Heckenberg & Ors v Fetterplace

CASES CITED: Kalifair Pty Ltd v Digi-Tech (Australia) Ltd [2002] NSWCA 383

Daniel William Heckenberg (first applicant/appellant) PARTIES: Keith John Stewart Heckenberg (second applicant/appellant) Dankeith Homes (third applicant/appellant) Katherin Marie Fetterplace (respondent)

COUNSEL: G M Colman (first - third applicants/appellants) M Izzo (respondent)

SOLICITORS: Noel F Bracks & Co (first - third applicants/appellants) Bartier Perry (respondent)

• 7 - IN THE SUPREME COURT OF NEW SOUTH WALES COURT OF APPEAL 40273/08

Monday 29 September 2008 Daniel William Heckenberg & Ors v Katherine Marie Fetterplace Judgment 1 McCOLL JA: By Amended Notice of Motion filed on 29 September 2008 the appellants, Daniel and Keith Heckenberg and Dankeith Homes Pty Limited, seek a stay of the judgment of Balla DCJ until the hearing of the appeal or further order. 2 Mr G Colman of counsel appeared for the applicants. Mr M Izzo of counsel appeared for the respondent. 3 The proceedings concern a contract for the sale of land entered into between the appellants as purchasers, and the respondent as vendor, of a property in Ingleburn. Contracts were exchanged on 8 March 2005. There were two buildings on that property, one used as a residence, another as a veterinary surgery. Special condition 37 of the contract provided: "The vendors shall have the right (but not the obligation) to take inclusions and/or improvements from the property prior to settlement and without limiting house/surgery paving/fencing on the following terms: (i) All removal work to be done at the vendor's expense. (ii) No part of the site is to be left unsafe at the conclusion of the removal of any part or parts of the building. (iii) No buildings are to be left in a partly demolished condition such as they are a hazard to the purchaser or its servants or agents. (iv) The vendor will have no rights to enter the property after settlement.

(v) This clause shall not merge on completion. 4 The primary judge found that after exchange of contracts and before the end of April 2006, items were removed from the property by or on behalf of the respondent including power points, lights and light switches.

5 Settlement of the contract was to take place more than six months after exchange and, pursuant to special condition 36, after the respondent gave forty-two days' notice in writing. That notice was given on 7 March 2006. On 8 March 2006, the appellants' solicitors informed the respondent's solicitors that the respondent had stripped and demolished sections of both buildings so that they had been left in an unsafe and uninhabitable condition. The purchasers rescinded the contract and sought a refund of the deposit. On 12 May 2006 the respondent's solicitors served a Notice to Complete appointing 31 May 2006 for settlement.

6 On 22 May 2006 the appellants' solicitor served a Notice of Termination professing they were entitled so to do because the respondent had left the premises in an unsafe and uninhabitable condition and thus had breached an essential term of the contract. They also subsequently communicated the appellants' view that the Notice to Complete was invalid. On 24 May 2006 the appellants' solicitor sought return of the deposit. On 29 May 2006 the respondent's solicitor forwarded a settlement statement confirming settlement on 31 May 2006. On that date the respondent's solicitor retained an agent to attend at settlement. The agent attended, but the appellants' solicitor did not attend. The property was subsequently sold for $620,000.

7 The appellants brought District Court proceedings seeking return of the deposit. The respondent cross-claimed seeking damages by reason of wrongful termination of contract. The primary judge held that the appellants were not entitled to terminate the contract. She also held that the appellants had repudiated the contract by their commencement of the District Court proceedings and that the respondent had accepted that repudiation in September 2006. She held that the respondent was entitled to damages for the loss suffered as a consequence of selling the property to a third party for a price lower than the price in the contract with the appellants.

8 Judgment was entered in the respondent's favour in the amount of $199,840.56.

9 The Notice of Appeal relies upon seven grounds of appeal, four of which turn on the factual determination of whether the work the respondent did on the premises left them either unsafe or hazardous within the meaning of special condition 37. There may also be a question of the proper construction of that special condition. The fifth and the sixth grounds of appeal complain about the primary judge's conclusion that at the time the Notice to Complete was served the respondent was ready, willing and able to complete the contract. That issue, as I understand Mr Izzo's submissions, related to the question whether at the time nominated for settlement, 31 May 2006, the respondent's mortgagee was prepared to discharge the mortgage over the properties the subject of the contract. The seventh ground of appeal relates to the question of whether or not the commencement of the District Court proceedings amounted to a repudiation which had been accepted. The eighth ground of appeal complains that the primary judge erred in finding there was no material difference between the subject matters of the contract between the appellants and the respondents and the later contract into which the respondent entered to sell the property to another purchaser.

10 Mr David Heckenberg has sworn an affidavit of 15 September 2008. He is not an appellant, rather he and his wife Linda are directors and shareholders of the third appellant. He attached to his affidavit a statement of his and his wife's assets and liabilities from which it appears that, as to their personal assets and liabilities, they have a property at Ingleburn the approximate value of which is $600,000, subject to a mortgage to the ANZ Bank of approximately $200,000. There are other more minor assets and more minor liabilities but the bottom line as I read it is that the directors have an equity in their Ingleburn property (even taking into account as charging it, although they clearly do not directly, their credit card liabilities) an equity of $365,000. 11 As to the corporate appellant the document attached to Mr David Heckenberg's affidavit purporting to be a statement of its assets and liabilities shows that it is technically insolvent in that it has liabilities which exceed its assets by $3,000. 12 Mr David Heckenberg appears in paragraphs 5 and 6 of his affidavit to be saying that at some unidentified stage the corporate appellant may come into further monies by reasons of actions described in those paragraphs. What he says is sufficiently vague as not to be given any real weight in the present application.

13 On 26 August 2008 the respondent served on the corporate appellant a statutory demand for payment of the judgment debt. Mr Heckenberg says the corporate appellant will be unable to pursue the appeal if a stay is not granted because it is unable to find the sum demanded. Proceedings have been commenced in the Equity Division of this court seeking to have the statutory demand set aside, but that application, as I understand the affidavit of Mr Kelly sworn on 8 September 2008 in its support, turns on the success of this application.

14 Mr Colman submits that the appellants have arguable prospects of success particularly in relation to those grounds of appeal which relate to special condition 37. He says this is so because the primary judge erred in rejecting the evidence of an electrician, Mr McCue, as to whether the condition in which the electrical wiring in the premises had been left was either unsafe and/or hazardous. He also submits the primary judge failed to give sufficient reasons as to why she did not accept Mr McCue's evidence both as to the general issue of danger and also in relation to his evidence that the condition in which the wiring had been left failed to comply with relevant regulations. 15 Mr Izzo does not submit that the appeal is hopeless although he came close to so doing. He submitted that if there were any prospect of appeal which could be described as arguable it was in relation to those grounds which turned on the issue of safety.

16 In considering an application for a stay the court may make a preliminary assessment of the prospects of appeal having considered the submissions advanced on both sides. Having perused the judgment I would not say the prospects of appeal were forlorn, although I am not sure I would rate them very highly. The issue at trial seemed to be a fairly basic factual controversy. No doubt the primary judge, having the benefit of hearing the evidence to the extent to which it was called and having closer familiarity with the evidence than do I at this stage, was in a good position to assess the degree of danger in which the premises were left. 17 There is no automatic right to a stay of a judgment. Mr Colman does not contend to the contrary. His primary submission, as I understand it, that based on Mr Heckenberg's evidence, if a stay is not granted then the appeal will be rendered nugatory. That may be so in relation to the corporate appellant but there is no evidence in fact the assets of either the first or second appellant, who also seek the benefit of the stay sought.

18 Insofar as the third appellant is concerned the evidence, as I have said, appears to indicate that it is technically insolvent. However those who stand behind it appear to have sufficient equity to provide some form of security for the judgment which as I have said is of the order of $200,000.

19 In Kalifair Pty Ltd v Digi-Tech (Australia) Ltd [2002] NSWCA 383; (2002) 55 NSWLR 737 (at [28]) the Court observed that: "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." (emphasis added) 20 Mr Colman relied on Kalifair (at [29]) for the proposition that a stay will be granted where there is evidence that the judgment is worthless. 21 However here, as I have said, there is no evidence that the first and second appellants are not in a position to meet the judgment. There is no evidence as to their assets and liabilities. There is no reason why the corporate appellant's apparent impecuniosity warrants them being the beneficiary of a stay. 22 To the extent to which there is evidence about the corporate appellant, there is also evidence that those who stand behind it, in my view, would be in a position to provide some sort of security for the corporate appellant's liability under the judgment. It may well be that if the judgment as against the corporate appellant is not stayed the outcome may be that proceedings on a statutory demand are pursued. In circumstances, however, where the impecuniosity relied upon is only that of one appellant, and where the parties seeking the stay do not put forward any proposal to protect the status quo, this Court ought not, in my view, grant a stay.

23 In my view, Orders 1 and 3 of the Amended Notice of Motion were made this morning by the Registrar. They include an order that the costs of the motion be the respondent's cost in the appeal. Accordingly, the order I make is that I refuse order 2 in the Amended Notice of Motion.

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