Deputy Commissioner of Taxation v Eskdale South Cattle Company Pty Ltd, in the matter of Eskdale South Cattle Company Pty Ltd

REASONS FOR JUDGMENT 1 This morning in Court I gave judgment in respect of para 1 and para 2 of the interlocutory application filed on 11 July 2013 by the Deputy Commissioner of Taxation in this proceeding, and ordered (inter alia) that a provisional liquidator be appointed to the first defendant, Eskdale South Cattle Company Pty Ltd ACN 162 208 157 ("Eskdale") (Deputy Commissioner of Taxation v Eskdale South Cattle Company Pty Ltd, in the matter of Eskdale South Cattle Company Pty Ltd [2013] FCA 740). Immediately upon delivery of judgment Mr Bickford for the respondents handed up an interlocutory application and supporting submissions, in which he sought on behalf of the defendants the following Orders: On the facts stated in the supporting affidavits the Applicants, Eskdale South Cattle Company Pty Ltd and the others named in the Schedule hereto, apply for the following relief : (1) an order staying the operation of any order for appointment of a provisional liquidator of the Respondent pursuant to s 472(2) of the Corporations Act 2001 and any other orders made pursuant to the interlocutory process filed by the Deputy Commissioner of Taxation as Applicant on 11 July 2013; (2) An order that the costs of and incidental to this application be reserved; and (3) liberty to apply. 2 In oral submissions Mr Bickford explained that the applicants in fact sought only a short stay of the judgment, in order to allow them the opportunity to consider whether they would seek leave to appeal or a longer stay of the decision. Counsel relied on the decisions in Australian Workers' Union v Pilkington (Aust) Ltd (2000) 101 FCR 35 and Australian Executor Trustees Ltd v Provident Capital Ltd (No 2) (2012) 90 ACSR 90; [2012] FCA 754. 3 Mr Schulte for the Deputy Commissioner stated that the Deputy Commissioner had received no notice of the interlocutory application, and opposed it. 4 I dismissed the interlocutory application filed by the defendants, in summary on the basis that: as was clear from my judgment, I was satisfied that a blatant dissipation of trust assets had occurred; I was satisfied that a provisional liquidator ought be appointed to Eskdale; and I was not satisfied as to the utility of a stay of the judgment. 5 As the interlocutory application had been brought without notice, and a substantive matter was listed to be heard before me, I did not give more detailed reasons. In the interests of justice, however, and for the information of the defendants, I consider it appropriate to publish brief reasons for my decision. 6 That a successful party is entitled to the fruits of its judgments is a well-settled principle. Decisions at first instance are not to be treated as merely provisional: Alexander v Cambridge Credit Corp Ltd (1985) 2 NSWLR 685 at 694-5; Cook's Construction Pty Ltd v Stork Food Systems Australasia Pty Ltd [2008] 2 Qd R 453; [2008] QCA 322 at [12]; Citrus Queensland Pty Ltd v Sunstate Orchards Pty Ltd [2008] FCA 1867 at [39]. The Court has a discretion to grant a stay of orders in appropriate circumstances. Relevant principles were considered by Besanko J recently in Wealthsure Pty Limited v Selig [2013] FCA 628 where his Honour observed: [10] The Court must first be satisfied that the grounds of appeal are arguable. In Alexander v Cambridge Credit Corporation Ltd (1985) 2 NSWLR 685 the New South Wales Court of Appeal said (at 695): This consideration is protective of the position of a judgment creditor where it may be plain that an appeal, which does not require leave, has been lodged without any real prospect of success and simply in the hope of gaining a respite against immediate execution upon the judgment. … [23] As I said in Barker v Commonwealth Bank of Australia at [21], the prima facie position is that the respondent to an application for a stay is entitled to enforce his judgment. However, as Alexander v Cambridge Credit and Powerflex Services Pty Ltd v Data Access Corporation (1996) 67 FCR 65 make clear, it is not necessary for an applicant for a stay to demonstrate that there are "special" circumstances before a stay will be granted. One circumstance which is accorded substantial weight in favour of a stay is where an appeal will be rendered nugatory if a stay is not granted: Federal Commissioner of Taxation v Myer Emporium Ltd [1986] HCA 13; (1986) 160 CLR 220 at 222 - 223 per Dawson J; Alexander v Cambridge Credit at 695; TCN Channel 9 Pty Ltd v Antoniadis (No 2) [1999] NSWCA 104; (1999) 48 NSWLR 381. It might be said that the absence of a stay may render an appeal nugatory because the appellant is unable to pursue the appeal or because the appellant, even if successful, will not be able to recover monies paid over in the absence of a stay. 7 In written submissions filed in Court this morning the defendants submitted, in summary: The Court has on a number of occasions granted short term stays to allow the party which was unsuccessful in the proceedings to consider whether or not an application for leave to appeal from an interlocutory order should be made: Australian Executor Trustees. A short stay is necessary because the legal representatives of the defendants need a proper opportunity to consider the judgment delivered this morning and whether leave to appeal should be filed or an order for a longer stay sought. An effect of the appointment of a provisional liquidator is that Eskdale would have no standing to apply for leave to appeal and an appeal would be rendered entirely nugatory. In light of orders already made and the actions taken by the Deputy Commissioner, the balance of convenience favours a short stay. The Court would also need to abridge time of service of the interlocutory order, as well as order liberty to apply on short notice for the matter to return later this week. 8 As I indicated in Court to Mr Bickford this morning, these are powerful submissions. However in my view it is a proper exercise of my discretion to refuse the application. I take this view for the following reasons. 9 First, no notice was given to the Deputy Commissioner of the intention to file an interlocutory application seeking a short stay. While, as Mr Bickford submitted, the defendants did not know until this morning the outcome of my decision concerning the appointment of a provisional liquidator, it would not have been unreasonable in the circumstances of this case to put the Deputy Commissioner and his legal representatives on notice that an application for a short stay would be made by the defendants if the Deputy Commissioner was successful. As it transpired, the Deputy Commissioner and his legal representatives were unprepared to meet the interlocutory application. 10 Second, and more significantly, as I indicated to Mr Bickford I am satisfied following consideration of the Deputy Commissioner's interlocutory application for the appointment of a provisional liquidator to Eskdale, and following the opportunity granted to the defendants to instruct solicitors and Counsel in their defence, that an appointment of this nature is wholly justified. In particular, it is clear that: Funds of the Carluke Capital Trust ("the Trust") have been quickly dissipated in recent times, in unexplained transactions, by Ms Carrie Hofmeister who is the sole director of Eskdale. A strong inference may be drawn that Ms Hofmeister removed Trust funds for the benefit of those other than creditors of the Trust or Eskdale. Events concerning the removal and appointment of a trustee of the Trust are highly suspicious, and suggestive of a strategy to remove Trust assets from the reach of creditors (in particular the Deputy Commissioner). An investigation into the dissipation of funds and management of Trust affairs is warranted. 11 Third, I am not satisfied as to the bona fides of the defendants in seeking a stay. The events concerning the Trust in 2013 including the appointment of a new trustee, dissipation of funds when the defendants were on notice of the Deputy Commissioner's claims, removal of management from the related company Carluke Capital Pty Ltd and loan documentation entered in favour of Ms Hofmeister are all, in my view, suggestive of delay to prevent the Deputy Commissioner from enforcing the tax debt owed by the Trust. I consider that the interlocutory application filed in Court this morning is a further step taken by the defendants in their resistance of the Deputy Commissioner's legitimate claims. 12 Fourth, while there may be prejudice to the defendants in respect of an appeal against my judgment this morning in light of my refusal to grant a short stay: it is difficult to identify the precise nature of the prejudice in the absence of properly formulated grounds of appeal; and in any event, in my view this prejudice is outweighed by the factors to which I have already referred, including the need to have matters concerning the management of Eskdale and the dissipation of Trust funds investigated. I certify that the preceding twelve (12) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Collier.