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  • Unreported Judgment

Jawhite Pty Ltd v Trabme Pty Ltd

 

[2018] QCA 225

 

SUPREME COURT OF QUEENSLAND

 

CITATION:

Jawhite Pty Ltd & Anor v Trabme Pty Ltd & Ors [2018] QCA 225

PARTIES:

JAWHITE PTY LTD
ACN 106 661 287
(first applicant)
TRENT ANDREW RYAN
(second applicant)
v
TRABME PTY LTD
ACN 154 609 159
(first respondent)
BOEDRY PTY LTD
ACN 154 609 882
(second respondent)
VESTWELL PTY LTD
ACN 106 478 808
(third respondent)
ADAM BOLAND
(fourth respondent)
MARK WILLIAM EDWARDS
(fifth respondent)

FILE NO/S:

Appeal No 9896 of 2018

SC No 2310 of 2014

DIVISION:

Court of Appeal

PROCEEDING:

Application for Stay of Execution

ORIGINATING COURT:

Supreme Court at Brisbane – Unreported, 4 September 2018 (Boddice J); [2018] QSC 174

DELIVERED ON:

19 September 2018

DELIVERED AT:

Brisbane

HEARING DATE:

18 September 2018

JUDGE:

Morrison JA

ORDERS:

Upon the undertaking of the appellants, by their Counsel, to conduct the appeal expeditiously:

  1. Orders No. 1, 2 and 3 made on 4 September 2018 in proceeding No. BS2310/14 are stayed, pursuant to r 761 of the Uniform Civil Procedure Rules 1999 (Qld), pending the determination of the appeal or further earlier order.
  2. The costs of the application are reserved.

CATCHWORDS:

APPEAL AND NEW TRIAL – PROCEDURE – QUEENSLAND – STAY OF PROCEEDINGS – GENERAL PRINCIPLES AS TO GRANT OR REFUSAL – where the applicants seek a stay of enforcement of orders made by the learned primary judge requiring particular payments until an appeal from those orders is heard – where the applicants contend that they may be unable to pay the sums specified in the orders below – where absent a stay, the applicants face the prospect of bankruptcy and insolvency and stultification of their appeal rights – where each of the orders sought to be stayed arose in consequence of the learned primary judge’s findings in respect of the credit of the witnesses, particularly the second applicant – whether the granting of a stay is appropriate

Uniform Civil Procedure Rules 1999 (Qld), r 761

Elphick v MMI General Insurance Ltd & Anor [2002] QCA 347, cited

Fox v Percy (2003) 214 CLR 118; [2003] HCA 22, cited

COUNSEL:

N J Shaw for the applicants

A Myers (sol) for the first and second respondents

A Boland (director) for the third respondent and appeared on his own behalf

The fifth respondent appeared on his own behalf

SOLICITORS:

McMahon Clarke for the applicants

Results Legal for the first and second respondents

A Boland (director) for the third respondent and appeared on his own behalf

The fifth respondent appeared on his own behalf

  1. [1]
    MORRISON JA:  The appellants, Jawhite Pty Ltd and Trent Ryan,[1] apply for a stay of orders made on 4 September 2018, pending an appeal against those orders.
  1. [2]
    In order to succeed in the grant of a stay Jawhite and Ryan must show that the circumstances indicate that the grant is appropriate.  That involves a consideration of:
    1. (a)
      whether there is a good arguable case on the appeal;
    2. (b)
      the prejudice to Jawhite and Ryan if a stay is not ordered; and
    3. (c)
      any competing prejudice to the respondents in the event that a stay is granted.[2]
  2. [3]
    The orders which were made by the learned primary judge followed a lengthy trial, and reasons delivered by his Honour on 2 August 2018.  In the limited time available it is not possible to fully summarise the nature of the proceedings below, so the following synopsis must suffice.
  3. [4]
    Jawhite (controlled by Ryan) and the third respondent (Vestwell),[3] merged their real estate businesses in 2012.  The corporate vehicles for the merged enterprise were the first and second respondents.[4]  The business was operated under the Boedry Unit Trust, of which Boedry was the trustee, and Trabme was the licence holding entity.
  4. [5]
    During 2013, Ryan was removed from his management position and suspended from his employment.  His employment was ultimately terminated, and he subsequently resigned his directorships.  After that time Boland and Edwards retained their directorships and operated the business until receivers were appointed in July 2017.
  5. [6]
    Ryan instituted proceedings claiming oppressive conduct in his removal from management and employment.  He sought relief under s 233 of the Corporations Act 2001, and in the alternative, the winding up of Trabme and Boedry, and the sale of the assets in the Boedry Unit Trust.  The respondents brought counter-claims against Jawhite and Ryan, claiming relief for misleading or deceptive conduct, misappropriate or re-direction of funds, breach of various contractual provisions and claims for equitable compensation.
  6. [7]
    The reasons of the learned primary judge reveal that Ryan’s evidence was rejected as being dishonest, and further, findings that Ryan’s conduct of the business affairs was also dishonest.  His evidence was rejected entirely and the evidence of Boland, Edwards (and others) was accepted.  Consequently none of the grounds for the oppression action were made out.
  7. [8]
    By contrast some of the orders made on 4 September 2018 granted relief in respect of aspects of the counter-claims.
  8. [9]
    The trial commenced in March 2017 and was adjourned part heard on 31 March 2017.  During the course of the trial, receivers were appointed to Trabme and Boedry, and to the Boedry Unit Trust, on 13 July 2017.  The trial resumed in January 2018, concluding in February 2018.

The orders

  1. [10]
    The orders made on 4 September 2018, in respect of which a stay sought, were as follows:
    1. The third respondent pay to the second respondent $33,224.74, with interest at the rate prescribed by section 58 of the Civil Proceedings Act 2011, from 1 September 2013 until the date of this order, by 4:00 pm on 19 September 2018.
    2. The applicant pay to the second respondent, the sum of $102,000 as capital contribution by 4:00 pm on 19 September 2018.
    3. By 4:00 pm on 19 September 2018, the applicant and the third respondent are to provide to Westpac Banking Corporation, security for the facilities provided by Westpac Banking Corporation to the first and second respondents, in accordance with their contractual obligations under the shareholding agreement entered into between the parties.
  2. [11]
    Order No. 7 made on 4 September 2018 was that “the appointment of liquidators to the first and second respondents is adjourned to 2:30 pm on 1 November 2018”.
  3. [12]
    During the course of the application for a stay, reference was made to comments made by the learned primary judge on 4 September 2018 when the orders were made.
  4. [13]
    It was said by Mr Shaw, Counsel for the applicants, that his Honour made reference to the purpose behind the three orders the subject of the application for a stay.  That transcript was not available during the hearing but has been provided subsequently.  Reference to what was said reveals these points:
    1. (a)
      his Honour concluded that as the applicant and fourth respondent[5] “remain hopelessly in dispute, the only reasonable and rational course is for the merged business to be wound up”;
    2. (b)
      there was no legitimate reason why the current receivers should not be appointed as joint and several liquidators of Trabme and Boedry;
    3. (c)
      however, there was substance in the submission by the respondents (other than Ryan) that the immediate appointment of liquidators would operate unfairly on them;
    4. (d)
      there were substantial sums owing to Trabme and Boedry by Jawhite and Ryan, such that if the appointment of a liquidator was “deferred to allow the repayment of those sums to the first and second respondents, the first and second respondents’ financial position will be significantly improved at the time it is ordered that liquidators by appointed for the winding up of those entities”;[6]
    5. (e)
      the deferral of appointment of the liquidators would not operate unfairly on Jawhite and Ryan, as the receivers would ensure the businesses were run fairly; and
    6. (f)
      it was unfair to the other respondents for Jawhite and Ryan not to provide security in accordance with their contractual obligations and contribute $102,000 by way of capital.
  5. [14]
    The learned primary judge then made the orders recited above and continued addressing the fourth and fifth respondents, Boland and Edwards:

“Mr Boland and Mr Edwards, the company will be placed into liquidation in due course.  I am trying, however, to put it in the best financial position possible, accepting that there is a considerable unfairness to the respondents in a situation where if a liquidation order was made today, essentially, the applicant and the third respondents would simply become debtors, in the liquidation.

I expect the receivers to ensure they carry out their duties as independent receivers.  That means they will enforce compliance with those orders.  If the funds are not paid by the due date, I would expect the receivers to take whatever steps are necessary to ensure those funds are recovered before the appointment of liquidators.  If they do not, that would be a relevant factor in determining whether they are appropriate liquidators to the appointment of the first and second respondents.”[7]

  1. [15]
    The Notice of Appeal challenges the findings made against Ryan, based on a rejection of his evidence as dishonest and an acceptance of the evidence otherwise.  However, the grounds of appeal also contest the orders recited above on the basis that each was in error, and that:
    1. (a)
      in respect of Order No. 1, there was no basis or justification for the imposition of a time to pay the sum the subject of that Order;
    2. (b)
      Order No. 2 was a form of relief which was not sought, nor was it appropriate under the Uniform Civil Procedure Rules 1999 (Qld) (“UCPR”); further, the order was in the nature of specific performance which was impossible to perform, and there was no justification or basis for the imposition of a time in respect of that Order; and
    3. (c)
      Order No. 3, to provide security to Westpac Banking Corporation, was not relief sought, nor appropriate to grant under the UCPR; further, the order was in the nature of specific performance, and was impossible to perform because it did not specify what security was to be given.
  2. [16]
    On the application for a stay Mr Shaw of Counsel, appearing for the applicants, contended that there was an arguable case that the orders were improperly made, for the reasons summarised above from the Notice of Appeal.  It was submitted that both Ryan and Jawhite had put evidence in affidavit form to the effect that they had no assets and could not meet the orders.  Consequently, if the orders were not stayed Ryan was exposed to the threat of bankruptcy and the company to the threat of liquidation.  On the evidence of Ryan the orders could not be complied with, either by the time limited by the Orders, or at all.
  3. [17]
    Further, it was contended that insofar as Order No. 3 is concerned, whilst Jawhite and Ryan could produce the security required by Westpac[8] the prejudice to them was that there was no way of compelling Westpac to relinquish that security in the event that the appeal was successful.  Westpac was not a party to the current proceedings, nor the appeal.  It was also contended that the order was impossible to comply with because it did not specify what security had to be given, leaving it at the demand of Westpac.

Arguable case on appeal?

  1. [18]
    It is difficult to assess the true strength of the case on appeal.  The pleadings are not before me, nor has there been time, given the urgency of the application, to properly analyse the reasons below.  However, some observations can be made.
  2. [19]
    The appeal faces considerable hurdles, given the findings made by the learned trial judge as to the credit of Ryan.  Those findings go well beyond simply preferring the evidence on one side to the other.  Ryan was found to be dishonest in his business dealings and dishonest in the evidence he gave at the trial.  The difficulties facing an appellant in overturning such findings are well known.[9]
  3. [20]
    However, the attack includes a contention that inadequate reasons were given, and that the assessment of credit was too tightly constrained.
  4. [21]
    Of greater import for the present application is the contention that the relief granted in Orders 1 to 3 was not pleaded, nor available.  Further, that the orders amount to an impermissible form of specific performance, and in the case of Order No. 3, an order to perform an imprecise obligation.
  5. [22]
    There are reasons to conclude, at least on a preliminary basis for the purposes of this application, that these contentions do not suffer the hurdles confronting the more general attack on the reasons below.
  6. [23]
    First, Orders No. 1 and No. 2 were made, it seems arguable, as interim orders but with final effect.  It is apparent that the learned trial judge has not concluded the trial, as there are yet to be orders relating to the winding up on Trabme and Boedry: see Order No. 7.  Orders No. 1 and 2 require payment of money sums on 19 September 2018, but are arguably not money judgments.  On one view, Orders No. 1 and 2 take the form of mandatory injunctions.
  7. [24]
    Secondly, Orders No. 1 and 2 were, it seems, imposed in order to enhance the financial position of Trabme and Boedry when they are eventually wound up, probably on 1 November 2018.  It is debatable that it is the legitimate function of the Court to compulsorily assist the financial position of companies prior to their winding up.  If there are debts owed to a company the pursuit of them is a matter for a liquidator.
  8. [25]
    Thirdly, Order No. 3 is in the form of a specific performance order, or, perhaps, a mandatory injunction.  However, it requires that security be provided by Ryan and Jawhite to a non-party, Westpac Banking Corporation, “in accordance with their contractual obligations under the shareholding agreement”.  The order does not identify what those obligations are beyond that recitation.
  9. [26]
    Reference to clause 8.3.1.2 of the Unitholders’ Agreement, the source of the obligation to which Order No. 3 is directed, does not take the matter much further.  It provides that Ryan and Jawhite must execute such documents “as will be reasonably required by the financier” (relevantly, Westpac).  That leaves open the question whether what is demanded by Westpac is reasonable, and how that might be determined.
  10. [27]
    Thus the content of the contractual obligations is left to an outsider to the litigation, Westpac.  It is arguable that Order No. 3 does not identify precisely what it is that the subject of the order must do to comply.
  11. [28]
    Fourthly, the contention is that those forms of relief were not part of the pleaded case.
  12. [29]
    In the light of the foregoing I am led to conclude, on the preliminary basis applicable to this application, that there is an arguable case on the appeal.

Prejudice to the applicants

  1. [30]
    The contention was that prejudice flowed from the fact that the orders required performance on 19 September 2018 of obligations that would be impossible to reverse if the appeal was successful.  Attention was focussed on the possible bankruptcy of Ryan, the sequestration of Jawhite and the inability to retrieve the security given to Westpac.
  2. [31]
    In my view, there is force in those contentions, though the prejudice has another dimension, slightly different from that contended.
  3. [32]
    First, the orders are in the form of mandatory injunctions requiring Ryan and Jawhite to take certain steps.  If the orders are not complied with, each of them will immediately be in contempt.  That exposes each to sanctions of the court.  There may be explanations advanced by way of excuse, such as that Ryan and Jawhite did not have the money to pay, but that does not relieve them of the fact that they will be in contempt.
  4. [33]
    Secondly, Order No. 3 requires that security be given to Westpac Banking Corporation.  During the hearing that was identified by way of a letter from Westpac dated 12 September 2018, setting out what it demanded by way of security.  That included: (i) a guarantee and indemnity by Jawhite; (ii) a fixed and floating charge over Jawhite’s assets and uncalled capital; and (iii), a guarantee and indemnity from Ryan.  There is no material which shows that such a request in fact meets the contractual obligations referred to in clause 8.3.1.2 of the Unitholders’ Agreement, nor the Order.  More importantly, if that security is given there is nothing to compel Westpac to relinquish it if the appeal succeeds.  Westpac has not been a party to the litigation and is not a party to the appeal.
  5. [34]
    Thirdly, given that the evident purpose of the Orders is to enhance the financial position of Trabme and Boedry prior to an order being made to wind them up, it is arguable that Ryan and Jawhite are being targeted in a way unlike any other creditor of those companies.  In the normal course of events if a creditor of a company owes it money then pursuit of that debt is a matter for the liquidator, once appointed.  As things stand there is no liquidator.
  6. [35]
    The foregoing is sufficient to demonstrate that there is the risk of real prejudice to Ryan and Jawhite if the stay is not granted.

Prejudice to the other respondents

  1. [36]
    There is no basis for reaching a conclusion that there is countervailing prejudice to the other respondents if a stay is refused.  It is true that Trabme and Boedry will not immediately receive the money the subject of those orders, but neither Mr Myers (appearing for the receivers and managers of those companies) nor Mr Boland (representing the companies at the hearing of the stay application) contended that there was prejudice beyond that fact.  However, the evidence of Ryan is that they would not do so anyway because each of Ryan and Jawhite is impecunious, with no prospect of ever paying those sums.
  2. [37]
    Mr Boland and Mr Edwards urged that Ryan’s affidavit be discounted because of the findings as to his dishonesty.  It was suggested that there might be a capacity to raise or pay the money.  However, that contention did not rise above assertion.

Conclusion

  1. [38]
    In the circumstances I am persuaded that this is an appropriate case to grant a stay of Orders 1-3 made on 4 September 2018.  Mr Shaw offered an undertaking by his clients that they would pursue the appeal in an expeditious manner.
  2. [39]
    The orders are:

Upon the undertaking of the appellants, by their Counsel, to conduct the appeal expeditiously:

  1. Orders No. 1, 2 and 3 made on 4 September 2018 in proceeding No. BS2310/14 are stayed, pursuant to r 761 of the Uniform Civil Procedure Rules 1999 (Qld), pending the determination of the appeal or further earlier order.
  2. The costs of the application are reserved.

Footnotes

[1]  Whom I shall call “Jawhite” and “Ryan”.

[2] Elphick v MMI General Insurance Ltd & Anor [2002] QCA 347 at [8].

[3]  Controlled by the fourth and fifth respondents, Boland and Edwards.

[4]  Trabme Pty Ltd (Trabme) and Boedry Pty Ltd (Boedry).

[5]  The two entities which held shares in Trabme and Boedry, and units in the Bowdry Unit Trust.

[6]  Transcript p 3 ll 3-6.

[7]  Transcript p 4 ll 34-45.

[8]  In the form of fixed and floating charges by Jawhite, and guarantees by Ryan.

[9] Fox v Percy (2003) 214 CLR 118, [2003] HCA 22, at [28]-[29].

Close

Editorial Notes

  • Published Case Name:

    Jawhite Pty Ltd & Anor v Trabme Pty Ltd & Ors

  • Shortened Case Name:

    Jawhite Pty Ltd v Trabme Pty Ltd

  • MNC:

    [2018] QCA 225

  • Court:

    QCA

  • Judge(s):

    Morrison JA

  • Date:

    19 Sep 2018

Litigation History

No Litigation History

Appeal Status

No Status