Cudgegong Australia Pty Limited v Transport for NSW

Evidence

1. Similar to evidence given in the earlier stay application the subject of Cudgegong (No 2) Mr Russell, the solicitor for Golden Mile, stated in his affidavit sworn 8 December 2015 at par 3 that, "I am concerned that if the money is paid out and the appeal is later allowed, it will be impossible to recover the sum paid to the Applicant". This concern is based on evidence given by Mr Sukhdev Singh, a director of Cudgegong, that Cudgegong needed time to raise funds to complete the first contract for sale of land, its only asset is the property the subject of these proceedings and that it had not paid legal costs of the principal proceedings and could not without considerable difficulty. Mr Russell also had concerns that if the Court determined the compensation payable to be only $3 million and Cudgegong had to repay money, the money would be paid back by a funding call on the shareholders. Mr Russell annexed to his affidavit a transcript extract from the substantive hearing in Cudgegong (No 1) of the cross-examination of Mr Singh and the affidavit of Mr Singh sworn on 16 August 2013 to support his concerns.
2. In his affidavit sworn 10 December 2015 Mr Sukhdev Singh stated that Cudgegong has no assets other than the property the subject of these proceedings and has no source of income. Cudgegong has agreed with their former solicitors that their legal fees will be paid from the advance payment of $757,300. Directors and shareholders of Cudgegong have personally contributed to legal fees for the current solicitors, which has placed great financial strain on them. Mr Singh does not believe Cudgegong can raise the necessary funds to defend the appeal.
3. Golden Mile tendered a draft Notice of Appeal and draft Summons seeking leave to appeal (exhibit 1). Cudgegong tendered an authority given by Cudgegong to Transport NSW providing for the payment of legal fees of approximately $50,000 if Cudgegong is found to be entitled to a 90% advance payment to their former solicitors (exhibit A).

Golden Mile's submissions in support of stay application

1. Golden Mile made similar submissions to Cudgegong (No 2), namely Golden Mile accepts that it must demonstrate that there is a reasonably arguable appeal: Alexander at 694F. The draft Notice of Appeal identifies grounds which are arguable given this case raises complex matters of law and fact. There need not be anything "special" or "exceptional" about the appeal, it is sufficient to demonstrate on a preliminary assessment that there are properly arguable grounds: Alexander at 695E.
2. The fact that a case raises novel or complex points of law or fact is relevant: Powerflex Services Pty Limited v Data Access Corporation (1996) 137 ALR 498; Alexander at 695F. This case does raise novel and complex laws of fact and law.
3. If there is "a risk that the appeal will prove abortive if the appellant succeeds and a stay is not granted, the courts will normally exercise their discretion in favour of granting a stay", per Alexander at 695C-D citing Scarborough v Lew's Junction Stores Pty Limited [1963] VR 129 at 130.
4. The stay will be ordered more readily if there is no risk of the claimant losing the benefit of the judgment by being prevented from enforcing it after the pending appeal, and is protected from financial consequences of any delay by the accrual of interest on the judgments in the meantime: TCN Channel 9 Pty Limited v Antoniadis (No 2) [1999] NSWCA 104; (1999) 48 NSWLR 381.
5. There is a real danger that if successful on appeal Golden Mile will not be able to recover the advance money from Cudgegong if the stay is not granted. The submissions made in support of the previous stay application are strengthened by the affidavit of Mr Singh dated 10 December 2015. This demonstrates that Cudgegong has very limited capacity to raise finance from its shareholders, which would be necessary if the appeal is successful as it has no other assets or cash reserves. There is no certainty that Cudgegong would raise funds from its shareholders.
6. The Court must balance the interests of justice in exercising its discretion. Any prejudice to Cudgegong is ameliorated by the advance payment sitting in an interest bearing trust account earning the rate of interest specified under the Just Terms Act. The sum is not being eroded.

Cudgegong's submissions opposing stay

1. The ordinary principle in litigation is that a successful party is entitled to the fruits of the judgment. There must be sound reasons sufficient to justify the Court suspending that right: McBride v Sandland (No 2) [1918] HCA 59; (1918) 25 CLR 369 at 374. Golden Mile bears that onus.
2. An applicant for a stay must show that the appeal raises serious issues for the determination of the appellate court, per Kalifair Pty Ltd v Digi-Tech (Australia) Ltd [2002] NSWCA 383; (2002) 55 NSWLR 737 at [18] (Handley, Sheller and Ipp JJA). For there to be a serious question to be tried in relation to an appeal, there needs to be a prospect demonstrated to the Court that the appeal may succeed: Vaughan v Dawson [2008] NSWCA 169 at [18] (Campbell JA).
3. Prospects of the appeal are weak based on the draft Notice of Appeal. Golden Mile has advanced nothing to demonstrate the incorrectness of Cudgegong (No 3) in the application of any principle or other legal error. No errors are identified.
4. It is in the interests of justice that no stay be granted given the history of the litigation to date with Cudgegong successful again in the hearing on the remitter. Alternatively, it at least needs payment of funds of $50,000 to enable it to be represented in the appeal. Cudgegong has to stave off existing creditors such as the lawyers for whom an authority in their favour has been entered into by Cudgegong in the event that Cudgegong is awarded an advance payment under the Just Terms Act.

Stay should be granted in exercise of Court's discretion

1. As confirmed by the extract from Alexander at par 5 Golden Mile bears the onus of establishing that a stay is warranted and I have a discretion whether a stay ought be granted and on what terms, such as a payment to Cudgegong of $50,000 for legal costs of any appeal. Weighing up the parties' competing submissions I must determine where the balance of convenience lies and the competing rights of the parties.
2. An appeal is restricted to a question of law pursuant to s 57(1) of the Land and Environment Court Act 1979 (NSW) (the Court Act). Leave to appeal is required pursuant to s 57(4)(d) of the Court Act given the appeal would be from an interlocutory decision.
3. While this is an interlocutory matter resulting in a discretionary decision to order an advance payment, the matter required the resolution of the substantive legal issue of who has rights to compensation as an owner of land under the Just Terms Act in the unusual circumstances in this matter. Those circumstances raise several complicated legal issues that have not required determination in the context of the Just Terms Act before. While this would be the second appeal in these interlocutory proceedings the issues of fact and law are both novel and complex yet again. I accept that Golden Mile has an arguable case at least.
4. There is a real risk Golden Mile will have difficulty recovering the amount of any advance payment from Cudgegong, a relevant matter in this application for a stay. That consideration arises even if Cudgegong is eventually under a legal obligation to repay any advance payment under subs 48(4)-(6) of the Just Terms Act. Both Golden Mile, in liquidation since 2007, and Cudgegong were or are investment vehicles with some overlap of directors and shareholders. Cudgegong's only asset is the claim for compensation for market value under the Just Terms Act for the acquired land. Its interest as an owner was otherwise dissolved at acquisition. The evidence of Mr Singh was that it requires the advance payment to defend the appeal. As I found in Cudgegong (No 2) at [36] on the assumption Golden Mile is successful in the appeal and the advance payment if made to Cudgegong has to be repaid in whole or part, there will be no benefit accruing to the directors and shareholders of Cudgegong to offset against any capital raising. There is no legal obligation on shareholders to raise capital so that there is a real risk this will not occur. This situation suggests that Golden Mile's appeal may be rendered nugatory if successful.
5. A difficult issue is where do the interests of justice lie in the circumstances of this case. Cudgegong which has the benefit of Cudgegong (No 3) relies on evidence of the efforts of shareholders to raise legal fees and the hardship this has caused as identified in the affidavit of Mr Singh. Golden Mile is represented by its liquidator in these proceedings who is acting pursuant to the duties of a liquidator as identified in s 478(1)(a) of the Corporations Act 2001 (Cth). He is required to collect the company's property and apply it in discharging the company's liabilities to its creditors. The liquidator's oral evidence at the first substantive hearing on 30 August 2013 was that nobody was funding the litigation so that the liquidator is at present incurring legal costs which he may or may not recover in pursuit of that statutory duty (TS 30/08/13, p 165.34-36).
6. Cudgegong submitted that an authority to pay out a certain sum to specified solicitors (exhibit A) in the event that Cudgegong receives a 90% advance payment must be satisfied as a matter of fairness before any additional amount for legal costs could be paid to Cudgegong if a stay is granted on a conditional basis. As Golden Mile submitted the authority does not require such an approach. If I grant the stay no entitlement to a 90% advance arises now, the obligation under the authority does not require the first approximately $50,000 to be paid out to the specified solicitors and the Court is not bypassing the authority in making a conditional stay order. I agree with these submissions of Golden Mile as to the effect of the authority.

Conclusion

1. There are compelling reasons to justify suspending the right of Cudgegong to obtain the benefit of Cudgegong (No 3). Considering the matters in Alexander, there is an arguable appeal supportable by proper grounds. The appeal may well prove abortive if the appellant succeeds and a stay is not granted. The interests of justice and the balance of convenience favour the grant of a stay as sought in Golden Mile's Notice of Motion to be conditioned on the payment of $50,000 to Cudgegong to enable it to participate in the appeal. The status quo is generally preferable whereby most of the money is preserved and continues to accrue interest as required under the Just Terms Act in the control of Transport's solicitors.
2. Golden Mile's leave to appeal application must be pursued expeditiously and whether an order to that effect will be made or an undertaking be required will be discussed with its representatives.

Orders

1. The Court makes the following orders: 1. Order 1 in Cudgegong v Transport for NSW (No 3) [2015] NSWLEC 185 is stayed until the date of final disposition of any application for leave to appeal lodged with the NSW Court of Appeal subject to the payment of $50,000 by Transport for NSW to Cudgegong Australia Pty Limited within 14 days (not its former solicitors who hold an authority (exhibit A) or any other person). 2. Costs are reserved.

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