ACES Sogutlu Holding Pty Ltd v Commonwealth Bank of Australia

Judgment 1McCOLL JA: The applicants, ACES Sogutlu Holdings Pty Ltd ("ACES Sogutlu"), Ceyser Pty Ltd ("Ceyser"), Ercan Sogutlu and Jamal Charara apply pursuant to a notice of motion filed on 26 February 2014 for a stay of a judgment for $132, 858.18 plus interest given by Young AJ against the first three applicants in favour of the respondent, the Commonwealth Bank of Australia: Commonwealth Bank of Australia v ACES Sogutlu Holdings Pty Ltd and Ors [2013] NSWSC 1184. 2Mr Jamal Charara sought leave to appear for the first three applicants. He relied on an affidavit filed on 20 February 2014 asserting that he was a director (and contributory) of the corporate applicants: Uniform Civil Procedure Rules 2005 r 7.2. The third applicant, Ercan Sogutlu was in Court and informed me that he authorised Mr Charara to appear on his behalf. On this basis I gave Mr Charara leave to appear for those applicants. 3The appeal from Young AJ was originally commenced by summons seeking leave to appeal. However the respondent accepts that the first three applicants, at least, have a right of appeal and, accordingly, the matter has proceeded on that basis. Mr Charara informed me, without contradiction, that all steps had been taken to have a date for the hearing of the appeal allocated. 4The substantial basis for the appeal from the judgment, as I understood Mr Charara's submissions is that Young AJ erred in calculating the judgment sum. That argument also formed the principal argument on the stay application. Mr Charara accepted that the first three applicants were indebted to the respondent in the amount of $48,068.03, however he contended that the judgment wrongly included amounts representing Goods and Services Tax ("GST") and interest calculated at the wrong rate. He advanced extensive argument to support the proposition that the applicants had an arguable case of establishing these propositions on appeal. He also argued that the applicants had substantial prospects of recovering a sum far greater than the judgment sum if an appeal from the dismissal of their cross-claim was successful. Before considering that argument I note the following matters. 5The overriding principle to apply when determining an application for a stay of execution of a judgment is to ask what the interests of justice require: NSW Bar Association v Stevens [2003] NSWCA 95 (at [83]) per Spigelman CJ. There is no automatic right to a stay. Prima facie the judgment appealed from is correct and the court should not deprive a party of the fruits of victory: Julia Farr Services Inc v Hayes [2003] NSWCA 142 (at [24]) per Santow JA. The onus is upon the applicant to demonstrate a proper basis for a stay that will be fair to all parties: Alexander v Cambridge Credit Corporation Limited (1985) 2 NSWLR 685 (at 694). 6Before a stay of a judgment pending appeal is granted, the applicant must show that there are serious questions for the determination of the appellate court: Kalifair Pty Ltd v Digi-Tech (Australia) Ltd [2002] NSWCA 383; (2002) 55 NSWLR 737 (at [18]) per Handley, Sheller and Ipp JJA. 7Even arguable grounds of appeal are not usually regarded as sufficient to stay orders for payment of money, where there is no evidence that the money, if paid over, would be irrecoverable: Mitzev v Foxman [2007] NSWCA 134 (at [2]) per Hodgson JA. Needless to say the applicants did not suggest this could be the consequence of them paying the judgment to the respondent. 8There is no evidence from the applicants that the appeal might prove abortive if a stay is not granted: cf Alexander v Cambridge Credit Corporation Limited (at 695). I was informed from the bar table that the applicants had been unsuccessful in an application before Brereton J to set aside a statutory demand served by the respondent, a matter which for reasons which were not apparent was due to return to his Honour's list on 25 March 2014 at the applicants' behest. However, subject to what I say in paragraph [11], there was no evidence that the applicants were unable to pay the judgment sum which I assume is the subject of that demand. 9The only evidence relied upon by the applicants was an affidavit from Mr Sogutlu asserting that Young AJ "manifestly erred in the wrongful calculation against us" of the judgment sum. There were a number of annexures to the affidavit which Mr Charara sought to analyse to make good Mr Sogutlu's assertion. 10No proposal was placed before the Court as to terms which would preserve the status quo by protecting the respondent as judgment creditor from the risk of loss if the stay was granted and the appeal was unsuccessful: cf Kalifair Pty Ltd v Digi-Tech (Australia) Ltd (at [28]). 11When I raised this with Mr Charara, his initial response was that if the applicants paid the respondent even the amount acknowledged to be outstanding, their business would be devastated. Later in the argument, Mr Charara asserted that if the Court were minded to grant a stay, the applicants would be prepared to obtain a bank guarantee for that undisputed amount. Having regard to Mr Charara's earlier statements, I obtain no comfort from that assertion absent evidence such a guarantee can be obtained. Further, the question whether a bank guarantee in the undisputed amount would be sufficient turns, in part, on the arguability of the appeal as to the wrongful calculation assertion and the appeal in relation to the cross-claim. I turn to that issue. 12The background to the matter appears from Young AJ's reasons as follows: "6. The background is given in the pleadings of the cross-claim as follows. Ceyser Pty Ltd purchased a property at Alexandria in 1998. Apparently at that time the Ceyser company was owned as to 45 per cent by Ercan Sogutlu and 55 per cent by his estranged wife, Aysen Sogutlu. 7. In October 2006 ACES Sogutlu Pty Ltd, a company solely owned by Ercan Sogutlu wished to purchase a factory at Botany. It made application to the plaintiff for a loan of $1.5M to purchase the property. When applying for the loan Ercan Sogutlu says he informed the plaintiff that he owned 45 per cent of the Alexandria property and he says that the Bank agreed to take security only over 40 per cent of his 45 per cent share. However, the defendants say that the Bank actually not only took a mortgage over the whole of the Alexandria property, but also over the whole of the Botany property. 8. The Alexandria property (sometimes referred to as the St Peters property) was leased commercially and rents were received from the tenant. 9. The mortgagor defaulted and the Bank proceeded to realise the security. The defendants had made some attempts to sell the property but the sale procedure was taken over by the Bank who appointed reputable real estate agents to handle the realisation for it. The agents themselves obtained valuations of the land to be sold from a valuer. Mr Lo, a registered valuer who later gave evidence in the case, gave the estate agents a valuation before the sale took place. The Alexandria property was sold for $805,000. The Botany property realised $1.2M. The Bank reckoned that it received $166,560 net and that this was approximately $120,000 less than what it was owed." 13An amended notice of appeal was filed on 20 February 2014. Ground 6 of that document complains that Young AJ failed to calculate correctly the amount owed to the respondent and that such error led to his Honour giving judgment in the wrong amount. As I have said, the wrongful calculation submission was the substantial basis on which the applicants argued the stay ought be granted. Mr Charara also argued that the applicants had a viable appeal in relation to a cross-claim they advanced before Young AJ, which would entitle them to a judgment in excess of $1 million. 14In essence Mr Charara's submission on the wrongful calculation point, as I understand it, is that the respondent was not entitled to debit an amount of $77,747.18 to ACES Sogutlu's loan account and, too, that interest was erroneously allowed at the rate of 15.80 per cent instead of 14.930 per cent, the latter being the debit rate shown in exhibit A, another statement in relation to the loan account, as at 16 March 2013. 15Young AJ (at [10]) described the defences as "rather difficult to understand". Insofar as the GST issue was concerned, he said the defence raised the question whether there was "proper accounting". He dealt with that defence as follows: "61. As I have said earlier, the GST matter was raised at the heel of the hunt. Mr Charara put forward a number of figures which are created in 'MFI 12'. On the other hand Mr Villa, between the second and third day of hearing, put forward the 'Plaintiff's Supplementary Submission re GST' which refers to various pages of Exhibit 'PX1' being the bank account for Sogutlu's nominated account and also for the Bank's agent for sale PPB Advisory. 62. Although Mr Charara says that if I were to accept Mr Villa's supplementary submissions I would be walking 'away from a realistic to the impossible'. In my view Mr Villa's supplementary submissions and the supporting documents make out his case. I am not completely sure that I have found the flaw in Mr Charara's figures. Mr Charara acknowledges that his figures do not include default interest because on his contention the loan was fully paid and I do not accept him on this. Furthermore, Mr Charara's figures were done on the basis that there was no nominated account which when further material came in he needed to withdraw. Accordingly I accept Mr Villa's submissions on this matter and find there was no problem with accounting of GST." 16The amount for GST to which Mr Charara referred appears as a debit entry described as "GST on sale" made on 18 November 2011 on a statement for a cheque account in the name of ACES Sogutlu as Trustee for the Sogutlu Family Trust. It was common ground that this was an account recording transactions in respect of the loan of $1.5 million to ACES Sogutlu the subject of the respondent's debt recovery claim below. Mr Charara, as I understand his argument, complained that that amount ought not to have been debited for GST because it had already been paid to the Australian Taxation Office ("ATO"). He drew the Court's attention to a Business Activity Statement for ACES Sogutlu which appears to record the GST of $107,597 paid to the ATO during the period 1 October 2011 to 31 December 2011 by, I gather, the agents the respondent appointed to conduct the sale of the properties. In a document provided as an aide memoire to the documents attached to Mr Sogutlu's affidavit, Mr Charara argued that after the agents paid the ATO the GST from the proceeds of sale, a payment he appears to assert was made prior to 9 November 2011, the respondent "fraudulently" debited the GST amount on 18 November 2011 to which I have referred. 17No submission was advanced concerning the erroneous interest rate assertion, other than to point to the fact that a different rate to that allowed appeared in the document to which I have referred (see [14]). I note that the interest rate that was applied appeared as the applicable debit interest rate as from 25 June 2012, in a loan account statement (which also related to the $1.5 million loan) attached to Mr Sogutlu's affidavit. 18Mr Villa referred to the fact that the GST issue had been raised at the heel of the hunt as Young AJ recognised and said the respondent had sought to deal with it by explaining to his Honour how it had calculated the GST payable, an explanation his Honour had accepted in unexceptionable reasons. 19In my view the applicants have not demonstrated that there is a serious question to be tried on either the GST or interest rate issues. The discrepancy Mr Charara sought to demonstrate concerning GST is not apparent on the face of the documents, nor from his submissions. The primary judge had the benefit of hearing full argument on the issue in the context of the trial. In such circumstances I must give weight to the fact he resolved the issues against the applicants. 20Insofar as the applicants sought to rely upon a likely judgment of more than $1 million in relation to the cross-claim, the principal complaint appeared to be that the respondent had taken a mortgage over the Alexandria property from Ceyser at a time when that entity had no interest in the property. This submission appears to be based on the proposition that while it was accepted that Ceyser gave a guarantee in its capacity as Trustee for an entity known as the "Hybrid Unit Trust", the latter had no unit trust holders and no property to encumber. Accordingly the amended notice of appeal seeks an order that the respondent pay Ceyser the market value of the Alexandria property. 21Young AJ dealt with this argument as follows: "31. It is clear on the face of the document that Ceyser only entered into the guarantee as trustee of the Ceyser Hybrid Unit Trust. However that's not the end of the story. The letter of offer and approval of the financial facility made it clear that the Bank wanted a number of documents. One was the guarantee from Ceyser as trustee of the Ceyser Family Trust and Hybrid Unit Trust, the other was that there should be an equitable mortgage over all Ceyser's assets and this was to include a document signed by the unit holder and others making sure that the assets of the unit trust were included in what was charged to the Commonwealth Bank by way of equitable mortgage or charge. Aysen Sogutlu signed this. Mr Charara argued that there never were any unit holders in the Ceyser Hybrid Unit Trust but that does not seem to me to be of any significance because it was otherwise represented to the Bank. Aysen was that person. Accordingly, the proposition D is made out, but it really takes the defendants nowhere." 22Once again, it is unclear what case the applicants seek to advance on appeal in respect to this assertion. Mr Charara acknowledged in his submissions, as I understood them, that Ceyser owned the Alexandria property which, it is also apparent, the Bank required as collateral security for an amount of $1.5 million it advanced to ACES Sogutlu to finance the purchase of the Botany property. Mr Villa suggested that the applicants' submissions in this respect appeared to be based on a misunderstanding of the effect of the Trustee giving the guarantee, as well as a misapprehension concerning an entry in the Registrar General's records showing the mortgagor as the corporate trustee, rather than recording the trust interest encumbered. 23Mr Charara also touched upon complaints about the respondent's exercise of its power of sale, an assertion that the appellants were entitled to stop paying the respondent three years after the $1.5 million was advanced because the respondent refused to refinance the loan and other matters, none of which, in my view, demonstrated on the exiguous argument advanced that there were serious questions for the determination of this Court. 24In my view the applicants have not demonstrated that there are serious questions for the determination of this Court. Rather, Mr Charara's submissions have left the position in a state of speculation or mere argument, in which circumstance I must give weight to the fact that the judgment below was in favour of the respondent: Alexander v Cambridge Credit Corp Ltd (at 694). Taking that into account with the other considerations to which I have referred, the applicants have not demonstrated that it is in the interests of justice to grant the stay sought. 25I dismiss the notice of motion with costs.