By a notice of motion filed on 10 February 2016, the defendant, Mr James, seeks an order that judgment entered against him by consent on 16 May 2014 in favour of the plaintiff (ANZ) for the sum of $13,928,818.66 be stayed until further order.
The judgment was entered in respect of a claim by ANZ under guarantees given by Mr James to ANZ of debts owed by various companies controlled by Mr James. Those companies are James Australia Group Pty Ltd, Newcastle Liquor Wholesalers Pty Limited (NLW), Print National Nominees Pty Limited, Rugama Trading Pty Limited and TLT Nominees Pty Limited (TLT) (together, the TLT Group).
The judgment was obtained following the appointment on 19 August 2013 by ANZ of receivers to the companies in the TLT Group (the TLT Group Receivers).
Mr James also had an interest in a number of other substantial companies. It is not necessary to identify each of those companies. They included James Estate Wines Pty Ltd (JEW). It will be convenient to refer to those companies together as the JEW Group. The companies in the JEW Group do not owe money to ANZ and were not put into receivership at the time the companies in the TLT Group were, although they have since gone into external administration.
The TLT Group Receivers have liquidated substantially all of the assets of the companies in the TLT Group.
Various attempts have been made to bankrupt Mr James. The first attempt by ANZ failed in November 2014, after a bankruptcy notice served on Mr James was set aside by consent. On 10 February 2015, the Commonwealth Bank of Australia commenced proceedings against Mr James by filing a creditor's petition with the Federal Circuit Court of Australia. Sequestration orders were made on 24 April 2015. However, on 18 August 2015, the Federal Court of Australia overturned those orders. On 9 December 2014, on an application by ANZ, the official receiver issued a bankruptcy notice addressed to Mr James in the amount of $11,751,606.73. On 20 August 2015, ANZ commenced proceedings against Mr James by filing a creditor's petition with the Federal Court of Australia. That proceeding has been listed for hearing before Katzmann J on 25 February 2016.
On 11 February 2016, Mr James commenced in his own name and the name of NLW and TLT and various companies in the JEW Group proceedings against ANZ and the TLT Group Receivers (the New Proceeding). In broad terms, two types of claim are made in the New Proceeding. First, Mr James claims that the TLT Group Receivers sold the assets of NLW and TLT at an undervalue in breach of the duty imposed by s 420A of the Corporations Act 2001 (Cth) to take reasonable care to sell the property of the companies for market value or, if the property does not have a market value, for the best price that is reasonably obtained having regard to the circumstances when the property is sold.
Second, Mr James claims that the TLT Group Receivers entered into premises occupied by companies in the JEW Group and took possession of property belonging to those companies with the result that those companies could no longer trade. In doing so, it is alleged that the TLT Group Receivers committed the torts of trespass and conversion and that the companies suffered consequential economic loss as a result. The total amount claimed in the proceeding is in excess of $50 million.
The first directions hearing in the New Proceeding is set down for 26 February 2016. It is plain that as a first step Mr James will require leave under s 237 of the Corporations Act to bring proceedings on behalf of the relevant companies. It is equally plain that any amount recovered as a result of the claim will be for the benefit of the relevant companies and not Mr James personally.
The power to stay a judgment is granted by s 135 of the Civil Procedure Act 2005 (NSW). That section relevantly provides:
Directions as to enforcement
(1) The court may, by order, give directions with respect to the enforcement of its judgments and orders.
(2) Without limiting subsection (1), the court may make any of the following orders:
(a) …
(b) …
(c) an order prohibiting any other person from taking any further action, either permanently or until a specified day, to enforce a judgment or order of the court,
(d) …
It is common ground that s 135 confers a broad discretion on the court to grant a stay where it is in the interests of justice to do so. One case where a stay may be appropriate is where a defendant has an outstanding cross‑claim involving a related subject matter: Joskovitz v Bonnick [1964] VR 654.
Mr James submits that it would be in the interests of justice to stay the judgment in this case at least until the Federal Court has determined the question whether a sequestration order should be made and this court has determined the question whether leave should be given under s 237 of the Corporations Act. He submits that if a stay is not granted there is a substantial risk that he will be made bankrupt with the result that the New Proceeding will be stultified. Mr James concedes that there has been some delay in commencing that proceeding and applying for the stay, but he submits that that delay can be explained by the fact that he has suffered from anxiety and depression which required him to be hospitalised for a number of weeks, his financial position and the fact that he has been preoccupied with other proceedings. Moreover, Mr James submits that ANZ has not been prejudiced by the delay since it is obvious that he is not able to pay ANZ the money he owes. On the other hand, Mr James will be irreparably prejudiced because he will be prevented by his bankruptcy from pursuing proceedings which, on the evidence he has filed, have at least arguable prospects of success.
I do not accept these contentions.
First, it is plain from the guarantees that Mr James gave and the consent orders that he agreed to that he accepts that he owes ANZ the money it claims and that he agreed that he would not seek to deduct from that amount amounts he claimed were owing to him. The guarantees specifically provide (to quote from one given on or about 1 August 2005) that:
Payments I make must be in cleared funds and free of any set off or deduction, except for taxes where required by law. I will not deduct amounts I claim are owing to me by ANZ or any other person.
Second, the claim brought by Mr James is not in the nature of a cross‑claim. It is a derivative action brought for the benefit of various companies in the TLT Group and JEW Group. Any money that is recovered will not be for the benefit of Mr James. It is unclear on the evidence what amounts may ultimately be received by Mr James if the derivative action is successful.
Third, I do not accept that Mr James has given an adequate explanation for the delay in commencing the proceeding or applying for the stay. It is apparent from correspondence sent by Hunt and Hunt, Mr James' then solicitors, on 21 August 2013 and 27 August 2013 to the solicitors for ANZ that Mr James must have been aware at that time of potential claims of companies in the JEW Group based on trespass and conversion, since those letters asserted those claims. It may be accepted that Mr James was delayed to some extent by his illness in giving instructions to enable proceedings to be commenced and the stay to be applied for. However, it has now been close to two years since ANZ obtained judgment against Mr James. It appears that Mr James has been able to instruct lawyers in relation to other court proceedings in which he has been involved. Apart from broad assertions, Mr James has not given an explanation of what he has been doing since judgment was obtained against him or of what funds have been available to him to provide any proper foundation for a conclusion that he was not in a position to apply for a stay until recently.
Fourth, I am not satisfied that the proceedings will be stultified if the stay is not granted. The New Proceeding could be brought by the liquidators of the relevant companies. They are the obvious plaintiffs in the claims that Mr James seeks to bring. There is no evidence that Mr James has placed before the liquidators of those companies material from which they could make a proper assessment whether to pursue proceedings of the kind Mr James has sought to bring. Nor has Mr James provided any evidence on how he expects to be able to fund the New Proceeding and why that funding would not be available to the liquidators if they could be convinced that the claim had merit.
It follows that the notice of motion filed on 10 February 2016 should be dismissed with costs.
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Decision last updated: 23 February 2016