Voukidis Holdings Pty Ltd v Pascoe

NO Power to Grant a STAY 6 Rule 36.08 of the Federal Court Rules 2011 (Cth) provides: 36.08 Stay of execution or proceedings under judgment appealed from (1) An appeal does not: (a) operate as a stay of execution or a stay of any proceedings under the judgment subject to the appeal; or (b) invalidate any proceedings already taken. (2) However, an appellant or interested person may apply to the Court for an order to stay the execution of the proceeding until the appeal is heard and determined. (3) An application may be made under subrule (2) even though the court from which the appeal is brought has previously refused an application of a similar kind. Note: Interested person is defined in the Dictionary. 7 It is well established that the Court has a broad discretion to grant a stay pending an appeal in "an appropriate case" (Powerflex Services Pty Ltd v Data Access Corporation (1996) 67 FCR 65 at 66 (Burchett J)). Whether a case is one in which it is appropriate to grant a stay requires the consideration of two questions: first, whether there is an arguable point in the appeal (Nolten v Groeneveld Australia Pty Ltd [2011] FCA 1494 at [24] (Kenny J)) or some "rational prospect of success" on any of the grounds of appeal (Burns v AMP Finance Ltd [2005] FCA 761 at [5] (Emmett J)); and secondly, whether the balance of convenience favours the grant of a stay (Nolten at [24]). 8 At the hearing it was accepted by the applicant that this is not an appropriate case in which to grant a stay. 9 The notice of appeal raises a single issue concerning the construction of a loan agreement. The notice of appeal does not seek any change to the orders made by the primary judge other than order 1. Having regard to the ground of appeal, there is no challenge to orders 2 to 7 or 10 to 11. The orders sought by the notice of appeal appear to accept the condition in order 9. In summary, the primary issue on appeal concerns the correctness of the declaration made in order 1. 10 As Lee J observed in XL Insurance Company SE (t/as Brooklyn Underwriting) v Kerembla Pty Ltd [2023] FCA 1038 at [4], if a judgment is, in substance, declaratory rather than executory, it does not order a party to act in a particular way, such as to pay damages or refrain from interfering with a claimant's rights, either of which would be enforceable by execution if disobeyed. A declaratory judgment is a formal statement by a court pronouncing upon the existence or non-existence of a legal state of affairs: XL Insurance at [5] (Lee J), citing Lord Woolf and Woolf J in Zamir & Woolf: The Declaratory Judgment (Sweet & Maxwell, 4th ed, 2001) (at [1.02]). 11 In Arnhem Land Aboriginal Land Trust v Northern Territory [2007] FCAFC 31; 157 FCR 255, the Full Court at [5]-[7] (French, Finn and Sundberg JJ) set out a wealth of authority in support of the proposition that ordinarily, a declaratory order will not be stayed. 12 A stay of order 1 made by the primary judge would not have the effect of creating, conferring or confirming a security interest in favour of Voukidis Holdings in the Property. A grant of a stay of order 1 is of no utility. 13 At the hearing, Voukidis Holdings sought to amend the form of relief sought to an interlocutory injunction to restrain the trustee in bankruptcy from proceeding with the auction scheduled for this Saturday. 14 Mr Pascoe as the trustee in bankruptcy is the registered proprietor of the Property. Based on the affidavit of Alan Foster dated 4 December 2024 filed on behalf of Mr Pascoe, it is anticipated that the sale of the Property will realise sufficient proceeds to pay out the creditors of the bankrupts and bring the bankruptcy to an end. At the hearing, Counsel for Mr Pascoe indicated that unsecured creditor claims made by some entities related to Mr Christos Voukidis have not been included in that estimate. At this stage formal proofs of debt have not been called for by the trustee in bankruptcy. If the creditor claims of those entities related to Mr Christos Voukidis are proven, it is not clear whether the anticipated proceeds of sale will necessarily be sufficient to enable all creditors to be paid in full. 15 The principles that govern the Court's discretion to grant interlocutory injunctive relief are well-settled. To qualify for such relief, the applicant must demonstrate that it has a prima facie case and that the balance of convenience favours the grant of an injunction: Australian Broadcasting Corporation v O'Neill [2006] HCA 46; 227 CLR 57 at [65]-[72] (Gummow and Hayne JJ, Gleeson CJ and Crennan J agreeing at [19]). Whether the applicant has made out a prima facie case and whether the balance of convenience and justice favours the grant of an injunction are related inquiries. "The question of whether there is a serious question or a prima facie case should not be considered in isolation from the balance of convenience": Samsung Electronics Co Ltd v Apple Inc [2011] FCAFC 156; (2011) 217 FCR 238 at [67], citing Sigma Pharmaceuticals (Australia) Pty Ltd v Wyeth [2009] FCA 595; (2009) 81 IPR 339 at [15] (Sundberg J). 16 The purpose of interlocutory relief is to preserve the status quo in order to ensure the effective exercise of the jurisdiction invoked by the parties: Patrick Stevedores Operations No 2 Pty Ltd v Maritime Union of Australia [1998] HCA 30; (1998) 195 CLR 1 at [35] (Brennan CJ, McHugh, Gummow, Kirby and Hayne JJ). Interlocutory relief does so by preventing the practical destruction of rights to be determined before there has been the opportunity to have those rights finally established: Australian Broadcasting Corporation v Lenah Game Meats Pty Ltd [2001] HCA 63; (2001) 208 CLR 199 at [9]-[12] (Gleeson CJ). 17 The issue on appeal concerns the construction of a contract and I have accepted for the purposes of this application that there may be some arguable point concerning the correct construction of the contract. Neither party addressed the Court on the precise point of construction. 18 I am not satisfied that such interlocutory relief is appropriate. Even if successful on appeal (the prospects of which are not necessary to determine for the purposes of this application), Voukidis Holdings' interest in the Property would be a security interest to ensure that the debts owed to it can be satisfied. The sale of the Property does not put that protection at risk, particularly if the trustee in bankruptcy is required to give an undertaking to preserve to Voukidis Holdings the proceeds of sale to the extent necessary to enable the debt owed to Voukidis Holdings to be paid in full by holding sufficient proceeds in trust pending determination of the appeal. I therefore reject the submission made by Voukidis Holdings that a sale would render any security nugatory. 19 Voukidis Holdings submits that it seeks to make a payment to annul the bankruptcy, subject to coming to an agreement with the trustee on the required amount. An annulment of the bankruptcy is not part of the jurisdiction sought to be invoked in the appeal. I also note that Voukidis Holdings has been on notice for months that the Property is to be sold and there is no evidence that Voukidis Holdings sought to progress any negotiation of annulment terms between 6 November 2024 and 3 December 2024. Based on the evidence before me, Voukidis Holdings has been advised of the amount required to be paid in order to annul the bankruptcy. It is open to Voukidis Holdings to make that payment if it wishes to annul the bankruptcy and avoid the auction of the Property. 20 Voukidis Holdings submits that a sale of the property prejudices the interests of a third party, being the bankrupt, Mrs Kathy Voukidis. It has been her home for 60 years. Mrs Voukidis has been residing in a nursing home since at least June 2024. Although termed by Mr Voukidis as a "respite care facility", Mrs Voukidis resides in the care of a facility (PJ [132]). She does not live at the Property. Mr Voukidis' own evidence is that the Property is now vacant. 21 As is not an uncommon experience, Mrs Voukidis may speak of returning to her home but there is nothing before me to suggest that there is any realistic prospect of her doing so. I accept that it will be distressing to Mrs Voukidis when she understands that the Property has been sold. However I am not persuaded that Mrs Voukidis' emotional attachment to the Property is a sufficient basis on which to restrain the trustee in bankruptcy from performing his duties. The creditors have an interest in being paid out as soon as possible. Whilst future property prices cannot be predicted, delay also exposes the bankrupt's estate to the risk of a fall in property prices. The extent of that delay is unknown. 22 The application is to be dismissed on the basis that the respondent provide an undertaking to hold sufficient proceeds in trust to enable the debt owed to Voukidis Holdings (calculated in accordance with order 7 of the orders of the primary judge) to be paid in full, pending determination of the appeal. The applicant is to pay the costs of the application. I certify that the preceding twenty-two (22) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Justice Hespe.