Orrong Strategies Pty Ltd & Ors v Village Roadshow Ltd [2007] VSCA 320

Court of Appeal (Vic)|2007-11-23|Before: MAXWELL P and ASHLEY JA

PRACTICE AND PROCEDURE - Appeal - Stay of execution - Impecunious appellants - Respondent as judgment creditor issued creditor's statutory demand and bankruptcy notice - Bankruptcy of individual appellant inevitable unless stay granted - Whether irreversible prejudice - Whether risk of bankruptcy caused by appellant's arrangement of his financial affairs - Whether bankruptcy would render appeal nugatory - Whether 'exceptional circumstances' warranting grant of stay - Whether stay would prejudice respondent - Whether appeal hopeless - Stay granted.

2 Although Village made no concession, it was apparent that the appellants could not - individually or collectively - satisfy the judgment. Village had already served on each of the corporate appellants ("Orrong" and "Remut" respectively) a creditor's statutory demand and had served the second appellant, Peter Ziegler, with a bankruptcy notice. It was inevitable, unless a stay was granted, that Mr Ziegler would be bankrupted and Orrong and Remut be wound up in insolvency.

3 The principal ground of the stay application concerned the adverse impact on Mr Ziegler of becoming bankrupt. If that occurred, he would not be able to be a company director or practise as an accountant or, without leave of the court, as a solicitor. In an affidavit Mr Ziegler said:

As a matter of reality, my ability to earn any material remuneration by way of consulting services or otherwise will effectively be eliminated. My professional and business life will for all intents and purposes be destroyed. Given the likely length of time it will take for the appeal to be heard, ... [even] if the appeal would be successful, the loss, harm and prejudice to me by virtue of any intervening bankruptcy will be irreversible.

4 Village pointed out that Mr Ziegler's vulnerability to bankruptcy is the direct result of arrangements which he deliberately put in place, when he was a partner in a large accounting firm, to ensure that he would not personally be exposed to losses of the firm. Mr Ziegler frankly states in his affidavit that he has always conducted his personal financial affairs so that, apart from shares which he inherited, he owns no material assets of any significant value, nor are any material assets held by any other person on his behalf. That being so, Village argued, Mr Ziegler could not now be heard to protest when the advent of a substantial judgment debt rendered him liable to bankruptcy. The respondent also contended that other substantial assets were, or had been, held by entities controlled by Mr Ziegler and that these funds should be made available to satisfy the judgment.

5 We concluded that the matters relied on by Mr Ziegler did constitute "exceptional circumstances" warranting the grant of a stay.[1] We accepted that the prejudice flowing from his being made bankrupt was likely to be, to a significant degree, irreversible even if he won his appeal. To that extent, success on the appeal would in a very real sense be nugatory. There was force in Village's argument that Mr Ziegler had brought this situation upon himself by the deliberate structuring of his affairs but, in the absence of any suggestion that Mr Ziegler's divesting himself of assets had occurred in anticipation of the present litigation, we did not think that this consideration outweighed the matters favouring a stay.

6 As to the corporate appellants, we concluded that there were sensible, practical reasons why their stay applications should also be granted. Given the overlap of issues and interests between Ziegler and the two companies, we did not think that it would be workable for him to conduct his own appeal while a liquidator was - if he determined to do so - conducting the respective appeals of the companies.

7 Village argued that it would suffer "significant, irremediable prejudice" in the event that a stay was granted. In essence, the submission was that the grant of a stay would delay Mr Ziegler's bankruptcy and the winding-up of the companies and this, in turn, would delay the commencement of the "relation back" periods within which questionable transactions might be investigated by the trustee in bankruptcy or the liquidator (as the case may be).[2] This is clearly right as a general matter, but no specific prejudice was identified - nor could it have been, given that Village is unaware of the dealings (if any) which might warrant such investigation. Even with the deferment which a stay will cause, the relation-back periods will, in various circumstances, extend a long way back: in a winding-up, four years for a transaction involving a related party, and 10 years for a transaction intended to defeat creditors; in a bankruptcy, five years for a transaction at undervalue and an unlimited period for fraudulent dispositions.

8 Village also pointed, correctly, to the recognised public interest in the winding-up of insolvent companies. Once again, however, this general consideration could not displace the specific considerations, peculiar to this case, which favoured the grant of a stay.

9 We should mention one further submission advanced for Village. It was submitted that the appeal was near hopeless although in prospect it would require close to a retrial. In the event that the corporate appellants were in liquidation, counsel argued, the liquidator might well determine not to proceed so there would be a virtue in the companies being wound up.

10 We could not say on the present state of the material that the prospects of appeal are near hopeless; and we would in any case doubt the propriety of refusing a stay on the ground that a liquidator of the corporate appellants might determine not to proceed with their appeals.

[1] See, for example, Challenge Charter Pty Ltd v Curtain Brothers (Qld) Pty Ltd [2004] VSCA 66; (2004) 9 VR 382, 385 [10].

At a glance

Court

Decision date

Before

Source

Judgment (15 paragraphs)

Parties

Cases Cited (1)