Grace v Grace

Judgment (ex tempore) 1HIS HONOUR: Consequent upon reasons for judgment given on 23 August 2012 [Grace v Grace [2012] NSWSC 976], orders were made on 9 November 2012, relevantly against the second defendant, as follows: 7. DECLARE THAT the transfer by the Plaintiff of 667 cumulative preference shares in the Third Defendant to the Second Defendant on or about 16 January 1995 was voidable and has been avoided by the Plaintiff. 8. ORDER THAT the Second Defendant transfer to the Plaintiff all of the interest in 667 cumulative preference shares in the Third Defendant held by her, within 7 days of the date on which this order takes effect or of the date on which any stay of this order expires, whichever is the later. 9. ORDER THAT the Second Defendant pay the Plaintiff's reasonable costs and expenses of the said transfer, including any applicable stamp duty. 10. ORDER THAT an account be taken of the benefits derived by the Second Defendant, as the accounting party, from the 667 cumulative preference shares in the Third Defendant whilst held by her. 11. ORDERS THAT the Second Defendant pay to the Plaintiff the amount found to be due (including interest) on the taking of such account. 12. ORDER THAT upon the Second Defendant giving to the Court the usual undertaking as to damages and undertaking that she will not alienate, encumber, exercise any rights attached to, or otherwise adversely deal with the 667 cumulative preference shares in the Third Defendant held by her, orders 8, 9, 10 and 11 be stayed until and including 7 December 2012. ... 20. DECLARE THAT the transfer of: (a) 1 cumulative preference share in the Third Defendant; (b) 1 ordinary share in the Fourth Defendant; (c) 1 ordinary share in the Sixth Defendant; from the Estate of the late Colin Grace to the Second Defendant was a breach by the First Defendant of her duties as administratrix of that Estate and that the Second Defendant received the said shares with knowledge of that breach. 21. DECLARE THAT the Second Defendant holds all of the interest held by her in the said: (a) 1 cumulative preference share in the Third Defendant; (b) 1 ordinary share in the Fourth Defendant; (c) 1 ordinary share in the Sixth Defendant; upon trust for the Plaintiff. 22. ORDER THAT the Second Defendant transfer to the Plaintiff all of her interest in the said: (a) 1 cumulative preference share in the Third Defendant held by her; (b) 1 ordinary share in the Fourth Defendant held by her; (c) 1 ordinary share in the Sixth Defendant held by her; within 7 days of the date on which this order takes effect or of the date on which any stay of this order expires, whichever is the later. 23. ORDER THAT the Second Defendant pay the Plaintiff's reasonable costs and expenses of the said transfer, including any applicable stamp duty. 24. ORDER THAT an account be taken of the benefits derived by the Second Defendant, as the accounting party, from each of: (a) the 1 cumulative preference share in the Third Defendant whilst held by her; (b) the 1 ordinary share in the Fourth Defendant whilst held by her; (c) the 1 ordinary share in the Sixth Defendant whilst held by her. 25. ORDER THAT the Second Defendant pay to the Plaintiff the amount found to be due (including interest) on the taking of such account. 26. ORDER THAT upon the Second Defendant giving to the Court the usual undertaking as to damages and undertaking that she will not alienate, encumber, exercise any rights attached to, or otherwise adversely deal with the trust shares the subject of Orders 20 to 25 held by her, orders 22, 23, 24 and 25 be stayed until and including 7 December 2012. ... 34. ORDER pursuant to (Cth) Family Law Act, s 79A THAT the orders made by the Family Court of Australia on 18 May 1995 in the proceeding numbered 1920 of 1988 in that Court be set aside. 35. DECLARE THAT the Second Defendant holds all of her interest in the property known as XXX Birrell Street, Bondi, comprised in Certificate of Title Folio Identifier X/316859 (XXX Birrell Street) upon trust for the Plaintiff. 36. ORDER THAT the Second Defendant transfer to the Plaintiff unencumbered title to XXX Birrell Street within 60 days of the date on which this order takes effect or of the date on which any stay of this order expires, whichever is the later, by the Second Defendant delivering to the Plaintiff the Certificate of Title of XXX Birrell Street, a Discharge of Mortgage in Registrable Form and a signed transfer in registrable form in favour of the Plaintiff. 37. ORDER THAT the Second Defendant pay the Plaintiff's reasonable costs and expenses of the said transfer, including any applicable stamp duty. 38. ORDER THAT an account be taken of the benefits (including rent) derived by the Second Defendant as the accounting party, after just allowances, from XXX Birrell Street, since 18 May 1995. 39. ORDER THAT the Second Defendant pay to the Plaintiff the amount found to be due (including interest) on the taking of such account. 40. ORDER THAT an inquiry be held as to the extent to which the equity held by the Second Defendant in the property known as XX/XX Etham Avenue, Darling Point NSW 2027, comprised in Certificate of Title Folio Identifier X/434806 and Y/434806 (XX/XX Etham Avenue) and/or the proceeds of sale thereof represents benefits derived by her from the use of XXX Birrell Street. 41. ORDER THAT upon the Second Defendant giving to the Court the usual undertaking as to damages and undertaking that she will not alienate, encumber, or otherwise adversely deal with XXX Birrell Street, orders 36, 37, 38, 39 and 40 be stayed until and including 7 December 2012. ... 51. DIRECT THAT, in respect of the accounts referred to in Orders 4, 10, 17, 24, and 38 above: (a) each of the accounting parties shall within 28 days of the date of these orders, serve on the Plaintiff their detailed account, verified by Affidavit of all of the benefits derived by them from the property the subject of the account; (b) such verifying Affidavits are to annex or exhibit all documents relevant to the detailed account as are in the possession, custody or power of the accounting parties; (c) the items of each said account and each statement shall be numbered consecutively; (d) the Plaintiff be at liberty within 30 days after service upon him of the said accounts and statements, to apply to an Associate Judge of the Equity Division to examine the accounting party or parties viva voce or upon interrogatories in respect of the said accounts and statements; (e) the Plaintiff, within 30 days after service upon him of the said accounts, or within 30 days of the conclusion of the examination of the accounting party or parties referred to in direction, have liberty to file and serve upon the accounting parties his surcharges, falsifications and objections (if any) thereto; (f) that all vouching be done out of Court prior to the matter being relisted; (g) liberty to each party to apply on 3 days notice. 2As will appear from those orders, orders 12, 26 and 41 contained interim stays of the operative orders against the second defendant. There were like stays then granted in respect of the orders made against the first defendant. The stays that initially operated until 7 December 2012 were subsequently extended until the hearing of the application yesterday, to which I shall come, and then until today, in respect of the second defendant. 3On 30 November 2012, the second defendant filed in the Eastern Regional Appeal Registry of the Family Court of Australia a Notice of Appeal from part of the judgment, and some of the orders to which I have referred. The appeal was correctly brought in the Full Court of the Family Court, since it was from aspects of the judgment which involved this court exercising the cross-vested jurisdiction of the Family Court of Australia. The notice of appeal appeals from orders 34 through 40, and 45 (see section A of the notice of appeal), and in the relief sought, seeks to have set aside orders 34 and 45 of the orders of 9 November 2012 (see annexure B to the notice of appeal paragraph 2). 4By interlocutory process filed in this Court on 3 December 2012, the defendants seek the following orders: 1. Pursuant to the liberty granted to the Second Defendant on 9 November 2012 by Order 55, an order pursuant to section 23 of the Supreme Court Act 1970 (NSW), that the stays granted by this Court to the Second Defendant in order 12 and 41 on 9 November 2012, be extended until such time as any Notice of Appeal and application to the Family Court of Australia by the Second Defendant is finally determined. 2. Pursuant to the liberty granted to the First Defendant on 9 November 2012 by Direction 51(g), an order that Direction 51(a) on 9 November 2012, in that the First Defendant shall within 28 days of the date of the Orders on 9 November 2012, serve on the Plaintiff her detailed account, verified by Affidavit of all the benefits derived by her from the property the subject of the account, be extended to 11 January 2013. 3. Pursuant to the liberty granted to the Second Defendant on 9 November 2012 by Direction 51(g), an order that Direction 51(a) on 9 November 2012, in that the Second Defendant shall within 28 days of the date of the Orders on 9 November 2012, serve on the Plaintiff her detailed account, verified by Affidavit of all the benefits derived by her from the property the subject of the account in Order 24, be extended to 11 January 2013. 4. That the Plaintiff pay the First and Second Defendants' costs of and incidental to this interlocutory process. 5. Such other order as this honourable Court thinks fit. 5It will be apparent from the above that a continuation of the stay originally contained in order 26 of 9 November is not sought, and the first defendant does not seek a continuation of the stays of the orders made against her. Accordingly, the issue is reduced to whether the stays contained in orders 12 and 41 of the orders of 9 November should be extended until the hearing of the appeal. 6In the appellate jurisdiction of the Family Court of Australia, the question of stays is governed by (Cth) Family Court Rules, r 22.11, which provides as follows: 22.11 Stay (1) The filing of a Notice of Appeal does not stay the operation or enforcement of the order appealed from, unless otherwise provided by a legislative provision. (2) If an appeal has been started, or a party has applied for leave to appeal against an order, any party may apply for an order staying the operation or enforcement of all, or part, of the order to which the appeal or application relates. (3) An application for a stay must be filed in the Registry in which the order under appeal was made and be heard by the Judge, Federal Magistrate or Magistrate who made the order under appeal. 7From that, it will appear that the practice and procedure of that court is that stay applications are made to the trial judge, at least unless that judge is unavailable. Similarly, in this Court, the practice is that while stay applications may be made either to the trial judge or to the Court of Appeal, the Court of Appeal has repeatedly encouraged the practice that applications should be made in the first instance to the trial judge. Accordingly, whichever way one looks at it, it is appropriate that this application be brought before the trial judge. 8Similarly, I do not understand that the principles applicable to the grant of a stay pending appeal differ between the two courts. I have sought to summarise the principles applied by this Court, in Seiwa Pty Ltd v Owners Strata Plan 35042 [2006] NSWSC 1472, as follows: [3] On an application for a stay in this context, the essential questions are first, whether there is a reasonably arguable ground of appeal, and secondly, whether the balance of convenience and prejudice between the parties favours the grant of a stay over the enforcement of the judgment. The Court has a wide discretion to impose terms, in order best to serve the ends of justice pending an appeal, once it is accepted or assumed that there is a reasonable ground of appeal. However, it is important to remember that, despite the more liberal approach taken nowadays to the granting of stays [Alexander v Cambridge Credit Corporation Ltd (Receivers Appointed) (1985) 2 NSWLR 685], it is still necessary for a case to be made out that a stay is appropriate, so as to displace the prima facie correctness of the first instance decision pursuant to which the successful party is entitled to the fruits of the judgment [Park v Brothers [2003] NSWSC 1054, [7]]. ... [10] ... The onus of making out a case for a stay falls fairly and squarely on the applicant for a stay. ... 9Likewise, in IceTV Pty Ltd v Ross [2011] NSWSC 1211, I said (at [3] - [4]): [3] On an application for a stay pending an appeal, the considerations and approach of the Court is well established: see Alexander and Others v Cambridge Credit Corporation Ltd (Receivers Appointed) and Another (1985) 2 NSWLR 685, where the Court of Appeal outlined the relevant principles as follows (at 694-695): It is sufficient that the applicant for the stay demonstrates a reason or an appropriate case to warrant the exercise of discretion in his favour. There are other principles to be kept in mind. The onus is upon the applicant to demonstrate a proper basis for a stay that will be fair to all parties ... The mere filing of an appeal will not, of itself, provide a reason or demonstrate an appropriate case, nor will it discharge the onus which the applicant bears ... The Court has a discretion whether or not to grant the stay and, if so, as to the terms that would be fair. In the exercise of its discretion, the Court will weigh considerations such as the balance of convenience and the competing rights of the parties before it. ... Two further principles can be mentioned. The first is that where there is a risk that the appeal will prove abortive if the appellant succeeds and a stay is not granted, courts will normally exercise their discretion in favour of granting a stay ... Thus, where it is apparent that unless a stay is granted an appeal will be rendered nugatory, this will be a substantial factor in favour of the grant of a stay ... Secondly, although courts approaching applications will not generally speculate about the appellant's prospects of success, given that argument concerning the substance of appeal is typically and necessarily attenuated, this does not prevent them considering the specific terms of a stay that will be appropriate fairly to adjust the interest of the parties, from making some preliminary assessment about whether the appellant has an arguable case. This consideration is protective of the position of a judgment creditor where it may be plain that an appeal, which does not require leave, has been lodged without any real prospect of success and simply in the hope of gaining a respite against immediate execution of judgment... [4] In that case, the Court of Appeal also referred with approval to the approach enunciated by Mahoney JA (with whom Moffitt P and Glass JA agreed) in Re Middle Harbour Investments Ltd (in Liq) (Court of Appeal, 15 December 1976, unreported) (at 2): Where an application is made for a stay of proceedings, it is necessary that the applicant demonstrate an appropriate case. Prima facie, a successful party is entitled to the benefit of the judgment obtained by him and is entitled to commence with the presumption that the judgment is correct ... 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. 10Reference might also be made to the judgment of Court of Appeal in Kalifair Pty Ltd v Digi-Tech (Australia) Ltd [2002] NSWCA 383; (2002) 55 NSWLR 737 (at [18], [28]) where the Court said: [18] Thus the relevant principles are analogous to those which govern the grant of interlocutory relief before trial to protect the status quo. The appellant must show that the appeal raises serious issues for the determination of the appellate court, and that there is a real risk that he will suffer prejudice or damage, if a stay is not granted, which will not be redressed by a successful appeal. This requirement will be satisfied if the appeal will be rendered abortive or nugatory unless a stay is granted. If these pre-conditions are established the Court will then consider the balance of convenience. ... [28] A successful party is prima facie entitled to the fruits of his judgment. He is entitled to be protected, as far as practicable, from the risk that if the appeal fails assets which earlier were available to satisfy the judgment will no longer be available for that purpose. The Court will endeavour to see that a stay does not cause that kind of prejudice to a judgment creditor. An appellant may be required to provide appropriate security as the price of a stay which may make the judgment creditor a secured creditor. Otherwise a requirement for security is only intended to protect the status quo, that is the existing value of the judgment and not to improve the position of the judgment creditor by increasing that value. 11The submissions for the plaintiff respondent to the application encapsulate the relevant considerations as follows: first, is there a reasonably arguable ground for appeal; secondly, does the balance of convenience and prejudice between the parties favour the grant of stay over the immediate enforcement of a judgment, taking into account matters such as: (1)The prima facie correctness of the first instance decision pursuant to which the successful party is entitled to the fruits of the judgment; and (2)Whether the failure to grant a stay would render a successful appeal nugatory, which in turn requires consideration of the effect of the decision being overturned and the likelihood that if the decision were overturned, the previously successful party would be able to provide full restitution. 12The principles in the Family Court are relevantly the same [see Carlin & Carlin (1977) FLC 90-320, especially at 76,696, and Gull v Gull (2009) FamCAFC 104, [9]]. 13I am relieved of the sometimes invidious task of evaluating whether there is an arguable ground of appeal by the plaintiff's concession, which accords with my overall impression, that at least some of the grounds of appeal are arguable, though not strong. That concession having been made, it is inappropriate to descend to a more detailed analysis of the relative arguability of the grounds of appeal, and one turns to what I have described as the balance of convenience and prejudice. In that respect, it is appropriate to note that the stay application addresses three discrete orders or groups of orders: first, those which require transfer of the 667 cumulative preference shares in the third defendant, presently held by the second defendant, to the plaintiff; secondly, those which require transfer by the second defendant to the plaintiff of the Birrell Street property unencumbered; and thirdly, those which require the taking of an account, and payment of the amount found due on the taking of such account, of the receipts derived by the second defendant from the Birrell Street property while it has been in her possession. 14The second defendant has submitted, correctly, that the plaintiff has adduced no evidence of hardship or other detriment to the plaintiff from the refusal of a stay. While that is correct, it is also true that the plaintiff does not have to adduce any such evidence, the onus of making out a case for a stay lying firmly on the defendant applicant. However, when what is involved is a balancing of convenience and prejudice, that balance will more easily be tipped in favour of the applicant where there is nothing in the scales on the other side of the balance. 15Here, the plaintiff argues, not unreasonably, that a stay will involve him being kept out of the fruits of his judgment, exacerbated by the circumstance that those fruits represent entitlements that the primary judgment has found he has been wrongly deprived of for many years. 16However, as he demonstrates no hardship from that state of affairs continuing for a time, the second defendant's task in showing that the balance of convenience and prejudice favours her is rendered easier than it otherwise might be. 17So far as the cumulative preference shares are concerned, it is not suggested seriously, if at all, that any particular hardship will be occasioned to the second defendant from being required to transfer them now. Nor is it seriously suggested that it would not be possible to restore the position if they were transferred, particularly if, as I propose to require, the plaintiff gives an undertaking not to alienate, encumber or otherwise adversely deal with them pending the outcome of the appeal. It is conceivable that there will be some stamp duty burden associated with their transfer, but if their retransfer is required, it seems to me that that would be negated, and the second defendant would be entitled to a refund. In those circumstances, I do not think a case has been made for a stay of the order requiring a transfer of those shares. That conclusion is fortified by the circumstance that the appeal is not brought from those orders which require that transfer, and no order is sought setting aside those orders. 18So far as the Birrell Street property and the taking of the account is concerned, the second defendant argues that implementation of those orders, or either of them, would have the practical effect of requiring her to sell her Burrabirra Avenue home. It appears that to discharge the mortgage over the Birrell Street property would require the second defendant to find some $610,000. In circumstances where her equity in Grace Securities Pty Limited substantially exceeds that amount, and where she is owed $1.3 million by the first defendant, which is not disputed to be due and payable, I am unpersuaded that she would be unable to find $610,000 with which to discharge the mortgage. That conclusion is fortified by the circumstances that while to do so might require some cooperation from the first defendant, there is no reason to doubt that such cooperation would be forthcoming, given the manner in which the two defendants have conducted these proceedings together to date, including the expressed willingness of the first defendant as late as yesterday to give evidence in support of the second defendant's stay application. 19It may well be that raising it, particularly if recovering it from the first defendant was required, would take longer than the 60 days for which the relevant order provides; but as I indicated when that order was made, the second defendant could apply to the Court on appropriate evidence for an extension of time in which to make the transfer, if she were able to demonstrate that reasonable endeavours had been and were being made, but further time was required to bring them to fruition. Accordingly, I do not accept that a case has been made that sale of the second defendant's home would be required to satisfy the order for transfer of the Birrell Street property, requiring as it does, the discharge of the mortgage secured on it. 20That said, it does appear to me that satisfying the order would require a significant rearrangement of the property holdings of the second defendant, and perhaps of the first defendant. While it is conceivable that moneys might be raised by loan on security of some of the properties, that seems unlikely, as it seems that most, if not all, of the properties are already encumbered. Accordingly, it is likely that the sale of some property would be required. A successful appeal could not result in the re-acquisition of properties that were sold in the meantime. While those properties might not be a family home, but rather be in the nature of investment properties, nonetheless it would involve a permanent and unrestorable alteration in the position of the second defendant, and potentially also of the first defendant. 21When it comes to balancing that against the absence of any demonstrated or claimed hardship to the plaintiff, it seems to me that the balance of convenience and prejudice favours the granting of a stay, so as to avoid those potentially irremediable consequences to the defendants. 22That applies even more strongly to the payment of the moneys that might be found due on the undertaking of account, which, prima facie, the second defendant has estimated at $2.5 million. But, in my judgment, it does not apply to the process of the taking of the account. Indeed, in the time already available the second defendant has been able to, on a preliminary basis, estimate the amount liable to be paid on such accounting. There seems to be no reason why, at least at this stage, the process for the taking of that account should not proceed. Whether the formal hearing should proceed, after the relevant affidavits have been made and accounts vouched, is another matter, which can be revisited at that stage. 23It also seems to me that while the considerations to which I have referred indicate that the second defendant should not be required at this stage to find the moneys required to enable the transfer of the Birrell Street property, the ongoing entitlement to the income from that property is quite another matter. And, indeed, it would be manifestly inappropriate to allow the amount for which the second defendant is liable to account to be increased by the ongoing appropriation by her of the income from the Birrell Street property. 24Accordingly, I propose to make orders which will have the effect of requiring the income after payment of outgoings and reasonable upkeep expenses (but not including mortgage payments, which are unrelated to the acquisition of the Birrell Street property) to be paid to the plaintiff. An agent will keep account of that so that the amount that might be required to be restored should the appeal succeed will be clearly and simply calculable. In essence, the intent so far as the Birrell Street property is concerned, is that effect will be given to the trust relationship declared in order 35 of 9 November, but the order that would bring the legal ownership into line with the equitable ownership will be stayed. 25Accordingly, I propose to make the following orders: (1)Upon the plaintiff by his counsel undertaking to the Court that he will not, until the hearing of Appeal No EA154 of 2012 in the Full Court of the Family Court of Australia (or further order of this court or that court) alienate, encumber or otherwise adversely deal with the 667 CUMP shares referred to in orders 7 and 8 of 9 November 2012, order that the application for further extension of the stay contained in order 12 of that date be dismissed. (2)Upon the Second Defendant by her counsel giving to the Court the usual undertaking as to damages and further undertaking to the Court that she will not alienate, encumber, or otherwise adversely deal with XX XXX XXXX ("the Birrell Street property") except as authorised under this order, order that the operation of orders 36, 37 and 39 of 9 November 2012 be stayed until the hearing of Appeal No EA154 of 2012 in the Full Court of the Family Court of Australia (or further order of this Court or of that Court) upon the following terms: (a)The Second Defendant is to appoint a licensed real estate agent nominated by the Plaintiff as manager of the Birrell Street property ("the Agent"), to receive all rents and any other income derived from the Birrell Street property; (b)The Second Defendant is to instruct the Agent to bank all such receipts into the Agent's trust account and to apply the moneys so received: (i)in payment of the outgoings and expenses reasonably required in the ordinary course of business for the maintenance and upkeep of the Birrell Street property, not including mortgage repayments; (ii)in payment of the balance to the Plaintiff. (c)The Second Defendant is to request the Agent to provide a written recommendation to the Plaintiff and the Second Defendant in relation to the granting of any new occupancy rights or the determination of any existing occupancy rights in respect of the Birrell Street property. (d)The Second Defendant may grant or terminate any occupancy right in respect of the Birrell Street property in accordance with the Agent's recommendation upon the expiry of a period of 7 days after receipt, subject to any contrary direction of the Plaintiff before the expiry of that period. (3)Order that time for the First Defendant and the Second Defendant to comply with order 51(a) of 9 November 2012 be extended to 11 January 2013, except in respect of the account under order 38 in which case such time is extended to 31 January 2013. (4)There be liberty to apply to Brereton J (or the Vacation Judge if his Honour is not available) in the event of any difficulty arising in connection with the implementation of these orders. (5)Order that costs of the stay application be costs in the appeal.