Break Fast Investments Pty Ltd v PCH Melbourne Pty Ltd [2007] VSCA 118

2 Break Fast Investments Pty Ltd ("BFI") is the registered proprietor of a property on Wellington Parade in East Melbourne. The property adjoins a property owned by PCH Melbourne Pty Ltd ("PCH") at 178 Wellington Parade. There is a 12-storey office building at 170-176 Wellington Parade. In 2006, BFI attached metal cladding to sections of the western face of the building, at the northern and southern ends and along the top of the western face. The cladding contains illuminated signage.

3 PCH wishes to develop the neighbouring property by constructing a 14- or 15-storey apartment building. That property is already the site of the Hilton Hotel and the MCG Hotel. PCH alleges that the cladding on 170-176 Wellington Parade projects up to 60 millimetres into the air space above its land. PCH sought a permanent injunction requiring BFI to remove the cladding and the signage from the western face of the building insofar as it encroaches on PCH's land.

4 The case was heard in the Trial Division before Smith J, who dealt with a number of issues, namely, the location of the actual common title boundary between the properties; whether and to what extent the cladding extended over the boundary; if there was an encroachment, whether it was trespass; and, if it was a trespass, what the appropriate remedy would be. His Honour concluded that PCH had a strong prima facie entitlement to injunction. The encroachment to the air space conferred a commercial benefit on BFI by improving the appearance of its building. There were no special countervailing considerations such as delay. BFI had made no serious attempts to resolve the issues nor offered to pay costs nor made a reasonable offer of damages, and the proposal of undertakings (to which reference has been made this morning) was unrealistic.

5 Although an injunction would create hardship for BFI, his Honour concluded, the encroachment would have been easily ascertainable by it before and after its erection of the building and the placement of the cladding. Finally, his Honour held that an award of damages would be inappropriate because it would have the result of enabling BFI to acquire from PCH, against its will, the legal right to use the air space. In the event, his Honour ordered that BFI remove the cladding within two months and further that BFI pay PCH's costs of the proceeding.

6 BFI has lodged an appeal against those orders. It now seeks a stay on the orders. The jurisdiction to grant a stay pending appeal is an exceptional jurisdiction.[1] It will only be exercised where it is shown that the circumstances are truly exceptional. BFI argues that, unless a stay of execution is granted, the appeal will be rendered nugatory because the cladding will have been removed from the western face of the building in accordance with the order. On the face of it, that is a very powerful argument for the grant of a stay. Indeed, it is difficult to think of a clearer case of an appeal potentially being rendered nugatory.

7 PCH argues that a stay should be refused on a variety of grounds, as follows: BFI has made offers previously to remove some or all of the cladding; BFI has admitted, so it is said, that the cladding does encroach; BFI has delayed in making application for this stay and has not provided any proper assurance that it will prosecute the appeal expeditiously; and the appeal is of little merit.

8 The most substantial objection advanced, however, was that BFI refuses to provide an undertaking as to damages as the appropriate price to pay for a stay. It is not in dispute that no undertaking has been offered. Counsel for PCH has drawn our attention to a line of authority in the New South Wales Court of Appeal and in particular to the decision of that court in Jesasu[2]. Those cases deal with interlocutory injunctions granted to preserve the status quo pending an appeal.

9 Counsel for PCH submits that, in substance, that is the true character of an application for a stay pending appeal. He argues that this Court should adopt the approach adopted by the New South Wales Court of Appeal and require an undertaking as to damages as the condition of the grant of a stay, just as the Trial Division ordinarily requires such an undertaking as the price of an interlocutory injunction.

10 As far as I am aware, that submission is novel in the Court of Appeal, and indeed in the history of the Supreme Court. In no application for stay in which I have participated, and in none of the authorities about stays in Victoria of which I am aware, has it been suggested that an undertaking as to damages should be required as the condition of the grant of a stay pending appeal. On the contrary, there is an unwavering line of authority in Victoria that it is for the applicant for a stay to establish that exceptional circumstances exist justifying the grant of a stay and that, if such circumstances are established, a stay may be granted. There has not been any suggestion, to my knowledge, that the requirement of an undertaking be imposed.

11 I think it would be quite inappropriate for a bench of two to entertain the argument that an undertaking should be required. That would represent such a significant change in the law with respect to stays pending appeal that it should not be entertained otherwise than by a bench of three, or perhaps even a bench of five, given the longevity of the practice. Accordingly, I regard the refusal to provide an undertaking as to damages as irrelevant to this application.

12 As to the other matters referred to, I am not persuaded that any of them weakens the force of the argument that compliance with his Honour's order now would potentially render the appeal nugatory. It is clear that offers of various kinds were made in the course of the trial. That is as may be. It does not, it seems to me, affect the position that BFI should not be required to comply with the order made at trial unless and until the appeal confirms the correctness of the order at trial.

13 As to the matter of delay, it has been explained in BFI's material and there is no suggestion that any prejudice has been caused to PCH by the delay in the bringing on of this application.

14 As to the contention by PCH that the appeal is of little merit, that is, of course, an argument which can be made against a stay, but it is only ever likely to succeed at an interlocutory stage if there is something palpably weak about the grounds or if they are obviously without substance. In the present case, the grounds set out in the notice are not of that kind. There are important issues to be investigated, including whether or not the encroachment was trifling, and whether or not such encroachment as was found did constitute a trespass.

15 In my opinion, for those reasons, the argument for stay succeeds. These are quite exceptional circumstances because of the obligation to perform works to comply with the order. A stay of his Honour's order should be granted until the hearing and determination of the appeal.**

**16 PCH makes two applications: for security for costs and for expedition of the appeal respectively. The application for security was but lightly pressed by counsel for PCH before the Court. Counsel for PCH conceded, properly in my opinion, that the sworn evidence on behalf of BFI establishes that there is significant net equity in BFI's property, notwithstanding that it is burdened with a substantial debt. He also concedes, properly, that the non-payment of the trial costs is explained by reference to there being a dispute about the quantum of those costs. In those circumstances, there is no material on which, in my opinion, PCH could establish the requisite special circumstances warranting the grant of security for costs. I would dismiss that application.

17 As to the application for expedition, in my opinion that application should be adjourned. As things presently stand, there is no substantial detriment to PCH flowing from the pendency of the appeal such as would justify a grant of expedition now. The only activity said to be being held up at present is that of design. The development itself and the engagement of builders cannot proceed until it is made clear - including by the determination of an appeal to be heard in this Court later this month - pursuant to which planning approval the development is to proceed.

18 This Court stands ready to consider any submission a party makes about the need for urgency. In my view the best way of dealing with this is to refer the application for expedition to Master Lansdowne and to give PCH liberty to bring the application on before the Master once the planning position is clarified, following the hearing and determination of the planning appeal.

**19 In this matter, as set out by the President in his reasons, the appellant seeks a stay of the orders of Smith J made on 2 April 2007 pending the determination of the appeal or further order. There is also a costs summons by the respondent to the appeal seeking orders that the hearing of the appeal be expedited. That matter has been disposed of by the President in his reasons, with which I respectfully agree.

20 The balance of the respondent's summons seeks an order that the appellant provide security for the payment of the respondent's costs of the appeal. In the course of the submissions to the Court, it was argued that the effect of a stay will be akin to an injunction requiring the proffering of an undertaking. Reliance was placed for the respondent upon the authorities Jennings Construction Ltd v Burgundy Royale Investments Pty Ltd (No 1)[3] and also Minister for Local Government v South Sydney City Council (No 3).[4] In the course of argument, counsel for the respondent also took the Court to the New South Wales Court of Appeal authority of Jesasu Pty Ltd v Minister for Mineral Resources[5] in support of the proposition that an application for a stay pending appeal is to be equated with or treated as equivalent to an application for an injunction. Counsel for the respondent also took the Court to a more recent authority of the New South Wales Court of Appeal in Network Ten Pty Ltd v Rowe,[6] and in particular the judgment of Santow JA. I observe that in both of the authorities, Jesasu[7] and Network Ten,[8] the specific application before the New South Wales Court of Appeal was termed an injunction, not an application for a stay.

21 Historically, appellate courts in Victoria have not treated stay applications as being tantamount to injunctions. There is the long line of Victorian authority that precedes the more recent authorities of Cellante v G Kallis Industries Pty Ltd[9] and Challenge Charter Pty Ltd v Curtain Bros (Qld) Pty Ltd[10] which do not equate the two concepts.[11] As adverted to by the President in the course of his reasons, it would be contrary to the conventional approach taken in Victoria to accede to the proposition put forward by counsel for the appellant. Furthermore, I agree with the President that it would be undesirable for such a shift to be dealt with by a court of two. More appropriately, the Court should be put on notice, in my view, of such an application and submissions forthcoming so that the Court could, if needed, constitute itself with a court of three. Be that as it may, I note the remarks of the learned authors in Meagher, Gummow and Lehane's Equity Doctrines and Remedies[12] on the approach to be taken with respect to what they term 'interlocutory injunctions...granted to preserve the status quo...pending an appeal.'[13] I note that the learned authors cite Jesasu[14] as the main authority on this point. However, the Victorian position is not discussed.[15] As I say, if one traces the history of the Victorian approach and considers the analysis in the Victorian authorities, it is distinctive from the approach taken in New South Wales. Furthermore, as I have already adverted to, the approach in New South Wales has been highlighted in cases where the application is termed as 'an interlocutory injunction.' So much is borne out by Network Ten[16] in the judgment of Santow JA[17] where his Honour sets out the relevant principles. As already stated, those principles are different from those presently applicable before the Court.

22 Counsel for the respondent in the course of argument also adverted to the fact that on occasion this Court will require conditions, or even require the proffering of an undertaking, before a stay will be granted. Whilst that might be the case, it is a discretion that is not exercised routinely or commonly. Rather, it is a discretion exercised as might be appropriate to the circumstances of the case. As stated by the President in his reasons, such circumstances do not presently arise.

23 For all the reasons expressed by the President, I would dispose of both summonses as his Honour proposes.

[1] Interactive Network Services Pty Ltd v NPV WA Securities Ltd [2006] VSCA 225.

[2] Jesasu Pty Ltd v Minister for Mineral Resources (1987) 11 NSWLR 110.

[3] [1986] HCA 84; (1986) 161 CLR 681, 684-85.

[4] [2002] NSWCA 327, [10]-[14].

[5] (1987) 11 NSWLR 110 ('Jesasu').

[6] [2006] NSWCA 4 ('Network Ten').

[7] (1987) 11 NSWLR 110.

[8] [2006] NSWCA 4.

[9] [1991] VicRp 99; [1991] 2 VR 653.

[10] [2004] VSCA 66; (2004) 9 VR 382.

[11] See, eg, Klinker Knitting Mills Pty Ltd v L'Union Fire Accident and General Insurance Co Ltd [1937] VicLawRp 28; [1937] VLR 142; Scarborough v Lew's Junction Stores Pty Ltd [1963] VicRp 20; [1963] VR 129; Sun Alliance Insurance Ltd v Steiger (unreported, Full Court, 22 March 1985); Noulikas Holdings Pty Ltd v State Insurance Office (unreported, Full Court, 22 March 1985); Held v Deputy Commissioner of Taxation (unreported, Full Court, 15 April 1988); and, with respect to a stay in the High Court, see Federal Commissioner of Taxation v Myer Emporium Ltd (No 1) [1986] HCA 13; (1986) 160 CLR 220; cf, Alexander v Cambridge Credit Corporation Ltd (1985) 2 NSWLR 685 and Re Middle Harbour Investments Pty Ltd (in liq) (unreported, Court of Appeal, 15 December 1976). Subsequent to these cases are several Victorian authorities that apply the 'exceptional circumstances' criterion, see Butterworths, Williams' Civil Procedure Victoria, vol 1 (at 23 May 2007), 64.25.10.

[14] (1987) 11 NSWLR 110. So much seems to arise from considering an application of this kind as being akin to an injunction as opposed to constituting its own category; see, eg, ICF Spry, Equitable Remedies (6th ed, 2001), 463.

[15] For a discussion of the difference between Victorian and New South Welsh law on this point, see Butterworths, Williams' Civil Procedure Victoria, vol 1 (at 23 May 2007), 64.25.

[16] [2006] NSWCA 4.