Pilmer & Ors v Duke Group Ltd (In Liquidation) & Ors A22/1999 [1999] HCATrans 612 (3 December 1999)

IN THE HIGH COURT OF AUSTRALIA

Office of the Registry

Adelaide No A22 of 1999

B e t w e e n -

ANGUS CLAYMORE PILMER

ALAN ROBERT CRAWFORD

DOMENIC VINCENT MARTINO

PETER JOHN MESSER

PETER LAWSON MUNACHEN

PAMELA ANNE ROBINSON and JOHN RICHARD LANGFORD as executors of the estate of GEOFFREY JAMES STOKES deceased

ROBERT JOHN GRAY

Applicants

and

THE DUKE GROUP LIMITED (IN LIQUIDATION)

First Respondent

FRANCIS ANTHONY QUILTY and KEITH DANIEL SINGLETON

Second Respondents

HAROLD ABBOTT

Third Respondent

KEVIN CLARENCE SOMES and SIR ERNEST LEE-STEERE

Fourth Respondents

RONALD WILLIAM EDWARD ARNOLD and OTHERS (as per attached schedule)

Fifth Respondents

FRANCIS ANTHONY QUILTY and KEITH DANIEL SINGLETON

Sixth Respondents

HAROLD ABBOTT, KEVIN CLARENCE SOMES and SIR ERNEST LEE-STEERE

Seventh Respondents

Application for a stay

McHUGH J

(In Chambers)

TRANSCRIPT OF PROCEEDINGS

FROM ADELAIDE BY VIDEO LINK TO CANBERRA

ON FRIDAY, 3 DECEMBER 1999, AT 9.00 AM

Copyright in the High Court of Canberra

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MR W.J.N. WELLS, QC: If the your Honour pleases, I appear with my learned friend, MR K.G. NICHOLSON, for the applicant. (instructed by Holding Redlich)

MR T.A. GRAY, QC: May it please the Court, I appear with my learned friends, MR S.J. LIPMAN and MR S.J. DOYLE, for the respondent. (instruction by Fisher Jeffries)

HIS HONOUR: Thank you. Yes, Mr Wells.

MR WELLS: If your Honour pleases, can I mention first of all before I put a submission that there is an affidavit which was sworn on 1 December and filed in the Court which has a sealed exhibit.

HIS HONOUR: Yes.

MR WELLS: Which is a report of Dr Tannenbaum's and I wonder if I can seek an order from your Honour in due course that that be the subject of a suppression order.

HIS HONOUR: Yes, I will make that order now.

MR WELLS: I am obliged to your Honour. Your Honour should have, in addition to our outline, there are some other materials including a draft minute of order and a chronology.

HIS HONOUR: I have not seen the chronology, and I have not seen the draft minute of order, I do not think. No, I have not seen either of those documents.

MR WELLS: I am surprised that they have not reached your Honour because they were, I think, sent down - - -

HIS HONOUR: There is such an enormous amount of material that has arrived here, it is possible that they are somewhere, but I have not seen it and neither has my associate. Do you know anything about it? No, we do not. The Registry knows nothing about it, either, Mr Wells.

MR WELLS: Perhaps I can say then that there is such a document. It must be somewhere in the system.

HIS HONOUR: Yes.

MR WELLS: Can I tell your Honour briefly the gist of the minute of order is that the orders for stays granted by the Supreme Court with the conditions attached to them are the ones that, in effect, should continue. With one exception, we are not seeking any variation in the conditions attached to the stay order that existed and was granted by the Supreme Court.

HIS HONOUR: Let me tell you a difficulty I see. I do not see any ground upon which I could make an order staying the execution for the judgment other than for any sum in excess of the sum of $31,737,000-odd. If this appeal was heard tomorrow and the appeal was allowed, the respondents would be entitled to judgment for that sum, and that seems to be common ground in the case. That being so, it does not seem to me it would be a proper exercise of discretion at all to prevent the respondents from recovering that sum if they can. That may have very significant practical consequences, I appreciate, but I think that is a matter that you have to face up to. I do not think it would be a proper exercise of discretion to stay the whole judgment.

MR WELLS: Your Honour may have gathered that in the conditions that were imposed in the Supreme Court that an order was made - at least the condition that was imposed included a condition that the second and third layer insurers pay moneys into court.

HIS HONOUR: Yes, I understand that and I understand the difficult problems that may well arise from your client by reason of the fact that HIH repudiates its 10 million liability under the first layer and its 24 per cent responsibility for the 30 million liability but how, in principle, could I possibly stay a judgment to which - a sum of money to which the respondent is entitled to obtain and to which there will be no appeal in this Court in respect of.

MR WELLS: Because, your Honour, effectively, at the moment, the plaintiff has the bulk of that money by reason of the conditions that apply.

HIS HONOUR: It has not, has it? I am not quite sure what the total figures are but it would seem to me that it cannot be more than - what is it, 16 million-odd, is it?

MR WELLS: The amounts paid in?

HIS HONOUR: Yes.

MR WELLS: No. Your Honour, the effective position, I can tell your Honour, is that - - -

HIS HONOUR: I think it is 22.8 million, is it not? Is that the effective sum that has been paid in by the GIO and the London underwriters.

MR WELLS: It has been paid out again, your Honour, to the plaintiff.

HIS HONOUR: To the plaintiffs.

MR WELLS: Yes, under a deed of settlement with the underwriters under which the payments out constitute an effective discharge of my client's liabilities up to a little over 29 million.

HIS HONOUR: The terms of that deed have not been put before the Court.

MR WELLS: No. Your Honour is quite right and we have been in some difficulty about that because the deed itself is subject to confidentiality provisions and what we had made available, your Honour, to the Registry, as I am instructed, was that deed under seal which was available to be tendered this morning. It is not attached to an affidavit. It stands separately as a proposed exhibit in the case, the difficulty being that because we are here and your Honour is there we cannot control the actual tender of the document.

HIS HONOUR: No. I have not seen the document but what is the precise amount which has been paid to the respondents.

MR WELLS: Your Honour, there are two matters involved here: the actual amount paid by the insurers and what that represents as a discharge of the plaintiff's liability. In other words, a deal has been done with the insurers by which the plaintiff has been paid moneys now but they have received a discount.

HIS HONOUR: On 18 October the Supreme Court entered orders releasing to Duke two sums of money - eight million odd and seven million odd.

MR WELLS: Yes, it is close to 16 million, your Honour.

HIS HONOUR: Yes.

MR WELLS: But it represents a discharge of the applicant's liabilities pro tanto of just over 29 million and it is then subject, however, to the results of the High Court appeal depending on how much more over the 29 million results from the High Court appeal. The insurers, under the deed, undertake to pay a further amount up to a maximum of 11 million but in proportion to their indemnity liabilities under the second and third layers.

HIS HONOUR: Yes, we now have the chronology and the draft minute of order, so they are here. Yes, carry on, Mr Wells.

MR GRAY: Your Honour, they are documents that we have not received and the document your Honour has just located we have not received.

HIS HONOUR: Judging from the top of it, it was sent by fax at 3.25 on 2 December. So, it was sent at 3.25 yesterday.

MR WELLS: My instructions are that these documents were sent at the same time both to the Court and to those instructing my friend. I do not know if your Honour has as well the sealed up envelope containing the deed of settlement because if - - -

HIS HONOUR: No, we do not have that and the Registry says they - - -

MR WELLS: Well, your Honour, my instructions are that they were provided to the Registry to be available to your Honour this - - -

HIS HONOUR: In Adelaide or - - -

MR WELLS: No, I think, initially, in Sydney to be conveyed to Canberra.

HIS HONOUR: I am told they are not here yet. That means they may be in the overnight bag.

MR WELLS: Well, I am sorry about that, your Honour, but the intent was to have that document available to be tendered to your Honour this morning.

HIS HONOUR: Yes.

MR WELLS: If your Honour were to turn to the annexure to our outline - I hope your Honour has our outline.

HIS HONOUR: I certainly have your outline and I have read it more than once, Mr Wells.

MR WELLS: If your Honour pleases. If your Honour were to turn to the annexure, what appears in the annexure is a summary of available funds. It was put in a way which was not intended to, and I do not think does, compromise the confidentiality of the deed unless and until it became a tendered document before your Honour, but it is an annexure that is headed "Extent of Funds" including insurance indemnities available to satisfy the judgment.

HIS HONOUR: Yes, I see.

MR WELLS: And your Honour will there see that, on the second page of that annexure 1.3, is the calculation to which we accept must be added some interest on the judgment which, by and large, with some differences about cost figures, appear to be common ground between the parties.

HIS HONOUR: Some 3 million-odd.

MR WELLS: Yes, that is up to now. It might be a little more by the time the judgment of the High Court comes.

HIS HONOUR: Yes.

MR WELLS: But your Honour will also see that there is set out there as well on page 3 a summary of the insurance position, and that is a summary of the insurance position, your Honour, without regard to the deed of settlement between the second and third layer insurers and the plaintiff, under which the plaintiff was paid and, as it were, paid irrevocably, something of the order of $16 million, but having the effect of discharging a liability of the defendants, my clients, up to a set figure which in round terms I will call 29, so there was a discount, and with an obligation under the deed for the insurer to pay a further proportion of any judgment which is more than that figure, the $29 million.

HIS HONOUR: Yes.

MR WELLS: So, your Honour, on that basis, the deed would have the effect of carrying the insurer's liability beyond the figures that your Honour mentioned, that is, the 31. And indeed, your Honour, it would include the payment of costs.

HIS HONOUR: But what about the first layer sum?

MR WELLS: Your Honour, whatever might have been the position, if the policies had had their full effect, that is - and it is not clear that.....the policy, but let us assume that under the policy the second and third layers are not payable until the first layer is paid. That has been bypassed by the deed. The deed has procured the payment by the second and third layers notwithstanding a dispute over the first layer. It needs to be said, your Honour, that as to the first layer the dispute is not really as to indemnity at all. The dispute really is as to whether that indemnity has been already discharged, because it is HIH which has effectively been conducting the litigation and has paid moneys by way of costs, and they are saying that - - -

HIS HONOUR: Can I ask you - this is the point that I am not sure I am clear on. What sum has the Duke Group been paid? Is it any more than $16 million-odd?

MR WELLS: Your Honour, the answer to that is no, apart from - perhaps I should qualify it. No, as far as these applicants are concerned. They have been paid moneys on account of the judgment by other defendants.

HIS HONOUR: Yes, but they are comparatively small sums, are they not?

MR WELLS: No, your Honour. Our understanding is that it is of the order of 13 million but the plaintiffs will not disclose to us what that is, so we are left with a guess about that. But our understanding, working from the liquidator's accounts, is that there is a figure of some 13 million which has already been paid on account of the judgment debt. Your Honour will no doubt have understood that in fact the Full Court's judgment varied the trial judge's judgment by saying that my clients were liable for, in round terms, 117 million but that the director defendants were liable in addition for some compound interest, Hungerford's damages, up to 188.

HIS HONOUR: Yes.

MR WELLS: Now, your Honour, up to 117 everybody is jointly liable and the directors, if they have paid, as we understand they have paid, something of the order of 13 million, whatever the terms of any agreements that have been reached with the plaintiff about that cannot affect my client's position in that respect, which is that if we are right and our understanding is something of the order of 13 million has been paid by other defendants, that that is in partial discharge of the applicants' judgment debt.

HIS HONOUR: Well, I am not sure what the answer is, but if the other defendants are liable for a greater sum, does the 13 million go to discharge that excess or can it be taken into account by your client?

MR WELLS: Your Honour, the latter, in our respectful submission. It cannot be the case that in some way the applicants are prejudiced by reason of the fact that other defendants have a greater liability and it cannot be the case, as it were, that the other defendants can pay off the top - - -

HIS HONOUR: Well, it is not a question of prejudice. It is a question that your clients have not paid the amount of the hypothetical judgment of 31 million against them.

MR WELLS: Well, your Honour, that 31 million is also a judgment pro tanto against the other defendants as well. It is not just against my clients.

HIS HONOUR: Yes, but at the end of the day, if you succeed on your appeal, there would be judgment for you against you and the other defendants jointly for 31 million and judgments against the other defendants, what, for an extra 70-odd million?

MR WELLS: Well, certainly an extra compounded amount.

HIS HONOUR: Yes.

MR WELLS: We do not need to calculate I think what it would be, but it would be obviously more than the amount for which my clients are liable, but that does not mean that whatever they have paid is paid off the top rather than off the bottom and principle suggest that it is paid off the bottom.

HIS HONOUR: I am not sure about that. Anyway - - -

MR WELLS: Your Honour, and I am sorry that there is a lot of material and your Honour would have gathered that, in fact, there was a lot of material in the Supreme Court as well. One of the later affidavits, your Honour, exhibits a letter from those instructing me asking the solicitors for the plaintiff to advise on the amounts that had been paid by other defendants and we undertook to indicate to your Honour what any response was.

Their response, your Honour, was that they had, they said, received something of the order of 7 million from other defendants but they said that was not relevant to the present matter and that was the effect of the response that was made but, as I say, it is not our understanding that it is limited to $7 million and it is a matter of some considerable significance that there are other defendants who have either discharged their liability by agreement or who have paid in partial discharge of the judgment debt. It is one judgment and up to $117 million is jointly owed.

HIS HONOUR: Yes.

MR WELLS: So, your Honour, if I come back to your Honour's question, how much has been paid, then from the applicants for whom I act my understanding is that it is the amount of 16 million. I am talking in round terms, your Honour. It actually has some thousands and hundreds attached to it but of the order of 16 million.

HIS HONOUR: Yes, but all this is machinery to be dealt with either outside this Court but, from the Court's point of view, why should the Court make any order other than one which restrains the defendant from executing the judgment or receiving under the judgment a sum greater than 31-odd million?

MR WELLS: Your Honour, what your Honour is proposing is in form a partial stay.

HIS HONOUR: Yes.

MR WELLS: Your Honour, the answer to that, we respectfully submit, is this. There is an issue over the first layer amount, that is whether it is, the first layer - HIH is - - -

HIS HONOUR: I understand that, Mr Wells, but it does not seem to me a matter that this Court can get involved in or whether it would be proper to take into consideration on a stay. It might be - if, for example, a bankruptcy notice was given to you it might be a matter for the Federal Court judge. I imagine it would be quite relevant but from our point of view, it seems to me at the end of the day, that the best you could obtain from this Court is an order that you be liable in the sum of 31 million.

MR WELLS: Can I address this proposition, your Honour, namely, that it is something for the Bankruptcy Court. The evidence is overwhelming, we respectfully submit, and was accepted by both the trial judge and Chief Justice Doyle in the stay applications before each of them, that commencement of bankruptcy proceedings, by which I mean - - -

HIS HONOUR: Yes, I understand that. You need not address me on that. I understand that and it seems to me that is a factor that the respondents cannot get over, that the bankruptcy, or even an application for bankruptcy, would cause irreversible harm to some of your clients other than Langford and Robinson as executors. But, that said, I am more concerned about this Court's position in relation to staying a judgment when the result of the Court's final order, if it was in your favour, would be that you would still be liable under the judgment of the Supreme Court of South Australia for 31 million. I do not really see how in principle we could prevent the respondents from executing up to that sum.

MR WELLS: Your Honour, because we have the opportunity before the High Court hears this appeal of being in a position through our indemnity claims to cover that amount, more than that amount, but at least that amount, and by not protecting it now - - -

HIS HONOUR: But if that is the case you can do it now.

MR WELLS: No, your Honour, and that is the point. We are trying to do it now but we have these two difficulties.

HIS HONOUR: I understand that.

MR WELLS: Well, your Honour, one is that by reason of the conditions of the stay presently applying, my clients are not in a position to take an active role in an action which the plaintiffs have already commenced against HIH to seek a determination of their indemnity liability.

HIS HONOUR: Yes, but test it this way, Mr Wells. Supposing that the appeal was heard and you were successful tomorrow, would you still be asking this Court to stay the execution of the 31 million on the basis that you are having some dispute with your insurer?

MR WELLS: Yes.

HIS HONOUR: You would?

MR WELLS: Yes, we certainly would, your Honour, because the alternatives are disproportionate, far too disproportionate, where there exists a real possibility of being able to enforce the indemnity. And that is the point, that the indemnity contract, the contract of insurance is there, that apart from the difficulties with HIH they have been acknowledged and accepted, and that the only thing that stands in our way is the resolution by action of that issue.

Now, given the alternative and the disproportionate nature of that alternative, your Honour, we would most certainly seek a stay, and can I say, your Honour - I am aware that the time is running out - that this is not, in our - - -

HIS HONOUR: Yes, I think it has run out, but carry on - - -

MR WELLS: I did not hear the last bit, your Honour?

HIS HONOUR: It has run out.

MR WELLS: This is not a matter, in our respectful submission, to be handed over to the Federal Court sitting in bankruptcy. If we are entitled to a stay, then, in our respectful submission, we should have it. If the view is that a Federal Court in bankruptcy would grant a stay, our answer is then we should have the stay from this Court. If the view is - - -

HIS HONOUR: But it is a judgment of the Supreme Court of South Australia, and although I would be the last person to want to increase the parties' expense, it may be that if you have a remedy, it would have to be to go back to that court to get a stay in respect of its judgment. But so far as we are concerned, I do not see, in principle, how we can stay that court's judgment when, according to its tenor and the consequence of any variation of it by us, there would still be a judgment for $31 million. Your remedy, it seems to me, may be in the Supreme Court, Mr Wells, rather than here.

MR WELLS: If your Honour pleases, I rather gather that I have run out of my time.

HIS HONOUR: Yes, thank you for your assistance. Yes, Mr Gray.

MR GRAY: If your Honour please, we say that this application is misconceived. A stay is not needed to preserve any right of appeal and what is really in issue is an attempt to preserve the applicants', for a stay, assets from sequestration. Your Honour, it has been conceded in my learned friend's written submission - and I am referring to the second part of the submission headed "Extent of Funds" and it is page 3, paragraph 6 - my client is entitled to pursue the insureds for the first $10 million and then the 24 per cent of the third layer.

HIS HONOUR: Yes.

MR GRAY: So that at the end of the day, that concession has been made and properly made that what this is really about is the question about the manner of enforcement, rather than a stay. If all our friend's arguments are right, that they can call in aid the $7 million-odd that was recovered from directors, well, then that will stand against the judgment. If my friend is right on that, then they can call that in aid. If my learned friend is right that we pay.....recovery, they can be called in aid. We dispute all that.

Now, if your Honour pleases, at the end of our written submission we have set out a calculation of what we have called "Duke's Inevitable Entitlement".

HIS HONOUR: Yes, I have read that. Well you add 16 million odd for costs, do you not?

MR GRAY: Yes.

HIS HONOUR: And, if the appeal succeeds, there may have to be some variation of costs order, I would imagine and, in any event, the costs orders are covered by the policies, are they not?

MR GRAY: No, they are not, your Honour.

HIS HONOUR: Are they not? I thought I read in Chief Justice Doyle's judgment, that the policy covered the costs of - - -

MR GRAY: Not the plaintiff's costs; the argument is whether they cover the defendants' costs or not.

HIS HONOUR: Only the defendants' - - -

MR GRAY: The argument relates to defendants' costs, not plaintiff's costs, under the policy.

HIS HONOUR: Yes.

MR GRAY: So my client stands, your Honour, we say, in dollar terms, being entitled by reason of the judgment that cannot be interfered with, to an entitlement in excess of $50 million. We note on the costs side of it, on one of my friend's schedules, that they have estimated our costs, including the appeal costs, at 21 million. I do not know if your Honour has seen that document.

HIS HONOUR: No.

MR GRAY: Did your Honour have that? Your Honour will see that there is an estimate there of 21 million; we have included a figure of 16, five less in terms of their liability.

HIS HONOUR: No, I have not seen that, Mr Gray.

MR GRAY: Well, your Honour, I do not want to take time over it, but we have been handed a document we were told had gone to the court, headed "Schedule of Existing and Prospective Costs Orders".

HIS HONOUR: It may be here somewhere among this great pile of documents.

MR GRAY: Yes. Your Honour, the bottom line is, they have estimated our costs of the trial and the intermediate Court of Appeal at $21 million and we, in our calculation, your Honour, in terms of recovery against the Nelson Wheeler partners, are seeking 16.

HIS HONOUR: Yes.

MR GRAY: But, your Honour, at the end of the day we simply take the position that we are entitled to a judgment come what may of just under $32 million. In addition to that, default interest is another 3.5 million. In addition to that we have obviously a very substantial entitlement to costs. It is conceded, your Honour, at the very least we are entitled to pursue the individual defendants for at least $17.2 million. Nothing can change that and we should be entitled to pursue that. If there is some reason why they should be protected at all, the Bankruptcy Court would deal with that.

HIS HONOUR: But what about the issue of damages relating to the value of shares issued by Kia Ora as considerations for the shares in Western United? That is $55-odd million and when you make an adjustment for the flow-on effects in relation to interest, at the end of the day there may be a difference of over $85 million, might there not?

MR GRAY: Yes. Your Honour, in that respect we would say this, that if the Court was inclined to grant a stay in regard to amounts of more than $55 million, then that would be a matter for the Court and that would have to be conditioned.

HIS HONOUR: Well, having read the submissions of the parties and listened to the submissions of Mr Wells, my present inclination, Mr Gray, is to order that the respondents be restrained from executing against the judgment in a sum greater than $31,737,000-odd.

MR GRAY: Yes, would your Honour intend that my client could not pursue the interest that would run on that under the default judgment of 31/2 million, because that is a necessary consequence.

HIS HONOUR: That is so, that it is a necessary consequence of it and it seems to me that you would be entitled to a proportionate share of the interest of it as well, on top of the $31 million.

MR GRAY: Yes, and in addition, your Honour, we have an order for costs of the trial including orders for indemnity costs on two major issues because of the way this trial is conducted by the defendants and, again, we would, as we understand your Honour's logic, we should be entitled to tax that and pursue that in the ordinary course. And then that would leave aside, your Honour, the matter of the share issue.

HIS HONOUR: Yes.

MR GRAY: If your Honour, we did write to my learned friends making an offer to them in regard to this, but I do not know if that letter is before your Honour. But what we said was that on their consenting on the payment of the $17.2 million we would agree to a continuation of the stay in regard to other amounts on the conditions imposed by Chief Justice Doyle and, in substance, it would appear that that is the effect of what your Honour suggests the Court might order.

HIS HONOUR: Yes, those orders themselves I would make subject to conditions, of course, basically along the lines of those contained in the order of the Supreme Court of 17 September, was it?

MR GRAY: Yes.

HIS HONOUR: Yes.

MR GRAY: Your Honour, the argument against granting any stay at all is really this, that the defendants have said they do not have assets at all, so in so far as their uninsured moneys, they go to face bankruptcy came what may. It is plain, your Honour - - -

HIS HONOUR: Well, it may be that the arguments that they directed here are arguments that are more properly directed to the Supreme Court because it is its judgment and this Court could not touch that component of the judgment.

MR GRAY: No.....refused leave in regard to that component, your Honour. We would say that that would be the position and, in accordance with Sali's Case, your Honour, and other cases, one would really say this is a matter for the Bankruptcy Court to handle in its discretion. That would be, we would say, the place where the matter would rest but your Honour has our points and I do not want to take time. Your Honour has read our outline. Our primary position is there should be no stay in regard to, as it were, the unimpeached judgment and in regard to the balance, it is a matter for the Court. May it please the Court.

HIS HONOUR: Yes. Yes, Mr Wells.

MR WELLS: Your Honour, three points in response. The first is that the insurance policies do cover, your Honour, plaintiffs' costs, that is they extend to paying plaintiffs' costs but, of course, there are indemnity limits as we know.

HIS HONOUR: Yes.

MR WELLS: The second thing is - and I am very sorry that your Honour does not have some of these materials, I cannot explain why that is so, but there was a cost schedule.

HIS HONOUR: I have this cost schedule now.

MR WELLS: My learned friend read from the bottom line of the first column, the first two columns actually, to say that we were estimating the plaintiffs' costs at 21 million. That is their solicitor/client costs. It is not party/party costs.

HIS HONOUR: Yes.

MR WELLS: The party/party costs position is in the third column headed "Net position" and there, your Honour, however one calculates it, our assessment is that the costs party/party, in the end the net position will be less than 10 million so that is the figure that is to be contrasted with the 16 that my learned friend is referring to.

Your Honour may have seen from the outline of my learned friend that a number of authorities are referred to including Sali's Case and other authorities referring to Sali's Case. Now, your Honour, could I just say in that respect - and it is relied on because there Justice Brennan, as he then was, suggested that there were matters that were better dealt with by the Bankruptcy Court. Sali's Case was a special leave application.

HIS HONOUR: Yes, I understand that.

MR WELLS: Sali's Case was stay pending special leave, your Honour, and it has to be said that his Honour, at that stage, took a somewhat narrower view of the implied incidental power of the Court than in more recent times has been the case so we would respectfully submit that caution needs to be exercised in applying the Sali proposition to the application before your Honour.

HIS HONOUR: In the Ramset Case I dealt with it on a wider basis although I acknowledge what his Honour said, if I remember rightly.

MR WELLS: Yes, indeed, but neither your Honour nor earlier in this case, Justice Callinan, took the view that what Justice Brennan there laid down was some kind of guideline of any kind. It was a comment on the particular facts. In our respectful submission, it would not be appropriate, in our submission, to leave this to a Bankruptcy Court. If the Bankruptcy Court adjourns or stays the matter then it should be stayed here. If the Bankruptcy Court does not, then there is all the more reason why there should be a stay now. On those two grounds, in our respectful submission, as a matter of principle, it would not be appropriate to leave the matter in the hands of a Bankruptcy Court.

I do not know what your Honour plans to do in relation to any conditions that your Honour would propose to impose, given that your Honour does not seem to have our minutes of order.

HIS HONOUR: We have them now. Do they vary in any substantial way from the conditions that were set out behind tab 8 in Miss Fernandez's affidavit?

MR WELLS: Your Honour should see that this draft minutes of order has attached to it the two orders of the Supreme Court. The answer is, in only one respect do these conditions vary from the Supreme Court conditions. That respect is set out in paragraph 2.1 of the draft order. Your Honour will see there that we have sought to have included a further exception to the undertaking which would allow the applicants to continue their periodic payments into court by borrowing funds and, if needs be, giving security for it. At the moment, their only means of paying this money into court, which is going overall at the rate of $84,000 a year in periodic payments, is out-of-cash flow, out of their income, and nothing more.

It really puts them in a worse position, your Honour, than if they were under a bankruptcy administration. So we are seeking that additional exception to the undertaking but otherwise they are intended to continue the position as it has been before the Supreme Court. If your Honour pleases.

HIS HONOUR: Yes. Thank you, Mr Wells. Mr Gray, what do you say about the variation that is referred to in 2.1 of this proposed order?

MR GRAY: Very little, your Honour. The matter was hotly debated before Chief Justice Doyle and he declined to make the order and, if your Honour thought it appropriate, we would leave it to the Court.

HIS HONOUR: Yes, thank you.

This is an application for the stay of a judgment of the Supreme Court of South Australia in respect of which an appeal is presently pending in this Court. The present respondents, Duke Group Limited (In Liquidation) and Others, which I will call the Duke Group, commenced proceedings as plaintiffs in the Supreme Court of South Australia against the present applicants as defendants. In January 1998 Mr Justice Mullighan awarded the Duke Group damages in the sum of $93 million-odd against each of the present applicants.

Following an appeal to the Full Court of the Supreme Court of South Australia in May 1999, the Full Court varied the orders of Justice Mullighan and awarded damages in favour of the Duke Group against each of the defendants in the sum of $117 million-odd . Other defendants who are not involved in the present appeal were also the subject of judgments in the litigation, and the sums awarded against them are significantly higher than those awarded against the present applicants. Up to the limit of the sum of $117 million, those other defendants are jointly and severally liable with the present applicants.

The present applicants made application for special leave to appeal to this Court on numerous grounds, but only one of them succeeded. The Court ordered that the applicants should be given leave to appeal against so much of the judgment as was involved in the Full Court holding that a company, Kia Ora, suffered loss by the issue and allotment of shares to the shareholders in another company, Western Union, as part of the consideration for the takeover of Western Union whereas the Full Court, it was alleged, should have held that Kia Ora did not suffer any loss by reason of the issue and allotment of shares to the shareholders of Western Union.

Because the appeal is limited to that ground, even if the present applicants are successful, only part of the damages awarded by the Full Court to the respondents may be disturbed. A successful appeal by the appellants will, on any view, still result in a substantial judgment in favour of the respondents. In fact it is common ground between the parties, and is conceded by the present applicants, that they will be liable in the sum of no less than $31,737,464.87 even if their appeal to this Court is successful. That being so, it seems to me that there is no basis upon which this Court could grant a stay in respect of so much of the judgment as is represented by the sum of $31 million-odd.

The applicants contend, however, that the Court should stay the judgment generally because they have insurance which, at face value, would be more than sufficient to cover any judgment of $31 million, notwithstanding that, at the present time, there exists a dispute between the applicants and an insurer in respect of two aspects of the insurance cover.

However, it seems to me that it would not be a proper approach in principle for this Court to stay so much of the judgment of the Supreme Court of South Australia which will, on any view, result in a judgment for the respondents of at least $31 million-odd after the proceedings in this Court is complete. That being so, I would not propose to issue any stay in respect of so much of the judgment as represents that sum.

A great deal of evidence has been put before me, as it was put before Chief Justice Doyle in a stay application heard by him in the Supreme Court over a number of days earlier this year. There is no need for me to go over the evidence that was before him and which is before me, together with the additional evidence that has been put before me. I am satisfied that the present applicants are entitled to a partial stay on the ground that the Court has granted leave to appeal against part of the judgment; that there is presently no prospect of the applicants paying the sum of money involved in that part of the judgment, either through their own resources or through any actual or potential entitlements against their insurers and that they will suffer irreversible prejudice unless a stay is granted.

Unless a stay is granted, the applicants, Pilmer, Crawford, Martino, Messer, Munachen and Gray, would inevitably be bankrupted and the estate of Geoffrey James Stokes, whom the applicants, Robinson and Langford, represent, would also be the subject of a bankruptcy order. The prejudice to the applicants would seem to me to be irreversible if I should refuse a stay in respect of that sum of money and they were rendered bankrupt and subsequently this Court allowed their appeal in respect of that sum.

In those circumstances I propose to order a partial stay. I will order that the respondents be restrained from executing the judgment against the applicants, Pilmer, Crawford, Martino, Messer, Gray and Munachen, and against the appellants, Robinson and Langford, as executors of the estate of Geoffrey James Stokes, deceased, for a sum greater than $31,737,464.87 upon condition:

(1) that the applicants prosecute the appeal with due diligence;

(2) that pending the hearing of the appeal or further order of the Court, the undertakings of the applicants, Pilmer, Crawford, Martino, Messer, Munachen and Gray, given in paragraphs 2.6, 2.7, 2.8 and the Schedule of the order of the Supreme Court dated 17 September 1999 are, mutatis mutandis, to continue;

(3) that pending the hearing of the appeal, the applicants, Robinson and Langford, as executors of the estate of Geoffrey James Stokes undertake to continue to comply with the conditions imposed by the Supreme Court and which are set out in the document headed Order which has been furnished by the applicants' solicitor, save that the undertaking to the Supreme Court be varied to include the following subclause (B)(3), "Of borrowing funds and giving security over assets in order to provide the periodic payment ordered by this Court to be made and continued."

In explanation of the restraining order I have made, I would make it clear that the respondents are entitled to execute in addition to the judgment figure of $31,737,464.87 such proportion of the interest as is applicable to that sum. Is there anything further?

MR GRAY: Just two matters for clarification, your Honour.

HIS HONOUR: Yes.

MR GRAY: Does your Honour - as we understood it, we would be entitled to pursue the costs that would relate to that judgment that we now hold and can execute on. That was the first point that - - -

HIS HONOUR: It may be very difficult, Mr Gray, to differentiate between the costs payable in respect of that sum and the costs payable in respect of the other part of the proceedings. I will give you liberty to apply in respect of that aspect of the matter.

MR GRAY: Yes. I take it that your Honour's order would not preclude our lodging, preceding the taxation, the bill of costs, for example?

HIS HONOUR: No, not at all.

MR GRAY: No, and the other matter, your Honour, would be just liberty to speak to the minutes. It was quite a complicated order, your Honour, and we would like to have the chance to speak to that if required.

HIS HONOUR: Yes, I have done it orally and it may need some clarification or polishing up.

MR GRAY: Just to guard against that possibility, your Honour. The other matter was the costs of this application and we do seek the costs of this application. We did write to my friends, your Honour, saying that if we received payment of the $17.2 million, the first 10 and the balance of 7.2, that we would agree to, as it were, a partial stay on the Chief Justice Doyle conditions, and we had no response to that offer.

HIS HONOUR: Yes, well, each party has had some success in the proceedings. Is there anything that you wish to say, Mr Wells?

MR WELLS: Only this, your Honour. We would propose that, really, the matter of costs be reserved. But, in any event, we have a particular application in that respect arising out of our initial application in Sydney. There is an affidavit on the file, your Honour, I am sorry to say, somewhere, sworn by Ms Fernandez on 1 December in she exhibits correspondence relating to the Sydney attendance. Your Honour, the correspondence makes it clear that an offer was put to the plaintiff that effectively invited them to consent to an interim stay, pending the hearing of this present application, upon the continuation of the same conditions as had applied in the Supreme Court. That offer was declined, as a result of which - and this was made clear - it was necessary for counsel to attend in Sydney in order to seek an interim stay. Your Honour may recall that when that moment arose, the Chief Justice proposed exactly those terms for the interim stay to which my learned friend consented.

HIS HONOUR: Yes.

MR WELLS: So that exactly what we had proposed took place, and our respectful submission is that we should have our costs at least of that application and that attendance, and that that should be included in the - - -

HIS HONOUR: Before the Full Court?

MR WELLS: Yes.

HIS HONOUR: Yes.

MR WELLS: It was on the special leave application, your Honour.

HIS HONOUR: Yes.

MR WELLS: But it is a matter on which we would invite your Honour to make an order on this application.

HIS HONOUR: Yes. What do you say about that, Mr Gray?

MR GRAY: Your Honour, we oppose that. What my friend has outlined did occur, but my client was quite entitled to hear what the Court said on the special leave. Any number of matters could have occurred, and we were given very short notice of this so-called offer and the matter was entirely proper, your Honour, to let the Full Court indicate what it wished about special leave and then make a decision in the light of that. It cannot be said my client acted unreasonably. May it please the Court.

HIS HONOUR: Yes. I think both parties have had partial success in respect of this application and, having regard to the various contingencies concerning the result of the special leave application, I do not think that it calls for any special order against the present respondents. I propose that each party pay its own costs of the application for this stay. I give both parties liberty to apply in respect of the orders that I have made. I certify for counsel.

AT 10.03 AM THE MATTER WAS CONCLUDED