APIR Systems Limited v Donald Financial Enterprises Pty Ltd

The proceedings before Edmonds J 10 The proceedings before Edmonds J concerned the acquisition by the respondent (which was the applicant below) of two parcels of shares in the first appellant (APIR). The first parcel of 200,000 shares was allotted by APIR to the respondent. The other parcel of 81,904 shares was purchased by the respondent from the second and third appellants (Messrs Broso and Riley) who were existing shareholders in APIR. The acquisition price in the case of both parcels was $2.65 per share. Thus, the allotment consideration was $530,000 and the purchase price in respect of the second parcel of shares was $217,045.60. 11 The allotment consideration of $530,000 was paid to APIR on 23 January 2004. The purchase price in respect of the balance of the shares acquired, viz $217,045.60, was paid a day or two after 23 January 2004. 12 At trial, the respondent contended that it had been misled and deceived by the appellants during the course of the negotiations which led to its acquisition of shares in APIR. It claimed relief pursuant to ss 1041E, 1041H, 1041I, 1325(1) and 1325(5) of the Corporations Act 2001 (Cth); ss 12DA and 12GM of the Australian Securities and Investment Commission Act 2001 (Cth) and ss 82 and 87 of the Trade Practices Act 1974 (Cth). 13 The respondent had acquired the shares which were allotted to it pursuant to a document styled Share Subscription Deed dated 23 January 2004, the parties to which were the respondent, APIR and Mr Sharp, who was the principal of the respondent at all relevant times and the person who negotiated the transactions on behalf of the respondent. It would appear that the shares which were purchased from Messrs Broso and Riley were acquired pursuant to a separate transaction. 14 In substance, at trial, the respondent sought confirmation of its attempted rescission of the Share Subscription Deed ab initio or an order declaring void the Share Subscription Deed ab initio and orders requiring the refund of all sums paid by it to APIR, Mr Broso and Mr Riley. The respondent also sought interest on the sums paid by it and costs. Interest was claimed for the period from the date of payment in 2004 until the date the relevant funds are repaid. 15 Although the respondent claimed damages in the alternative, it is quite clear that its primary claim for relief was to reverse the transactions whereby it acquired shares in APIR and to obtain a full refund of the amounts which it paid for those shares plus interest. 16 The essence of the case propounded by the respondent at trial was that APIR and the individual appellants did not disclose to Mr Sharp the existence of two sets of Heads of Agreement. Under the arrangements embodied in those Heads of Agreement, Messrs Broso and Riley, who were and are Executive Directors of APIR, were entitled to receive as part of their remuneration at least 100,000 shares each in APIR at no cost to either of them. His Honour held that the appellants' failure to disclose the existence and terms of these arrangements was material. His Honour also held that the respondent would not have acquired the two parcels of shares to which I have referred had these matters been revealed to Mr Sharp during the negotiations which he had with the appellants. Mr Sharp had been told that a total of 50,000 shares was to be allotted to Messrs Broso and Riley but had not been told of the full entitlements which those men had secured from APIR. 17 His Honour held as follows (Donald Financial Enterprises Pty Ltd v APIR Systems Ltd [2008] FCA 1112 at [190]): In the present case, while the number of shares that might be issued in discharge of the completion payment under the second heads of agreement has a floor - 100,000 for each executive director - it has no ceiling, so that the number of shares that might be issued is potentially unlimited depending on the value of the APIR shares at the relevant time. In context, such an event, post acquisition, is a cause inherent in the thing itself - the second heads of agreement - and not extrinsic or independent of it, and should be taken into account in any assessment of the real value of the shares at the time of acquisition. This makes any assessment of loss or damage, other than for the full subscription/purchase price, exceedingly difficult, if not impossible. 18 His Honour went on to hold that the most appropriate remedy to be granted to the respondent was an order avoiding the share purchase transactions with consequential orders requiring a full refund of all moneys paid to APIR and to Messrs Broso and Riley pursuant to those transactions together with interest thereon. 19 There were many subsidiary issues dealt with by his Honour in his Reasons, findings in respect of which underpin his Honour's ultimate conclusions. Necessarily involved in his Honour's factual findings were findings as to the credit of the main witnesses who gave evidence at the trial. It is not necessary for me to traverse the detail of his Honour's findings concerning the important witnesses at the trial. It is sufficient for present purposes for me to observe that, in general terms, his Honour found Mr Sharp, the principal witness for the respondent, to be a reliable and truthful witness whereas his Honour had serious reservations about the evidence of Mr Riley and Mr Broso. 20 APIR also brought a cross-claim against the respondent and against Mr Sharp. His Honour dismissed the cross-claim. There has been no appeal in respect of his Honour's conclusions on the cross-claim.

The Amended Notice of Appeal 21 The Amended Notice of Appeal has been filed on behalf of all respondents in the proceedings at first instance although his Honour did not grant any relief against the fourth, fifth and sixth appellants. His Honour found in favour of those parties but did not consider it necessary to dismiss the proceedings as against them. The Amended Notice of Appeal contains 13 grounds of appeal. Most of those grounds are directed to overturning findings of fact made by his Honour. 22 Grounds 8, 9, 10 and 11 are in the following terms: 8. The learned Trial judge erred in concluding that the Respondent (Applicant at trial) had suffered any "loss or damage" [Judgment # 181] within the meaning of section 1041I(1) of the Corporations Act 2001 (Cth). Particulars

The learned Trial judge erred in failing to conclude that the Respondent failed to prove that it had suffered any loss or damage.

Further and alternatively, the learned Trial judge failed to take into account or proper account the expert evidence led by the Appellants (Respondents at trial) in the proceedings on the issue of whether any loss or damage could properly be said to have been incurred.

9. In the alternative, the learned Trial judge erred in law in making an order in the form of order 4 and that a proper form of order would have been that upon payment of the subscription price of the shares, the shares should be deemed to be cancelled. 10. In the alternative, the learned Trial judge erred in failing to exercise his discretion to order interest up to and including 27 March 2007 only and not after that date. 11. In the alternative, the Trial judge erred in exercising his discretion in failing to order that the Respondent/(Applicant at trial) pay the Appellants' costs of the Respondent's claim on: (a). An indemnity basis; or alternatively; (b). A party-party basis; or alternatively; (c). The basis that each party pay their own costs of the Respondent's claim; or alternatively (d). On a reduced, proportional or other basis from 27 March 2007 or such other time or basis as this Court considers just. (Original emphasis.) 23 In the Amended Notice of Appeal, the appellants seek to have all of the orders made by Edmonds J on 30 July 2008 set aside and the respondent's claim dismissed with costs. In the alternative, they seek to set aside the orders made by Edmonds J in respect of interest and costs and to substitute for those orders orders in the following terms: 4(b). … (i). An order that the Respondent/(Applicant at trial) pay the Appellants' costs of the Respondent's claim on: 1. An indemnity basis; or alternatively

3. The basis that each party pay their own costs of the Respondent's claim; or alternatively

from 27 March 2007 or such other time or basis as this Court considers just;

(ii). An order that the First, Second and Third Appellants/(First, Second and Third Respondents at trial) pay the Respondent's/(Applicant's at trial) prejudgment interest up to and including 27 March 2007 only.

Some relevant post judgment matters 24 Under cover of a letter dated 22 August 2008, the appellants tendered to the respondent two bank cheques - one for $530,000 and the other for $217,045.60. The appellants contend that they have thus attempted to comply with orders 2, 3, 4, and 5 of the final orders made by Edmonds J on 30 July 2008. 25 In the letter, under cover of which those cheques were tendered, the solicitor for the appellants said: Upon receipt of these cheques, kindly complete and return to our client APIR Systems Ltd the properly executed instruments of transfer for 281,904 shares pursuant to orders 4 and 5.

APIR directs that all the shares be transferred to Dalton Consultants Pty Limited ABN 86 052 406 309, PO Box 3798 Weston ACT 2611, 15-25 Trenerry Street, Weston ACT 2611. Kindly ensure that this information is correctly transcribed as necessary on the transfer documents you return to APIR for completion.

Finally, as you are aware, an appeal has been filed in this matter. This payment now is made without prejudice to our clients' appeal. 26 The respondent did not accept the tender of those cheques. 27 In a letter dated 25 August 2008 from the solicitor for the respondent to the solicitor for the appellants, the solicitor for the respondent said: Apart from the inherent conflict in your clients' actions in seeking simultaneously to stay all of the orders made by Justice Edmonds and to selectively enforce such of those orders which appear to suit your clients' tactical and commercial interests, this approach appears to be one designed to maximise the prejudice to my client's interests whatever the outcome of the appeal.

Your clients' offer involves our client agreeing to the transfer of these shares to your clients' nominee. We assume the nominee is a third party. In the normal course, if your client were to succeed in the appeal, each party would need to make restitution. That restitution would involve:

1. my client refunding the $747,045.60 (and also perhaps interest); and

Otherwise, the parties are not returned to the position they would have been in had the orders made by the Full Court on appeal (assuming your clients are successful) been made at first instance.

We understand that such restitution would not be possible in view of the proposed transfer of these shares being to a third party.

Accordingly, there are significant and difficult issues that would need to be resolved if restitution was not possible by the return of these shares to our client.

My client does wish to enforce all of the orders of Justice Edmonds without limitation. It is not willing to be in a position where it only receives back what was paid 4½ years ago without any compensation for the loss of the use of that money for that period of time, in return for the shares. Otherwise, if your client were to succeed on the appeal, my client would be arguably in the worst position.

Also if my client succeeds in the appeal it would be left chasing the balance of the orders with the prejudice of delay imperilling the recovery of interest and costs. My client does not trust your clients. This is a reasonable position for it to take in view of the findings of Justice Edmonds.

My client, however, would be willing to agree to a transfer of the shares pending the appeal upon the following basis:

1. your client abandon its application for a stay of the orders of Justice Edmonds or any part thereof; 2. my client be paid in full the original purchase price of $747,045.60 plus interest in accordance with the orders of the Court calculated up to the time the money is paid; 3. there be an agreement between the parties that in the event of your client succeeding on the appeal: (a) it would not be under any obligation to return the shares to our client; (b) at the same time, your client would not be entitled to any refund of the abovementioned sums (the original purchase price of $747,045.60 plus interest); 4. my client agrees and undertakes not to pursue any of the orders with respect to costs until the reasons for judgment on the appeal are published by the Full Court. Alternatively, my client will await the outcome of the Court's determination of your client's application for a stay.

In these circumstances, and consistent with the reasons outlined in this letter, the two bank cheques totalling $747,045.60 which were enclosed with your letter dated 22 August 2008 are returned herewith. 28 In a letter sent the next day, the solicitor for the respondent substituted the following for para 4 in his letter dated 25 August 2008: My client agrees to undertake to the Court not to pursue any order in relation to the costs of this matter until the reasons for judgment on appeal are published by the Full Court or the appeal is otherwise disposed of (whichever is the first to occur) on the condition that:

(a) your clients prosecute the appeal expeditiously; (b) your clients undertake to the Court to prosecute the appeal expeditiously; and (c) there be liberty to apply to the Court so as to permit our client to be released from this undertaking in the event of your clients failing to prosecute the appeal expeditiously. 29 In a subsequent letter dated 5 September 2008 from the solicitors for the appellants to the solicitor for the respondent, the solicitor for the appellants stated that the appellants "remain willing and able to tender the judgement sum" (referring to the total of the two bank cheques referred to above viz $747,045.60). 30 The solicitor for the respondent replied promptly to this last letter and repeated the respondent's position, namely, that the respondent was entitled to withhold its signature to any transfer of shares pursuant to his Honour's orders until such time as not only the principal sums paid by it to the first, second and third appellants pursuant to the share purchase transactions were refunded but also until such time as interest thereon was also paid to it. 31 As I understand the respondent's position, it continues to maintain that it is not obliged to execute a transfer of the relevant shares until such time as both the total of the allotment consideration and the purchase price and interest thereon are tendered and paid by the appellants to the respondent. 32 In a letter dated 16 September 2008 from the solicitors for the appellants to the solicitor for the respondent, the appellants' solicitors said: We refer to your letter dated 25 August 2008, and specifically to your client's offer set out on page 3 of your letter. The problem with your client's offer is that our clients would be penalised as to interest even if they were to succeed on appeal.

We are instructed to make the following counter-offer in reply:

1. Acceptance of this offer will make a stay unnecessary except as to interest. 2. On a date to be agreed, which will be in about two months time from the date of this letter, simultaneously: (a). Your client be paid in full the original purchase price for its shares, namely $747,045.60; (b). Interest calculated for the period 29 January 2004 to 20 April 2007 be paid to a trustee to be agreed (possibly you and David Toole) who will disburse the funds and interest in accordance with the orders of the Full Federal Court (or High Court) on appeal; and (c). Your client transfer its shares as directed by the third appellant, Andrew Riley; 3. Agreed except with regard to interest which, as stated above, would abide by the orders on ultimate appeal (as would the balance of interest ordered by his Honour); and 4. Agreed subject to the orders on ultimate appeal concerning the costs order. Kindly seek urgent instructions on the above. If this offer is not accepted, we will put this proposal (amended mutatis mutandis to become orders of the Court) to the Court on Thursday, 18 September. 33 The solicitor for the respondent replied on the same day as follows: I refer to your letter dated 16 September 2008 in reply to my letter of 25 August 2008.

The problem with your clients' counter-offer is that it reflects a protection of the status quo for your clients, but no protection of the status quo for my client. If your clients succeed in their appeal, the end result will be that they will have had an interest-free loan for over 4½ years and my client will have nothing whatever to show for it. My client is surely entitled to protect its position in relation to the shares if there is to be any stay of any part of the orders of Justice Edmunds [sic], whether by agreement or by orders made by the Court. Accordingly, I regret that my client cannot accept your clients' counter-offer in its present terms and it is rejected.

There are two further problems with your clients' counter-offer. First, no reason is given for a further 2 month delay, nor any protection if, at the end of that time, your clients do not deliver. Secondly, it is not apparent why interest should stop running at 20 April 2007.

I suggest that a fair resolution of the issue of a stay involves a mutual protection of the status quo. I am therefore instructed to put the following compromise in lieu of a stay, failing which your clients' motion for a stay will have to be heard and determined:

1. The initial payment sums totalling $747,045.60, or alternatively security to the same sum, be paid to an agreed neutral trustee (perhaps a solicitor from each side); 2. Interest from 24 January 2004 to the date of payment, or alternatively security to the same sum, be paid to an agreed neutral trustee; 3. The shares to be held by an agreed neutral trustee; 4. The agreed neutral trustee be bound to give effect to the eventual orders of the Full Court; 5. The appellants provide security for the respondent's costs of the appeal in the sum of $100,000; 6. Costs of the trial be held in abeyance pending the outcome of the appeal; 7. The Appellants expedite their appeal; 8. Liberty to apply. Please advise of your clients' instructions as soon as possible. 34 As is apparent, the parties have been unable to agree upon a regime to protect all parties' interests pending the determination of the appeal.

The submissions of the parties 35 In the first part of his submissions, Mr DMJ Bennett QC, who appeared for the appellants with Mr MJ Heath, addressed the strength of the appellants' appeal. Mr Bennett placed particular reliance upon three Grounds of Appeal in order to justify his further submission that the appeal had reasonable (or, at the very least, reasonably arguable) prospects of success. 36 His first point was that the learned trial judge had approached the question of relief upon the basis that the correct principle to apply in the present case was to look at awarding expectation damages rather than reliance damages and that, in the circumstances of the present case, the approach said to have been taken by his Honour was incorrect in principle. 37 Mr Bennett pointed to [188] of his Honour's Reasons which was in the following terms: There is no doubt that when DFE entered into the SSD on 23 January 2004 and paid the sum of $530,000 to APIR in subscribing for 200,000 shares in APIR, it suffered a loss measured by reference to the difference between what it paid in ignorance of the existence of the second heads of agreement and what it, as a rational investor, would have paid, if anything, in the knowledge of the existence of the second heads of agreement; or what was described in HTW Valuers, at [36], by reference to authority, as the 'real value' or 'fair value' or 'what would have been a fair price to be paid … in the circumstances … at the time of the purchase'. Similarly, for the 81,904 shares in APIR it purchased from existing shareholders for the sum of $217,045.60. 38 It was this passage which was submitted by Mr Bennett to reveal the error which his Honour is said to have made. 39 Mr Bennett then submitted that, contrary to his Honour's express findings concerning non-disclosure, there had in fact been some attempt to disclose the critical information when a folder of documents called the 'due diligence folder' was offered to Mr Sharp but not taken and looked at by him. His Honour held that Mr Sharp was probably offered access to some folder or bundle of documents but that, at the time those documents were offered, they were misdescribed causing Mr Sharp not to pay any regard to them. Mr Bennett submitted that these findings needed to be taken into account in favour of the appellants when the Court came to consider the non-disclosure case propounded by the respondent. 40 The third submission made by Mr Bennett in this part of his submissions concerned interest and costs. 41 On 27 March 2007, the solicitors for the appellants wrote a letter to the then solicitors for the respondent in which they made an open offer. The letter was in the following terms: OPEN OFFER TO PURCHASE APIR SYSTEMS LIMITED SHARES

Our client has received notice from a group of investors independent of APIR who wish to make an offer to purchase the shareholding held by your client Donald Financial Enterprises Pty Limited as trustee for the Elysum Trust. The potential investors wish to remain anonymous at this time.

Could you please contact your client and submit the following offer made on behalf of the investors. The offer is to purchase 281,904 shares held by your client in our client. The offer is for $2.80 per share for the entire shareholding and is not severable. This offer is open until 4pm on Friday, 20 April 2007 and must be accepted in writing. Payment will be made 14 days from the date of acceptance by your client by bank cheque or, alternatively, a cheque from our trust account.

The investors will require separate share transfers executed by your client. We will submit the share transfers to you seven (7) days after your client's acceptance of our client's offer. Your client will also need to provide at settlement the APIR Systems Limited share certificates in its possession.

We look forward to receiving your client's response within the timelines set forth in this letter. 42 The offer contained in this letter was rejected. Mr Bennett submitted that it was rejected on irrational and unreasonable grounds. Mr Bennett submitted that, when the terms of the offer contained in this letter are properly understood in the context in which the offer was made, it should have had a significant bearing on the way in which his Honour approached the respondent's claim for interest and also the question of costs. The appellants' case on appeal will be that, having regard to the terms of this letter, no interest should have been awarded against them and costs should have been awarded in their favour rather than against them. 43 Mr Bennett then made various submissions directed to the terms of any stay that might be ordered. During the course of those submissions, Mr Bennett repeatedly put that, if the appellants were deprived of control of both the shares and the amounts which his Honour ordered to be refunded (excluding interest), the appellants would be unable to raise sufficient funds to cover the interest which they have been ordered to pay and would eventually be deprived of their opportunity to conduct the appeal. Further, Mr Bennett made clear that the appellants would be content with a stay merely in relation to interest and costs. He also accepted that, in the event (as appears highly likely) the shares are transferred to an entity which is not a party to the present litigation, it may well prove impossible for the appellants to return the shares to the respondent or to procure a return of the shares in the event that the appellants are successful in their appeal. Mr Bennett suggested that such an outcome was really only a problem for the appellants and need not concern the respondent. 44 Mr Bromwich, who appeared for the respondent, submitted that no stay should be granted. 45 Mr Bromwich submitted that, consistent with the correct approach to stay applications pending an appeal, the appellants must demonstrate a reason to warrant the exercise of the discretion to order a stay in their favour. In this context, the Court exercises a broad discretion. 46 Mr Bromwich relied upon Philip Morris (Australia) Ltd v Nixon [1999] FCA 1281. In that case, a Full Court of this Court held at [17]: The general principles governing an application for a stay pending the determination of an appeal or application for leave to appeal are not in doubt. The party seeking a stay must demonstrate a reason, or an appropriate case, to warrant the exercise of a discretion in his or her favour. This requirement is not satisfied by the mere filing of an appeal or an application for leave to appeal: Alexander v Cambridge Credit Corporation Ltd (1985) 2 NSWLR 685 (CA), at 694. The Court has a discretion whether or not to grant the stay, and if so, as to the terms that will be fair. In the exercise of the Court's discretion, it weighs consideration such as the balance of convenience and the competing rights of the parties, in particular whether prejudice will be caused by reason of the grant or withholding of a stay: Alexander, at 694; Jennings Constructions Ltd v Burgundy Royale Investments Pty Ltd (1986) 161 CLR 681 (Brennan J), at 685. Within this framework, the Court exercises a broad discretion, and the party seeking a stay does not have to establish "special" circumstances: Powerflex Services Pty Ltd v Data Access Corporation (1996) 67 FCR 65 (FC), at 66, per Burchett J. In general, a party which has succeeded at the trial is entitled to the benefit of a judgment and thus to commence with the presumption that the judgment is correct: Powerflex, at 66. The question on the present application is how these principles apply to the unusual circumstances of the present case. 47 Mr Bromwich also placed reliance upon Alexander v Cambridge Credit Corp Ltd (1985) 2 NSWLR 685 in support of two particular submissions made by him as follows: (a) a stay will be granted if, unless it is granted, the appeal will be nugatory - there is no basis for that conclusion in this case; (b) although courts will not generally speculate about the appellant's prospects of success, this does not prevent some preliminary assessment about whether the applicant for the stay has an arguable case, a consideration which is protective of the judgment creditor where it may be plain that an appeal has been lodged without any real prospect of success and simply in the hope that of gaining a respite against immediate execution upon judgment. Mr Bromwich submitted that the appellants had poor prospects of success on appeal. 48 Mr Bromwich also directed some attention to the financial position of APIR. He submitted that the financial position of APIR was not such as to give confidence that it was going to be, or remain, in a position to meet the requirements of his Honour's orders.

The relevant principles 49 There did not appear to be much dispute between the parties as to the principles which govern the present case. 50 Order 52 r 17 provides a specific basis upon which a stay pending appeal may be granted. 51 In addition to the two authorities relied upon by Mr Bromwich, Mr Bennett relied upon Kalifair Pty Ltd v Digi-Tech (Australia) Ltd; McLean Tecnic Pty Ltd v Digi-Tech (Aust) Ltd (2002) 55 NSWLR 737; especially at [16]-[29]. In the passages in Kalifair 55 NSWLR 737to which my attention was directed, the NSW Court of Appeal was concerned with the prospect that, because the appellants with whom they were dealing in those paragraphs had no assets, the respondent might move to wind them up and thus render their appeals nugatory. The present case, of course, is not such a case. Indeed, APIR appears to have net assets at its disposal. On one view of the evidence, it has sufficient assets to meet the whole of the judgment including interest and probably costs. There was no evidence as to the assets and liabilities of Messrs Broso and Riley. 52 In my view, the present case can be distinguished from the circumstances before the Court in Kalifair 55 NSWLR 737.

Consideration and conclusions 53 In my view, the appellants' prospects on appeal are weak. I express this view as a tentative or preliminary view and only for the purpose of giving appropriate weight to those prospects when considering the present application. 54 Further, I am not convinced that the Amended Notice of Appeal contains a ground of appeal which supports Mr Bennett's submission concerning his Honour's reasoning in respect of damages and relief generally. Ground 8 seems to raise a different point and no other ground of appeal seems apt to cover the matter. 55 In any event, I think that there is real difficulty with the proposition that his Honour approached his consideration of the appropriate relief to be granted in the present case upon the basis that, were damages to be awarded, those damages would be expectation damages. His Honour's remarks at [188] of his Reasons (Donald Financial Enterprises Pty Ltd v APIR Systems Ltd [2008] FCA 1112) have to be read in context and in light of the arguments advanced to his Honour by the appellants at trial. 56 It must be remembered that his Honour did not award damages to the respondent but, rather, reversed the transactions. His Honour did so because his Honour also held that any assessment of loss or damage which involved the respondent keeping the shares was "… exceedingly difficult, if not impossible" (see Donald Financial Enterprises Pty Ltd v APIR Systems Ltd [2008] FCA 1112 at [190]). 57 The second ground of appeal developed by Mr Bennett in his oral submissions depends upon the appellants persuading the Full Court of two propositions. First, they will have to demonstrate that, within the bundle of papers offered to Mr Sharp but declined by him, there was material which amounted to appropriate and sufficient disclosure of that which his Honour found had not been disclosed. Second, they will have to persuade the Full Court that Mr Sharp's decision not to look at the material tendered to him operated in some way to relieve the appellants from liability. Both of these propositions are problematic. 58 The final grounds of appeal developed by Mr Bennett in his oral submissions concerned his Honour's discretionary orders in respect of interest and costs. Much will turn upon the Full Court's evaluation of the letter dated 27 March 2007. The offer contained in that letter did not address the payment of interest or the costs of the proceedings. The offer was made on behalf of unidentified persons or entities who were not parties to the litigation. Mr Bennett submitted that the respondent could have accepted the offer and gone back to the Court to argue about interest and costs. In this way, Mr Bennett sought to advance an argument that the offer made constituted, in substance, a satisfactory (albeit informal) Calderbank offer. My present view is that this is an extremely difficult argument, based as it is on a somewhat strained interpretation of the letter. 59 In the remaining grounds of appeal, the appellants seek to overturn findings of fact made by his Honour. Many of these were based upon his Honour's assessment of witnesses' credit. 60 It is for the above reasons that I consider the appellants' prospects in the appeal to be weak. This factor is, of course, only one factor to be considered. 61 In the present case, there are several other factors which militate against the grant of any stay. 62 There is no evidence to suggest that, should the appellants prevail in the appeal, the respondent would be unable to refund to the appellants the total acquisition consideration, together with any other monies that may be recovered by it pursuant to his Honour's orders pending the determination of the appeal. No submission was made by the appellants to the effect that the respondent may not be able to refund all relevant sums in due course, if required. 63 Further, in the evidence adduced in support of the present application, the appellants' solicitor said that the appellants were willing and able to "… continue to tender the two cheques for the judgement sum to the [respondent] …" and that the appellants " … remain willing and able to continue to tender the judgement sum to the respondent …". In the submissions made on behalf of the appellants, both in writing and orally, the same sentiment was expressed. 64 What, then, is it about the prospect of the respondent enforcing his Honour's orders that is of real concern to the appellants? Apparently, they are content to refund to the respondent the whole of the acquisition consideration paid for the shares in 2004. They are even prepared to run the risk of the consequences of not being able to return the shares to the respondent should their appeal be successful in circumstances where those shares have been transferred to a third party which is not prepared to, and cannot be compelled to, return the shares. 65 The answer to the question which I posed in the preceding paragraph seems to be that the appellants want a stay in respect of the order for interest and possibly the order for costs made by his Honour. Until assessed, the order for costs cannot be enforced in any real sense. Assessment of those costs will, no doubt, take some months. Furthermore, the respondent will have to weigh up the wisdom of having the costs assessed whilst ever the appeal remains on foot. It seems to me that the appellants' real desire is to obtain temporary relief from having to pay the interest which his Honour ordered them to pay. 66 In support of their present stay application, the appellants submitted that they should not be deprived of both the principal sums paid for the shares and the shares themselves because that state of affairs would lead to their being unable to raise sufficient funds to pay all of the interest and costs which they have been ordered to pay. There was no evidence from the appellants to support this contention and I am not disposed to accept it in the absence of evidence. 67 Further, and in any event, if no stay at all is granted, the appellants would be free to on-sell or charge the shares once the orders for reversal made by his Honour were performed (something which the appellants have repeatedly said they are prepared to do) and the so-called difficulty in raising funds would disappear because the appellants would have control of the shares for that purpose. 68 In circumstances where the appellants are prepared to consummate the reversal of the share transactions of 2004 and take the risk on appeal in the event that they are successful that the shares cannot be returned to the respondent, the real focus of the present application has to be on his Honour's orders concerning interest and costs and whether or not the appellants have a sufficient basis for a stay in respect of those two matters. 69 His Honour's orders in respect of both interest and costs are discretionary orders. The reasons which his Honour gave for making the orders which he made in respect of interest and costs are not obviously wrong. The appellants' prospects of overturning those orders are weak. In my view, the appellants have not advanced any compelling reason or argument for staying his Honour's orders in respect of interest and costs. Unlike Kalifair 55 NSWLR 737, the evidence does not demonstrate that the appellants cannot pay the amounts reflected in the orders which his Honour made. The evidence does not support a conclusion that the appeal will be rendered nugatory if no stay is granted. There is no evidence to suggest that payments made by or on behalf of the appellants to the respondent in fulfilment of his Honour's orders will not be able to be refunded in the event that the appeal is successful. 70 Having regard to the fact that the appellants are quite content to take back the shares and refund to the respondent the principal sums which it paid to the appellants for the acquisition of the shares, there is no justification for a stay of the reversal orders in the present case. Once that conclusion is reached, it seems to me that there is no justification for a stay of his Honour's orders in respect of interest and costs. All of the factors considered above point to this conclusion. 71 Were I minded to grant a stay of his Honour's orders in respect of interest and costs, I would only consider doing so if adequate security were provided. But, since there is no suggestion that the respondent will not be able to restore all payments made to it in the event that the appeal is successful, I think that the Court's discretion to deprive the respondent of the fruits of its success at trial should not be exercised in the present case by granting a stay on condition that adequate security is provided. 72 The respondent expressed concerns in argument before me that, should the appeal be successful, it would wish to have the option of retaining the shares and not want to be left in the position where the question of what should happen to the shares is within the sole control of the appellants. Indeed, the respondent went so far as to submit that it should not have to execute share transfers pursuant to orders 2, 3, 4 and 5 of his Honour's orders until the appellants have paid to it the sums required to be paid pursuant to orders 2, 3, 4 and 5 as well as those sums required to be paid pursuant to orders 6 and 7 (which dealt with interest and costs). In my view, his Honour's orders do not permit such a stance to be adopted by the respondent. Further, in circumstances where the relief granted conforms to the relief sought and where there has been no appeal by the respondent against the orders made on 30 July 2008, the respondent's stance is untenable. 73 In my judgment, if the appellants' application for a stay is refused, the shadows at which the respondent has been boxing will disappear. 74 For all of the above reasons, the appellants' application for a stay will be dismissed with costs. I certify that the preceding seventy-four (74) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Foster.

Associate: Dated: 23 September 2008 Counsel for the Appellants: Mr DMJ Bennett QC with Mr MJ Heath

Solicitor for the Appellants: Williams Love & Nicol