ACN 002 306 283 Pty Ltd (formerly known as Moraitis Fresh Packaging (NSW) Pty Ltd (ACN 002 306 283) v Fresh Express Australia Pty Ltd

CATCHWORDS: PROCEDURE - judgments and orders - stay pending appeal - no question of principle

Alexander v Cambridge Credit Corporation Ltd (1985) 2 NSWLR 685 Kalifair Pty Ltd v Digi-Tech (Australia) Ltd [2002] NSWCA 383; (2002) 55 NSWLR 737 Moraitis Fresh Packaging (NSW) Pty Ltd v Fresh Express Australia Pty Ltd [2010] NSWSC 704 CASES CITED: Moraitis Fresh Packaging (NSW) Pty Ltd v Fresh Express Australia Pty Ltd [2007] NSWSC 626; (2007) ANZ ConvR 383 Moraitis Fresh Packaging (NSW) Pty Ltd v Fresh Express (Australia) Pty Ltd [2008] NSWCA 327 New South Wales Bar Association v Stevens [2003] NSWCA 95; (2003) 52 ATR 602 Whitlam v Australian Securities and Investments Commission [2002] NSWCA 312; (2003) 43 ACSR 73

PARTIES: ACN 002 306 283 Pty Ltd (formerly known as Moraitis Fresh Packaging (NSW) Pty Ltd (ACN 002 306 283) - Applicant Fresh Express Australia Pty Ltd (ACN 065 867 218) - Respondent

COUNSEL: M Jones for the Applicant F Douglas QC with R Newton for the Respondent

SOLICITORS: Hicksons for the Applicant David Legal for the Respondent

LOWER COURT JURISDICTION: Supreme Court

LOWER COURT FILE NUMBER(S): SC2006/260307

LOWER COURT JUDICIAL OFFICER: McLaughlin AsJ

LOWER COURT MEDIUM NEUTRAL CITATION: [2010] NSWSC 704

IN THE SUPREME COURT OF NEW SOUTH WALES COURT OF APPEAL 2006/260307

27 August 2010 ACN 002 306 283 Pty Ltd (formerly known as Moraitis Fresh Packaging (NSW) Pty Ltd (ACN 002 306 283) v Fresh Express Australia Pty Ltd (ACN 065 867 218) Judgment 1 McCOLL JA: This is an application by ACN 002 306 283 Pty Ltd (formerly known as Moraitis Fresh Packaging (NSW) Pty Ltd (ACN 002 306 283)) ("Moraitis") for a stay pending determination of its appeal from a judgment of McLaughlin AsJ given on 2 July 2010: Moraitis Fresh Packaging (NSW) Pty Ltd v Fresh Express Australia Pty Ltd [2010] NSWSC 704. Those proceedings were an inquiry as to damages claimed by Fresh Express Australia Pty Ltd (ACN 065 867 218) ("Fresh Express"), the respondent, pursuant to the usual undertaking as to damages given to the Court by Moraitis on 8 January 2007 as a term of interlocutory injunctive relief Moraitis then sought and obtained. 2 Pursuant to short minutes of order of 8 January 2007, upon Moraitis giving the usual undertaking as to damages, Fresh Express gave an undertaking which prevented it from dealing with any interest or right in two stands at the Flemington Markets without giving Moraitis 14 days prior written notice. The primary judge described that undertaking as "equivalent to an interlocutory injunction": primary judgment (at [27]). Fresh Express claimed that in consequence of the undertaking it lost the opportunity to sell those stands. 3 The primary judge concluded that consequent upon the giving of that undertaking Fresh Express had sustained damages in an amount of $450,000. He ordered Moraitis to pay that sum to Fresh Express with interest thereon at Supreme Court rates from 8 January 2007 until payment. It is that decision which Moraitis seeks to challenge on appeal. 4 The inquiry as to damages was consequent upon Moraitis failing to make good its substantive claim that pursuant to a right of first refusal granted to it by Fresh Express in 1996, Fresh Express was required to transfer to it the right to occupy the stands for $85,971. Moraitis was unsuccessful in that claim both before Windeyer J and the Court of Appeal in consequence of which failures it was ordered to pay Fresh Express's costs (the "judgment costs"): Moraitis Fresh Packaging (NSW) Pty Ltd v Fresh Express Australia Pty Ltd [2007] NSWSC 626; (2007) ANZ ConvR 383 Moraitis Fresh Packaging (NSW) Pty Ltd v Fresh Express (Australia) Pty Ltd [2008] NSWCA 327 (the "principal proceedings"). 5 There is also before the Court a notice of motion filed by Fresh Express seeking orders staying the appeal until Moraitis has paid to Fresh Express the sums of $210,836.55 in respect of the judgment costs and, further, until Moraitis has paid into Court the judgment sum. The notice of motion also seeks security for costs in a sum agreed or as ordered by the Court. The application was conducted on the basis that those two orders were, in effect, the conditions Fresh Express sought as a condition of any stay the Court might be minded to grant Moraitis.

Evidence 6 Moraitis sought the stay because it asserted that the evidence it led established that, in the event its appeal was successful but a stay was not granted, the appeal would prove abortive because it may not be able to recover the judgment sum: see Alexander v Cambridge Credit Corporation Ltd (1985) 2 NSWLR 685 (at 695). 7 An extract from the Australian Securities and Investments Commission database in relation to Fresh Express recorded that it was subject to three unsatisfied charges in favour of the National Australia Bank Ltd and was presently the subject of an application for a winding up order. It is an event of default pursuant to two of the charges if Fresh Express is or becomes "insolvent or steps are taken to make [Fresh Express] insolvent". 8 The application for a winding up order has been made by King Producers Pty Ltd and is said to be based on Fresh Express's failure to comply with a statutory demand: s 459Q, Corporations Act 2001 (Cth). Mr C G Price, Moraitis's solicitor, deposed that at least three companies, each of which claims to be a creditor of Fresh Express's pursuant to judgments in their favour, intend to file appearances as supporting creditors in King Producers' winding up application. 9 Mr Price asserted that the fact of the outstanding application to wind up Fresh Express and the outstanding judgment debts gave rise to events of default under the National Australia Bank charges to which I have referred. He expressed concern that if Moraitis paid Fresh Express the judgment sums it would be unable to repay that money if the appeal was ultimately successful. 10 Fresh Express also led evidence through an affidavit of its solicitor, Mr F David, in support of its contention that, if a stay, was granted it should be conditional upon Moraitis being required to pay it the judgment costs and pay the judgment sum into Court. That evidence demonstrated that Fresh Express, and an associated company, Cranvale Holdings Pty Ltd (which was said without contradiction also to be the beneficiary of the Court of Appeal costs order), had served statutory demands on Moraitis in respect of both the judgment sum and the judgment costs and that Moraitis had failed to make payment as required by those statutory demands at the date his affidavit was sworn. 11 The first two statutory demands were served on 28 January 2010. Moraitis failed to comply with them, but Fresh Express took no action consequent upon that failure. 12 Two further statutory demands were served on 6 August 2010 and gave the recipient 21 days after service either to pay the amount of the debt or secure or compound the amount of the debt to the creditors' reasonable satisfaction. At the time Mr David swore his affidavit Moraitis had not complied with either statutory demand.

Issues on appeal 13 Before the primary judge, Moraitis raised two principal defences to Fresh Express's claim for damages. The first turned on the construction of Fresh Express's undertaking not to deal with the stands without giving Moraitis 14 days written notice. In short, Moraitis contended that the undertaking had effect only for 14 days after Fresh Express gave 14 days notice of its intention to sell or dispose of the stands. Fresh Express never gave that notice and, accordingly, Moraitis argued, did not suffer any loss or damage: primary judgment (at [12] - [13]). Moraitis wishes to re-agitate the construction argument on appeal. 14 Secondly, Moraitis sought to argue that Fresh Express did not establish that there was any causal nexus between the damages it contended it had suffered and the undertaking. Fresh Express sought to establish that loss by adducing evidence from its principal, Mr Musumeci, that a Mr Hendrix had offered to buy the right to occupy the stands for $1.8 million. Mr Musemeci said he would have accepted that figure. Mr Hendrix's evidence was that he only offered $1.2 million, an offer to which Mr Musumeci did not respond. The primary judge accepted Mr Hendrix's evidence. He found (at [38]) that Mr Musumeci was prevented from continuing his negotiations with Mr Hendrix in consequence of the undertaking which Fresh Express gave on 8 January 2007 and hence lost the opportunity to sell the stands for $1.2 million. 15 Moraitis wishes to argue on appeal that absent evidence from Mr Musemeci that he would have accepted $1.2 million for the right to occupy the stands, Fresh Express did not establish a causal nexus between the injunctive relief and any lost opportunity to sell its interest in the stands.

Consideration 16 The overriding principle in an application for a stay is to ask what the interests of justice require: New South Wales Bar Association v Stevens [2003] NSWCA 95; (2003) 52 ATR 602 (at [83]) per Spigelman CJ (Meagher and Sheller JJA agreeing). While the Court will not generally speculate about the appellant's prospect of success before a stay of a judgment pending appeal is granted (Alexander (at 695)), the applicant for a stay must show there are serious questions for determination by the appellate court: Kalifair Pty Ltd v Digi-Tech (Australia) Ltd [2002] NSWCA 383; (2002) 55 NSWLR 737 (at [18]) per Handley, Sheller and Ipp JJA. Nevertheless, stay applications are not an occasion for detailed consideration of the merits of the appeal: Whitlam v Australian Securities and Investments Commission [2002] NSWCA 312; (2003) 43 ACSR 73 (at [39]) per Giles JA. 17 The applicant must also demonstrate that there is a real risk that it will suffer prejudice or damage if a stay is not granted which will not be redressed by a successful appeal, a requirement which will be satisfied if the appeal would be rendered abortive or nugatory unless a stay is granted: Alexander (at 695); Kalifair (at [18]). 18 Once the applicant has demonstrated there is a serious issue for determination upon appeal and risk of prejudice or damage, the court moves to consider the balance of convenience: Kalifair (at [18]). Since a stay will prevent the judgment being enforced while the appeal is pending, the Court should endeavour to preserve the status quo by protecting the judgment creditor from the risk of loss: Kalifair (at [28]).

Conclusion 19 In my view the appeal is arguable in a sense that it cannot be said there is no serious issue to be tried. I did not understand Mr F Douglas of Queens Counsel, who appeared for Fresh Express with Mr R Newton, to contend otherwise. 20 Mr Douglas also frankly conceded there was evidence that Fresh Express's financial situation was "somewhat rocky", while pointing at the same time to the fact that Moraitis's failure to comply with the January statutory demands and, as at Monday's hearing date, the August demands gave little confidence in its financial situation. 21 I am satisfied that there is a risk that if the judgment sum is paid to Fresh Express, it may not be able to restore those monies to Moraitis in the event of a successful appeal. The evidence of Moraitis's failure to comply with the statutory demands, in particular those relating to the judgment costs, persuade me that it is necessary to preserve the status quo pending determination of the appeal. 22 Mr M Jones, who appeared for Moraitis, did not argue against a condition of a stay to the effect that the judgment sum should be paid into Court pending the outcome of the appeal. He did, however, oppose the term which would require Moraitis to pay the judgment costs to Fresh Express. 23 In my view it is not appropriate to impose as a term of the stay, a requirement that Moraitis pay Fresh Express the judgment costs. Those costs relate to the principal proceedings, not directly to the judgment from which the present appeal is brought. The amount of those costs was determined in December 2009. Fresh Express has taken proceedings to recover those costs by the service of successive statutory demands. Moraitis failed to comply with the January statutory demands and there was, accordingly, a deemed insolvency. However Fresh Express did not pursue the rights which then devolved upon it. It has now issued a fresh statutory demand for, among other amounts, the judgment costs. Those statutory demands will, Mr Douglas informed the Court, expire shortly. In the event Moraitis does not pay the judgment costs sought in those statutory demands, Fresh Express may pursue its rights in that respect in the ordinary course. It should not, however in my view, be permitted to use the present stay application as a vehicle to secure payment of the judgment costs.

Security for costs 24 The Court was informed that the parties had agreed that Moraitis should provide security for costs in the amount of $40,000, that sum not to limit the quantum of security being varied in the event of changed circumstances.

I order that the judgment given and the orders made by McLaughlin AsJ on 2 July 2010 be stayed until the determination of the appeal in this Court, on condition that Moraitis pay into Court the sum of $450,000 plus interest as at the date of payment in respect of the judgment now appealed from.

I order that that the stay of the enforcement of the judgment shall include, but not be limited to, prohibiting Fresh Express from petitioning for the winding up of Moraitis on the basis of any non-compliance with the statutory demand served by Fresh Express on the appellant dated 5 August 2010 claiming an amount of $701,558.67, to the extent it claims an amount representing the judgment below and interest thereon.

I order Moraitis to furnish security for the costs of Fresh Express of and incidental to the appeal in the amount of $40,000.

I stay the proceedings in this Court until such security is provided.

Costs of the appellant's and respondent's notices of motion respectively to be costs in the appeal. **********

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.