Michael Hill Jeweller (Australia) Pty Ltd v Gispac Pty Ltd

JUDGMENT

The appellant in this matter filed a notice of motion dated 22 March 2024. By that motion, the appellant sought a stay of the orders made in Gispac Pty Ltd v Michael Hill Jeweller (Australia) Pt Ltd [2024] NSWSC 18, where the primary judge, Gleeson J, entered judgment for the respondent in the amount of $2,259,971.40 plus interest. The appellant has appealed from that decision, and the appeal is listed for hearing on 20 and 21 June 2024 before this Court.
On 8 April 2024, Gleeson J dismissed the respondent's application for the release of $210,000 which it paid into court as security for costs: Gispac Pty Ltd v Michael Hill Jeweller (Australia) Pt Ltd [2024] NSWSC 356 ("Security Judgment"). His Honour did so on the basis that, first, the appeal raised arguable grounds and secondly there was reason to doubt that the respondent would be able to satisfy any order to pay the appellant's costs of the trial, which order could follow as a result of a successful appeal.

Relevant principles

The principles governing the grant of a stay pending an appeal are well-settled, as the parties on this application agreed. They are analogous to those which govern the grant of interlocutory relief before trial: Alexander v Cambridge Credit Corp Ltd (1985) 2 NSWLR 685 at 694-5, Kalifair Pty Ltd v Digi-Tech (Australia) Ltd (2002) 55 NSWLR 737; [2002] NSWCA 383 at [18]. A party applying for a stay must show, first, that the appeal raises serious issues for determination by the appellate court; and secondly, that there is a real risk that the appellant will suffer prejudice or damage if the stay is not granted. If an appellant prevails on those two questions, then the Court is to consider the balance of convenience and the competing rights of the parties: Pamplin v Irwin [2024] NSWCA 112 at [11] per Leeming JA.
The appellant sought a stay primarily on the basis that the respondent may be unable to repay to the appellant any of the judgment sum that it would owe to the appellant if the appeal were to be successful. The respondent accepted that a stay should be granted, but argued it should be on terms that the appellant pay the judgment debt, that is $2,259,971.40, into Court.
I find that the appellant has discharged its onus on the first and second questions. On the first question, as the appellant contends, and as Gleeson J found in the Security Judgment at [40], its notice of appeal takes a carefully considered, "focused approach", setting out in a "detailed and layered" manner the reasoning in support of its appeal.
On the second question, the appellant pointed out that the respondent has at no point in these proceedings revealed details of its financial position, including in answer to the appellant's motion at first instance for security of costs: Gispac Pty Ltd v Michael Hill Jeweller (Australia) Pty Ltd [2020] NSWSC 577. Property searches reveal the respondent does not own or lease any real property in any part of Australia, or have registered securities over any property.
Even though the appellant bears the onus on this question, it is open to infer from the respondent's failure to give evidence of its finances that the respondent lacks means. That is because the respondent is the party best placed to know its own means: New South Wales Insurance Ministerial Corporation v Robertson [1994] NSWCA 227 at 5. I am satisfied that the respondent's financial position is such that there is a real risk the appellant will suffer prejudice if the stay is not granted.
In any event, the respondent does not dispute that: 1. The appellant's notice of appeal contains grounds which are arguable; 2. The respondent has not adduced evidence of its financial position.
The respondent accepts that only the balance of convenience falls to be considered. Its position is that the Court may only grant a stay that is "fair to all parties", citing Cambridge Credit at 694. In its submission, the only "fair" stay, in these proceedings, is one that requires the appellant to pay security, in the full amount of the judgment entered against it. In seeking security in that amount, the respondent argued that the appellant's financial position left the respondent at risk that, if the respondent succeeds on appeal, the full judgment debt might not be paid.
The appellant, however, correctly submitted that there was minimal risk that it would be unable to satisfy the potential judgment debt. That is because the appellant is the wholly-owned subsidiary of a public company, Michael Hill International Ltd, which is listed on the Australian Securities Exchange and which has undertaken by deed of cross-guarantee that it will discharge the appellant's debts if the appellant is wound up. Michael Hill International has given this guarantee, as all publicly listed companies must: ASIC Corporations (Wholly-owned Companies) Instrument 2016/785. The respondent accepts that the listed entity will be able to pay the judgement sum, plus interest.
Mr Jameson, who appeared for the respondent, nonetheless argued that security should be ordered. He did so for three overlapping reasons: 1. The respondent was at risk in circumstances where it was not a beneficiary of the cross-guarantee given by the listed entity and where its rights would only arise upon liquidation. 2. Were I to grant an unconditional stay, I would be treating the respondent's rights under the judgment as diminished. 3. Authority, in particular Woolworths Limited v Strong (No 2) (2011) 80 NSWLR 445; [2011] NSWCA 72, did not compel the conclusion that an unconditional stay should be granted here.
I reject these submissions. As to the first two matters, in circumstances where the respondent accepted that the listed entity is well capable of meeting the judgment sum plus interest, where credit risk is managed on a group basis and there are cross guarantees, it is inconceivable that if the appeal fails the listed entity will permit the filing of an application for the winding up of the appellant, its wholly owned subsidiary. There is no prospect that faced with the possible winding up of a wholly owned subsidiary that the listed company will not pay the judgment debt. To fail to do so would have catastrophic consequences and would, no doubt, be an event of default under numerous commercial arrangements including those with its lenders. Shortly put, I am satisfied on all of the evidence that the respondent is not and will not be at risk in the event that it succeeds in resisting the appeal.
The appellant's submissions on the question of balance of convenience should be preferred. Michael Hill International's financial reports for the 2023 financial year disclose net assets of $188.6 million and operating income of $58.9 million, and there is no doubt that it has the capacity to pay the judgment sum if its wholly owned subsidiary is unsuccessful on appeal. The respondent will suffer little, if any, prejudice by reason of delay. The appeal is being prosecuted promptly and will be heard in just over six weeks. Because it is an appeal from a monetary judgment, the respondent is "protected from the purely financial consequences of any delay by the accrual of interest on the judgment in the meantime": TCN Channel 9 Pty Ltd v Antoniadis [No 2] (1999) 48 NSWLR 381 at [15].
As to the third matter, whilst authority does not compel the grant of a stay, Woolworths v Strong at [68]-[69] provides a persuasive basis for the grant of a stay: [68] The present situation, where restitution needs to be sought at all, arises from the trial judge having failed to follow the usual practice of staying judgments pending appeal where there is a risk that the plaintiff will be unable to repay the money without difficulty or delay if the appeal were to succeed. It is an appropriate time to reiterate the importance of that practice. [69] As well as the trial judge, the Appellant is partly responsible for the situation where the First Respondent is placed in a situation where restitution might cause her hardship. Even though the judge incorrectly granted a stay on condition that the First Respondent pay part of the verdict money, it was open to the Appellant to approach this Court, in its original jurisdiction (not by an application for leave to appeal from the trial judge's order), to seek a stay without such a condition. This Court's original jurisdiction arises under UCPR 51.44. It is likely that this Court would have granted an unconditional stay if asked, if it were established that the money paid may be irrecoverable if the appeal were successful. If the First Respondent argued that refusal of the stay would deprive her of the means of defending the appeal the situation would be somewhat more complicated. However, such an argument is one that the First Respondent could put forward only if she gave instructions that such an argument should be advanced.
This is a case where I am satisfied that the respondent is not at risk and it is fair to both parties that an unconditional stay be granted pending the decision of this Court on the appeal. Of course, there may well be circumstances, as I discussed with Mr Jameson in argument, where a listed entity may be the subject of a successful application for security for costs. In the present case, however, I am satisfied that a grant of an unconditional stay is fair to both parties.
For these reasons, I made the orders at [3] above.

At a glance

Court

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Before

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Judgment (4 paragraphs)

Parties

Legislation Cited (1)

Cases Cited (11)

Cited By (3)