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[2010] VSCA 80
Court of Appeal (Vic)
2010-03-12
REDLICH JA and HANSEN AJA
Original judgment source is linked above.
PRACTICE AND PROCEDURE - Appeal - Application for stay of orders that would be unaffected by outcome of appeal - Applicants seek to set off amount payable by them under orders not subject to appeal against possible orders in their favour if appeal successful - Risk of dissipation of amount payable - Stay granted - Supreme Court (General Civil Procedure) Rules 2005 (Vic) rr 64.25, 66.16.
1 The appeal in this matter relates to proceedings which concerned a dispute over the property of a seven year de facto relationship. A judge of the trial division of this Court made adjustment orders pursuant to Part 9 of the Property Law Act 1958. The applicants have appealed against those orders as to interest on the amount that must be paid on the amount which the applicants have been ordered to pay the respondent and as to leave to appeal against the order made as to costs of the trial.
2 The respondent has filed a cross-appeal as to the adjustment orders. The present application by way of summons sought a number of orders but on the hearing of the application the issues raised by the summons were narrowed to the question whether the judgment below ought to be stayed or paid in part or in entirety and whether or not the applicants should be granted leave to appeal against the order made on the trial as to the costs of the trial.
3 For the purposes of disposing of the present application it is unnecessary to refer, other than very briefly, to certain facts which gave rise to the present dispute between the parties. The respondent had asserted at trial that she was entitled to no less than one half of the value of the applicants' personal and business assets at the time of the separation of the first applicant and the respondent in March 2000.
4 On one view of the applicants' assets, they exceeded $10m at that time. The respondent placed heavy reliance on the fact that notwithstanding her alleged contributions to the growth of the applicants' assets, she left the relationship with virtually nothing. She had savings of approximately $50,000, a modest car purchased for her by the first applicant during the course of the relationship and a small amount in cash given to her by the first applicant when she left.
5 In 2000, 2001 and 2007 the respondent placed caveats on all of the applicants' real estate including all of the applicants' commercial real estate. On 27 January 2009 and shortly prior to the commencement of the trial the applicants made a written Calderbank offer to the respondent to settle the proceedings on the following terms:
4. This offer remains open until 5:00pm on 3 February 2009.
7 On 29 May 2009 the trial judge determined that the respondent was entitled to an adjustment order under Part 9 of the Property Law Act that was based upon a valuation of the assets of the parties as at the date of separation. It therefore required the applicants to pay the sum of $500,000 to the respondent. Whether interest be ordered and in what amount was the subject of further argument. On 17 September 2009 the trial judge ordered that the respondent was entitled to interest on the amount of the adjustment order in the sum of $509,109. Judgment was then entered for the respondent in the sum of $1,009,109.
8 On 18 September 2009 the applicants gave the following undertakings:
Upon the Defendants and each of them by their Counsel undertaking, subject to their rights of appeal and any order made by the Court of Appeal that:
(1) they will not seek to remove any caveat lodged by the Plaintiff over any real estate owned by them or any of them (collectively 'the properties');
(2) the properties shall stand as security for the payment of any judgment sum, interest or costs recovered by the Plaintiff against them or any of them in the proceeding and
(3) they will abide by any orders made by the Court to effectuate the security referred to in paragraph (2) of these undertakings.
9 The further hearing of the proceedings was then adjourned to enable the parties to prepare and file written submissions as to the appropriate disposition of the question of costs. On 23 October 2009 the learned trial judge gave judgment for the respondent on the question of costs and made certain orders. He determined that as a consequence of the adjustment order and the order for interest the respondent was in a worse position than she would have been in had she accepted the Calderbank offer.
10 The trial judge ultimately held however that it was reasonable for the respondent to refuse the offer that was made at that time. He did however reduce the amount of costs by 25 per cent and made certain adverse findings as to the respondent's conduct in the course of the proceedings. He then made the following orders:
1. The Defendants pay the Plaintiff's costs of the proceeding incurred prior to 2 February 2009, including reserved costs, on a party and party basis.
2. The Defendants pay 75 per cent of the Plaintiff's costs of the proceeding, including reserved costs, from 2 February 2009.
3. The Defendants give 14 days notice in writing to the solicitor for the Plaintiff of any intention to sell, encumber, further encumber, or otherwise dispose of any interest in any real estate owned by them or any of them.
4. The operation of paragraph 1 of the orders of the Honourable Justice Hargrave made 18 September 2009 be extended until 4.00pm on 23 November 2009.
1A. Insofar as is necessary, the Appellants have leave to appeal the costs order pronounced by the Honourable Justice Hargrave on 23 October 2009, pursuant to the provisions of s 17A(1)(b) of the Supreme Court Act 1983.
7. The costs of this Application be costs of the Appeal.
12 The applicants' position as reflected in the notice of appeal and in the solicitor's affidavit filed in support of the present application is to the effect that the applicants do not contest the quantum of the adjustment order but do contest the amount and the method by which interest was calculated and do contest the costs order that was made. The applicants contend that at most the respondent ought to have received by way of interest the amount of $180,000.
13 On the basis that the parties each retained senior and junior counsel and instructing solicitors in a trial that ran for 45 days the applicants contend that reasonable solicitor/client costs for the trial would be no less than $630,000 at a rate of $14,000 per day. The applicants further contend that in relation to costs, both sides ought bear their own costs to the date of the applicants' Calderbank offer and that the respondent should thereafter have been ordered to pay the applicants' costs on an indemnity basis.
14 One of the orders no longer sought was a variation of the undertakings which had been given by the applicants. The applicants undertook to secure the properties upon which orders might be made (either in satisfaction of the judgment debt or any further order that might be made in the event that the cross-appeal was successful).
15 Dealing first with the application for leave to appeal the costs order, that appeal is intimately linked to the appeal on the question of interest. Although an appeal on the question of interest lies as of right, as does the respondent's cross-appeal, if on the hearing of the appeal the court is persuaded by the applicants' arguments in relation to interest, it may follow that the court will make an order in favour of the respondent that may be for a lesser sum than that which she presently has the benefit of. In that case the significance of the Calderbank offer might be viewed in a different light. Arguably, for a number of possible reasons it may bear upon the reasonableness of the respondent's refusal to accept the Calderbank offer. It may then follow that a different costs order might be made. Accordingly it is appropriate that all of the parties' disputes be determined in the appeal including the disputed costs question. In my view, the issue of leave to appeal against a costs order should therefore be adjourned to the hearing of the substantive appeals.
16 As to the stay application, the respondent relies upon the applicants' conduct in relation to the secured properties. Although the order seeking a variation of the properties which are the subject of present securities has been abandoned, it is relevant to say something of that order and more particularly the material that was filed in support of that proposed order. The summons filed by the affidavit sought to vary the undertakings given on 18 September. The properties to be secured comprised four properties being two adjacent commercial properties at 1 and 7/200 Princes Highway, Dandenong, and two adjacent residential houses at Yarrabee Court, Mount Waverley.
17 There is some utility then in setting out a brief history of the circumstances in which the orders and undertakings were made. In his reasons for judgment delivered on 29 May 2009 the trial judge said:
In my view having regard to the dim opinion which I take of the defendant's credibility and business practices this is an appropriate case in which to make orders under s.291(1)(g) of the Act in aid of enforcement of the plaintiff's judgment. This can be done by the making of appropriate injunctions restraining to the extent necessary disposition or further encumbering of real property owned by the defendant Azura and/or DSK.
18 In response on 18 September 2009 the applicants undertook that they would not seek to remove any caveat lodged by the plaintiff over any real estate owned by them or any of them and that the properties would stand as security for the payment of the judgment sum, interest or of costs recovered by the respondent against them in the proceedings and that they would abide by any orders of the court to effectuate the security referred to in the undertakings.
19 At a later hearing it was ordered on 23 October 2009 by the trial judge that the defendants give 14 days notice in writing to the solicitor of the plaintiff of any intention to sell, encumber or further encumber or otherwise dispose of any interest in the real estate owned by them or any of them. Subsequently by affidavit dated 20 November 2009 the solicitor acting for the applicants deposed that he had been informed by the first applicant that the applicants required to use one of the properties to raise legal costs by way of mortgage for the purposes of the appeal.
20 By affidavit in reply sworn on 4 December 2009 the solicitors for the respondent alleged on her behalf that the applicants had placed two of the properties up for sale without giving notice to the respondent. The affidavit made further reference to a further premises displaying a 'for lease' sign, which the respondent contended in written submissions showed that the business would shortly be vacated. In a further affidavit filed by the solicitors for the applicants on 8 December 2009 it was deposed that the applicants would no longer press to be released from the undertakings or any variations of the orders relating to the caveats.
21 In that regard I should also refer to the submissions made in oral argument in response to inquiry from the courts as to the parties' submissions on a proposed order that the applicants pay part of the adjustment order and interest order by way of payment into court. Counsel for the applicants referred to the affidavit of the applicants' solicitor which, as I have said, was prepared in support of an order seeking variation of the security required on the properties. In substance he submitted that the affidavit disclosed that it was necessary for the first applicant to have access to one of his properties to increase his cash flow for the business and to raise funds to pay for the costs of the appeal.
22 It was following the receipt of that affidavit that solicitors for the respondent indicated their view that it was unsatisfactory for the applicants to rely solely on an affidavit deposed to by the solicitor for the first applicant. It was contended that the first applicant should himself file an affidavit setting out his true financial position and confirming the matters which had been raised by his solicitor. Following this, it appears that the applicant resolved not to press his application to seek a variation of the order for release from security in relation to one or more of his properties.
23 I turn now to the substance of the stay application. The applicants do not appeal against the principal sum ordered by the learned trial judge ($500,000), and seek only to appeal the orders of the trial judge which awarded interest on the principal sum and the order for costs (the remaining amount of $509,109).
24 The applicants contend that in the event of success as to the appeal as to interest they may be able to set off any moneys the respondent is owed against moneys owed to them. In the event of success on the appeal, it is submitted, they may be liable to the respondent in either a small sum or no sum at all. That submission is based upon the contention that the applicants would seek to make out on the prospective appeal, that interest should not have been ordered in the sum fixed or that costs should not have been ordered in the manner in which they were or a combination of the two.
25 While it was common ground between the parties that a stay will not be granted unless special or exceptional circumstances can be shown, it was submitted on behalf of the respondent that such a stay could not be granted in relation to orders made at first instance that are not the subject of appeal. In support of that submission counsel sought to rely upon the decision of Luxmore Pty Ltd v Hydedale Pty Ltd.[1]
26 Upon analysis it became apparent that that case is not authority for the proposition advanced on behalf of the respondent. The question of whether, and in what circumstances the Court of Appeal might stay the execution of orders that are not the subject of appeal was recently raised in Sami v Roads Corporation.[2] In that case the applicants sought a stay of costs orders made in relation to interlocutory applications arising from an unsuccessful trial proceeding against the respondent. The applicants appealed from the substantive judgment in the proceeding but the costs orders were not the subject of the appeal. The applicants sought a stay of the execution of the costs orders on the basis that, in the absence of that stay, they would be bankrupted and prevented from prosecuting their appeal and from investigating or mounting a further potential challenge. Williams AJA with whom I agreed said:
[27] The possibility of setting off obligations under a costs order against some future order in favour of an applicant has been proffered as the justification for a stay. This was the case in Grant v Banque Franco-Egyptienne where a stay of costs orders associated with an application was sought on the basis that the amount payable could be set off against costs which might be payable if the applicant were successful in the action. The application was refused, and Jessell Mr (with whom Cotton and Thesiger LJJ agreed) said:
'It was quite unheard of, in Courts where the practice of several taxations prevailed, that the mere chance of the litigant obtaining costs upon a decision at some subsequent stage of the case was to prevent his paying the costs already ordered to be paid under a separate judgment. Certainly no such rule ever existed in the old Court of Chancery and no such practice has been established under the Judicature Act; it does not seem to me that we ought to establish any such practice and that part of the application ought to fail.'
[28] A similar application was met with a different fate in Re UTSA Pty Ltd (in liq), where Chernov J distinguished the facts in Grant from those before the court. His Honour awarded a short stay of an order for costs in favour of liquidators who were obliged to pay costs, yet to be taxed, to the applicant in another proceeding.
[29] Chernov J emphasised the width of the Court's discretion to grant a stay under r 66.16 in a proper case. He considered the circumstances of the case, referring to the fact that there was no further step to be taken before the applicant became entitled to the costs ordered in its favour, which were to be taxed within a matter of months only. His Honour cited the lack of material which might reasonably have been expected from the liquidators as to their asserted ability to satisfy their obligations. He granted the stay, having concluded, in all the circumstances of the litigation between the parties, that there was a reasonable basis for the applicant's concern about the liquidators' ability to meet their obligations and a reasonable risk of prejudice to it if the stay were not granted.[3]
27 Ultimately, the Court in Sami was not required to decide the point as the evidentiary material was not sufficient for the first applicant to establish the likelihood of bankruptcy in the absence of the stay. The Court did, however countenance the possibility of setting off a judgment which is not the subject of an appeal, against a prospective successful judgment on appeal and that this may in some circumstances provide a basis for a stay of the former judgment.
28 I am satisfied, in the present case, that the Court has jurisdiction to grant a stay of the part of the judgment which relates to the principal amount, even though the relevant orders are not subject to appeal. As the decision of Chernov J (as he then was) in Re UTSA Pty Ltd (in liq)[4] demonstrates, the court retains a broad jurisdiction to grant a stay under r 66.16. If a stay is necessary, according to ordinary principles, then the court's jurisdiction to make such an order would not be limited to only those orders which are under appeal.
29 The principles then upon which a stay should be granted are clear enough. They were set out recently in the judgment of Dodds-Streeton JA in Maher v The Commonwealth Bank of Australia:[5]
[19] The principles governing a stay of execution of judgment pending the hearing and determination of an appeal are well established.
[20] Prima facie, a successful party is entitled to the benefit of the judgment obtained below and the presumption that the judgment is correct. The applicant for a stay therefore bears the onus of demonstrating that a stay is justified.
[21] In Cellante and Ors v G Kallis Industries Pty Ltd (Cellante), Young CJ (with whom Brooking J agreed), cited with approval the observation of Mahoney JA (with whom Moffit P and Glass JA agreed) in Re Middle Harbour Investments Ltd (in liq) that:
'... where an applicant for a stay has not demonstrated an appropriate case but has left the situation in the state of speculation or of mere argument, weight must be given to the fact that the judgment below has been in favour of the other party.'
[22] Young CJ concluded that an applicant for a stay under r 66.16 must show special or exceptional circumstances to take the case out of the general rule that an appeal does not operate as a stay.
[23] The Court has a wide discretion, which is not circumscribed by rigid rules. It should take into account all the circumstances of the case.
[24] In Scarborough's v Lew's Junction Stores Pty Ltd (approved in Cellante), Adam J recognized that special circumstances might exist where a successful first applicant would be deprived of the fruits of the appeal if a stay of execution were not granted. In such a case, the appeal might be rendered nugatory.
[25] In Cellante, Young CJ stated that special circumstances would 'exist where for whatever reason, there is a real risk that it will not be possible for a successful first applicant to be restored substantially to his former position if the judgment against him is executed'.
[26] An appeal could be rendered nugatory in that sense in a variety of ways. The test could be satisfied where a defendant appeals and there is a real risk that the plaintiff would remove the proceeds of the judgment from the jurisdiction. Similarly, special circumstances may be recognised where, for example, although the respondent is solvent, the subject matter of the appeal is, in substance, irreplaceable.
[27] The prospect that the appeal may be rendered nugatory must be balanced against the principle that the successful party is entitled to the fruits of the judgment. A stay should not be granted unless there is at least an arguable ground of appeal, although otherwise speculation as to the ultimate prospects of success is usually inappropriate.[6]
30 The court has sufficient power to make the orders which the applicants seek and, as has been foreshadowed in discussion with counsel, it is the court's view that it is appropriate in this case for there to be a partial stay of the orders the subject of this application and that it is appropriate to direct the applicants to make a payment into court. That will serve the interests of justice. It will provide the respondent with some degree of security and on the other hand it will relieve the applicants of the risk that were they to make a payment to the respondent, those funds would be dissipated.
31 As to the latter matter it was not in issue on the appeal that the respondent's circumstances are such that the risk is high that were she to now receive that part of the judgment debt which is not the subject of appeal or any part of the judgment debt, the risk is significant that those amounts would be dissipated and would not be recovered in the event that the applicants are successful in their appeal. In those circumstances it seems to me that justice is best done by making the orders that are proposed.
33 Gentlemen, I will then pronounce the orders that you have kindly prepared. The orders of the Court will be:
2. The appellants pay into court the sum of $680,000 within 21 days of this date to abide the outcome of the appeal.
[1] [2008] VSCA 212; (2008) 20 VR 481, [14].
[4] Unreported, Supreme Court of Victoria, Chernov J, 26 June 1998.
Apostolidis & Ors
Kalenik [2010] VSCA 80
(2008) 20 VR 481