CFI Rentals Pty Ltd v Roussos [2018] QDC 141

DISTRICT COURT OF QUEENSLAND CITATION: CFI Rentals Pty Ltd v Roussos & Anor [2018] QDC 141 PARTIES: CFI RENTALS PTY LTD (applicant) v MICHAEL IVON ROUSSOS (first respondent) and JULIA KATHERINE GARDINER (second respondent) FILE NO/S: BD4837/16 DIVISION: Civil PROCEEDING: Civil Application ORIGINATING COURT: Brisbane DELIVERED ON: 3 August 2018 DELIVERED AT: Brisbane HEARING DATE: 30 July 2018 JUDGE: Williamson QC DCJ ORDER: I will hear from the parties as to the terms of the orders. CATCHWORDS: PROCEDURE – CIVIL PROCEEDINGS – JUDGMENTS AND ORDERS – ACTIONS ON JUDGMENTS – GENERALLY – where application for stay of proceedings under Uniform Civil Procedure Rules 1999 (Qld) r 761(2) – whether good arguable grounds of appeal – whether applicants disadvantaged if stay not granted – whether competing disadvantage to respondent outweighs disadvantage to applicants. COUNSEL: Mr L Copley for the applicants/respondents Mr D Keane for the respondent/applicant SOLICITORS: Shand Taylor Lawyers for the applicants/respondents SLF Lawyers for the respondent/applicant -- 1 of 10 -- 2 Introduction [1] On 29 June 2018 the Court declared that CFI Rentals Pty Ltd has an equitable charge over Mr Roussos’ interest in two properties under a signed secured guarantee. Ancillary orders were also made appointing a Statutory Trustee under section 38 of the Property Law Act 1974 (Qld). Mr Roussos and Ms Gardiner have appealed against the orders of 29 June 2018. Their appeal is yet to be heard and determined. [2] Mr Roussos and Ms Gardiner seek a stay of the order of 29 June 2018. Further, or in the alternative, they seek: (a) an order that an account be taken as between CFI Rentals Pty Ltd and Mr Roussos; (b) an injunction restraining the Statutory Trustees from selling the properties the subject of the order of 29 June 2018; and (c) an order setting aside the order of 29 June 2018. [3] For the reasons that follow, I am persuaded that this is an appropriate case to grant a stay, subject to compliance with a condition requiring the payment of an identified sum of money into Court. Given I will grant the primary relief sought, it is unnecessary for me to consider the alternative position advanced on behalf of Mr Roussos and Ms Gardiner. Rule 761 of the UCPR and relevant principles [4] The primary relief sought is a stay under rule 761(2) of the Uniform Civil Procedure Rules 1999 (Qld). To succeed, Mr Roussos and Ms Gardiner must show there is a good reason for the stay to be granted, and it is an appropriate case in which to grant the stay1. It was common ground that the factors relevant to the determination of whether a case is an appropriate one to grant a stay are: (a) whether there is a good arguable case on appeal; (b) whether the applicant will be disadvantaged if a stay is not ordered; and (c) whether the competing disadvantage to the respondent should the stay be granted outweighs the disadvantage suffered by the applicant if the stay is not granted. [5] It has also been held that an applicant is usually required to show that its success on appeal will be rendered nugatory if the order appealed from is not stayed in the interim2. [6] The issue to be determined in this application is whether Mr Roussos and Ms Gardiner have demonstrated this is an appropriate case for a stay having regard to the factors set out in paragraphs [4] and [5] above. [7] I now turn to deal with each of the relevant factors. 1 Elphick v MMI General Insurance Limited & Anor [2002] QCA 347 [8]. 2 Elphick (Supra), [9]. -- 2 of 10 -- 3 Is there a good arguable case on appeal? [8] The first matter to be considered is whether Mr Roussos and Ms Gardiner have a good arguable case on appeal. The relevant starting point is the grounds of appeal stated in the Notice of Appeal filed on their behalf and dated 27 July 2018. Section 2 of the Notice of Appeal contains the following three grounds of appeal: “1. The learned judge erred in the exercise of his discretion in appointing the statutory trustees for sale to sell two properties referred to as Westlake Property and the Surfers Paradise Property in the circumstances that amount owing (if any) was not determined. 2. The learned judge erred in failing to order that an account be taken to determine the amount owing (if any) to the respondent and/or by failing to order that the application proceed by way of pleadings. 3. The learned judge erred by failing to accord the appellant procedural fairness by failing to allow the appellant to be heard concerning the order to be made appointing the Statutory Trustee pursuant to section 38 of the Property Law Act before the actual order was made.” [9] The first ground of appeal asserts that the discretion exercised by the judge at first instance miscarried because he acted upon a wrong principle, namely, he exercised the discretion to appoint the Statutory Trustees under section 38 of the Property Law Act 1974 in circumstances where the amount owing under the secured guarantee, if any, was unknown. It is correct to say that the judge at first instance did not make a finding as to the exact amount owing under the secured guarantee. Rather, as the reasons for judgment disclose, his Honour was satisfied that an amount was owing under the secured guarantee which was sufficient for CFI Rentals to establish its entitlement to the relief sought. This was dealt with by the judge at first instance at paragraphs 12, 13 and 43 of the reasons for judgment. [10] Paragraph 12 of the reasons for judgment records that it was not disputed that Mr Roussos, by clause 7 of the Guarantee, created an equitable charge over his beneficial interest in two parcels of land. It was against this background that the judge at first held at paragraph 13 that the primary factual issue for him to determine was whether there remained any debt owing to CFI Rentals Pty Ltd. Relevantly, his Honour said: “… So long as there is an amount payable from Zetland to CFI under any lease, rental or other transaction under which CFI provides goods, services or any other financial accommodation or credit to Zetland, CFI is entitled to a declaration of charge.” [11] The judge at first instance found there was an amount payable to CFI Rentals Pty Ltd under the relevant agreement. At paragraph 43 of the reasons for judgment he said: -- 3 of 10 -- 4 “… The important finding, is my satisfaction that there are arrears due under the Agreement for rent payable between February and May 2017.” [12] Mr Roussos and Ms Gardiner opposed the relief sought by CFI Rentals Pty Ltd on the basis that the amount of the debt payable, if any, needed to be quantified for Mr Roussos’ liability to arise, and for a charge to become enforceable. Counsel who appeared on their behalf submitted that the Court of Appeal’s decision in Filmana Pty Ltd & Ors v Tynan & Anor [2013] QCA 256 (‘Filmana’) supported this proposition, as well an earlier decision of the Court of Appeal in this same proceeding. This submission was rejected by the judge at first instance [13] The judge at first instance rejected the submission that the quantum of indebtedness must be established before Mr Roussos was liable and the charge enforceable for the reason articulated at paragraph 16, which is in the following terms (footnotes omitted): “I am satisfied that Zetland’s debt to CFI need not be quantified for Mr Roussos’ liability to arise and for the charge to become enforceable. Counsel for the respondents submitted that Filmana and the decision of the Court of Appeal in this proceeding each support the proposition that the quantum of Zetland’s indebtedness must be established before Mr Roussos is liable and the charge is enforceable. I read the decisions differently and reject that submission.” [14] The first ground of appeal asserts that the judge at first instance erred in principle because he did not ascertain the quantum of the debt owing under the agreement. In order to establish that the first ground of appeal was arguable, it was necessary to demonstrate that the point is supported by authority or a legislative provision, such as a provision of the Property Law Act 1974. [15] The written outline prepared on behalf of Mr Roussos and Ms Gardiner for this application does not contain specific submissions about the first ground of appeal. The outline merely asserts at paragraph 24 that a stay is appropriate in this case as there is a good arguable case on appeal. [16] An attempt was made in oral submissions to establish that the first ground of appeal was arguable by reference to section 38 of the Property Law Act 1974 and a general statement of principle. [17] As to section 38 of the Property Law Act 1974, it is unclear as to which, if any, sub- section of that provision establishes the proposition that the quantum of indebtedness must be established before Mr Roussos was liable, and the charge enforceable. Accordingly, I am not satisfied that it has been established that section 38 of the Property Law Act 1974 provides the foundation for the first ground of appeal. [18] Mr Copley, who appeared for Mr Roussos and Ms Gardiner, advanced the general proposition that the extent of CFI Rentals Pty Ltd’s interest in the two properties was limited to the quantum of indebtedness under the relevant agreement. This was, in turn said to found a submission that it is was therefore necessary for the quantum of the debt under the agreement to be ascertained before relief was granted under section 38 of the Property Law Act 1974. -- 4 of 10 -- 5 [19] As a general proposition, it can be accepted that the extent of CFI Rentals Pty Ltd’s interest in the two properties was, and is, limited to the quantum of the debt owing under the agreement. That does not however mean the precise quantum of the debt must be ascertained before relief under section 38 of the Property Law Act 1974 is granted. No authority was drawn to my attention to suggest otherwise. In my view it was incumbent on counsel for Mr Roussos and Ms Gardiner to identify an authority in support of the proposition given what was said by Muir JA at paragraph [37] of Filmana. Mr Keane, in his oral submissions, drew my attention to this part of the decision, which is in the following terms (footnotes omitted): “In Re Taylor, Ex Parte Century 21 Real Estate Corporation, it was accepted that, as a general rule, demand on a surety is not necessary to give rise to liability under a guarantee unless the guarantee so provides. A similar view was expressed in Wardman v Hatfield. The guarantor’s liability arises although the extent of their liability may not have been quantified.” (emphasis added) [20] No submissions were made on behalf of Mr Roussos and Ms Gardiner about this aspect of the Filmana decision which, in my view, appears to point to a position that is contrary to that which will be advocated on their behalf in support the first ground of appeal. [21] In the result, I was unpersuaded that the first ground of appeal is an arguable point for the purposes of this application. [22] The second ground of appeal has two parts. It is asserted that the judge at first instance erred in that he: (a) failed to order that an account be taken to determine the amount owing (if any) under the relevant agreement; and (b) failed to order that the application proceed by way of pleadings. [23] Having regard to the oral submissions made before me on behalf of Mr Roussos and Ms Gardiner, it is the position that the second ground of appeal assumes that the first ground is established, namely that the exercise of the discretion miscarried because the judge at first instance did not ascertain the quantum of the debt owing to CFI Rentals Pty Ltd. It can therefore be said that the success of the second ground of appeal is contingent upon the success of the first ground of appeal. Given the relationship between the grounds, and my earlier findings, I am not persuaded that the second ground of appeal is an arguable point for the purposes of this application. [24] Further, the reasons for judgment disclose that the judge at first instance did not deal with the issue of whether an account should be taken. This reason for this is simple enough. He was not asked by CFI Rentals Pty Ltd to make an order including a requirement to account. The draft order provided to the Court did not include such an order. His Honour stated at paragraph 58 of the reasons that Counsel for Mr Roussos and Ms Gardiner did not submit that the draft order for which CFI Rentals Pty Ltd contended was inappropriate. -- 5 of 10 -- 6 [25] With respect to the issue of pleadings, the judge at first instance was satisfied there was no serious issue fit for trial. This finding appears at paragraph 53 of the reasons for judgment and explains why no order was made by him requiring the preparation of pleadings. [26] The second ground of appeal challenges a decision that involves the exercise of a discretion. It was therefore necessary for Mr Roussos and Ms Gardiner to identify on the face of the reasons for judgment an error of the kind referred to in House v The King (1936) 55 CLR 49. No such error was identified in writing in respect to the second of appeal. Further, no such error was identified during oral submissions that would support the assertion made in the second ground of appeal. [27] I am not persuaded that it has been established that the second ground of appeal is an arguable point for the purposes of this application. [28] The third ground of appeal asserts that Mr Roussos and Ms Gardiner were denied procedural fairness. In support, it was submitted that the orders of 29 June 2018 were made by the judge at first instance without first hearing from the parties. It was said that this occurred in circumstances where the judge at first instance indicated that Mr Roussos and Ms Gardiner would have an opportunity to be heard about the orders in the event they were unsuccessful. No such opportunity was provided to the parties. The reasons for judgment were emailed by the Court to the parties on 29 June 2018 and no appearance was required. [29] To establish the third ground of appeal, Mr Copley drew my attention to the following passage appearing at page 34 of the transcript of the oral argument where the judge at first instance said: “His Honour: What I would ordinarily do is say, Mr O’Brien, if you lost, is the order an appropriate one rather than have you explain to me why it would be appropriate?” [30] The reference to Mr O’Brien is a reference to counsel appearing for Mr Roussos and Ms Gardiner at first instance. As the reasons for judgment record at paragraph 58, and confirmed by a perusal of the transcript, he did not make submissions to the judge at first instance as to the precise terms of the orders that would be made assuming the primary arguments advanced on behalf of Mr Roussos and Ms Gardiner were rejected. This reason for this was submitted to be as a consequence of the statement set out above. [31] Mr Copley submitted that his Honour’s statement was taken to mean that an opportunity would be provided in the future for submissions to be made about the specific form of orders under section 38 of the Property Law Act 1974. This opportunity would only arise in the event Mr Roussos and Ms Gardiner were unsuccessful. No such opportunity was provided. It was submitted the failure to hear Mr Roussos and Ms Gardiner as to the precise terms of the orders made resulted in a breach of procedural fairness causing the exercise of the discretion to miscarry. -- 6 of 10 -- 7 [32] I accept that the judge at first instance delivered his reasons and made final orders without first hearing from the parties. The question is whether it has been established it is arguable there has been a denial of procedural fairness. [33] On balance, I am of the view that the third ground of appeal is arguable because, on a fair reading of the transcript, one could readily appreciate why an advocate formed the view that his clients would be given an opportunity in the future to make further submissions about the precise terms of the orders and, as a consequence, elected not to make specific submissions going to the terms of the orders during the course of oral submissions. It is a matter about which reasonable minds may differ, however in my view, a review of the transcript can establish support for the proposition that counsel at first instance for Mr Roussos and Ms Gardiner proceeded on the basis articulated by Mr Copley. [34] Given the nature of the orders made under section 38 of the Property Law Act 1974, I am persuaded that Mr Roussos and Ms Gardiner have established that the third ground of appeal is an arguable point that is reasonably open to them and, at face value, has merit. [35] Mr Keane submitted that the third ground of appeal was factually unsustainable and does not show that any different order would be made in any event. I reject this submission for two reasons. [36] First, the submission proceeds on a misapprehension that the third ground of appeal asserts there was a denial of a right to be heard as to whether relief should be granted under section 38 of the Property Law Act 1974. Mr Copley confirmed that the third ground of appeal does not suggest that procedural fairness has been denied for this reason. Rather, he submitted the point was directed at establishing that his clients were not given an opportunity to be heard with respect to the specific form of the orders made in circumstances where they understood they would be given such an opportunity. [37] Second, contrary to Mr Keane’s submission, I was persuaded that Mr Roussos and Ms Gardiner would have contended for a different form of order if the circumstances permitted. It was submitted on their behalf that the different form of order would, as a starting point, include an order for CFI Rentals Pty Ltd to account to Mr Roussos. This difference is one that can be appreciated having regard to the argument advanced at first instance and before me. The argument which will remain substantially in dispute is that the extent of indebtedness is yet to be quantified. It is reasonable to infer Mr Roussos would have made submissions to the effect that the order should include a requirement for CFI Rentals Pty Ltd account to him for the quantum of the debt. It is also likely that submissions would have been made as to whether the orders should be tailored to enable Mr Roussos to discharge the debt, if any, without having to sell one, or both of the properties the subject of the equitable charge. [38] I am satisfied that Mr Roussos and Ms Gardiner have established that their appeal has an arguable point with merit. The point is one going to a breach of procedural fairness, and if established, impacts on the form of the orders made by the judge at first instance. -- 7 of 10 -- 8 Will Mr Roussos and Ms Gardiner be disadvantaged if the stay is not granted? [39] The order of 29 June 2018 appoints Statutory Trustees for the purposes of selling two properties in which Mr Roussos and Ms Gardiner have an interest. Mr Roussos and Ms Gardiner are the registered owners as joint tenants of land and improvements at West Lake and as tenants in common of land and improvements at Surfers Paradise. [40] The unchallenged evidence before me establishes that Mr Roussos has the means to discharge the debt, if any, owing to CFI Rental Pty Ltd and does not want to sell the two properties the subject of the order of 29 June 2018. In this context, success in the Court of Appeal would mean, in practical terms, Mr Roussos could avoid a situation where one, or both, of the properties are sold to discharge a debt, which is yet to be quantified, and where he has the means to discharge the debt without having to sell one, or both, of the properties. [41] If a stay was not granted, and the Statutory Trustees continued to comply with the order as made, the properties the subject of the order may be sold. The disadvantage to be suffered to Ms Roussos and indeed Ms Gardiner in such circumstances is readily apparent. They may find themselves in a position where the Statutory Trustees sell the two properties to a third party prior to the determination of their appeal to the Court of Appeal. Absent a stay, success on appeal would be rendered nugatory in those circumstances. [42] There is, in my view, a genuine risk that success on the appeal would be rendered nugatory if a stay was not granted, this is particularly so given the position adopted by the Statutory Trustees appointed under the order of 29 June 2018. The Statutory Trustees advised the solicitors for Mr Roussos and Ms Gardiner that $12,836.00 had already been incurred by way of professional fees in the exercise of their duties under the order. It was estimated that the Statutory Trustees would incur further fees in the discharge of their duties under the order. This was estimated to be in the sum of $66,000.00 over the next six month period. The estimated fees exclude conveyancing fees and commission payable to real estate agents. [43] The position adopted by the Statutory Trustees is understandable given the obligations imposed upon them by reason of the order of 29 June 2018. In correspondence, the Statutory Trustees advised the solicitors for Mr Roussos and Ms Gardiner that they would continue to discharge their duties under the order of 29 June 2018 unless and until an injunction was granted restraining them from doing so. The letter to the solicitors for Mr Roussos and Ms Gardiner stated: “Unless and until your clients successfully obtain an injunction to refrain me from taking any steps to sell the properties I will continue to conduct any investigations I consider appropriate and that are within my powers as Statutory Trustee, including the redirection of income should the income not currently be paid directly to the Mortgagee.” [44] Given the Statutory Trustees’ obligations under the order of 29 June 2018 and their stated intention to comply with those obligations in the absence of an injunction, I am satisfied that success on an appeal may be rendered nugatory if the order appealed from was not stayed in the interim. This is a risk that can be eliminated by granting a stay of the order of 29 June 2018. -- 8 of 10 -- 9 Will CFI Rentals Pty Ltd be disadvantaged if the stay is granted? [45] The final factor to be considered is whether CFI Rentals Pty Ltd will be disadvantaged if the stay is granted, and whether that disadvantage outweighs the disadvantage suffered by Mr Roussos and Ms Gardiner if the stay is not granted. [46] In this context, Mr Copley submitted there was no suggestion that CFI Rentals Pty Ltd would be prejudiced if the stay was granted. This is correct having regard to the evidence before the Court; however, it would be wrong in my view to proceed on the footing that CFI Rentals would not be disadvantaged if a stay was granted. [47] As a general proposition, it can be accepted that a stay will preclude CFI Rentals Pty Ltd from taking the benefit of the fruits of a favourable judgment. The loss of that benefit is a disadvantage that CFI Rentals Pty Ltd will suffer. As to the nature of the benefit that would be lost, it involves the loss of declaratory relief as to the existence of an equitable interest and consequential orders providing for the sale of two properties. Assuming the order was perfected, the proceeds of sale would be held on trust until the quantum of the debt owing to CFI Rentals Pty Ltd, if any, is ascertained. It does not however follow that the proceeds of the sale of the properties will be distributed to CFI Rentals Pty Ltd in the foreseeable future. [48] An examination of the submissions before this Court and the history of the litigation generally, reveals there is a genuine dispute between the parties as to the quantum of the debt, if any, owed to CFI Rentals Pty Ltd under the relevant agreement. This is an issue that is unlikely to be resolved by the orders made on 29 June 2018, although, compliance with the orders will represent a step towards resolution. [49] The fact that the order of 29 June 2019 will not finally resolve the dispute between the parties leads me to find that the disadvantage to CFI Rentals Pty Ltd in staying the order of 29 June 2018 is outweighed by the disadvantage to be suffered by Mr Roussos and Ms Gardiner if the stay is not granted. CFI Rentals Pty Ltd would lose the benefit of enforcing an order which would only partially resolve the dispute. On the other hand, Mr Roussos and Ms Gardiner are exposed to the risk that their appeal may be rendered nugatory if the order of 29 June 2018 is not stayed. [50] The disadvantage suffered by CFI Rentals Pty Ltd in granting a stay could be addressed in two ways. First, only a partial stay could granted, limited to a stay of the order appointing the Statutory Trustees. Second, a condition could be imposed. A condition of the stay could require Mr Roussos to pay the sum of $93,211.60 into Court, being the sum certified as being outstanding by Mr Scurr who is the Managing Director of CFI Rentals Pty Ltd. Payment of this sum into Court would, in my view, put CFI Rentals Pty Ltd in position where a sum of money is secured, and subject to proof of debt, may be applied to discharge the proven debt. Should the stay be granted? [51] For the reasons set out above, I am satisfied Mr Roussos and Ms Gardiner have demonstrated: (a) they have a good arguable case on appeal; (b) they will be disadvantaged if a stay is not granted; and -- 9 of 10 -- 10 (c) the competing disadvantage to CFI Rentals Pty Ltd should the stay be granted does not outweigh the disadvantage they would suffer if the stay is not granted. [52] There are no factors in this case (such as delay) that would otherwise mitigate against granting the primary relief sought. [53] I am satisfied this is an appropriate case to grant a partial stay of the order of 29 June 2018. The partial stay will be granted subject to a condition, namely that Mr Roussos pay the sum of $93,211.60 into Court before the expiration of a specified period. This should be a period in the order of 14 days. I invite the parties to address me specifically with respect to the time for payment as it is intended that the partial stay will cease to operate if this condition is not complied with. Conclusion [54] Subject to hearing from the parties with respect to the time for compliance with paragraph 1 below, I intend to order as follows: 1. By 4.00 pm on 17 August 2018, the first respondent is to pay the sum of $93,211.60 into Court in compliance with rule 560 of the Uniform Civil Procedure Rules 1999. 2. Subject to compliance with paragraph 1 above, paragraph 1 of the order of 29 June 2018 appointing Statutory Trustees under section 38 of the Property Law Act 1974 be stayed until further order of the Court or judgment in Court of Appeal proceeding number 8062/18, whichever is the earlier. 3. The parties have liberty to apply with respect to costs. -- 10 of 10 --