Bradcorp Wilton Park Pty Limited v Country Garden Wilton West Pty Limited

Judgment

1. HIS HONOUR: By notice of motion filed on 14 November 2019 the appellant ("Bradcorp") seeks a stay of execution of the judgment of Parker J in Bradcorp Wilton Park Pty Limited v Country Garden Wilton West Pty Limited [2019] NSWSC 1407 and the orders that his Honour made on 6 November 2019 to give effect to that judgment. Bradcorp seeks the stay pending the determination of its appeal, by way of extension to an interim stay which is presently in force. The hearing of the appeal has been fixed to commence on 3 March 2020.
2. The proceedings arise out of Bradcorp and the first respondent's ("CGWW") entry into put and call option agreements relating to a substantial rural property which is owned by Bradcorp and earmarked for development as a housing estate. Bradcorp contends that it validly exercised the put options provided for in the agreements and that, in breach of the agreements, CGWW refused to execute the requisite contracts of sale. CGWW (and its guarantor, the second respondent, "CGA") contended that certain conditions precedent to Bradcorp's ability to exercise the put options had not been satisfied.
3. Parker J upheld CGWW's argument that a condition precedent concerning the property's access to and from the adjacent Hume Highway had not been satisfied prior to the requisite date. His Honour also held that even if Bradcorp had been entitled to exercise the put options, CGWW's conduct did not amount to a repudiation of its contractual obligations and that Bradcorp was therefore not entitled to terminate the put options and claim damages. There was considerable valuation evidence relevant to the damages claim but in light of his decision on the other issues his Honour did not consider it necessary to address it.
4. The primary judge further held that although CGWW had no contractual right to repayment of the option fees totalling $29.7 million which it paid, it was entitled to an equivalent amount by way of damages as a consequence of Bradcorp's repudiation of the agreements. Of that amount, the $20.7 million that was provided by Bradcorp is presently held by HWL Ebsworths, solicitors, as a stakeholder. The parties are agreed that that should remain the position pending determination of the appeal. If the present interim stay is not continued CGWW will be entitled to require payment to it, before the disposition of the appeal, of the remaining amount of $9 million plus interest of $644,449.32.
5. So far as the principles of law in relation to stays pending appeals are concerned, it is sufficient to refer to the decision of this Court in Alexander v Cambridge Credit Corporation Ltd (1985) 2 NSWLR 685. That case established that it is not necessary for the grant of a stay to demonstrate special or exceptional circumstances. Rather, it is sufficient that a "reason or an appropriate case" for the grant of a stay exists (at 694). Matters relevant to the exercise of an appellate court's discretion to grant a stay include whether the appeal is arguable, whether there is a risk that if a stay is granted the respondent may later be unable to enforce its judgment and whether there is a risk that if no stay is granted and the appeal succeeds, the appellant may be unable to recover from the respondent amounts which it has paid to it in satisfaction of the judgment (ibid at 694-5).
6. Having heard full argument presented by senior counsel representing each party, I have reached a firm conclusion on four matters which are of significance in relation to the exercise of my discretion. Due to the interlocutory nature of this judgment and the need for its urgent preparation, it is sufficient for me to state my conclusions on these matters briefly, as follows.
7. First, I am satisfied that the appeal is arguable. Indeed, the respondents did not contend otherwise. It is not however necessary, or in fact possible, for me to form any more definitive view as to Bradcorp's prospects of success.
8. Secondly, I am satisfied that the determination of the present application should be approached on the basis that Bradcorp cannot be completely assured of its ability to recover readily from the respondents any amounts which it may become entitled to have repaid to it in the event that it succeeds on the appeal. To establish this risk, Bradcorp justifiably relied, inter alia, on the following facts concerning CGWW and CGA: (1) CGWW is a special purpose vehicle with no substantial assets in Australia; (2) CGWW's ultimate parent company or controlling entity is domiciled out of Australia; (3) CGA, which, as I noted, is a guarantor of CGWW's obligations the subject of these proceedings, has no substantial assets in Australia. Its parent company is incorporated in the British Virgin Islands and the ultimate parent company or controlling entity it shares with CGWW is incorporated in the Cayman Islands;
9. (4) Whilst audited accounts for the financial year ended 31 December 2018 for a corporate group of which CGA is a member disclose substantial net assets, the assets are to a significant extent comprised of debts owed by related entities. The evidence does not reveal the financial position of those entities;
10. (5) These accounts state that the corporate group is "economically dependent on finance" from its ultimate parent company referred to in [8(3)] above. They state that the group has a letter of support from the Board of the parent company "who have agreed to provide financial support to the Group for a period of 12 month from the date of signing of the 31 December 2018 financial report." Bradcorp submitted that the group is only a "going concern" with that letter of support, which expires at the end of 2019, and that in any case such letter of support would be difficult to enforce in Australia.
11. Thirdly, and correspondingly, CGWW cannot be completely assured that it will be able to recover from Bradcorp amounts to which it will be entitled in the event that the appeal is dismissed and the stay ceases to be operative at that time.
12. CGWW's argument in this respect is not that Bradcorp is not in a position to pay the full judgment debt at the present time. On the contrary, CGWW contends (based on Bradcorp's own assertions to that effect) that Bradcorp can now pay the judgment debt. CGWW submits however that it should not have to run the risk that that may not be the case in the future, when (and if) the appeal is dismissed.
13. The matters to which CGWW justifiably referred in this regard included the following: (1) In support of its stay application Bradcorp tendered only very limited information concerning its financial position. This comprised a heavily qualified report of a professional services firm which stated inter alia that "we do not express any conclusion and provide no assurance on the Adjusted Net Assets [of] Bradcorp as of 30 June 2019". Bradcorp did not tender its accounts for the preceding financial year, nor for any previous year. This was the position despite the respondents having invited Bradcorp by solicitors' correspondence to provide the relevant financial information. (2) The property the subject of the put and call options appears to be Bradcorp's only substantial asset and Bradcorp appears to have been attempting since about 26 March 2019 to sell the property, but has been unsuccessful. (3) The property is mortgaged to a bank but there is no evidence of the terms of the mortgage other than that it contains a loan to value ratio covenant.
14. Fourthly, in its solicitors' letters of 28 October and 21 November 2019 and its written submissions (at [5]) Bradcorp asserted that it is presently in a position to pay the amount of $9 million plus interest which is not held by the stakeholder. In their letter of 21 November 2019, Bradcorp's solicitors in fact said that "Bradcorp's assets are such that it can comfortably pay the remaining $9 million plus interest" (emphasis added). The same language was used in the written submissions.
15. In these circumstances, I consider that, to protect both parties against the risks to which I have referred, a stay should be granted conditional upon Bradcorp paying the remaining amount of $9 million plus interest to a stakeholder to be held pending the disposition of the appeal. The respondents' proposed short minutes of order provided that if I was of this view, Bradcorp should have 14 days to make that payment. In oral argument, its senior counsel accepted that a 21 day period would not present any immediate prejudice to the respondents. On the other hand, Bradcorp's senior counsel submitted that in this event, Bradcorp should be given two months to make the payment.
16. In light of the repeated assertions of Bradcorp's present ability to pay the sum in question (see [12] above), I consider that three weeks is an appropriate period to allow but, as requested by Bradcorp, it should be granted liberty to apply for an extension of that period in the event that exceptional circumstances occur. In the meantime, the respondents' position should be protected by undertakings to the effect of those that it sought, including from the directors of Bradcorp. Senior counsel for Bradcorp indicated that the directors were prepared to give the much more limited undertakings that Bradcorp proffered but that he would need to obtain instructions as to whether the directors were prepared to give the undertakings that the respondents sought as a term of a stay. To enable Bradcorp to seek these instructions, the stay that is presently in place should be extended to 5.00pm on Tuesday 3 December 2019.
17. For these reasons, I make the following orders: 1. On the condition that the undertakings previously given by the appellant are correspondingly extended, extend the stay granted by Parker J on 7 November 2019 to 5.00pm on Tuesday 3 December 2019. 2. Upon the appellant and each of its directors giving the undertakings described in order (3) below, extend that stay until 5.00pm on Friday 20 December 2019. 3. The undertakings referred to in the previous order are undertakings to the Court by the appellant and each of its directors to provide 28 days written notice to the respondents before the appellant: 1. Sells, disposes of, encumbers or otherwise deals with the land (or any part of it) referred to in [50] of the affidavit of Jonathan Milner sworn 14 November 2019; 2. Takes any steps to extend, discharge or otherwise deal with the Facility (as that expression is defined in [57] of the affidavit of Jonathan Milner sworn 14 November 2019); or 3. Incurs any liability in excess of $50,000. Any notice provided pursuant to these orders must: (i) be sent by email to both; Brad Woodhouse at brad.woodhouse@corrs.com.au; and Niall Watson-Dunne at niall.watson-dunne@corrs.com.au; and (ii) include details of the proposed transaction, together with all information reasonably necessary to enable the first respondent to consider it. 1. Extend the stay referred to in order (1) above to the date upon which the appeal is disposed of, subject to the appellant paying by 5.00pm on Friday 20 December 2019 the sum of $9,644,449.32 (the "escrow monies") into an escrow account maintained by an Australian bank or other institution or entity agreed between the appellant and first and second respondents (the "escrow account"). 2. Order that until further order the appellant not remove any of the escrow monies from the escrow account or otherwise deal with them save with the consent of the first and second respondents. 3. Until further order, the appellant is restrained from taking any steps to deal with or otherwise cause the release of any of the T1 Held Monies and the T2 Call Option Fee (as those expressions are defined in the appellant's Further Amended Commercial List Statement in Supreme Court proceedings 2018/381314). 4. The Court notes that these orders are not intended to affect the first respondent's entitlement, if any, to receive post-judgment interest on the judgment below in the event that the appellant remains liable to the first respondent following determination of the appeal. 5. The appellant's notice of motion dated 14 November 2019 is otherwise dismissed. 6. The costs of that motion are ordered to be costs in the cause. 7. Grant each party liberty to apply for a variation of these orders on 48 hours' notice to the others.

Amendments 29 November 2019 - Coversheet: Order (3)(ii) the word "reasonable" changed to "reasonably" [15]: Order (3)(ii) the word "reasonable" changed to "reasonably". DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated. Decision last updated: 29 November 2019