Doppstadt Australia Pty Ltd v Lovick & Son Developments Pty Ltd

Judgment 1This is an application for a stay of a judgment given and orders made in Equity Division proceedings in which Slattery J awarded a substantial sum against the present applicants (who were the defendants below) and in favour of the present respondents (plaintiffs below). 2The respondents' claims arose from representations made by the applicants concerning performance capabilities of a machine purchased by the former from the latter. The sum awarded was $254,468.80 plus interest from a date in 2005. I was told from the bar table that the total sum, as at 15 April 2013, was $437,515.49. There is also a liability for costs 3The applicants' stated grounds of appeal go to a number of factual findings made by the primary judge. For the purposes of the present stay application, the respondents accept that arguable grounds of appeal are advanced in the notice of appeal filed by the applicants. 4The questions to be addressed on the present application are therefore questions going to the balance of convenience or the balance of hardship if the applicants are required to satisfy the judgment immediately. 5The principal issue concerns the creditworthiness of the respective parties or, in a more immediate sense, the question whether, if the applicants satisfy the judgment by payment, there will arise an appreciable risk that the respondents will be unable to repay if the appeal is allowed so that, in that way, the appeal is rendered nugatory. It is because of such a risk that the applicants say that the respondents should be denied the fruits of their judgment pending appeal. 6The principles relevant in a case of this kind were referred to by McColl JA in Penrith Whitewater Stadium Ltd v Lesvos Pty Ltd [2007] NSWSC 103 at [18] - [19] as follows: "18 The overriding principle in an application for a stay is to ask what the interests of justice require: New South Wales Bar Association v Stevens [2003] NSWCA 95 at [83] per Spigelman CJ (Meagher JA and Sheller JA agreeing). 19 The detailed principles concerning the grant of a stay are set out in Alexander v Cambridge Credit Corporation Limited (1985) 2 NSWLR 685 at 694: a. Where there is a risk that an appeal will prove abortive if the appellant succeeds and a stay is not granted, the Court will normally exercise its discretion in favour of granting a stay; b. the onus is upon the applicant to demonstrate a proper basis for a stay; c. it is a matter of discretion whether the Court grants a stay and if so as to the terms which would be fair as part of the granting of a stay; d. what is important in considering whether or not a stay ought be granted is the balance of convenience and the competing rights of the parties before it; e. it is not necessary that special or exceptional circumstances should be made out; it is sufficient for the applicant to demonstrate a reason or an appropriate case to warrant the exercise of discretion in its favour." 7The applicants' contention is that the respondent companies are, on the available evidence, devoid of financial substance and that there is accordingly a substantial risk that, if they receive the proceeds of judgment and are later required to repay, they will not be able to do so. 8The applicants rely on ASIC searches of the respondents showing minimal share capital and containing no other financial information. The applicants also point to the failure of the respondent companies to provide any information about their financial position in the context of an earlier security for costs application. 9The respondents rely, in reply, on certain undertakings the terms of which are set out in affidavits of Mr Paul Lovick and Mrs Vicki Lovick. The ASIC materials indicate that Mr Lovick is the sole director of each of the respondents (Lovick & Son Developments Pty Ltd and Lovick Engineering Pty Ltd). Mrs Lovick is his wife. 10Each of five paragraphs of Mr Lovick's affidavit begins with the words: "I am prepared to and do so give an undertaking to the Court that ..." 11One of these paragraphs refers to an undertaking of Mr Lovick himself "to be personally liable for" all costs that may be ordered against the respondents in this Court or in the first instance proceedings. The next paragraph sets out a like undertaking on behalf of a company called Lovick Investments Pty Ltd. 12The next two paragraphs set out undertakings "to be liable for the repayment of any judgment sum plus interest" paid to the respondents. One such undertaking is an undertaking of Mr Lovick; the other is expressed by him to be given on behalf of Lovick Investments Pty Ltd. 13Finally, Mr Lovick sets out an undertaking given by him on behalf of Lovick Investments Pty Ltd not to transfer, dispose of or encumber certain land at Orange. 14Mrs Lovick's affidavit contains an undertaking by her to be personally liable for costs ordered against the respondents in this Court or in the first instance proceedings. Mrs Lovick goes on to give particulars of several parcels of land of which she is the registered proprietor, in some cases alone and in others as co-owner with Mr Lovick. Title searches are annexed to the affidavit. Each search discloses a registered mortgage to a bank. 15Annexed to Mr Lovick's affidavit are documents showing that Lovick Investments Pty Ltd is the registered proprietor of two parcels of land in respect of which no mortgage is registered and that one of these was transferred to that company in September 2008 by a transfer stating a consideration of $280,000. 16In two obvious respects, the several undertakings are of very limited utility. First, there is no means of judging the financial strength of any of the persons offering the undertakings (Mr Lovick, Mrs Lovick and Lovick Investments Pty Ltd). While there is some information about their assets, there is none about their liabilities. Second, it is by no means clear how Lovick Investments Pty Ltd, a stranger to the litigation and a company no doubt having creditors of its own, could properly perform (or even give) a promise to answer for sums that might become due by the respondents: Charterbridge Corporation Ltd v Lloyds Bank Ltd [1970] Ch 62. 17Implicit in the proffering of the undertakings of Mr Lovick and Mrs Lovick must be an acknowledgement that the respondents themselves are not of such financial stature that they could make prompt and full refund if they received the proceeds of the action and were later required to repay. But I am no position to make any finding that the proffered undertakings would in any way remedy that deficiency. 18I must, I think, therefore accept that there is a risk that the appeal will prove abortive if the appellants succeed and a stay is not granted. That being so, the discretion would normally be exercised in favour of granting a stay: see the first of the principles in Alexander v Cambridge Credit Corporation Ltd (1985) 2 NSWLR 685 extracted above. 19It is, however, important to note that, as was pointed out in In Adeels Palace Pty Ltd v Moubarak [2009] NSWCA 130, any stay must take into account the fairness as between the respective interests of the parties. It is therefore not enough to consider just the interests of the applicants in being able to recover the proceeds of the litigation if they are paid over to the respondnts and the appeal is eventually allowed. The Court must also consider the interests of the respondents in successfully obtaining the proceeds at some future time if the appeal is ultimately dismissed and a stay operative until then has prevented their doing so in the meantime. 20The Court does not have available to it any material that would enable it to make an assessment of the financial capability of the applicants, present or projected. What is shown by the evidence, however, is that, in response to the applicants' motion for a stay, the respondents offered to consent to the stay on certain terms, including that the applicants pay $437,515.49 into a controlled moneys account to be held and administered by the respective solicitors pending determination of the appeal. The other terms were apparently rerasonable. The applicants rejected that proposal, from which it can be inferred that they were unwilling to set aside the necessary moneys and that it is at least possible that the unwillingness (for which no reason was given) might have been a product of inability. 21There is no degree of assurance that, if a stay is ordered and the respondents are precluded from enforcing their judgment, money will ultimately be forthcoming to meet the judgment debt in the event that the appeal is unsuccessful and the applicants' liability for the judgment sum remains. That being so, a fair basis for the grant of a stay is not shown. 22The notice of motion dated 21 March 2013 is dismissed with costs. 23The primary judge ordered an interim stay up to and including 23 April 2013. At the conclusion of the hearing on 22 April 2013, I extended that stay until the conclusion of the day on which judgment was given on the stay application heard by me. The stay will therefore cease at the conclusion of today.