Barker v Commonwealth Bank of Australia

Barker v Commonwealth Bank of Australia - [2012] FCA 1076 - FCA 2012 case summary — Zoe

Introduction 1 The applicant in this application is the Commonwealth Bank of Australia and the respondent is Mr Stephen John Barker. 2 After a trial I made orders in favour of the respondent against the applicant: Barker v Commonwealth Bank of Australia [2012] FCA 942. The orders which I made were as follows: 1. Judgment be entered for the applicant [the respondent to this application] against the respondent [the applicant in this application] in the sum of $317,500. 2. The respondent pay the applicant the sum of $37,090 by way of interest. 3. The respondent pay the applicant's costs of the proceeding. 3 On 17 September 2012, the applicant made an application for an order that the orders I made be stayed pending the determination of an appeal by the Full Court of this Court. 4 The application for a stay of the orders is made pursuant to Rule 36.08 of the Federal Court Rules 2011, which is in the following terms: (1) An appeal does not: (a) operate as a stay of execution or a stay of any proceedings under the judgment subject to the appeal; or (b) invalidate any proceedings already taken. (2) However, an appellant or interested person may apply to the Court for an order to stay the execution of the proceeding until the appeal is heard and determined. (3) An application may be made under subrule (2) even though the Court from which the appeal is brought has previously refused an application of a similar kind. Note: Interested person is defined in the Dictionary. 5 On 21 September 2012 the applicant filed and served a Notice of Appeal against the orders which I had made and the grounds of appeal are as follows: 1. The learned judge erred in law in finding that there was an implied term of mutual trust and confidence in the Contract of Employment between the appellant and the respondent (Contract of Employment). 2. The learned judge erred in law in finding that a serious breach of the appellant's redeployment policy by the appellant gave rise to a breach of the implied term of mutual trust and confidence in the Contract of Employment. 3. The learned judge erred in law in finding that the respondent was entitled to damages for loss of future earnings beyond the 4 week notice period expressed in the Contract of Employment. 6 The orders which the applicant seeks on the appeal are as follows: 1. That the appeal be allowed. 2. That the orders of this honourable Court given on 3 September 2012 at Adelaide be set aside. 3. That judgment be entered for the respondent against the appellant in a sum equivalent to four weeks' pay at the time at which the respondent's employment was terminated, being $11,692.31 less any applicable taxation. 4. The respondent pay the appellant's costs of the appeal and of the proceedings. 7 The order sought in paragraph 3 involves an acceptance by the applicant that it failed to terminate the respondent's contract of employment in accordance with the provision requiring notice or payment in lieu (see reasons at [276] and [279].

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The Facts 8 In support of its application, the applicant relied on two affidavits of a lawyer (Mr Jarrad Nelson Parker) employed by the firm of solicitors acting for it. In his first affidavit, Mr Parker referred to evidence given by the respondent at the trial to the effect that between 9 April 2009 and 30 June 2011, that his consulting business earned $116,528.18. Mr Parker said that the applicant is concerned that if it paid the respondent the sum of money it is required to pay pursuant to the orders, and is subsequently successful in its appeal, it will not be able to recover that sum from the respondent due to the fact that his means are limited relative to the size of the anticipated payment. 9 In opposition to the application, the respondent relied on an affidavit of a lawyer (Ms Alisha Nicole Thompson) employed by the firm of solicitors representing him. Ms Thompson's affidavit establishes the following matters: (1) The respondent has recently secured permanent full-time employment as a "Key Account Manager: Banking" with Elders Services Company Pty Ltd. His cash salary in this position is $140,000 plus 9 per cent superannuation, plus a fully maintained motor vehicle. (2) The respondent owns a property at 2 Light Walk, Adelaide. The property is an investment property and the respondent receives rent from the property of $2,590 per month net after management fees and expenses. The rent received is approximately equal to the repayments of the loan for the property, with the effect that the property is currently held by the respondent on a cashflow neutral basis. The applicant is the first mortgagee. It lent an amount to the respondent which is secured by a first mortgage over the property. The applicant obtained a valuation of the property from Megaw and Hogg, national valuers and their valuation of the property as at 25 January 2011 was $720,000. There are two further encumbrances over the property, the first being a caveat lodged by Serina Iolanda Pace and the other being a caveat lodged by Semaphore Palais Hotel Pty Ltd. Ms Thompson states that the equity in the property after deducting the amounts secured by the encumbrances is approximately $180,000. (3) If the judgment sum is paid by the applicant to the respondent then, according to his instructions, the respondent intends to use the majority of the funds received to reduce the debt secured against the property, thereby increasing the value of the equity in the property by a corresponding amount. (4) Other than the amount secured against the property, the respondent has no further significant liabilities other than his normal day-to-day bills and expenses that he has and continues to pay from time to time when they fall due. (5) The respondent has incurred legal fees from time to time in the conduct of this proceeding. As at the date of Ms Thompson's affidavit, he had discharged a total sum of $314,550.20 by way of solicitor's fees, counsel fees and other disbursements. The respondent continues to make payments towards his accounts as rendered from time to time. 10 In his second affidavit, Mr Parker deposes to the following matters: (1) The capital value of the property was assessed by the Department of Planning, Transport and Infrastructure as at September 2012 at $620,000. (2) The amount outstanding under the applicant's first registered mortgage over the property is $237,863.31. (3) The caveat in favour of Ms Pace is dated 24 May 2012 and was lodged to support a charge given by the respondent to Ms Pace whereby he charged the property in respect of legal fees and disbursements owing to Ms Pace. The caveat does not mention an amount. (4) The caveat lodged by the Semaphore Palais Hotel Pty Ltd is lodged to protect an interest described as a registrable mortgage granted by the respondent to the Semaphore Palais Hotel Pty Ltd "as security for the sum of $60,000 advanced or to be advanced by the caveator to the caveatee together with interest and any other payments as set out in the said mortgage". 11 The applicant submits that the caveat in favour of Ms Pace must secure a debt in the order of $240,000. If Ms Thompson prepared her calculations on the basis that the property was worth approximately $720,000 and if the current value of the loan to the applicant is in the order of $240,000 and the debt to the Semaphore Palais Hotel Pty Ltd is in the order of $60,000, then for Ms Thompson to assert that the equity in the property is $180,000 the debt to Ms Pace must be in the order of $240,000. The applicant further submits that Ms Pace's overall legal fees and disbursements must be in the order of $554,000, bearing in mind that the respondent had already paid her an amount in the order of $314,000. On the same assumptions but assuming the property is worth in the order of $620,000, the net equity in the property is only in the order of $80,000. 12 The applicant contends that if the orders are not stayed then it will be required to pay the respondent a sum in the order of $750,000 being $317,500 and $37,090 plus an estimated $387,800 by way of party and party costs being 70 per cent of $554,000. I note that the respondent put before me a letter from his solicitors to the applicant's solicitors offering to agree his party and party costs at $375,000. 13 The applicant referred to a further matter. It put forward certain without-prejudice offers it made before trial and contends that if it is successful on the appeal then it is likely to obtain an order for the payment of its costs on an indemnity basis. It also contends that it is likely to obtain an order that the respondent pay its costs of the appeal.

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Issues on the Application 14 It is not necessary for the applicant to show "special" or "exceptional" circumstances in order to obtain a stay. Two important matters are whether the grounds of appeal are arguable and where the balance of convenience lies. As to the latter matter an important factor in favour of a stay will be the fact (if it be the fact) that the appeal will be rendered nugatory if a stay is not granted: Alexander v Cambridge Credit Corporation Ltd (1985) 2 NSWLR 685 at 694-695; Powerflex Services Pty Ltd and Ors v Data Access Corporation (1996) 35 IPR 193 ("Powerflex"); Australian Competition and Consumer Commission v BMW (Australia) Limited (No 2) [2003] FCA 864. 15 I have no doubt that the grounds of appeal raise important matters which are arguable and that this application is to be determined by reference to the balance of convenience or by having regard to the competing rights of the parties. 16 In the context of orders requiring the payment of moneys, what precisely is meant by an appeal being rendered nugatory if a stay is not granted? 17 In Federal Commissioner of Taxation v Myer Emporium Ltd (1986) 160 CLR 220, Dawson J said at 222-223: Special circumstances justifying a stay will exist where it is necessary to prevent the appeal, if successful, from being nugatory: see Wilson v Church [No. 2]; Klinker Knitting Mills Pty. Ltd. v L'Union Fire Accident and General Insurance Co. Ltd Generally that will occur when, because of the respondent's financial state, there is no reasonable prospect of recovering moneys paid pursuant to the judgment at first instance. However, special circumstances are not limited to that situation and will, I think, exist where for whatever reason, there is a real risk that it will not be possible for a successful appellant to be restored substantially to his former position if the judgment against him is executed: see McBride v Sandland [No. 2]. (Citations omitted.) 18 In Henderson v Amadio Pty Ltd (No 3) (1996) 65 FCR 66 at 69, Heerey J expressed the test in terms of whether the applicant for a stay had established that there would be no reasonable probability of getting back moneys paid under the judgment if the appeal succeeded. 19 The following matters favour the applicant's application. The respondent is a private individual. For a private individual the sum of approximately $750,000 is a very substantial sum. The respondent has significant liabilities to third parties, including the applicant of approximately $237,000, his lawyers of, it seems approximately $240,000, and Semaphore Palais Hotel Pty Ltd of approximately $60,000. I should mention at this point that I am not disposed to place any weight, or at least any substantial weight, on further possible liabilities for costs on the respondent should the applicant succeed on its appeal. The primary focus on this application is what might happen if the existing orders are not stayed. Finally, as the applicant points out, there can be no serious question as to its ability to satisfy the orders should its appeal be dismissed. 20 The following matters favour the rejection of the applicant's application. The respondent has final orders in his favour. Final orders are not in any way provisional until confirmed on appeal. There is no evidence that the respondent plans to "hide" or dissipate his assets. I realise that this point is of limited weight in the circumstances, but it is to be noted nevertheless because there will be cases where there is such evidence. The applicant has full-time employment and, on the face of it, use of the judgment moneys to meet liabilities to third parties will result in an increase in the net equity of the property. 21 It seems to me that this is an appropriate case for a partial stay. If the only amount in issue was the judgment sum of $317,500 and interest of $37,090, I would not grant a stay because I do not think the evidence adduced by the applicant is sufficient to displace the prima facie position that the respondent is entitled to enforce his judgment (see the statement of Mahoney JA in Re Middle Harbour Investments ltd (in liq) (unreported, NSW Court of Appeal, 15 December 1976) cited in Powerflex at 194). On the other, there must be real doubt as to the respondent's ability to repay a sum in the order of $750,000 within a reasonable time should he be required to do so. It is not possible to be precise, but I think the appropriate course is to stay enforcement of the costs order in favour of the respondent against the applicant. The costs can be agreed or taxed, but the order for costs cannot be enforced until the hearing and determination of the appeal. I am fortified in thinking that this is an appropriate order because it is similar to another course which might have been adopted which is the extraction of an undertaking from the applicant's solicitors that any costs paid to them be repaid should the appeal be successful: Hood Barrs v Crossman [1897] AC 172 at 175-176 per Lord Herschell; TCN Channel 9 Pty Ltd v Antoniadis (No 2) (1999) 48 NSWLR 381 at 385.

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