PRACTICE AND PROCEDURE - Primary judge refused to grant a stay of execution on summary judgment - Where applicant has a counterclaim against the respondents - Parry v State Bank of Victoria [1989] WAR 240, considered - Leave to appeal refused.

PRACTICE AND PROCEDURE - Application to raise new arguments not raised before primary judge - New arguments on appeal only allowed in the interests of justice, a test which can only be satisfied in exceptional circumstances - Application also to adduce fresh evidence not before primary judge - Where no explanation for failure to adduce evidence before primary judge - Application refused.

1. The plaintiffs (who are the respondents in this application) made claims against the defendant ('Timelio', the applicant in this application) for amounts alleged to be owing under two convertible note deeds dated 1 March 2022 (the 'CN Deeds') and a settlement deed dated 14 July 2022 (the 'Settlement Deed'). In addition to defending these claims on the basis that no amounts were owing, Timelio counterclaimed against the respondents seeking damages for breaches of contract, misrepresentation and breach of their duties under the Corporations Act 2001 (Cth) ('Corporations Act').
2. The respondents applied for summary judgment in respect of their claims and, on 25 October 2023, a judge in the trial division granted that application in part by ordering that:

(a) Timelio pay each of the respondents:

(i) the sum of $22,000 with interest of $1,609.32 in respect of each respondent's long service leave entitlements which were the subject of the Settlement Deed (the 'long service leave judgment');

(ii) the sum of $110,194.52 with interest of $5,373.87 in respect of the CN Deeds (the 'CN Deeds judgment'); and

(b) there be no stay of execution of these judgments notwithstanding the existence of a counterclaim.

1. Timelio now seeks leave to appeal and (if leave is granted) to appeal the orders granting the CN Deeds judgment (proposed grounds 1 to 5). Those grounds relate, for the most part, to the construction of the terms of the CN Deeds. Timelio contends that, by reason of these matters, the judge wrongly concluded that its defence to the respondents' claims under the CN Deeds had no real prospect of success. Alternatively, Timelio seeks leave to appeal and (if leave is granted) to appeal the judge's refusal to grant a stay of execution of both the long service leave judgment and the CN Deeds judgment until the determination of the counterclaim (proposed ground 6).
2. At the hearing, Timelio sought leave to adduce fresh evidence, namely three pieces of correspondence between the parties from March and April 2023. For the reasons outlined below, we have rejected Timelio's application to adduce fresh evidence.
3. For the reasons that follow, we would refuse to grant leave to appeal in respect of proposed grounds 1 to 6.

1. The respondents established Timelio in around 2015. They had a majority interest in Timelio through a corporate vehicle and were directors and employees of that company. The respondents sold their interest in Timelio in 2022 and, as a consequence, the parties entered into the Settlement Deed. The Settlement Deed provided for the termination of the respondents' employment, their resignation as directors and for the payment of certain entitlements, including long service leave entitlements, to the respondents.
2. In March 2022, Timelio issued convertible notes to the respondents in order to raise capital. The convertible notes were governed by two separate but relevantly identical convertible note deeds, one executed by the first respondent, and one executed by the second respondent (i.e. the CN Deeds). Timelio issued convertible notes to other noteholders around the same time and in total raised approximately $4.6 million. The CN Deeds refer to the fact that each 'Noteholder' to whom convertible notes were issued by Timelio between March and April 2022 entered into a convertible note deed on substantially the same terms as the CN Deeds.
3. The CN Deeds provide that each respondent was to be issued 1000 convertible notes in exchange for paying Timelio a principal amount of $100,000. Upon the occurrence of particular events, the convertible notes would either be converted into shares in Timelio or redeemed for cash.
4. Clause 9 of the CN Deeds deals with redemption of the convertible notes. Clauses 9.1 to 9.3 provide:
   • 9.1 Right to redeem

The Notes cannot be redeemed except by [Timelio] in accordance with this clause 9.

Subject to clause 8, [Timelio] will only redeem the Notes to the extent the Notes have not already been converted by or on the Maturity Date in accordance with this deed and on the Redemption Date, [Timelio] will:

(a) pay the Redemption Amount for each Note to the Noteholder; and

(b) redeem each Note and remove the entry of each Note from the Register.

In respect of any Note redeemed in accordance with clause 9.2, the Noteholder must, on the Redemption Date, provide [Timelio] with the Note Certificate.

1. Thus, in substance, cl 9.2 provides that Timelio will:

(a) redeem any notes which have not been converted by the 'Maturity Date'; and

(b) pay to the Noteholder the 'Redemption Amount' (defined to mean the principal amount plus interest) by the 'Redemption Date'.

1. While the CN Deeds provide for various possible Maturity Dates, the only one relevant to this appeal is the 'Scheduled Maturity Date'. The Scheduled Maturity Date is defined as 'the Sixth Month Anniversary' (in turn defined as 30 September 2022) but also provides that Timelio could extend the Scheduled Maturity Date in the absence of a subsisting event of default to:

(a) ... the First Anniversary [31 March 2023] by giving the Noteholder notice of the extension at least 10 Business Days before the Six Month Anniversary [30 September 2022]; and

(b) .. if the Scheduled Maturity Date has previously been extended to the First Anniversary, ... the Eighteenth Month Anniversary [30 September 2023] by giving the Noteholder notice of the further extension at least 10 Business Days before the First Anniversary [31 March 2023].

1. The CN Deeds relevantly provide that, in respect of a redemption pursuant to cl 9.2, the Redemption Date is ten business days after the Scheduled Maturity Date.
2. On 23 May 2023, the respondents brought this proceeding against Timelio relevantly alleging that the Redemption Amount of $100,000 plus interest of $11,641.10 became payable to each respondent pursuant to cl 9.2 ten business days after the Scheduled Maturity Date of 30 September 2022. As noted above, Timelio then brought a counterclaim alleging breaches of contract, misrepresentation and breach of the respondents' duties under the Corporations Act.
3. Timelio's defence admits that the Redemption Amount has not been paid but alleges that the Scheduled Maturity Date was extended to 30 September 2023 including by amendment pursuant to cl 18(a) of the CN Deeds. Clause 18 provides:

(a) [Timelio] may, by resolution of its Board, modify, alter, cancel, amend or add to all or any of the terms of the Notes in this deed, if: > > > (i) in their reasonable opinion the modification, alteration, cancellation, amendment or addition is:

(ii) necessary to comply with the provisions of any statute or the requirements of any statutory authority; or

(iii) such modification, alteration, cancellation amendment or addition is authorised by a majority, based on the principal amount of all convertible notes issued under the Capital Round, of the Noteholders,

provided that all Noteholders are made aware of such amendments.

(b) Subject to clause 18(a), the parties to this deed may amend this deed in writing and signed by each party to this deed.

1. On 8 August 2023, the respondents filed a summons seeking summary judgment of their claims under the CN Deeds and the Settlement Deed. On 25 October 2023, Justice Matthews delivered oral reasons granting summary judgment in respect of the respondents' claims under the CN Deeds (i.e. the CN Deeds judgment) and part of their claims under the Settlement Deed (i.e. the long service leave judgment).

1. The judge found that the Redemption Amount became payable pursuant to cl 9.2 ten business days after the passing of the Scheduled Maturity Date on 30 September 2022 and that Timelio's defence which alleged it was extended had no real prospect of success.
2. We note in passing that in oral argument before the judge, Timelio submitted that there were two extensions: one on about 14 December 2022 extending the Scheduled Maturity Date to 31 March 2023 (i.e. the first anniversary) and one on 16 March 2023 extending the Scheduled Maturity Date to 30 September 2023. As noted above, the definition of Scheduled Maturity Date only allowed an extension to 30 September 2023 following a separate and earlier extension.
3. As to the defence that the Scheduled Maturity Date was extended to 30 September 2023, the judge noted that Timelio did not dispute that it did not give ten business days' notice of an extension of time to the respondents before 30 September 2022. Such notice was a requirement of an extension to the Scheduled Maturity Date pursuant to the CN Deeds as set out in [11] above. The judge therefore found that the allegation that the Scheduled Maturity Date was extended to 30 September 2023 (in [10] of the defence) was unsustainable.
4. The judge noted that [17] of the defence referred to a letter of 13 April 2023 sent by Timelio's solicitors to the respondents' solicitors, which asserted that the Scheduled Maturity Date had been extended to 30 September 2023 and provided a list of 17 documents, the terms of which are not pleaded or in evidence. The judge noted that she had asked counsel for Timelio whether any of these documents extended the Scheduled Maturity Date and was not provided an answer.
5. The judge rejected a submission by Timelio to the effect that an extension to the Scheduled Maturity Date is apparent from the respondents' failure to seek redemption in September 2022. This is because the judge found that cl 9.2 provides for 'automatic' redemption and that it does not need to be sought by notice or demand from the Noteholder. Timelio's submissions in respect of the second extension (said to have occurred on 16 March 2023) were not accepted on the basis that they could not affect the redemption which had already occurred pursuant to cl 9.2 because the CN Deeds do not provide for a retrospective extension of the Scheduled Maturity Date.
6. The judge therefore concluded that the defence to the claims under the CN Deeds had no real prospect of success and ordered summary judgment for the respondents.
7. The judge dealt with an argument to the effect that the respondents were only able to redeem their convertible notes under cl 13 after the first respondent sent an email on 28 February 2023 (the '28 February email'). That email referred to failures by Timelio to comply with its obligations under the CN Deeds (though not its obligation to pay the Redemption Amount under cl 9.2) and advised that the respondents wished to redeem their convertible notes. It appears that Timelio raised the 28 February email in light of cl 13 of the CN Deeds.
8. Clause 13 addresses a number of matters under the heading 'Events of Default': whether and when notice of any such event is to be given, whether and when any such Event of Default can be remedied, and when certain defined 'Enforcement Actions' can be commenced by Noteholders. Clause 13, titled 'Events of Default', provides as follows:
   • 13.1 Events of Default

Each event or circumstance set out below is an Event of Default, unless waived by the Noteholders by way of Resolution of Noteholders:

(a) if the Company defaults in the due and punctual payment of any money owing under this deed and such default is not remedied within 7 days of issue by the Noteholder of a written notice of default;

(b) if the Company defaults in the observance or performance of any of the obligations contained in this deed and such default is not remedied within 10 Business Days of issue by the Noteholder of a written notice of default;

(c) an application or order is made for the winding up of the Company or for the appointment of a liquidator except an application made to a court for the purpose of winding up the Company which is disputed by the Company acting diligently and in good faith and dismissed within 10 Business Days;

(d) the Company passes a resolution for its winding up or any other Insolvency Event occurs in respect of the Company; or

(e) the process of any court of authority is invoked against the Company or a material part of its property to enforce any judgment or order for any amount.

• 13.2 Noteholder entitled to issue Mandatory Redemption Notice

Following the occurrence of an Event of Default, the Noteholder is entitled to issue a notice to the Company requiring redemption of some or all of its Notes in accordance with clause 9.2 (Mandatory Redemption Notice).

(a) Subject to clauses 13.2 and 13.3(c), no Enforcement Action may be taken by or on behalf of a Noteholder unless it has been approved by a Resolution of Noteholders.

(b) Where a Resolution of Noteholders approves any Enforcement Action, each Noteholder (whether or not the Noteholder has agreed to the Resolution of Noteholders) must do all acts and execute all such documents (except an act or document involving or requiring the Noteholder to incur an obligation or liability or to pay money) and provide such reasonable assistance as may be necessary for the successful and timely prosecution of the Enforcement Action.

(c) Where a Noteholder wishes to take any Enforcement Action which does not involve any Enforcement Action under or in connection with a Security Document (other than the issue of a Mandatory Redemption Notice, which does not require any approval by a Resolution of Noteholders), and a Resolution of Noteholders approving the taking of that Enforcement Action by or on behalf of the Noteholder has not been passed within 5 Business Days from the date the Noteholder notified each other Noteholder in writing that it wished to take the Enforcement Action, the Noteholder may take the Enforcement Action itself.

1. The judge found that cl 13 was an alternative method for redeeming the convertible notes which did not cut across the 'automatic' redemption under cl 9.2.
2. Although not the subject of a proposed ground of appeal, the judge concluded that the respondents were entitled to summary judgment for their long service leave entitlements of approximately $22,000 each and that the counterclaim did not impeach these entitlements, given that Timelio admitted in its defence that each of the respondents had an unpaid entitlement to long service leave of $22,312. However, Timelio denied any liability in excess of that sum. As a result, the judge granted the long service leave judgment with liability in respect of additional long service leave amounts to be determined on the hearing of the counterclaim.
3. Finally, Timelio submitted before the judge that there should be a stay of the execution of the long service leave judgment and the CN Deeds judgment pending determination of the counterclaim which sought damages of $1.4 million. Timelio relied on r 10.07 of the Supreme Court (General Civil Procedure) Rules 2015 ('Rules'). The judge was not satisfied that the application for a stay fell within r 10.07 but, relying on the Court's inherent jurisdiction, declined to grant a stay because she did not consider the existence of the counterclaim meant the respondents should be denied the fruits of their summary judgment.

Relevant principles: application for leave to appeal and summary judgment

1. The applicable principles are not in dispute.
2. This Court recently restated the principles to be applied in granting leave to appeal in Qu v Wilks.[1] Relevantly, an applicant may only be granted leave to appeal if this Court is satisfied that the appeal has a real (as opposed to fanciful) prospect of success. Even if the Court is so satisfied, there remains a residual discretion to refuse leave.
3. This Court set out the test to be applied in summary judgment applications pursuant to s 63 of the Civil Procedure Act 2010 in Lysaght Building Solutions Pty Ltd v Blanalko Pty Ltd as follows:

(a) the test for summary judgment under s 63 of the Civil Procedure Act 2010 is whether the respondent to the application for summary judgment has a "real" as opposed to a "fanciful" chance of success;

(b) the test is to be applied by reference to its own language and without paraphrase or comparison with the "hopeless" or "bound to fail test" essayed in General Steel;

(c) it should be understood, however, that the test is to some degree a more liberal test than the "hopeless" or "bound to fail" test essayed in General Steel and, therefore, permits of the possibility that there might be cases, yet to be identified, in which it appears that, although the respondent's case is not hopeless or bound to fail, it does not have a real prospect of success;

(d) at the same time, it must be borne in mind that the power to terminate proceedings summarily should be exercised with caution and thus should not be exercised unless it is clear that there is no real question to be tried; and that is so regardless of whether the application for summary judgment is made on the basis that the pleadings fail to disclose a reasonable cause of action (and the defect cannot be cured by amendment) or on the basis that the action is frivolous or vexatious or an abuse of process or where the application is supported by evidence.[2]

1. As noted above, the issues before the judge and the proposed grounds of appeal relate to legal issues and do not involve disputed facts. In summary judgment applications where facts are not in dispute, the courts, while noting the caution to be exercised, have referred to the desirability of resolving even complex legal questions after full argument.[3] As Latham CJ said in Dey v Victorian Railways Commissioners:

If, as a result of argument, the court reaches a clear decision which could not be altered by any evidence which could be adduced at the trial, then it is proper in the interests of both parties to dismiss the action instead of allowing the parties to incur completely useless expense.[4]

1. We will address the principles to be applied in reviewing the exercise of the discretion not to grant a stay of execution when addressing proposed ground 6.
2. The respondents contend that each of proposed grounds 1 to 4 involve new arguments which were not put before the trial judge and should not be entertained by this Court.
3. We agree that many of the proposed grounds of appeal raise new arguments not raised before the judge. A party will ordinarily only be permitted to rely on an argument on appeal that was not put before the judge at first instance if the applicant can show that it is expedient and in the interests of justice, a test which will only be satisfied in exceptional circumstances.[5] This Court has held that this principle is applied with less stringency in appeals from summary judgment given that the parties have not had the benefit of a full trial.[6] However, in this instance, Timelio has not discharged its onus of demonstrating that it would be expedient and in the interests of justice to allow new arguments to be raised, particularly where no explanation was proffered for the failure to raise these arguments before the trial judge. With respect, the failure to raise these issues appears to lie with the legal advisers for Timelio. Nevertheless, in this application, we have considered each proposed ground of appeal and determined that they have no real prospect of success.

Application for leave to adduce fresh evidence

1. Before addressing the proposed grounds of appeal, it is appropriate to address the application by Timelio to rely upon fresh evidence. The fresh evidence sought to be adduced consists of two letters sent to Timelio's solicitors by the respondents' solicitors on 11 April 2023 and a notice Timelio alleges it provided to Noteholders on 16 March 2023.
2. Rule 64.13(1)(b) of the Rules states that evidence that was not before the court or tribunal whose decision is sought to be appealed shall not be relied upon on in an appeal unless this Court orders otherwise. Rule 64.13(2) provides that a party may apply to this Court to adduce further evidence. We note that Timelio has not complied with the formal requirements of such an application under r 64.13(3) as to when the application must be filed, its form and the necessary supporting affidavit. Further, even if Timelio had met the formal requirements, we would refuse the application.
3. Generally, the Court will only grant leave to adduce fresh evidence on appeal if it is satisfied of three matters:

(a) the evidence could not have been obtained with reasonable diligence for use at first instance;[7]

(b) the evidence is sufficiently credible; and

(c) there is a high probability that the result would have been different had the evidence been received.[8]

1. It has been held that the approach to admission of fresh evidence in an appeal from summary judgment is less stringent.[9] But even in appeals from summary judgment applications, the Court has regard to the general principles set out in the previous paragraph. For example, in Total Gas Care Pty Ltd v Barry Bros Specialised Services Pty Ltd, Hargrave AJA allowed fresh evidence to be adduced having regard to the fact that there was an explanation for the failure of the legal practitioners to obtain full and precise instructions about the subject matter of the fresh evidence.[10] In Yin v Wu, however, an application to adduce fresh evidence was refused because the evidence lacked credibility.[11]
2. Timelio has not attempted to establish why the material on which it now seeks to rely could not have been put before the trial judge. Indeed, the documents (the letters and the notice) must have been in the possession of Timelio or its solicitors prior to the hearing of the summary judgment application as they were prepared by or provided to Timelio or its solicitors. Further, we do not consider that the evidence would have led to a different outcome in the summary judgment application. As a result, the application for leave to rely upon fresh evidence is refused.

The Learned Judge failed to bind the Respondents to their election of a particular Event/s of Default and associated pre-conditions/procedures for redemption of the Convertible Notes.

1. Timelio contends that the 28 February email constituted the respondents' 'election' to redeem their convertible notes under cl 13 of the CN Deeds following an Event of Default, with the result that the respondents lost any right to redeem the notes under cl 9.2. This is in light of cl 13 (set out above at [23]). Most relevantly, cl 13.2 of the CN Deeds provides that, '[f]ollowing the occurrence of an Event of Default, the Noteholder is entitled to issue a notice to [Timelio] requiring redemption of some or all of its Notes in accordance with clause 9.2 (Mandatory Redemption Notice)'.
2. The respondents contend that this 'election' issue was not raised before the judge. We agree. Nor does it form part of Timelio's pleadings, which refer only to the alleged extensions of the Scheduled Maturity Date in response to the claim for payment of the Redemption Amount.
3. We note that in oral argument counsel for Timelio sought to resile from his contention that the 28 February email constituted an 'election' and asserted that it constituted notice under cl 13.2 that the respondents were seeking redemption of their convertible notes based on Events of Default (i.e. a Mandatory Redemption Notice). This is notwithstanding the fact that Timelio's defence denies that the 28 February email was a written notice of default under cl 13.1. From this basis counsel appeared to contend that there could be an extension of the time for redemption under cl 9.2 after the Scheduled Maturity Date had passed. This argument is related to the other proposed grounds of appeal.
4. In any event, we have formed the view that the substance of proposed ground 1 (whether the 28 February email operated as an election or as a notice under cl 13.2) does not have any real prospect of success. This is because we have formed the view, as set out in response to proposed grounds 2 and 4, that cl 9.2 provides for automatic redemption of the convertible notes independent of any Event of Default or notice of the Noteholders.
5. As to the 28 February email, it provides:

Dear Symon

As you are aware, Charlotte and I are holders of Convertible Notes which were paid for and issued to us on 1 March 2022. The Convertible Note Deed (of the same date) sets out specific obligations that Timelio Pty Ltd will provide to all Noteholders during the period following 1 March 2022. These are:

• Issuance of Warrants (both Subscription and the First Extension Warrants) at the subscription date and First Extension Date;
• Notification to noteholders of the extension of the loan beyond the Six Month Anniversary;
• Communication to Noteholders including monthly updates regarding status of the Next Capital Round;
• Quarterly Management accounts of the Company within 30 days;
• Annual accounts for FY2022.

To date the Company has failed to provide these as outlined in the Note Deed.

In addition, all Noteholders should be treated equally in relation to their rights as Noteholders.

It has come to my attention that Timelio has recently redeemed a single investor's Convertible Note position, redeeming in full both Note Principal and accrued interest on the 2nd February 2023.

We would like to redeem our Convertible Notes immediately and have our loan to the company repaid in full with all applicable accrued interest.

Please call me today so that we can finalise an appropriate mechanism to achieve this.

Kind regards

Andrew

1. Timelio's submissions do not explain how the rights under cl 9.2 (which relate to 'redemption' if the convertible notes have not been converted by the Maturity Date) are inconsistent with the rights under cl 13.2 (which relate to a right to redemption following an Event of Default). We will address this further in dealing with proposed grounds 2 and 4. In our view, there is no reason why there cannot be multiple bases upon which the Redemption Amount could be payable. It is significant that cl 13.2 enables the Noteholder to require redemption of 'some or all' of their convertible notes; cl 13.2 explicitly provides that further redemptions can occur after a Noteholder's exercise of their cl 13.2 rights.
2. Further and in any event, the terms of the 28 February email are not in our view consistent with an election or notice under cl 13.2 to redeem the convertible notes. This is because it does not expressly rely on the alleged failure of Timelio to comply with obligations under the CN Deeds as a basis to claim redemption of the convertible notes. It refers to these alleged failures and states that Timelio redeemed another Noteholder's convertible note on 2 February 2023. It then records that the respondents 'would like to redeem our Convertible Notes immediately and have our loan ... repaid in full with all applicable accrued interest'. We do not consider that the language of the 28 February email could be reasonably construed as an election or notice to rely upon the alleged breaches of obligations by Timelio as a basis, let alone the only basis, for redeeming the convertible notes.
3. For these reasons, we would not grant leave to appeal in respect of proposed ground 1.

The Learned Judge misconstrued the agreed procures [sic - procedures] for redemption when the scheduled maturity date of the Convertible Notes had passed.

1. This proposed ground raises issues relating to proposed ground 4 which are addressed below.
2. Timelio relies on two principal matters. First, it relies upon cl 9.3 of the CN Deeds which provide '[i]n respect of any Note redeemed in accordance with clause 9.2, the Noteholder must, on the Redemption Date, provide [Timelio] with the Note Certificate'. Timelio submits that cl 9.3 is a condition precedent to its obligation to pay the Redemption Amount under cl 9.2.
3. The respondents submit that this contention was not raised before the judge. We agree. In fact, Timelio concedes that the respondents' failure to provide the note certificates was not raised before the judge but contends that it should have been raised by the respondents' counsel or detected by the judge even in the absence of it being raised. With respect, this misconceives the role of counsel for the respondents and of the judge.
4. Further and in any event, we have formed the view this submission is without merit. There is no express reference to cl 9.3 being a condition precedent to Timelio's obligation pay the Redemption Amount and redeem each convertible note in accordance with cl 9.2. The word 'automatic' in the title of cl 9.2 and in the definition of Redemption Date as set out below tends very much against a construction that the obligation in cl 9.3 must be carried out first, and as a condition precedent, to the obligation in cl 9.2. Indeed, Timelio admits at [8] of its defence that the obligation to redeem in accordance with cl 9.2 was 'automatic'.
5. Second, Timelio relies upon cl 13, submitting that its failure to comply with its obligations under the CN Deeds (including the failure to pay the Redemption Amount in accordance with cl 9.2) was an Event of Default with the result that the only way to redeem the convertible notes is pursuant to the process set out in cl 13 (by issuing a 'Mandatory Redemption Notice' pursuant to cl 13.2 and following the mechanism in cl 13.3 for the taking of an 'Enforcement Action').
6. This argument was raised, at least in substance, before the judge. However, in our view, it must also be rejected. In short, this is because we agree with the judge that cl 13.2 provides Noteholders with an independent right (separate from cl 9.2) to issue a Mandatory Redemption Notice if an Event of Default arises under cl 13.1 and that cl 13 does not prescribe a 'procedure' by which 'automatic' redemption under cl 9.2 must occur (i.e. redemption absent an Event of Default).
7. Clause 13.2 provides that '[f]ollowing the occurrence of an Event of Default, the Noteholder is entitled to issue a notice to [Timelio] requiring redemption of some or all of its Notes in accordance with clause 9.2'. In our view, this clause does not and could not have the effect that, after the expiration of the Scheduled Maturity Date, the Redemption Amount is not payable until such a notice is given. The use of the words in cl 13.2 'in accordance with clause 9.2' does not suggest or dictate that the only way to obtain payment of the Redemption Amount is in accordance with cl 13.2 (or cl 13 more generally).
8. Further, other provisions of the CN Deeds are inconsistent with any suggestion that the only way to obtain payment of the Redemption Amount is in accordance with cl 13. Most relevantly, Redemption Date is defined in two different ways depending on the nature of the redemption:

(a) in respect of an automatic redemption pursuant to clause 9.2, the date that is 10 Business Days after the occurrence of the Conversion Trigger Event [relevantly defined as the Scheduled Maturity Date];[12] and

(b) in respect of a redemption in response to a Mandatory Redemption Notice pursuant to clause 13.2, not later than 10 Business days after delivery of a Mandatory Redemption Notice to [Timelio] under clause 13.2.

1. We note that convertible note deeds often contain provisions either for redemption of the convertible notes or for the notes to be converted into shares in the issuing company. That is true of the CN Deeds: cl 8 provides for conversion into shares and cl 9 provides for redemption. Further, the key legal and commercial provisions of a convertible note deed are the amount of each note, and for the purpose of redemption, the amount to be paid when the note is redeemed and when that amount is to be repaid. These commercial purposes are evident from the words used in cl 9.2, including its title and the definitions it incorporates.
2. Further, before this Court, Timelio failed to explain why the provisions of cl 13.3 are relevant to this proceeding.
3. Clause 13.3 in substance provides that certain kinds of actions, namely 'Enforcement Actions', cannot be taken by an individual Noteholder:

(a) unless a 'Resolution of Noteholders' has been passed providing approval for any Enforcement Action; or

(b) until five business days after a 'Resolution of Noteholders' seeking approval of any Enforcement Action has failed to pass provided that that Enforcement Action is not in connection with any Security Document.

1. Clause 13.3(c) also states that 'the issue of a Mandatory Redemption Notice ... does not require any approval by a Resolution of Noteholders'.
2. The definition of Enforcement Action is of some relevance. It provides:

(a) the exercise of any right, power, discretion or function conferred or permitted by a Security Document ....

(b) the taking of any step or action to enforce [Timelio's] obligation to pay any amount which is due and payable by [Timelio] in respect of any convertible notes issued under a Convertible Note Deed as a result of or in response to an Event of Default occurring, or

(c) the taking of any step or action to enforce any of [Timelio's] other obligations owed to a Noteholder in respect of any convertible notes issued under a Convertible Note Deed which the applicable Noteholders agree by Resolution of Noteholders in writing is an Enforcement Action for the purposes of this definition.

1. In our view, properly construed in light of cl 9.2, cl 13 creates a mechanism to allow Enforcement Actions to be taken prior to the time of the Maturity Date. Up until that time, there is a requirement for the Noteholders to comply with cl 13.3 in order to take an Enforcement Action. It would appear that the commercial purpose of this clause is to limit the types of actions that could be pursued prior to the Maturity Date which might affect the interests, and in particular the security interests, of all Noteholders without the approval of a majority of them. This is in circumstances where, as noted above, all CN Deeds were executed with all Noteholders on substantially the same terms. This regime is quite different from the regime that would apply after the Maturity Date. In our view, there is nothing ambiguous about the nature of the rights contained in cl 9.2 and cl 13 in the CN Deeds or how those rights are to be enforced.
2. Furthermore, Timelio has not established that a claim for payment of a Redemption Amount under cl 9.2 is an Enforcement Action as defined in the CN Deeds. In relation to that issue, it is noteworthy that Timelio did not explain:

(a) whether the CN Deeds are a 'Security Document' for the purpose of (a) of the definition;

(b) how paragraph (b) of this definition can apply given that an 'Event of Default' relevantly requires written notice of default which Timelio denies has occurred; or

(c) how (c) of the definition can apply given that there is no evidence of any relevant Resolution of Noteholders providing that this claim is an Enforcement Action.

1. For these reasons, we would not grant leave to appeal in respect of proposed ground 2.

The Learned Judge misconstrued the combined operation of clauses 9 and 18 of the Convertible Note Deed to mean that the scheduled maturity date could not be extended by a majority of note holders without the Respondents' agreement.

1. Proposed ground 3 is related to proposed ground 4 but we will deal with each proposed ground in turn.
2. Timelio contends that the Scheduled Maturity Date was extended to 30 September 2023 by amendment to the CN Deeds pursuant to cl 18(a) without the consent of the respondents. We have set out cl 18 above. The relevant terms are as follows:

(a) [Timelio] may, by resolution of its Board, modify, alter, cancel, amend or add to all or any of the terms of the Notes in this deed, if:

(iii) such modification, alteration, cancellation, amendment or addition is authorised by a majority, based on the principal amount of all convertible notes issued under the Capital Round, of the Noteholders,

provided that all Noteholders are made aware of such amendments.

(b) Subject to clause 18(a), the parties to this deed may amend this deed in writing and signed by each party to this deed.

1. Timelio now asserts that the first extension was undertaken with the approval of a majority of Noteholders (by value) on 14 December 2022 (the 'December approval') and by resolution of the directors of Timelio of the same date amending the CN Deeds (the 'December amendments') which amended the definition of Scheduled Maturity Date. The December approval and the December amendments are in evidence, but the judge was not taken to them. The second extension is alleged to have occurred by notice dated 16 March 2023 which is not in evidence (and which is one of the documents which is sought to be adduced under the applicant's application for leave to adduce fresh evidence).
2. We note in passing that cl 2(b) of the December approval entitled 'Background' states that 'although [Timelio] intended to give that notice to the Noteholders of an extension of the Scheduled Maturity Date, it did not do so within the timeframe required by each [CN Deed]'.
3. We also note that a majority of Noteholders purported to amend the CN Deeds again on 26 September 2023 to extend the Scheduled Maturity Date to 31 March 2024. These amendments also purported to amend cl 9.2 to include an explicit power for Timelio to redeem 'some or all of the Notes' prior to the Redemption Date provided that any such redemption was authorised by a majority of Noteholders, based on the 'principal amount of all convertible notes issued under the Capital Round'.
4. Timelio now submits that the judge erred in holding that any change to the Scheduled Maturity Date in the CN Deeds required the respondents' agreement. Timelio submits that cl 18(a), which refers only to the amendment of the 'Notes', created a power to amend the CN Deeds. Timelio submits this is because 'the ordinary or natural means to amend the Notes in the circumstances was to amend the Convertible Note Deed' and 'cl 18(a) was to provide a means to amend the Notes. It is implicit in the clause that the means of doing this is to amend the CN [Deed]'.
5. The CN Deeds define a 'Note' as 'a convertible note to be issued by [Timelio] to the Noteholder in accordance with this deed'. Schedule 1 of the CN Deeds sets out the 'details' of the convertible notes consisting only of the Noteholder's name, address and number of convertible notes (and the principal amount of those notes). However, no such 'note' issued to the respondents, or any other Noteholders is in evidence. Relatedly, 'Note Certificate' is defined to mean 'the certificate issued by [Timelio] in the form of Schedule 2 [to the CN Deed] indicating the number of Notes to which the Noteholder is entitled and the Principal Amount'.
6. The respondents submit that the construction which Timelio now advances had not been advanced before with the result that the judge did not consider any interrelationship between cll 9 and 18. Further, they submit that the power to amend under cl 18(a) relates to the power to amend the terms of the convertible notes issued in accordance with the CN Deeds, and not the terms of the CN Deeds themselves.
7. We agree that the construction of cll 9 and 18 now advanced by Timelio was not advanced before the judge. No reference was made to cll 18(a) or 18(b) in the written or oral submissions of Timelio before the judge.
8. Further and in any event, that construction has no real prospect of success.
9. First, Timelio's construction is contrary to the express words of cl 18(a), which refer only to amending 'the terms of the Notes', not the relevant CN Deed. Second, the language of cl 18(b) indicates an objective intention that cl 18(b) was intended to be the sole means of amending each CN Deed as it refers to 'this deed' in contrast to the wording of cl 18(a).
10. Third, Timelio contends that in an arrangement such as this, it was commercially sensible to allow the CN Deeds to be amended by the majority of Noteholders without the consent of the parties to the CN Deeds. The basis of this broad and far-reaching assertion was not made clear. However, to the extent that Timelio or a majority of Noteholders wanted to extend the Scheduled Maturity Date, the CN Deeds expressly provided that Timelio had the power to unilaterally extend the Scheduled Maturity Date by giving ten business days' notice to each Noteholder, and relevantly the respondents, before 30 September 2023. That was the power expressly vested in Timelio in light of the commercial objectives of the parties. In our view, Timelio's proposed construction of cl 18(a) and allegations of commerciality must be considered in light of the CN Deeds as a whole and in particular cl 9.2.
11. Fourth, we repeat our comments in [54]-[63] above to the effect that cl 9.2 provides for 'automatic' redemption of the convertible notes, independent of the procedure in cl 13.
12. For these reasons, any interpretation that would allow an extension to the Scheduled Maturity Date without the agreement of the respondents, by construing the specific reference in cl 18(a) to 'Notes' as creating a power to amend the CN Deeds, cannot be accepted.
13. Timelio also relies on the words '[s]ubject to clause 18(a)' at the beginning cl 18(b) in support of its construction. In our view, the words 'subject to' in cl 18(b) do not assist Timelio, as these words could only operate to limit the scope of cl 18(b), not to expand the scope of cl 18(a) beyond its express terms.
14. As a result, Timelio's submission that the Scheduled Maturity Date was extended by the December amendments (and the second extension on 16 March 2023, which was dependent on those amendments) has no real prospect of success. Accordingly, we would not grant leave to appeal in respect of proposed ground 3.

1. Timelio's application for leave to appeal provides that proposed ground 4 is as follows:

The Learned Judge misconstrued the combined operation of clauses 9 and 18 and the meaning and practical effect of the word "automatic" in the Convertible Note Deed to mean that an individual Noteholder could rely on "automatic" redemption of the Convertible Notes at a time after said maturity date had been extended.

1. Timelio's written case, however, frames proposed ground 4 as:

Failing to find a construction was open where amendment of the Schedule Maturity Date [sic] was possible before any election to redeem by the Noteholder was exercised.

1. Both of these grounds appear to challenge the judge's finding that the CN Deeds do not provide for retrospective extensions of the Scheduled Maturity Date under cl 18(a). For the reasons set out above however, cl 18(a) does not provide any power to amend the CN Deeds, retrospectively or otherwise. For this reason alone, proposed ground 4 (in either form) must fail.
2. In any event, the judge was correct to find that the Scheduled Maturity Date could not be extended retrospectively.
3. Timelio also contends that the effect of cl 9.2 is that, upon the Maturity Date, the respondents became entitled to call for redemption and then take Enforcement Action upon non-payment. However, for the reasons set out in [54]-[63] above, we do not consider this construction is correct or reasonably open.
4. Timelio submits that the construction to the effect that cl 9.2 provides for automatic redemption is uncommercial because, upon the Redemption Date, Timelio would be obliged to repay all the 'capital necessary and essential for the operation of the business back to all investors/Note Holders' which would have closed the business. There is no evidence that this would have been the effect of redeeming the convertible notes or, more relevantly, that this was an objective background fact known to the respondents at the time of entering the CN Deeds. But even accepting this, it is not at all clear how Timelio's construction ameliorates this uncommercial outcome; under its construction, Timelio would still be obliged to repay the same amounts following the Enforcement Action procedure it contends for.
5. As to commerciality, as noted above, Timelio had the power to extend the Scheduled Maturity Date pursuant to the definition of Scheduled Maturity Date by giving ten business days' notice to the Noteholders but did not do so.
6. Further, we do not accept Timelio's submission to the effect that the respondents in some way accepted or acquiesced to the extension because they did not seek to enforce their rights under cl 9.2. We refer to our comments in response to proposed ground 1.
7. We reject the submission that, because there was no express term that the Scheduled Maturity Date could not be retrospectively extended, as a matter of construction, a court should conclude it could be extended under cl 18(a). We refer to our conclusion in respect of proposed ground 3 (most relevantly because such a submission ignores the effect of cl 9.2 and the requirement for notice prior to the Scheduled Maturity Date).
8. For completeness, in the event we are wrong in respect of proposed ground 3, it is one thing to say that prior to the Redemption Date, the Scheduled Maturity Date could be extended unilaterally by Timelio pursuant to the definition of Scheduled Maturity Date or by a majority of Noteholders under cl 18(a). However, it is quite another thing to conclude that such an extension may be granted after the Redemption Date has passed and the respondents' right to payment of the Redemption Amount has accrued. In our view, such a construction would require clear and unequivocal language. However, there is nothing in the language of cl 18(a) in light of the other provisions of the CN Deeds (including most relevantly cl 9.2) which would envisage or allow such an extension after the Redemption Date for the convertible notes has passed with the result that the Redemption Amount is due and payable under cl 9.2.
9. For these reasons, we would not grant leave to appeal in respect of proposed ground 4.

By reason of the failures referred to in grounds 1 - 4 the Learned Judge wrongly concluded the Appellant's defence to the claim for redemption of the notes had no real prospects of success and thereby merited summary judgement [sic].

1. It follows from the disposal of proposed grounds 1 to 4 that proposed ground 5 must also fail. The judge made no error in concluding that Timelio's defence to the claim for the Redemption Amounts had no real prospect of success and ordering summary judgment accordingly.

The Learned Judge wrongly exercised her discretion with regard to staying the operation of her orders for judgement [sic] until the disposal of the counterclaim.

1. As noted above, after granting summary judgment, the judge declined to stay execution of the judgment debt. On 23 November 2023, the judge granted leave to the respondents to issue a garnishee summons in relation to the summary judgment amount. On the return of the garnishee summons on 7 December 2023, the garnishee summons was dismissed and Timelio was ordered to pay the amount of $281,554.41 into court until further order. In oral argument, counsel for Timelio submitted that his client was content for these amounts to remain in court pending the determination of the counterclaim.
2. By its counterclaim, Timelio alleges that the respondents, as directors, caused Timelio to increase their salaries in breach of a shareholders deed executed in 2016, failed to accurately record the annual leave they had taken, failed to keep company records of Timelio in breach of ss 181 and 182 of the Corporations Act, and caused Timelio to wrongly reimburse the respondents' childcare expenses. Timelio further alleges that the Settlement Deed was vitiated by the respondents' misrepresentation regarding these issues in contravention of s 18 of the Schedule 2 of the Competition and Consumer Act 2010 (Cth) (Australian Consumer Law). The counterclaim seeks damages totalling approximately $1.4 million and a declaration that the Settlement Deed is void ab initio.
3. In its written case, Timelio submitted that the judge erred in refusing to stay execution of the summary judgment for reasons which 'were unstated and in their effect not just, convenient or logical and devoid of reasons' but did not otherwise refer to the failure to provide reasons. Proposed ground 6 relies solely on an alleged wrongful exercise of discretion. In the course of argument, we raised with counsel for Timelio that this alleged failure to give reasons was not within proposed ground 6. Counsel asserted that the failure to give reasons was a House v The King error. Plainly, that is not so.[13] Further, in the circumstances of this case, we do not consider it is appropriate that Timelio now have leave to rely upon a further proposed ground and we would have refused leave to amend the grounds of appeal if such an application had been made. This is for three principal reasons: the decision to refuse the stay relates to a matter of practice and procedure; Timelio had the opportunity to consider its proposed grounds of appeal before issuing its application; and, for the most part, those proposed grounds already raised many issues not raised before the judge.
4. In any event, we will address the alleged failure to give reasons below.
5. In its written case, Timelio focuses upon the existence and nature of the allegations in the counterclaims to contend it would be 'unjust' to reward the respondents by making orders for the immediate payment of the long service leave judgment and the CN Deeds judgment (totalling approximately $278,000). In oral argument, Timelio submitted that it was 'normative' for a court to grant a stay where the defendant has a counterclaim in which the amount claimed exceeds the summary judgment sum, relying upon the decision of Malcom CJ in State Bank of Victoria v Parry.[14]
6. The respondents contend that r 10.07 of the Rules, which was relied upon before the judge, has no application. Further, they contend that Timelio has not identified any error of the kind required by House v The King, particularly in circumstances where the judge expressed scepticism about the strength of the counterclaim.
7. It is necessary to say something about the arguments before the judge and her reasons on the stay application. After determining that summary judgment should be entered in respect of the CN Deeds judgment and the long service leave judgment, the judge heard oral argument on Timelio's application for stay of execution of those judgments. Her Honour stated that she would not make any orders for set off of the long service leave claim given the statutory nature of that entitlement. The judge then invited argument from counsel for Timelio (the same counsel who appeared for Timelio in this Court) in respect of the stay application.
8. Counsel made very brief oral submissions. After referring to the damages sought in counterclaim, counsel for Timelio contended that 'in the ordinary course the plaintiff shouldn't be given the advantage of an early judgment when a larger judgment may in effect reverse payments made to them.' He then accepted that there should be a 'carve out' of the long service leave judgment. No other arguments were advanced.[15]
9. Counsel for the respondents raised a number of matters in opposition to the stay including that r 10.07 did not apply, that the counterclaim was weak, and that there was evidence that Timelio might sell its assets or business causing prejudice. Counsel for Timelio was then invited to respond and made very brief oral submissions referring to r 10.07 and the fact that the counterclaim was alleged as a set off in the defence.
10. The judge then immediately addressed these arguments. As noted above, the judge was not satisfied that the application for a stay fell within r 10.07. That was undoubtedly correct given r 10.07 applies to stay of a claim (not a judgment) where the defendant admits the claim and counterclaims. This was conceded by counsel for Timelio in oral argument before this Court.
11. Rather, relying on the court's inherent jurisdiction, the judge declined to grant a stay because she did not consider the existence of the counterclaim meant the respondents should be denied the fruits of their summary judgment. In our view, this conclusion must be read in the context of, and in light of, the immediately preceding oral argument (including the very limited argument of Timelio). This is confirmed by the fact that the judge expressly stated she did not have regard to the respondents' submission that Timelio might seek to sell its assets. Further, as noted above, the judge stated that she did not consider the counterclaim particularly strong. In all these circumstances, there is no basis for the assertion of an alleged failure to give adequate reasons. We note that counsel for Timelio did not seek further reasons for the judge's decision following the ruling.
12. We do not accept Timelio's submission that it is 'normative' for the court to grant a stay where the defendant has a counterclaim in which the amount claimed exceeds the summary judgment sum. Rather, while we acknowledge that courts often grant a stay in such circumstances, the power of the court is discretionary, and the authorities have identified the factors to be taken into account in the exercise of that discretion. These include the strength of the counterclaim, the degree of connection between the claim and the counterclaim; any likely delay before the determination of the counterclaim and the risk of prejudice to either party.[16] As is evident from the previous paragraphs, counsel for Timelio did not refer the judge to these relevant principles or rely on any relevant factor save that the defence sought to set off the amounts claimed in the counterclaim with any liabilities.
13. As to the challenge to the judge's decision, this Court will exercise considerable restraint in interfering with discretionary decision of an interlocutory nature relating to a matter of practice and procedure which does not determine substantive rights, such as the refusal to grant a stay of execution.[17] To overturn the refusal to grant a stay, the appellant must identify a House v The King error. In our view, no such error has been identified.
14. But even if it had been, we can see no proper basis to interfere with the judge's decision. This is in circumstances where:

(a) the counterclaim for the most part arises under a different document and relates to different facts to the enforcement of the CN Deeds which is the primary component of the summary judgment liability;

(b) the respondents' long service leave entitlements are statutory in nature and the fact that Timelio admitted part of those entitlements were owing;

(c) the judge considered that the counterclaim was not particularly strong and Timelio did not demonstrate that the judge made an error in this regard;

(d) there is no suggestion that the respondents will not be able to satisfy a judgment debt for the counterclaim; and

(e) the likely delay in the hearing of the counterclaim.

1. As to the last matter, we are not persuaded that the conduct of the counterclaim will be as straightforward as Timelio contends. In the course of oral argument, counsel for the respondents stated that a discovery order made in September 2023 had not yet been complied with by the parties (which was not disputed). Based on this fact, the material before this Court in relation to the counterclaim and the number of cases in the Commercial Court awaiting trial, it seems there will be some delay in the hearing of the counterclaim.

1. As a result, we would refuse leave to appeal in respect of all the proposed grounds of appeal.
2. There is one final matter to note. As is evident from these reasons, nearly all of the issues raised by the proposed grounds were not raised below. Further, the judge was not taken to relevant principles and authorities relevant to the argument before the judge, particularly in relation to Timelio's application for a stay of execution. That was the appropriate time for the parties to raise all issues relevant to the summary judgment application. This application and (if leave were granted) this appeal is not a hearing de novo and not an occasion to 're-run' Timelio's opposition to the summary judgment application by raising new and different arguments. Without expressing a concluded view, and subject to hearing the parties further, it seems to us that this conduct may have resulted in unnecessary costs to the respondents and which may need be reflected in an appropriate costs order.

[1] [2023] VSCA 198, [67] (Beach, Kennedy and Walker JJA).

[2] [2013] VSCA 158; (2013) 42 VR 27, 40 [35] (Warren CJ and Nettle JA).

[3] See, General Steel Industries Inc v Cmr for Railways (NSW) [1964] HCA 69; (1964) 112 CLR 125, 130 (Barwick CJ). See also the approach adopted in Theseus Exploration NL v Foyster [1972] HCA 41; (1972) 126 CLR 507, 514 (Barwick CJ), 515 (Gibbs J), 523 (Stephen J) concerning a summary judgment application on questions of law.

[4] (1949) 78 CLR 62, 84-5.

[5] Water Board v Moustakas (1988) 180 CLR 491, 497 (Mason CJ, Wilson, Brennan and Dawson JJ); Sambucco v Sambucco [2023] VSCA 199, [29] (McLeish, Walker JJA and Gorton AJA).

[6] Chan v Liu [2020] VSCA 28, [45]-[52] (Beach, Kyrou and Kaye JJA).

[7] This is reflected in the requirements imposed by r 64.13(3)(c)(iv) of the Rules.

[8] Giles v Jeffrey [2016] VSCA 314, [207] (Santamaria and Kyrou JJA and Elliot AJA); Yin v Wu [2023] VSCA 130, [153]-[154] (Kyrou, T Forrest and Hargrave JJA).

[9] Yin v Wu [2023] VSCA 130, [154].

[10] [2012] VSCA 303, [19], (Hargrave AJA, with Whelan JA agreeing at [26]).

[11] Yin v Wu [2023] VSCA 130, [155]-[157].

[13] See House v The King (1936) 55 CLR 499, 505 (Dixon, Evatt and McTiernan JJ).

[14] [1989] WAR 240, 246 (Malcolm CJ) ('Parry').

[15] Transcript of Ruling (25 October 2023) 16.06-16.

[16] Parry [1989] WAR 240, 246 (Malcom CJ); New Resource Holdings Pty Ltd v Lunt (No 3) [2008] WASC 221, [32]-[40] (Templeman J); MAK Industrial Water Solutions Pty Ltd v Doherty [No 2] [2023] WASC 279, [156]-[167] (Quinlan CJ).

[17] Adam P Brown Male Fashions Pty Ltd v Philip Morris Inc [1981] HCA 39; (1981) 148 CLR 170, 177 (Gibbs CJ, Murphy, Aickin, Wilson and Brennan JJ), citing In Re the will of F.B. Gilbert (dec). [1946] NSWStRp 24; (1946) 46 SR (NSW) 318, 323 (Jordan CJ).