Vaughan v Dawson

CATCHWORDS: PRACTICE AND PROCEDURE - application for stay of judgment pending appeal - principles for grant of stay - whether serious question to be tried - where no legal error alleged in judgment below - where proceedings below involved significant credit issues - where applicant unable to identify anything tending to show trial judge's findings contrary to incontrovertibly established facts or uncontested testimony or that trial judge failed to use or palpably misused his advantage or that finding glaringly improbable or contrary to compelling inferences - balance of convenience - whether respondents would be unable to repay the judgment if appeal were to proceed and succeed - whether denial of stay would stifle appeal - where respondents have served applicant with bankruptcy notice - where applicant has costs order against him in favour of the respondents arising from cross-claim in proceedings below - where respondents have applied for assessment of costs of cross-claim - where reasonable to infer that applicant will seek review of cost assessment - where no material before Court to make out basis for concluding that such application would be concluded before hearing of appeal

Fair Trading Act 1987 LEGISLATION CITED: Trade Practices Act 1974 (Cth) Uniform Civil Procedure Rules

Alexander v Cambridge Credit Corporation Limited (1985) 2 NSWLR 685 Devries v Australian National Railways Commission [1993] HCA 78; (1993) 177 CLR 472 CASES CITED: Fox v Percy [2003] HCA 22; (2003) 214 CLR 118 Kalafair Pty Limited v Digitec (Australia) Pty Limited [2002] NSWCA 383; (2002) 55 NSWLR 737 Watson v Foxman (1995) 49 NSWLR 315

Graham Vaughan (Applicant) PARTIES: Rhonda Dawson (First Respondent) Wayne Dawson (Second Respondent)

COUNSEL: F Rogers (Applicant) P Carlisle, solicitor (Respondents)

SOLICITORS: In person (Applicant) Carlisle Attorneys, Sydney (Respondents)

LOWER COURT JURISDICTION: Supreme Court - Equity Division

LOWER COURT MEDIUM NEUTRAL CITATION: Dawson v LNG Holdings [2008] NSWSC 137

IN THE SUPREME COURT OF NEW SOUTH WALES COURT OF APPEAL 40182/08

14 JULY 2008 GRAHAM VAUGHAN v RHONDA DAWSON Ex Tempore Judgment 1 HIS HONOUR: This is an application for a stay pending appeal concerning a judgment of White J given on 29 February 2008: Dawson v LNG Holdings [2008] NSWSC 137. The proceedings in the court below were heard over eight hearing days, from 16 July to 26 July 2007. In them Mr and Mrs Dawson brought claims against three defendants, LNG Holdings Pty Ltd ("LNG"), Mr Vaughan and Mrs Nash.

The Proceedings Below 2 The claim related to representations concerning investment in a development project at Balmain. The plaintiffs alleged that there had been representations that had induced them to invest in the development project and that they lost the money they invested. 3 The allegations of misrepresentation were cast in the form of various causes of action: misleading and deceptive conduct in contravention of s 52 of the Trade Practices Act 1974 (Cth) and s 42 of the Fair Trading Act 1987; involvement by one of the defendants in a contravention by the other of a breach of those provisions; and also the tort of negligent misrepresentation. 4 The trial judge was not satisfied that some of the representations alleged by the plaintiffs had been made, but found that four of them had been made. Three of those were representations as to the future and therefore would be misleading and deceptive only if there were no reasonable grounds for making them at the time they were made. 5 The judge was not satisfied that there were no reasonable grounds concerning one of those representations as to the future, however he was satisfied there were no reasonable grounds concerning the other two representations as to the future. 6 The fourth representation, a representation that Mr Vaughan was not a bankrupt was alleged to have been made by silence. The judge found that that representation had been made. The judge was not satisfied that Mrs Nash had made any of the representations, nor that she had knowledge of the circumstances by virtue of which any of the representations had been misleading. Thus Mrs Nash succeeded in having the action dismissed against her. Initially that dismissal was with costs other than the cost of a particular affidavit, but his Honour later reconsidered that costs verdict. 7 The judge found in favour of the plaintiffs on various causation issues that had been raised concerning the other misrepresentations, at least so far as the initial investment of $150,000 that the plaintiffs had made was concerned. In the result he entered judgment against LNG and Mr Vaughan for $150,000 plus interest and costs. It is Mr Vaughan alone who makes the present application for a stay. 8 In another judgment delivered on 23 April 2008 the judge made various orders concerning reserved costs, the effect of which was to modify the cost orders he had previously made. The history recited showed the second and third defendants, Mrs Nash and Mr Vaughan, having a tendency to not appear at interlocutory hearings and that some final hearings that had been set down were vacated at their instance, or because of their late service of material. 9 There is a recording of the finding that Brereton J had made to the effect that the second and third defendants had engaged in deliberate delay, but Brereton J was not satisfied that that was something that was personally desired by the second and third defendants, rather than something that their solicitor had done on their behalf. Nonetheless he took the view that they bore a responsibility for it. 10 White J accepted that the defendants conduced the litigation prior to the hearing itself in a way that was calculated to occasion unnecessary expense, as well as to occasion delay. All that led his Honour to decide to grant the second defendant costs only after 20 December 2006, and ordered her to pay the costs of the plaintiff thrown away by reason of the failure to comply with directions, the failure to appear on direction hearings and on the return of interlocutory application, and by reason of the service by her or her solicitor of affidavits that were not read. I mention it because, to the extent Mr Vaughan was involved in the delay, Mr and Mrs Dawson rely on it as one factor to be taken into account that tends against the grant of a stay. 11 In broad terms the task of the trial judge was to apply well-established legal principles to a very complicated factual situation. The judgment of White J on the substantive issues was delivered by him on 29 February 2008. It was on that day that he pronounced the order giving judgment for $150,000 plus costs.

Appeal Incompetent? 12 Today the legal representative of the respondents advanced a submission that an appeal that Mr Vaughan has lodged is incompetent because it was not lodged in time. I do not propose to say anything about the merits of that submission. No notification had been given to Mr Vaughan or his present legal representative that it was proposed to allege that the appeal was incompetent. While it is true to say that the evidentiary material on the basis of which a conclusion might be drawn that the appeal was incompetent was all contained in affidavit evidence that had been filed, the substance of the point that could be arrived at by arranging the mosaic of evidence in a way that enabled that conclusion to be reached was not pointed out to the other side, and was not obvious on reading the evidence. 13 In these circumstances, it seems to me that it is procedurally unfair to rely upon any alleged incompetence of the appeal for the purpose of today's hearing. I take that view without expressing any views about the merits concerning the competence of the appeal. 14 Whether the appeal is incompetent could enter, however, into a later question that needs to be considered, about whether the effect of denying the application would be to stifle the appeal. Even insofar as it enters into that question, it seems to me that it would be procedurally unfair for the court today to place reliance upon it, and I shall not do so.

Principles for Grant of Stay 15 It is common ground that the lodging of an appeal does not operate as a stay of execution of the judgment below: Uniform Civil Procedure Rule 51.44. 16 It is unexceptional principle that a successful party is prima facie entitled to the fruits of his judgment. That principle has recently been re-affirmed in this Court in Kalafair Pty Limited v Digitec (Australia) Pty Limited [2002] NSWCA 383; (2002) 55 NSWLR 737 at [28]. What that "prima facie entitlement" means, in practical effect, however, is that the onus is on an applicant for a stay to make out a case that it is suitable for the court to award a stay. This is recognised in Alexander v Cambridge Credit Corporation Limited (1985) 2 NSWLR 685 at 694, when the court held that it was for the applicant to demonstrate a proper basis for a stay that will be fair to all parties. 17 There are some significant differences between the granting of an interlocutory injunction and the granting of a stay pending an appeal concerning the manner in which the order operates. The interlocutory injunction operates solely as a command by the court to the litigant. In contrast the stay operates through statutory provisions whereby the various machineries through which the court allows execution of judgment to take place cannot operate when a stay has been ordered, and whereby the procedures for obtaining the bankruptcy of an individual or the winding of a corporate debtor do not run what would otherwise be their usual course. Notwithstanding these differences a practical objective of both types of orders is the same, namely to establish a basis on which the inevitable lapsing of time between the initiating of legal proceedings and the ultimate determination of them will cause injustice, to the minimum extent possible, to those involved in the litigation. Thus for both types of order it is appropriate to consider whether there is a serious question to be tried and, if there is, where the balance of convenience lies. That approach has also been confirmed in this court in Kalafair at [18].

Serious Question to be Tried? 18 For there to be a serious question to be tried in relation to an appeal, there needs to be a prospect demonstrated to the Court that the appeal may succeed. Sometimes, this is a matter of concession - as in Alexander v Cambridge Credit, where it was conceded, as recorded at 696, that the appeal was an arguable one. No such concession is made in this case. Thus it is necessary to look, from comparatively first principles, at whether arguable grounds for appeal are demonstrated. 19 The notice of appeal identifies alleged failures on the part of the primary judge in reaching certain ultimate conclusions, or in the weight that he gave to a well established principle, namely that articulated by McLelland CJ in Eq in Watson v Foxman (1995) 49 NSWLR 315. An example is the allegation that the judge erred in "Finding as a fact that the appellant deliberately failed to disclose the fact of his bankruptcy to the plaintiffs and that had they known they would not have invested in light of the totality of their evidence." 20 The requirements of the rules concerning a notice of appeal are set out in UCPR 51.18. It is required to state, briefly but specifically, the grounds relied on in support of the appeal. As well, sub rule 2 requires that the appellant "also specify in the notice of appeal any material facts that the appellant contends that the court below should, or should not, have found." 21 The notice of appeal fails to meet the requirements of UCPR 51.18(2), save perhaps in relation to the third ground of appeal, which alleges "failing to find that the only relevant representations made to the plaintiffs at the meeting at the Coffee Bean on 7 September 2002 were contained in a Feasibility Study shown to the plaintiffs at that meeting that was not the appellant's document."

22 Having a notice of appeal that does not comply with the rules is an unpromising start for proving there is a serious question about whether the appeal will succeed. However it may not be fatal if there is reason to believe the notice of appeal could be amended to state properly arguable grounds. That requires one to consider on a broader basis whether the applicant has shown a prospect of successfully appealing from the judgment. 23 It is accepted by counsel for the applicant that the case below was one where there were significant credit issues to decide. The various ultimate findings of the judge that are challenged are all ones that would have been affected by his view concerning the credibility of the witnesses. No legal error, in the sense of an application of the wrong principle, rather than the alleged failure to give sufficient weight to the principle in Watson v Foxman, is alleged. Success in such an appeal requires the appellant to show that the finding is contrary to incontrovertibly established facts or uncontested testimony or that the trial judge has failed to use or has palpably misused his advantage or (in rare cases) that the finding is glaringly improbable or contrary to compelling inferences. Fox v Percy [2003] HCA 22; (2003) 214 CLR 118 at [29]; Devries v Australian National Railways Commission [1993] HCA 78; (1993) 177 CLR 472 at 479. 24 I invited Ms Rogers, counsel for the applicant, to explain how the Fox v Percy, and Devries tests would be met in the present case. She is not briefed on the appeal, and was unable to identify anything that could be submitted would amount to incontrovertibly established facts or uncontested testimony that were inconsistent with the judge's findings, or any way in which the trial judge had failed to use or had palpably misused his advantage, or to point to any way in which it would be argued that the finding was glaringly improbable or contrary to compelling inferences. One is left with a notice of appeal that contends, simply, that the judge reached the wrong conclusion on matters of disputed fact that were influenced by the views he took concerning the credibility of witnesses. In these circumstances, given what needs to be established for an appeal against credit-based factual findings to succeed, I am not persuaded that the applicant has shown that there is an arguable ground of appeal. Merely filing a document that alleges that the judge came to the wrong conclusion is insufficient to discharge that onus.

Balance of Convenience 25 There were some other matters that were relied upon by the respondents in opposing the application. 26 As mentioned earlier, they sought to draw support from the applicant having engaged in some delaying tactics in the court below, or at least in delaying tactics having been engaged in on his behalf in the court below. 27 That is the sort of factor that is not enough by itself to lead to a stay being refused, though it might sometimes be relevant in conjunction with other factors. I put it to one side for the moment.

Impecuniosity of Respondents 28 The respondents submitted that it had not been shown that the respondents were impecunious. The real complaint that the applicant makes on this score is that, if the judgment were to be paid to them, he could not be confident that he would get it back if he were to run the appeal and succeed in it. He asserts that there is a likelihood that all or part of the amount would be consumed in financing the appeal. 29 The evidence of financial circumstances of the respondents shows that they do not own real estate. They are living in rented premises. There is evidence that they have been able to pay $200,000 or thereabouts of fees connected with the running of the case so far. There is no evidence, one way or the other, about them being able to fund their own costs of the appeal from their own resources or any other source. In these circumstances, if it were shown that there had been a serious question to be tried concerning the appeal, I would reach the conclusion that there was some risk that the respondents would not be able to repay the judgment if the appeal were to proceed, and succeed.

Stifling the Appeal? 30 A submission made by the applicant is that, if the stay were denied, that would stifle the appeal. Concerning that, he relies in particular upon the fact that the respondents have served him with a bankruptcy notice concerning a judgment debt of $227,655, which is the judgment debt in these proceedings, together with the amount said to be pre-judgment interest. He has filed an application to set aside that bankruptcy notice, which was listed for hearing on 1 July 2008. I was not told what happened to it on that day, but that is not very important. The grounds on which the bankruptcy notice is sought to be set aside are, I am informed, in part the existence of the present appeal, but also in part at least one alleged technical defect in the bankruptcy notice itself. 31 The affidavit of Mr Dawson of 10 July 2008 thew out a forensic challenge: "The appellant has not disclosed a complete statement of his assets and liabilities, nor corroborative evidence as to his income; for example Income Tax Returns and Notices of Assessment." 32 The applicant had earlier filed evidence that disclosed his financial circumstances to some extent. He is the sole director and sole shareholder of a company called Taffia Property Investments Pty Limited. He says: "I do not presently own any real property and I am renting my place of residence. Further, I do not have any substantial assets other than my personal effects and my shareholding in Taffia. In this regard, I do not even own a motor vehicle...I am presently funding my modest living expenses through the income generated through Taffia."

That is as far as his disclosure of financial circumstances goes. 33 The evidence does not enable the court to reach a conclusion that the litigation would be stifled if a stay were not granted. In an earlier affidavit that Mr Vaughan swore he said: "That the payment of the judgment against me ... represents a significant sum that I would need to fund from the assets of my business interests and as a consequence severely impact on my ability to carry out my businesses and generate ongoing income which I presently use to support my day to day expenses." 34 One would ordinarily read those words as carrying with them an implication that endeavouring to fund the judgment from the assets of his business interests would not be a totally futile endeavour. I am not satisfied that he has put his financial position sufficiently before the Court for the Court to be satisfied that refusal of a stay would stifle the appeal. The practical task that someone seeking to show that a stay would stifle an appeal needs to perform is to show that, in practical terms, he cannot raise, from any sources in fact available to him, enough money to pay the judgment debt and also run the appeal. I am not satisfied the evidence goes that far. 35 Another basis upon which it was submitted that refusing the stay might not necessarily have the effect of stifling the appeal was a submission that the likelihood is that the appeal will not proceed anyway, regardless of whether a stay is issued. The basis of that submission is that Mr Vaughan has a costs order against him, in favour of the Dawsons, arising from a cross claim in the proceedings below. No appeal is on foot concerning that cross claim, or concerning the costs order that was made in it. The Dawsons have made an application for assessment of the costs of the cross-claim. The likelihood is that that application for assessment of costs will be decided before the appeal comes on for hearing. Given the stance that the Dawsons have taken so far, it is a reasonable inference that, once they had a judgment debt against Mr Vaughan available to them, they would use it as the basis of a bankruptcy notice. 36 Even so, I am not satisfied that the appeal would be stifled anyway, for that reason. That is because of the possibility of there being an application to review a cost assessment. Given the stance that Mr Vaughan has taken so far, it is a reasonable inference that he would seek a review of any costs assessment. There is no material before the Court which makes out a basis for concluding that it is likely that any application to review a costs assessment would be concluded before the appeal came on for hearing.

Conclusion 37 Though I have dealt with various of the matters that were put to me that would go to the balance of convenience, a sufficient basis for rejecting the application for stay is that I am not satisfied that an arguable case for appeal has been made out. 38 In circumstances, the application will be dismissed.

[Respondent seeks costs. Argument] 39 The dismissal will be with costs. **********

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