Tre Cavalli Pty Limited v The Berry Rural Co-operative Society Limited

Judgment 1By notice of motion filed on 14 June 2012, the appellant, Tre Cavalli Pty Ltd ("Cavalli"), seeks an order staying execution of two District Court judgments. Each is a judgment deemed by s 368(5) of the Legal Profession Act 2004 to have arisen upon filing in the registry of the District Court of a certificate under s 368(1) of that Act in respect of an amount of costs assessed as a result of the making of a costs order by the District Court. There were two such orders against Cavalli and two assessments, one of $68,262.03 and the other of $1,582.09, making a total of $69,844.12. 2It is necessary to give a general description of the proceedings in which the two costs orders were made. 3Cavalli is a cattle breeder. In 2007, it purchased certain cattle vaccine from The Berry Rural Co-Operative Society Ltd ("Berry"). The vaccine had been manufactured by Fort Dodge Australia Pty Limited ("Fort Dodge"). Cavalli commenced proceedings in the District Court against both Berry and Fort Dodge because certain of its cattle died and others were injured after being injected with the vaccine. 4The claim against Berry proceeded to trial. The essence of the claim was that the vaccine sold by Berry to Cavalli was not of merchantable quality. That proposition was not accepted by Acting Judge Puckeridge who, in December 2011, dismissed Cavalli's claims against Berry. 5On 3 May 2012, Cavalli filed a notice of appeal in this Court. On 18 May 2012, Berry filed a motion seeking an order that the appeal be dismissed. That motion has not yet been determined. The appeal remains on foot. 6Fort Dodge was the second defendant in the District Court proceedings but the case brought by Cavalli against it did not proceed to trial. On 26 June 2009, two relevant orders were made by consent as between Cavalli and Fort Dodge: first, an order that the proceedings be dismissed as against Fort Dodge and, second, an order that Cavalli pay Fort Dodge's costs of the proceedings. That costs order was the source of the later deemed judgments totalling $69,844.12. 7Despite the orders of 26 June 2009, Fort Dodge remained a party to the District Court proceedings. This is because Berry had filed a cross-claim alleging a right of contribution or indemnity against Fort Dodge as the manufacturer of the vaccine, in the event that Berry itself should be found liable to Cavalli. In the result, of course, that did not happen. 8When it filed its notice of appeal on 3 May 2012, Cavalli included Fort Dodge as a respondent, in addition to Berry, taking the view that Fort Dodge, as a cross-defendant sued by Berry in the original action, it is a necessary party to the appeal. 9The significant point for present purposes is that, although Cavalli's notice of appeal names Berry as first respondent and Fort Dodge as second respondent, it seeks no relief against Fort Dodge. In particular, Cavalli makes no challenge to the orders for costs made by consent on 26 June 2009 or to the deemed judgments that arose through the filing of certificates of assessment of the costs the subject of those orders. 10The situation is thus one in which Cavalli, by the notice of motion now before me, seeks a stay of execution of two judgments in circumstances where there is no challenge in this Court to those judgments and no argument whatsoever that the underlying costs orders that generated them should be upset or reviewed. 11The reason why it is said that the Court of Appeal should stay execution of entirely unimpugned judgments totalling $69,844.12 is, in essence, that, unless execution of them is stayed, the appeal that Cavalli has instituted will be stultified - the appeal, that is, in which Cavalli will seek to argue that its District Court proceedings against Berry should not have been dismissed and that it should have been awarded damages against Berry. 12In order to understand this argument, it is necessary to refer to further facts. 13On or soon after 13 March 2012, Fort Dodge served on Cavalli a statutory demand under s 459E of the Corporations Act 2001 (Cth) in respect of the two judgment debts totalling $69,844.12. Cavalli neither paid the sum demanded within the specified period of 21 days (or at all) nor made an application under s 459G to have the statutory demand set aside. Non-compliance with the statutory demand therefore occurred and, by virtue of s 459C(2)(a) of the Corporations Act, Cavalli was deemed to be insolvent for the purposes of an application under s 459P for an order for winding up in insolvency. 14Such an application has been made by Fort Dodge. On 18 May 2012, Fort Dodge filed an originating process in the Federal Court of Australia seeking winding up of Cavalli in insolvency. Those Federal Court proceedings currently stand adjourned until tomorrow, 22 June 2012. 15Cavalli refers to the clear interest that Fort Dodge might be thought to have in avoiding determination of the appeal pending in this Court. If Cavalli, on appeal, succeeds in establishing liability of Berry for the allegedly defective vaccine, questions of contribution as between Berry and Fort Dodge will no longer remain academic. It is therefore in the commercial interests of Fort Dodge, Cavalli says, that the result at first instance in the District Court remains undisturbed and, therefore, that the pending appeal should not proceed. 16Cavalli says that it should be inferred that Fort Dodge's purpose in pursuing the winding up proceedings in the Federal Court is to stifle Cavalli's appeal to this Court. If a winding up order is made and a liquidator is appointed, pursuit of Cavalli's appeal will be put out of the hands of its directors and under the control of a liquidator who, Cavalli says, is likely to be less willing and less able (in financial terms) - or both - to prosecute the appeal than the directors are. Reference is made to evidence suggesting that Cavalli does not have the financial capacity to pay $69,844.12. 17I do not think that the suggested inference can be drawn. If the cause of action on appeal is a good and viable cause of action, it is of that quality whether decision-making within Cavalli rests with its directors or with a liquidator. Fort Dodge, it may safely be assumed, will not offer financial support for the pursuit of the appeal, regardless of who the Cavalli decision-makers are. And there is nothing to suggest that directors who are unwilling or unable to provide money to allow the company to pay its legitimate debts of $69,844.12 would (or could) provide money to pursue the appeal. It was said from the bar table that lawyers are assisting Cavalli in the appeal on a "no win no fee basis". There is no apparent reason of logic why their attitude should be different according to the identity of the company's decision-makers. 18All these matters involve a significant degree of speculation and supposition. It is sufficient to say that I see no sufficient factual basis for the suggested inference. 19Counsel for Cavalli referred to the decision of this Court in Kalifair Pty Ltd v Digi-Tech (Australia) Ltd [2002] NSWCA 383; (2002) 55 NSWLR 737. The Court there made orders staying all proceedings on certain judgments until determination of the appeal. An apprehension that the judgment debtor might be put into liquidation because of the judgment debts featured prominently in the Court's assessment. The joint judgment of Handley JA, Sheller JA and Ipp JA contains, at [21] - [23], the following passage: " [21] In the present cases if stays are refused the judgment creditor would be free to serve statutory demands and proceed to winding-up. The prosecution of the appeals would then be stayed automatically and the stays would continue unless and until the liquidator elected to prosecute the appeals. The directors would lose control of the litigation and the creditors, including the judgment creditor, would have a say in any decision to proceed. [22] The directors would thus suffer delay and difficulty and incur additional expense in securing a decision from the liquidator to proceed with the appeals. [23] Three of the four appellants have no assets and in these cases the real purpose of any winding-up proceedings can only be to stop the appeals. . . ." 20As counsel for Fort Dodge pointed out, however, there is a crucially significant difference between Kalifair and the present case. The judgments affected by the stay in Kalifair were judgments challenged in the appeal itself. The Court formed the view that there were serious questions to be argued on appeal. A distinct possibility that the judgments might be overturned on appeal was thus evident to the Court. And it was that possibility that was central to the finding that consequences, in terms of resort to winding up proceedings against the judgment debtor based on the judgment debts, ought to be postponed until it was seen whether the judgments survived the appeal. The decision was, in reality, a decision about preservation of the subject matter of the pending appeal. 21Here, by contrast, the judgments in favour of Fort Dodge are in no way impeached or challenged on appeal. They do not form part of the subject matter of the appeal. The appeal has absolutely nothing to do with them. Whatever the outcome may be on appeal, the judgments will stand. 22The possibility recognised by the Court in Kalifair - the possibility that the appeal might cause the relevant judgment debt to be no longer available as a basis for winding up proceedings - simply does not exist in this case. 23Assume, for the sake of argument, that the purpose of Fort Dodge in initiating and pursuing the winding up proceedings against Cavalli in the Federal Court is to supplant the directors and to install a liquidator who, it is thought (or hoped), will decide not to pursue Cavalli's pending appeal to this Court. That might conceivably raise a question whether the winding up proceedings are an abuse of process (see, for example, Australian Beverage Distributors Pty Ltd v Evans and Tate Premium Wines Pty Ltd [2007] NSWCA 57; (2007) 61 ACSR 441; Australian Beverage Distributors Pty Ltd v The Redrock Co Pty Ltd [2007] NSWSC 966; (2007) 213 FLR 450; TS Recoveries Pty Ltd v Sea-Slip Marinas (Aust) Pty Ltd [2007] NSWSC 1410). It might also be relevant to exercise of the Federal Court's discretion under s 467(1) of the Corporations Act to dismiss a winding up application even though grounds for the making of a winding up order have been established. 24What the existence of any such postulated purpose cannot do, in my opinion, is to support an order of this Court staying execution of judgments regularly made and entered and not subject to any form of challenge whatsoever. 25Of course, the exerting of improper pressure or influence upon a litigant in order to deflect that litigant from continuing a pending appeal may attract sanctions for contempt of court or interference with the course of justice. But it is not suggested (nor could it be, on the material before me) that Fort Dodge's reliance on unchallenged judgment debts to found winding up proceedings in the Federal Court involves conduct of that kind in relation to Cavalli's pending appeal to this Court. 26The notice of motion filed by the appellant on 14 June 2012 is dismissed with costs.