Masters v Lombe

1. The application for a stay be dismissed.
2. The applicants pay the respondent's costs of and incidental to the application for a stay. Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

(Delivered ex tempore, revised from the transcript)

SHARIFF J: 1 The applicants have made an application for leave to appeal, and appeal, from the orders made in Masters v Lombe (Liquidator), in a matter of Babcock & Brown Limited (in liq) (Lump Sum Costs) [2024] FCA 1336 (Cheeseman J). As part of that application, the applicants have sought a stay of her Honour's orders. They pressed that application before me as the Commercial and Corporations List Duty Judge on 18 December 2024 on the basis that it was urgent. I dismissed that application and gave my reasons ex tempore. These are my revised reasons from the transcript. 2 The background is this. The applicants were plaintiffs in proceedings commenced in this Court against the respondent. Those proceedings, and ones related to it, have an extensive and lengthy history. There were, in fact, three separate proceedings that were commenced in this Court as against the respondent in respectively, December 2013, September 2014 and May 2015. Each proceeding involved common features, and there were a total of 1,221 plaintiffs across all three proceedings. 3 The three primary proceedings were heard together by Foster J between 10 October 2016 and 13 October 2016. That hearing was conducted on the basis that the evidence in each proceeding would be evidence in the others, with a joint book that spanned 20 volumes of more than 5,000 pages. Foster J delivered his judgment on 18 October 2019 dismissing each of the primary proceedings and made orders that the applicants in each of those proceedings pay the respondents' costs of and incidental to those proceedings. 4 There was then an appeal. This appeal was heard on 16 and 17 November 2020. On 3 September 2021, the Full Court delivered its judgment dismissing each of the appeals and made orders for costs in favour of the respondents as against the applicants before me: Masters v Lombe (liquidator), in the matter of Babcock & Brown Limited (in liq) [2021] FCAFC 161; (2021) 392 ALR 326 (Middleton, Beach and Colvin JJ). 5 There was then an application made for special leave to appeal. On 8 April 2022, the High Court of Australia heard and refused a grant of special leave in these proceedings and ordered costs in favour of the respondents. 6 By 8 April 2022, the applicants had exhausted all appellate processes available to them. During that time, Foster J had retired. And, Middleton J, the presiding judge in each of the appeal proceedings, had also retired. Unsurprisingly, the respondents pressed for their costs. They made an application to the Court that costs be determined on a lump-sum basis. This is the application that was heard and determined by Cheeseman J. 7 Her Honour made orders that the cost orders made on 18 October 2019 in each of the primary proceedings, and the cost orders made on 3 September 2021 in each of the appeal proceedings, be determined on a lump-sum basis. Her Honour made orders referring the quantification of the amount of the lump sum to be the subject of an inquiry by a Registrar of the Court and to be conducted in a way (which in the Registrar's opinion) was the most efficient and practical with as little formality and expense as is reasonably possible. Her Honour ordered that the Registrar was to provide the Court with a written report by no later than 28 February 2025, with such a report attaching relevant documents. Her Honour made a further order that, subject to further order, the question of whether the Registrar's report should be adopted would be considered by the case managing judge on the papers that were before the Registrar without the filing of any additional papers. 8 As a result of the above, her Honour had given effect to a process by which the quantification of the lump-sum determination of costs would be determined in the first instance through an inquiry conducted by a Registrar of this Court and, then, by adoption or not of the Registrar's report by a judge of this Court (the Lump Sum Process). In accordance with these orders, and to give effect to the Lump Sum Process, Judicial Registrar Segal has given directions in relation to the inquiry. Those directions involve, amongst other things, the provision of further evidentiary materials limited in page length, and the provision of submissions (also limited in page length), and the opportunity for an oral hearing if one or both parties request such a hearing to occur. 9 As I understand it, there are two primary grounds of appeal which the applicants wish to propound in the event that leave to appeal is granted. It is by reference to these grounds that the applicants contend that her Honour's orders are attended by sufficient doubt to warrant the grant of leave to appeal. These two grounds appear to be as follows. First, that her Honour erred by concluding that s 25(2B)(ab) of the Federal Court of Australia Act 1976 (Cth) (FCA Act) empowers a single judge of the Court to make a lump sum cost order in respect of costs orders made by a Full Court, especially where that single judge was not a member of the Full Court. Second, that her Honour erred in determining that costs should be quantified on a lump sum basis, and, in doing so, failing to be satisfied that such an approach to the determination of costs was one in respect of which her Honour was "confident that the material" enabled her Honour to "make a sufficiently reliable calculation or estimate of an appropriate cost sum": relying upon Tzaneros Investments Pty Ltd v Walker Group Constructions Pty Ltd (No 4) [2018] NSWSC 431 at [21] (Ball J). Whilst the applicants acknowledged that this second ground of appeal involved a challenge to an exercise of discretion by her Honour, it was nevertheless contended that that discretion could only be exercised if her Honour had reached that level of confidence as expressed by Ball J in Tzaneros. 10 The principles applicable to a stay are well settled and not controversial. A party bound by a judgment or order may apply to the Court for an order that the judgment or order be stayed: see s 29 of the FCA Act and r 36.08(2) of the Federal Court Rules 2011 (Rules). A party may also apply for a stay of a judgment or order in circumstances where only an application for leave to appeal has been filed: see r 41.03 of the Rules. This is the case here. 11 The Court has a broad discretion whether or not to grant a stay pending the determination of an application for leave to appeal or an appeal: see Powerflex Services Pty Ltd v Data Access Corporation [1996] FCA 460. The relevant principles were summarised by Wigney J in Martin & Pleasance Pty Ltd v A Nelson & Co Limited [2021] FCA 368 at [25]-[31]. I gratefully, and respectfully, adopt his Honour's analysis. 12 As Wigney J points out, it is not necessary for an applicant for a stay to demonstrate special or exceptional circumstances, though the applicant must establish a sufficient reason or a proper basis for the exercise of the discretion in their favour, or that the case is an appropriate case for a stay: Powerflex at 66. Next, in determining whether to exercise the discretion to grant a stay, the Court must consider and weigh considerations such as where the balance of convenience lays, the competing rights of the parties, the extent to which the grant or withholding of a stay will result in prejudice being suffered by the parties, or would be fair: Powerflex at 66; Philip Morris (Australia) Ltd v Nixon [1999] FCA 1281 at [17]; Australian Competition and Consumer Commission v BMW (Australia) Limited (No. 2) [2003] FCA 864. Next, a stay will generally be appropriate where there is a likelihood that a successful appeal will be rendered nugatory if no stay is granted: Alexander v Cambridge Credit Corporation Ltd (1985) 2 NSWLR 685 at 695; In-N-Out Burgers, Inc v Hashtag Burgers Pty Ltd (No 2) [2020] FCA 772 at [25] - [26]. In the context of money judgments, a stay may be appropriate where there is a real risk that it would not be possible for a successful applicant to be restored to its former position if the judgment is executed. Next, while a judge is not required to speculate about the applicant's prospects of success, a stay will not be granted if the applicant is unable to demonstrate there are at least arguable grounds for leave to appeal, or grounds of appeal. A stay will not be granted if an appeal, or proposed appeal, has no prospects of success or is not bona fide. 13 In the hearing before me, Mr McDonald of counsel appeared for the applicants and Mr Scarcella, solicitor, appeared for the respondent. The primary point made by Mr McDonald in support of the application for a stay was that if it was not granted, the application for leave to appeal, and appeal, would be rendered redundant or thwarted by reason of a continuation of the Lump Sum Process. It was submitted that unless a stay was granted, the applicants would be subjected to the Lump Sum Process when the purpose of the application for leave to appeal and appeal is that they should not be. 14 In the present case, it is not necessary for me to consider the merits of the application for leave to appeal or appeal, and I can proceed on the basis (without commenting on the merits) that the applicants have some arguable case. However, I reject the contention that if a stay is not granted, it will result in the application for leave to appeal, and appeal, being rendered nugatory. I further reject the contention that the balance of convenience weighs in favour of the grant of a stay. 15 First, if a stay is not granted, the Lump Sum Process will continue. In that scenario, if leave to appeal is granted and the appeal is upheld, then it is true that the applicants will have been subjected to the Lump Sum Process. However, in this scenario as the appeal will have been successful, the determination of costs on a lump sum basis will be set aside and it will likely follow that the applicants will be awarded their costs. This does not render the appellate process nugatory. It may indicate that there will be time and costs incurred that are wasted, but these will be the subject of likely favourable cost orders. 16 Second, the prejudice, such as it is to the applicants, has to be weighed against the prejudice to the respondent if leave to appeal or the appeal is not granted. In this scenario, the respondent will have suffered further delay in the determination of their costs which relate to cost orders that they have had the benefit of since 18 October 2019 in respect of the primary proceedings, and since 3 September 2021 in respect of the appeal proceedings. And, in respect of which, there has been a determination made by her Honour that those costs should be determined on a lump sum basis. 17 Third, in my view, the most significant factor weighing against the grant of a stay is the interest of the administration of justice that was raised by the present application. The underlying and substantive controversy between these parties relates to proceedings that were commenced in 2013, 2014 and 2015 respectively. It has been some 10 years since these proceedings were first commenced. There is also the fact that Babcock & Brown has been in liquidation for a substantial period of time. I was informed, and it can be readily accepted, as it was without demur, that there are creditors whose proofs of debts have been accepted in the liquidation, but that liquidation cannot be finalised. Whilst there may be other reasons why the liquidation cannot be finalised, at least one reason is the subsistence of the outstanding issues between the parties in the various proceedings before the Court. Whilst it might be open for the applicants to contend, as they did, that there is little prejudice to arise from further delay in the resolution of these proceedings that would be brought about by a stay until the determination of their application for leave to appeal, and appeal, I do not accept that that submission advances the interests of the administration of justice or the case management dictates of this Court consistently with ss 37M and 37N of the FCA Act. 18 For these reasons, I was not satisfied that the stay should be granted. Specifically, I was not satisfied that the refusal of the stay would render the applicant's application for leave to appeal, and appeal, nugatory. Nor was I satisfied that the prejudice that would be occasioned to the applicants was of such a nature as warranted the grant of a stay. Further, I was positively satisfied that it would not be in the interest of the administration of justice to grant the stay. 19 It is for these reasons that I dismissed the application for a stay and made the orders. I certify that the preceding nineteen (19) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Justice Shariff.