) by Ms Stolyar. Ms Stolyar also seeks interlocutory orders for a stay of execution of the orders made on 1 March 2024 pending the determination of any appeal against those orders.

10    In this regard, on 1 March 2024, Markovic J ordered that a writ of possession be issued in respect of Longworth Avenue not before 31 May 2024, in light of submissions by Mr Hall SC that Ms Stolyar required time to vacate the premises (having moved into the property with Mr Stolyar and Ms Nguyen): transcript at Exhibit SKM-2, pp 160–2. While that period had expired before this application was heard, the trustee gave an undertaking not to take possession of Longworth Avenue until after 18 July 2024, given that the application for leave to appeal and the stay were expedited and listed to be heard on 11 July 2024.

11    For the reasons set out below, the proposed appeal lacks any reasonable prospects of success and it would not, therefore, be in the interests of justice to grant leave to appeal. The application for leave to appeal must be dismissed with costs. In those circumstances, the stay application must also be dismissed.

2.    THE APPLICATION FOR MR STOLYAR TO REPRESENT MS STOLYAR

12    As indicated above, Mr Stolyar was granted leave to represent Ms Stolyar before the primary judge. Mr Stolyar wrote to the Court on behalf of his mother in relation to the application for leave to appeal on various instances.

13    On 4 June 2024, I caused the Registry to write to the parties advising relevantly as follows:

The ordinary position is that a person may be represented in the Federal Court by a lawyer or may be unrepresented: rule 4.01 of the Federal Court Rules 2011 (Cth). While Mr Stolyar was permitted to make submissions on the applicant’s behalf before the primary judge, this was because Justice Markovic granted leave to the applicant for Mr Stolyar to do so. There has been no dispensation from rule 4.01 pursuant to rule 1.34 of the Federal Court Rules 2011 (Cth) in the application for leave to appeal. It follows that documents should not be filed, or correspondence to the Court sent, by Mr Stolyar on the applicant’s behalf unless and until any such orders are made.

An alternative option would be for the applicant to seek the assistance of Mr Stolyar as a McKenzie friend. A McKenzie friend may assist a litigant (in this case, the applicant) by taking notes, making suggestions and giving a litigant advice. However, a McKenzie friend is not generally permitted to make submissions on behalf of a litigant.

If the applicant would like to seek dispensation from rule 4.01 or to seek the assistance of a McKenzie friend, the applicant can make an oral application to that effect at the hearing tomorrow. Justice Perry will then determine that application at the commencement of the hearing.

14    Ms Stolyar indicated, at the case management hearing on 5 June 2024, that she wanted her son to speak on her behalf. Mr Stolyar is not a legal practitioner and has no right of appearance in this Court. He may appear with the leave of the Court.

15    At the hearing on 11 July 2024, Ms Stolyar was assisted by a Level 2 provisional certified interpreter in Russian and English who confirmed that she was familiar with the Code of Conduct for Interpreters in Legal Proceedings at Annexure A to the Federal Court Practice Note GPN-INTERP and agreed to abide by the Code. Ms Stolyar, with the assistance of the interpreter, confirmed she continued to want her son to represent her and that she had discussed with him what she would like him to say.

16    At the hearing, I did not consider that it would be appropriate to grant dispensation from rule 4.01 to enable Mr Stolyar to represent Ms Stolyar. In particular, Mr Stolyar has a personal interest in the outcome of the case because (among other things) he and his wife are residing with Ms Stolyar in Longworth Avenue.

17    However, I did grant leave for Mr Stolyar to provide assistance to Ms Stolyar as her McKenzie friend and to speak in that role on her behalf at the hearing, even though (as indicated in the correspondence above) a McKenzie friend is not generally permitted to make submissions on behalf of a litigant: see McKenzie v McKenzie [1971] P 33; [1970] 3 All ER 1034. In so doing, and mindful that a McKenzie friend does not owe the duties to the Court and a client which are owed by a legal representative, I took a number of steps to endeavour to ensure that the submissions which Ms Stolyar wished her son to make on her behalf were properly reflected in the submissions put by Mr Stolyar. In this regard, before granting leave, I drew Ms Stolyar’s attention to the fact that her son had a personal interest in the outcome of the case. I also emphasised that the application for leave to appeal was her application alone and not her son’s, and that if he said anything that she disagreed with, she should put up her hand whereupon I would stop him speaking and ask Ms Stolyar what she wished to say. The trustee did not object to Mr Stolyar making submissions on Ms Stolyar’s behalf within these parameters.

3.    THE APPLICATION FOR LEAVE TO APPEAL

3.1    Evidence

18    The trustee relied upon the affidavits of Stephen Keith Mullette, solicitor, sworn on 2 April 2024 and 30 May 2024.

19    Ms Stolyar sought to rely upon two affidavits sworn on 15 March 2024 and 26 June 2024 in support of her applications for leave to appeal and the stay. These largely dealt with Ms Stolyar’s contention that the primary judge had acted in breach of the rules of procedural fairness, based upon what was said to have occurred in the conduct of the proceeding before the primary judge and in written submissions in the Court below.

20    I ruled that these affidavits were not admissible on the basis that the affidavits could have no probative weight and were therefore not relevant. This is because, in all of the circumstances, I could not be satisfied that the evidence contained in the affidavits was Ms Stolyar’s own evidence. It was apparent, with respect, that the affidavits were not in Ms Stolyar’s own words as her written and spoken English, as demonstrated to me, was clearly not sufficient. Rather, as the footer to her affidavits stated and as Mr Stolyar accepted at the hearing, he prepared the affidavits, albeit that he said that he believed that they reflected Ms Stolyar’s evidence. They did not comprise a translation of Ms Stolyar’s own evidence certified by a qualified translator in accordance with [17.1] of the Federal Court Practice Note Working with Interpreters (GPN-INTERP). Furthermore, while I mean no disrespect to Mr Stolyar, as I have earlier said, he has a personal interest in the outcome of the litigation. In those circumstances, upon Ms Stolyar confirming that the affidavits reflected matters which she wished to say to the Court by way of submissions, I received the affidavits as submissions made on her behalf by her son. Importantly, I also note that the transcripts of the hearings before the primary judge were already in evidence before me on the application for leave to appeal, together with the parties’ written submissions at first instance. As such, the Court has the best evidence before it as to what occurred at the hearings below and as to the content of written submissions.

21    Finally, I note that Ms Stolyar’s affidavits contained serious allegations of misconduct by counsel for the trustee and the trustee with respect to the conduct of the litigation which rose no higher than the level of bare assertion. The allegations were therefore scandalous and inadmissible, and should not have been made.

3.2    Relevant principles

22    The power to grant leave to appeal is discretionary. Relevant factors include whether, in all of the circumstances, the decision is attended with sufficient doubt to warrant its reconsideration on appeal, and whether substantial injustice would result if leave were refused: Bienstein v Bienstein [2003] HCA 7; (2003) 195 ALR 225 at [29]; Décor Corp Pty Ltd v Dart Industries Inc (1991) 33 FCR 397 at 398–9.

23    Importantly, in considering whether an appeal would have sufficient merit, it will often be appropriate to consider the proposed grounds of appeal at a “reasonably impressionistic level”: see, by analogy, Tu’uta Katoa v Minister for Immigration, Citizenship, Migrant Services and Multicultural Affairs [2022] HCA 28; (2022) 276 CLR 579 at [16]–[18] (Kiefel CJ, Gageler, Keane and Gleeson JJ). However, there are other cases in which a closer examination of the merits is appropriate: Tu’uta Katoa at [18]. In this matter, Ms Stolyar’s proposed grounds of appeal lack any merit on their face, as I explain below. This is not a case where there is a reason to examine the merits of the proposed grounds other than at a reasonably impressionist level.

24    Finally, as the decision subject to the application for leave to appeal is discretionary, it would be necessary for the applicant on an appeal to demonstrate an error of the kind identified in House v The King (1936) 55 CLR 499, such as where the primary judge acts “upon a wrong principle”, mistakes the facts, takes into account extraneous or irrelevant matters, or where a failure to properly exercise the discretion can be inferred from a decision which was “unreasonable or plainly unjust”: at 505 (Dixon, Evatt and McTiernan JJ). As such, on the application for leave to appeal, it is incumbent on the applicant to establish a reasonably arguable error of this nature.

3.3    Draft grounds of appeal

25    The draft notice of appeal sets out the following proposed grounds of appeal:

1.    The primary judge erred in finding that Longworth Avenue property was part of ‘First Respondent’s Remaining properties” as defined by Order 5 on 23 April 2020, thereby making an error in ordering the sale of the property by the trustee.

2.    The primary judge erred in finding that Longworth Avenue property was to be used as security for the money judgements that referred to as “Share Arrangement”.

3.    The primary judge ought to have found that Judgement orders 26 and 28 of the September 2022 and the enforcement of them related to the share portfolio owned by the Appellant, and frozen by the order of Justice Markovic since November 2021.

4.    The primary judge ought to have found that no funds from the sale of shares found its way into the purchase funds used to purchase Longworth Avenue property in December 2020.

5.    The primary judge ought to have found that the respondent already had a charge over the shares in full satisfaction of the Judgement orders 26 and 28 referred in paragraph 3 above.

6.    By reasons 1-5 above, the Court while having had power to make orders dated 1 March 2024, should not have made those orders as they caused a substantive injustice to the Appellant.

7.    The primary judge did not allow the Appellant to be heard on the issue of Longworth Avenue property, there by denying the Appellant procedural fairness by only relying on the false evidence and submissions submitted by the Respondent.

26    These grounds overlap with Ms Stolyar’s grounds for seeking leave to appeal, save for where I have separately dealt with the grounds for seeking leave to appeal. In this regard, I note that the grounds of the application for leave to appeal also allege that “the primary judge could have been biased against the Applicant, by refusing to give the Applicant an opportunity [to] put on evidence”. However, at the hearing, Mr Stolyar for Ms Stolyar withdrew any allegation of bias and said that this was ultimately another way in which the procedural fairness point was made.

3.4    Disposition of the application for leave to appeal

27    Turning first to Ground 1 of the draft notice of appeal (and the application for leave to appeal), this ground incorrectly assumes that the primary judge found that Longworth Avenue was part of Ms Stolyar’s “Remaining Properties”, as defined in her Honour’s orders of 23 April 2020. The trustee was granted a charge against any or all of the Remaining Properties under those orders in respect of any amounts to which he was entitled with respect to the Rose Bay, Campbell Parade and Ocean Street properties: see order 5. However, there was no finding or suggestion by the primary judge to the effect that Longworth Avenue was one of the Remaining Properties. Rather, the trustee held a charge over Longworth Avenue pursuant to orders made by the primary judge, by consent, on 14 December 2020, and as also declared in the September 2022 orders (which are quoted in Stolyar (No 5) at [5]).

28    In any event, as the trustee submitted and contrary to the assumption which underlies ground 1, the orders from which Ms Stolyar seeks leave to appeal were not based on the existence of the trustee’s charge over Longworth Avenue, even though the existence of the charge was taken into account as a discretionary consideration supporting the orders for equitable execution against Longworth Avenue: see Stolyar (No 5) at [40].

29    With respect to Grounds 2, 3, 4, 5 and 6 of the draft notice of appeal (and ground 2 of the application for leave to appeal), orders 26 and 28 of the September 2022 orders were unsecured “money judgments” in favour of the trustee against Ms Stolyar. While these money judgments were largely referable to underlying claims arising from dealings with shares (see Scott v Stolyar), it is not open to Ms Stolyar to challenge those judgments in this proceeding which relates purely to the question of enforcement. As counsel for the trustee submitted, these grounds reveal a “[f]undamental error in the applicant’s either understanding, or at least presentation of this application, insofar as it appears to be based on a view that her Honour enforced a charging order” and therefore the grounds fail to engage with the decision in fact made by the primary judge: transcript of the hearing on 11 July 2024 (T)-37.6–8.

30    Rather, as the trustee submitted, Ms Stolyar’s true complaint appears to lie in her strong disagreement with the September 2022 orders requiring her to pay the Money Judgments and part of the proceeds from the sale of the Rose Bay property. No doubt, she also has genuine fears and concerns about being required to leave Longworth Avenue where she now lives with her son and his wife. However, these are not matters on the basis of which an appeal against the judgment in Stolyar (No 5) could succeed.

31    It follows that grounds 2 to 6 inclusive do not raise any arguable ground of appeal.

32    Ground 7 of the draft notice of appeal alleges a breach of procedural fairness on the basis that the primary judge relied on “false evidence” and did not allow the applicant to be heard on the issue of Longworth Avenue. Related to this, ground 4 of the application for leave to appeal alleges that the primary judge failed to allow the applicant “due process to put on evidence to rebut the false evidence provided by the trustee”, which evidence is said (by ground 3) to be the trustee’s evidence as to the state of repair of Longworth Avenue and any taxes or strata levies owed on the property.

33    In support of ground 7, Mr Stolyar for his mother submitted that, by reason of the fact that the trustee’s submissions in support of the orders for equitable execution of Longworth Avenue and appointment of a receiver were received only on the afternoon before the hearing on 30 January 2024, neither he nor Ms Stolyar had any opportunity to go through the legal principles and rebut the trustee’s submissions as to the power to appoint a receiver. If Ms Stolyar had been accorded procedural fairness , Mr Stolyar submitted that she would have submitted that “the main criteria is that the receiver should not be appointed unless all the other avenues, legal avenues, have been exhausted”: T-26.1–3. Mr Stolyar submitted that the primary judge failed to appreciate this criterion because, at [32], her Honour “put half of a passage” from [269] of the decision of Meek J in Riva NSW Pty Ltd v Key Nominees Pty Ltd [2023] NSWSC 711. In particular, the primary judge observed that “Meek J noted that it was not necessary for execution at law to be impossible before equitable execution by way of the appointment of a receiver may be ordered”. Mr Stolyar, however, sought to emphasis Meek J’s consideration that the authorities do “suggest that [the discretion] is considered in circumstances to enable a judgment creditor to obtain payment out of property which cannot be reached by legal execution” (emphasis added). Mr Stolyar further submitted that Ms Stolyar does not consider that she had sufficient opportunity to present her case with respect to the appointment of a receiver, given that the consequences of doing so would render her homeless. He also submitted that Ms Stolyar had always maintained that the judgment in Stolyar (No 5) was wrong and that she had not been heard, referring to submissions by Mr Hall SC, then counsel for Ms Stolyar, made on 1 March 2024.

34    In order to consider whether there is any merit in this ground, it is necessary first to summarise the procedural steps adopted after Ms Stolyar’s application for special leave to appeal to the High Court was dismissed.

35    There were two applications relevantly before the primary judge, as identified at the case management hearing on 23 November 2023, namely:

(1)    the trustee’s application for a judicial sale of Longworth Avenue and appointment of a receiver; and

(2)    Ms Stolyar’s application for a stay of execution of the September 2022 orders including the orders in relation to the Ocean Street property where Ms Stolyar then resided and in respect of which an eviction was scheduled for 6 December 2023.

36    The transcript of the case management hearing shows that both parties submitted that their respective interlocutory applications required an urgent hearing, as opposed to their applications with respect to the division of the Campbell Parade proceeds. The primary judge was able to accommodate an urgent hearing in the following week on 30 November 2023 at 10:15am. As such, a short timetable was set at the case management hearing for the filing of evidence and submissions on the two applications. Those orders afforded Ms Stolyar the opportunity to file and serve any evidence on which she sought to rely with respect to the trustee’s application by midday on 27 November 2023, and the parties to file and serve submissions by 4:00pm on 29 November 2023.

37    The trustee’s submissions were filed at 3:51pm on the day before the hearing, in compliance with the orders of the primary judge, and addressed the question of the power to appoint a receiver. Due to the time spent in oral argument on the application for a stay of execution of the orders with respect to Ms Stolyar’s eviction from the Ocean Street property, the trustee’s application with respect to Longworth Avenue was not reached until late in the day. However, submissions were made on that application only after: (1) the primary judge confirmed with the parties how long they were likely to require for oral submission; (2) the parties indicated that they required only approximately 15–20 minutes each; and (3) the parties confirmed that they were happy for the Court to sit late to hear those applications. The decision to continue the hearing late on that day was made by the primary judge so as “not to cause the cost of bringing everyone back”: transcript at Exhibit SKM-2, p 96. After a short break, the parties made oral submissions on the trustee’s application, including Mr Stolyar for Ms Stolyar. At the end of his submissions, Mr Stolyar stated that, subject to any questions from the primary judge, “[t]hat’s all I have to say”: transcript at Exhibit SKM-2, p 108.

38    No complaint was therefore made, before the primary judge, by Mr Stolyar that he and Ms Stolyar had had an inadequate opportunity to respond to the trustee’s submissions on the power of the Court to make appoint a receiver or on any other ground. To the contrary, Mr Stolyar indicated that he had said what he and Ms Stolyar wished to say in response to the trustee’s application by way of submissions. Nor was any application for an adjournment made by Ms Stolyar at the hearing on 30 November 2023 on the basis that she or Mr Stolyar had not had a fair opportunity to consider and respond to the trustee’s submissions.

39    In these circumstances, I agree with the trustee that there is no arguable breach of procedural fairness.

40    Nor is there any arguable case that the primary judge misapprehended the principles for determining whether an order for equitable execution of a judgment debt should be made. Her Honour accurately referred to the relevant principles and cited applicable authorities. Contrary to Mr Stolyar’s submissions, the decision in Riva does not support the proposition that “the main criteria is that the receiver should not be appointed unless all the other avenues, legal avenues, have been exhausted”. To the contrary, Meek J explained (at [269]), that:

The passage in [Corporate Affairs Commission (NSW) v Smithson [1984] 3 NSWLR 547] does not suggest that impossibility to obtain execution by other means is a necessary criterion to enliven or favour the discretion for the appointment of receiver but does suggest that it is considered in circumstances to enable a judgment creditor to obtain payment out of property which cannot be reached by legal execution: at 552D-E.

(Emphasis added.)

41    In other words, impossibility of execution is not a “criterion” but can be a relevant consideration in the exercise of the discretion. In line with this, in a passage referred to by the primary judge at [31], Meek J stated at [265] that:

the appointment of a receiver to facilitate execution is not ordinarily the first port of call for a judgment creditor. It is evident from the caselaw that the Court has expressed reluctance to appoint a receiver as a means of enforcing judgments.

(Emphasis added.)

42    Thus ultimately, as the primary judge held at [35], the Court has power to appoint a receiver in the execution of a judgment. Further, as her Honour also held, the question whether or not to exercise that power turns upon whether, in the particular circumstances of the case, that course is appropriate having regard to the question of whether “the quick, inexpensive and efficient way for the judgment to be enforced is by ordering the sale of the relevant property by equitable means by the appointment of a receiver or, on the facts before [the primary judge], by leaving it to the trustee to pursue a sale by the Sheriff pursuant to the writ or, as Mrs Stolyar submits, by leaving it to her to undertake a sale in due course”: Stolyar (No 5) at [35]. Her Honour then weighed up the relevant factual considerations bearing upon that question, including those relied upon by Ms Stolyar, before concluding that orders should be made for the sale of Longworth Avenue by way of equitable execution. In so doing, the primary judge had regard to relevant considerations and did not take into account any extraneous considerations.

43    It follows that no arguable error has been shown in the decision from which Ms Stolyar seeks leave to appeal. I acknowledge that this result must be a distressing one for Ms Stolyar in that she must vacate her home which is to be sold by the trustee. Nonetheless, it would not be in the interests of justice to grant leave to appeal where to do so would, in my view, be futile. As the trustee has been wholly successful in resisting the application for leave to appeal, the applicant should pay the trustee’s costs.

Associate:

Dated:    19 July 2024