123 259 932 Pty Ltd v Cessnock City Council

[Note: The Uniform Civil Procedure Rules 2005 provide (Rule 36.11) that unless the Court otherwise orders, a judgment or order is taken to be entered when it is recorded in the Court's computerised court record system. Setting aside and variation of judgments or orders is dealt with by Rules 36.15, 36.16, 36.17 and 36.18. Parties should in particular note the time limit of fourteen days in Rule 36.16.]

JUDGMENT

1. In 123 259 932 Pty Ltd v Cessnock City Council [2023] NSWCA 21 this Court upheld an appeal by a company which the parties refer to as "Cutty Sark", being its former name. The Court ordered the respondent Council to pay the company an amount of some $6.154 million for breach of contract, and to pay costs at first instance and on appeal. An application for special leave to appeal has subsequently been filed in the High Court by the Council. It now seeks a stay with respect to orders 2-4 made by this Court, which relate to the judgment sum and costs. That application is resisted by Cutty Sark. The present application was nominally listed in the referrals list on 8 May 2023 but the parties agreed that it should be determined on the papers.

Relevant legal principles

1. It was held in Rinehart v Welker (2012) 83 NSWLR 347; [2012] NSWCA 1 that this Court, when considering whether to stay its own orders pending the determination of an application for special leave to the High Court, should apply the principles applied by the High Court itself in resolving such applications. The most commonly quoted statement of principle in that regard is by Brennan J in Jennings Construction Ltd v Burgundy Royale Investments Pty Ltd (No 1) (1986) 161 CLR 681 at 684-685; [1986] HCA 84: A stay to preserve the subject matter of litigation pending an application for special leave to appeal is an extraordinary jurisdiction and exceptional circumstances must be shown before its exercise is warranted. If an order for a stay is made, the respondent is kept out of the benefit of the order of the court in which the matter is pending until the hearing of the application for special leave to appeal. … In exercising the extraordinary jurisdiction to stay, the following factors are material to the exercise of this Court's discretion. In each case when the Court is satisfied that a stay is required to preserve the subject-matter of the litigation, it is relevant to consider: first, whether there is a substantial prospect that special leave to appeal will be granted; secondly, whether the applicant has failed to take whatever steps are necessary to seek a stay from the court in which the matter is pending; thirdly, whether the grant of a stay will cause loss to the respondent; and fourthly, where the balance of convenience lies.
2. Of the four factors, the second is a factor peculiar to consideration by the High Court and is not relevant in this Court. The third factor can be seen as an element of the fourth. The relevant factors identified by Brennan J, thus, are whether there is a substantial prospect that special leave to appeal will be granted and where the balance of convenience lies. The prospects question relates to obtaining special leave, not the prospects of an appeal succeeding if special leave was to be granted: note Gerah Imports Pty Ltd v Duke Group Ltd (1994) 68 ALJR 196 at 197; [1994] HCA 3 per Dawson J.
3. These factors are not to be applied in a mechanical way: note Rinehart v Welker at [49]. Nor are they exhaustive: Obeid v R (2016) 90 ALJR 447; [2016] HCA 9 at [14] per Gageler J. As explained below, the overall issue is whether the grant of a stay (perhaps on terms) is warranted taking account of all the circumstances. A particularly important matter in that regard is whether the absence of a stay may render the special leave application, and any subsequent appeal, nugatory because of the loss of the subject matter of the appeal: see eg in Gerah at 197-198 per Dawson J.
4. In this case there was some dispute about whether the notion of "exceptional circumstances" was an additional factor. That notion is better understood as an overall characterisation of the burden the applicant must meet. The applicant must persuade the court that, taking account of all the relevant facts and factors, there are exceptional circumstances warranting the granting of a stay; it will not be ordered as a matter of course. In contrast, when this Court is considering whether to grant a stay of a decision of a lower court "it is not necessary … that special or exceptional circumstances should be made out": Alexander v Cambridge Credit Corporation Ltd (1985) 2 NSWLR 685 at 694.
5. The difference in approach can be rationalised on the basis that there is no appeal to the High Court as of right, where commonly there is to this Court (especially in the sorts of matters in which a stay is sought), and the prospects of obtaining special leave are on average low. An analysis of special leave applications in the three year period from 2015/16 to 2017/18 revealed a 10.7% success rate in non-criminal matters: Justice Phillip Priest, "Special Leave to Appeal to the High Court in Criminal Cases: A Change of Approach?" (2018) 92 ALJ 957 at 958. Given the absence of an appeal to the High Court as of right, and the low average prospect of obtaining special leave, it is understandable that exceptional circumstances would be required for the grant of a stay. As Mason CJ explained at 138-139 in Zoeller v Federal Republic of Germany (1989) 64 ALJR 137; [1989] HCA 67, in the context of considering a bail application (see similarly Bryant v Commonwealth Bank of Australia (1996) 70 ALJR 306 at 308-309; [1996] HCA 3 per Kirby J): At the point when bail is sought pending the hearing of a special leave application, the ordinary processes of appeal have been exhausted; they have resulted in a final order committing the applicant to prison. The process of appeal revives only in the event that this Court exercises its jurisdiction, an extraordinary jurisdiction, to grant special leave to appeal. There can be no assumption that the Court will, or is likely to, make such a grant. Hence, to justify an order for bail, something exceptional needs to be shown.
6. Different views have been expressed in various cases as to what "a substantial prospect that special leave will be granted" means in practice. In Haydon v Chivell (1999) 73 ALJR 1311; [1999] HCA 39, at [8] footnote 2, Gaudron J referred to an earlier decision of her own and noted that "'substantial prospect' or 'not insubstantial prospect' both mean 'a probability of ultimate success'". In Ampolex Ltd v Perpetual Trustee Co (Canberra) Ltd (1996) 70 ALJR 603 at 608; [1996] HCA 15, Kirby J said that it "is sometimes described as a heavy onus". However, in Patrick Stevedores Operations No 2 Pty Ltd v Maritime Union of Australia (1998) 72 ALJR 869; [1998] HCA 32, in which a stay was granted, Hayne J spoke of the prospects being "not insignificant" (at [20]). Most recently, in Mercanti v Mercanti (2017) 91 ALJR 258; [2017] HCA 1, Kiefel J said at [11] that this factor "should not be understood as requiring that the prospects of success on the application for special leave be high", and noted that in Burgundy Royale Brennan J had said that in that case at 685 that he did not "think that the prospect of a grant of special leave is insubstantial".
7. There are obvious difficulties, and potential invidiousness, in a single judge of the High Court or an intermediate court of appeal seeking to undertake a refined probabilistic analysis of the prospects of success of a special leave application. Further, the ultimate purpose must be kept in view, being to serve the interests of justice including by protecting the potential for the exercise of appellate jurisdiction: note United Mexican States v Cabal (2001) 209 CLR 165; [2001] HCA 60 at [37].
8. In that context, the requirement may be understood as requiring that there be sufficiently significant prospects of special leave being obtained to warrant a grant of a stay, taking into account all the circumstances. In this area, as for interlocutory injunctions, it may be that "the requisite strength of the probability of ultimate success depends upon the nature of the rights asserted and the practical consequences likely to flow from the interlocutory order sought": quotation from Australian Broadcasting Corporation v O'Neill (2006) (2006) 227 CLR 57; [2006] HCA 46 at [71] per Gummow and Hayne JJ. This approach is consistent with Hayne J's conclusion in Apache Northwest Pty Ltd v Western Power Corporation (1998) 72 ALJR 1136 at [25] that he was not persuaded "that the chances of the applicants obtaining special leave to appeal are sufficient to warrant making an order now for a stay". This type of approach was also implicit in the judgment of Gummow J in Pelechowski v Registrar, Court of Appeal (1998) 72 ALJR 711 at [6], and of Kirby J in N v G (1998) 72 ALJR 1329 at [18]-[22]. That understanding is also consistent with the following recent explanation by Gageler J in Obeid v R at [14] (citation omitted): Since Jennings Construction Ltd v Burgundy Royale Investments Pty Ltd (No 1), judicial exposition of the conditions under which a stay will be granted in the context of an application for special leave to appeal has uniformly emphasised the need for the existence of "exceptional circumstances". The standard exposition has gone on to emphasise the relevance, even where the Court or a Justice is satisfied that a stay is required to preserve the subject matter of litigation, of consideration of whether there is a substantial prospect that special leave to appeal will be granted, of whether the grant of a stay would occasion prejudice to a respondent, and of where the balance of convenience might lie in the circumstances of the case. Those factors, however, do not always arise for consideration and collectively they do not exhaust the considerations that may be relevant in every case.
9. In summary, then, exceptional circumstances must be shown to warrant the grant of a stay pending the determination of a special leave application; significant factors in that regard are whether the applicant has substantial prospects of obtaining special leave, where the balance of convenience lies and whether the application for special leave may be rendered nugatory unless a stay is granted; those factors are not exhaustive; "substantial prospects" does not require that the court conclude that a grant of special leave is likely; the overall question is whether, taking account of all the circumstances, there are sufficiently significant prospects of special leave being obtained to warrant a grant of a stay, perhaps on terms designed to protect the interests of the respondent.
10. Here, it is convenient first to consider issues going to balance of convenience before addressing the prospects of success of the Council's special leave application.

Balance of convenience

1. Prior to this litigation Cutty Sark had been deregistered but was then reinstated. Mr James Johnston is the sole shareholder. He is described in the company's special leave response as the "principal" of the company. The evidence indicates that he resides in Spain. The company owns no realty in Australia. The solicitor on the record for the Council, Mr Bede Haines, has expressed the fear that any sums paid to Cutty Sark pursuant to this Court's orders: may be transferred to Spain (either by way of distribution to Mr Johnston or otherwise), such that if the Respondent were to be granted special leave to appeal, and if it were to succeed in any resulting appeal, it would encounter significant difficulty in seeking to recover such sums from the appellant, which otherwise appears to have no assets.
2. The company resists this conclusion. A distinctive feature of this application is that open correspondence has been exchanged in which Cutty Sark offered to agree to a stay of 75% of the judgment sum along with a stay of the costs orders (with the judgment proportion to be paid into a jointly controlled, interest-bearing account), with the remaining 25% of the judgment sum being paid to it. The Council's solicitors sought clarification of "how our client can be assured that it would recover the 25% judgment sum". The company's solicitors responded that the "purpose of the interim payment to our client is to recognise the fact that it was successful in the Court of Appeal and is entitled to the fruits of its judgment". No assurance was given relating to the recoverability of the 25%, the solicitors merely saying that "[o]rdinarily, no such assurances are given".
3. Whether or not such assurances ordinarily are given, the company has provided no evidence to answer the expressed fear of Mr Haines that money paid to the company may be transferred to Spain such that it would subsequently be difficult to recover were the Council to succeed in the High Court. Cutty Sark noted that it had been ordered to pay security for costs both at first instance and on appeal, which it had done. However, that the company could find funds when that was the necessary price of pursuing its litigious claim does not establish that it will be able to (or that its principal will choose to) find funds to repay the judgment debt were the Council ultimately to succeed in the High Court. No undertaking or assurance about maintaining the funds has been offered.
4. In this context I consider Mr Haines' fear to be warranted. The Council's application for special leave involves seeking to avoid having to pay the judgment sum and the associated costs. There is a real risk that the Council's application to the High Court would be rendered nugatory to the extent that a stay is not granted.
5. Cutty Sark submits in the alternative, in effect, that it should be permitted to receive at least the 25% portion of the judgment sum (ie approximately $1.54 million). It said that the Council was trying to have it both ways by alleging that the company was impecunious while also saying that an order preventing it from enforcing the judgment will cause no loss to it. It put that the Council should not be permitted to frustrate its right to enforce the judgment on the basis of impecuniosity when "it was the Council's deliberate breach of cl 4.2 of the AFL that has put Cutty Sark in the position in which it finds itself".
6. There is no particular basis for the suggested proportion. This is not a case where the respondent party will have a right to obtain some portion of the judgment regardless of the outcome of the application to the High Court.
7. No doubt in a generic sense some loss or prejudice can be inferred in that the company is kept out of the fruits of its judgment. However, there is no evidence that this will cause any particular harm to it. The Council's proposal is that the full judgment sum be paid into Court or into a jointly controlled interest-bearing account, where the entitlement to interest mitigates the loss of the use of the money.
8. I am not persuaded that there is a real risk that the ability of Cutty Sark to participate in the ongoing litigation will be impeded. No evidence has been provided that some payment of the judgment sum is needed to fund its legal costs in the High Court. There is no reason to infer that the funds are needed for that purpose given that it previously paid security for costs which security has now been returned to it, and where it has been represented in this Court and in the special leave application by a well known firm of solicitors instructing senior and junior counsel.
9. In my view the balance of convenience favours the grant of a stay.

Prospects of success and determination

1. Assessing prospects of obtaining special leave in this context is an impressionistic exercise: note Bryant at 308. It is undesirable to include in this judgment a detailed analysis of the merits of the Council's application. To do so might be seen to pre-empt the High Court's own determination. It might influence how the parties present their case to that Court. It might also be seen as providing undue commentary on a decision of this Court.
2. I have considered the decision of this Court, the special leave application of the Council and the special leave response of Cutty Sark. I was not provided with any written reply by the Council to that response.
3. Based on those materials I would not assess the Council's prospects of obtaining special leave as high. There appears some force in the company's argument that the decision involved the application of established principle to particular facts. The decision of this Court was unanimous, although that did involve overturning the decision of the primary judge. Further, the Council has conceded that it cannot point to conflicting decisions of intermediate courts of appeal, which is one common basis on which special leave is be granted. That being said, the special leave application does seek to raise some issues of legal principle, which the High Court could choose to revisit. Overall, I regard it is a plausible case for obtaining special leave; I would not characterise the prospects as insubstantial.
4. As outlined above, there is a real risk that if a stay is not granted then the proceeds of the judgment will be removed from this country and dispersed in a way that would make recovery very difficult were special leave to be granted and the appeal upheld. Further, Cutty Sark has presented no evidence that it will suffer any particular harm if a stay is granted.
5. In that context I consider that this is an exceptional case where the Council has established that, taking account of all the circumstances, there are sufficiently significant prospects of special leave being obtained to warrant a grant of a stay.

Orders

1. The Council has offered an undertaking to prosecute its application for special leave to appeal and any appeal in the High Court with due diligence. That undertaking should be accepted. The usual undertaking as to damages was not proffered but nor was it sought. For the avoidance of doubt the stay should also be subject to any subsequent order of the High Court, although I will also grant liberty to apply to this Court in case any issue arises with the orders made. The company should pay costs of the application for a stay in circumstances where it opposed the application.
2. The orders of the Court will be as follows: 1. The Court notes the undertaking of the respondent Council to prosecute its application for special leave to appeal and any appeal in the High Court with due diligence. 2. Subject to any order of the High Court of Australia, execution of orders 2, 3 and 4 made by this Court on 16 March 2023 is stayed until determination of the respondent's application for special leave to appeal to the High Court from those orders and, if special leave is granted, until determination of the appeal to that Court. 3. Order 2 ceases to have effect if the respondent has not, within 28 days of these orders being made, paid the sum of $6,154,459.40 either into Court or, if so agreed between the parties, into a controlled monies account under the joint control of the solicitors for the two parties (with the Registrar to be notified if the latter has occurred). 4. The appellant company is to pay the costs of the application for a stay. 5. Liberty to apply.

DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated. Decision last updated: 09 May 2023