Stone v Ebeid

• Jurisdiction: Australia Federal only
• Judgment Date: 10 March 2020
• Neutral Citation: [2020] FCA 343
• Court: Federal Court
• Date: 10 March 2020

FEDERAL COURT OF AUSTRALIA

Stone v Ebeid [2020] FCA 343

File number(s):	NSD 2027 of 2017
Judge(s):	THAWLEY J
Date of judgment:	10 March 2020
Legislation:	Federal Court of Australia Act 1976 (Cth) s 54A Federal Court Rules 2011 (Cth) r 28.67
Cases cited:	Chocolate Factory Apartments Ltd v Westpoint Finance Pty Ltd [2005] NSWSC 784 CPB Contractors Pty Ltd v Celsus Pty Ltd (No 2) (2018) 364 ALR 129 Oldendorff Carriers GmbH & Co KG v Tharmalingam [2019] FCA 2020 Sheehan v Lloyds Names Munich Re Syndicate Ltd [2017] FCA 1340 VoR Environmental Australia Pty Ltd v Taset Inc (No 2) [2019] FCA 1094 Weston v Rajan [2019] FCA 1455
Date of hearing:	10 March 2020
Registry:	New South Wales
Division:	General Division
National Practice Area:	Commercial and Corporations
Sub-area:	Corporations and Corporate Insolvency
Category:	No Catchwords
Number of paragraphs:	16
Counsel for the Plaintiff:	Mr J Kohn
Solicitor for the Plaintiff:	Stacks Law Firm
Counsel for the Defendant:	Mr DC Eardley
Solicitor for the Defendant:	Gardner Ekes Lawyers

Table of Corrections

23 October 2020

The following sentence has been removed from the end of the quotation in paragraph 8, and added as a new paragraph 9: “As noted by McDougall J in Chocolate Factory Apartments at [7], a referee’s reasoning process must be “sufficiently disclosed” such that it can be seen “that the conclusion is not arbitrary, or influenced by improper considerations” and “that it is the result of a process of logic and the application of a considered mind to the factual circumstances proved”.”

ORDERS

		NSD 2027 of 2017
BETWEEN:	RICHARD ANDREW STONE IN HIS CAPACITY AS LIQUIDATOR OF THE COMPANIES AS NAMED IN THE SCHEDULE ATTACHED Plaintiff
AND:	SAM EBEID Defendant

JUDGE:	THAWLEY J
DATE OF ORDER:	10 MARCH 2020

THE COURT ORDERS THAT:

1. The report of Mr Barry Taylor dated 3 February 2020 be adopted in full.

2. The plaintiff send to the defendant a draft index to the Court Book by 17 March 2020.

3. The defendant provide any additional items or modifications to the index to the Court Book to the plaintiff by 20 March 2020.

4. The plaintiff file an electronic version only of the Court Book by 27 March 2020, which contains appropriate bookmarks to the relevant documents.

5. The plaintiff file an outline of submissions by 9 April 2020.

6. The defendant file an outline of submissions by 16 April 2020.

7. The plaintiff file an outline of submissions in reply by 23 April 2020.

8. The defendant pay the plaintiff’s costs of the adoption hearing.

9. The matter be listed for hearing on 30 April 2020.

Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

REASONS FOR JUDGMENT

(revised from transcript)

THAWLEY J:

1. On 8 August 2019, the Court made orders under s 54A of the Federal Court of Australia Act 1976 (Cth) referring certain questions to Mr Barry Taylor as a referee for inquiry and report. The questions referred to Mr Barry Taylor were agreed between the parties and related to the solvency of the Cardinal Group of companies from 1 July 2011 to 15 December 2011 and the identification of debts incurred during any period of insolvency. The questions posed were whether three specific entities within the Cardinal Group were insolvent in the period from 1 July 2011 to 15 December 2011, and, if not, whether they were insolvent for part of that period.

2. Mr Taylor provided the report on 3 February 2020.

3. The plaintiff has applied for the report to be adopted, and submitted that the referee is well qualified; the report demonstrated a thorough, analytical and scientific approach to the assessment of insolvency; there is no error of principle in the report; and the conclusions reached in the report are supported by the evidence provided to the referee.

4. The defendant submitted that the Court should not adopt the referee’s report, primarily because – so it was contended – the report failed to consider the evidence given by Mr Sam Ebeid and Mr Michael Ebeid, or provide sufficient reasons in respect of its findings about that evidence. The first defendant, Mr Sam Ebeid, and his brother, Mr Michael Ebeid, provided affidavit evidence to the referee stating that Mr Sam Ebeid was able to raise $2-$2.5 million in additional finance from his brother. The defendant submitted that the referee report merely noted this evidence, but provided no analysis about whether it impacted the referee’s ultimate finding that relevant entities were unable to raise additional capital. The defendant asked the Court not to adopt the report in its current form, and for the Court to provide further instructions to the referee to clarify the following matters:

(1) Where [sic] each of the affidavits considered;

(2) What affect if any did the availability to raise finance from Mr. Michael Ebeid have on the findings in the expert report; and

(3) What affect if any did the availability to raise finance from Mr. Michael Ebeid have as to solvency or insolvency of any entities being the subject of the expert report.

5. Section 54A of the Federal Court of Australia Act 1976 (Cth) empowers the Court to refer a proceeding or questions in a proceeding to a referee, and empowers the Court to deal with the report as it thinks fit, including by adopting it in whole or in part or varying or rejecting the report: s 54A(3). See also Federal Court Rules 2011 (Cth) r 28.67.

6. These principles concerning adoption were summarised by McDougall J in Chocolate Factory Apartments Ltd v Westpoint Finance Pty Ltd [2005] NSWSC 784 at [7]:

The relevant principles, distilled from those decisions, can be stated as follows:

(1) An application under Pt 72 r 13 is not an appeal either by way of hearing de novo or by way of rehearing.

(2) The discretion to adopt, vary or reject the report is to be exercised in a manner consistent with both the object and purpose of the rules and the wider setting in which they take their place. Subject to this, and to what is said in the next two sub paragraphs, it is undesirable to attempt closely to confine the manner in which the discretion is to be exercised.

(3) The purpose of Pt 72 is to provide, where the interests of justice so require, a form of partial resolution of disputes alternative to orthodox litigation, that purpose would be frustrated if the reference were to be treated as some kind of warm up for the real contest.

(4) In so far as the subject matter of dissatisfaction with a report is a question of law, or the application of legal standards to established facts, a proper exercise of discretion requires the judge to consider and determine that matter afresh.

(5) Where a report shows a thorough, analytical and scientific approach to the assessment of the subject matter of the reference, the Court would have a disposition towards acceptance of the report, for to do otherwise would be to negate both the purpose and the facility of referring complex technical issues to independent experts for enquiry and report.

(6) If the referee’s report reveals some error of principle, absence or excessive jurisdiction, patent misapprehension of the evidence or perversity or manifest unreasonableness in fact finding, that would ordinarily be a reason for rejection. In this context, patent misapprehension of the evidence refers to a lack of understanding of the evidence as distinct from the according to particular aspects of it different weight; and perversity or manifest unreasonableness mean a conclusion that no reasonable tribunal of fact could have reached....