EXTENSION OF TIME - Application for extension of time to file notice of appeal - Not opposed - Extension granted

STAY - Application for stay on execution of judgment pending appeal - Principles - Whether real risk that appeal will be rendered nugatory - Stay granted

1 By summons filed 31 January 2002, the applicants apply pursuant to s 74(2A) of the County Court Act 1958 for an extension of time to file and serve a notice of appeal against orders made against them by Judge McInerney in the County Court of Victoria on 23 December 2011. The applicants also seek a stay of execution of the judgment of Judge McInerney under rule 64.25 of the Supreme Court (General Civil Procedure) Rules 2005 pending the hearing and determination of the proposed appeal.

2 The applicants have made out a clear case for an extension of time. The respondent has made no submission to the contrary. The extension of time will be granted accordingly.

3 For the reasons which follow, we consider that a stay of execution should also be granted.

4 Rule 64.25 provides:

64.25 Except so far as the Court of Appeal or a Judge of the Court, or an Associate Judge, as the case may be, otherwise orders -

(a) an appeal shall not operate as a stay of execution or of proceedings under the decision appealed from;

(b) no intermediate act or step shall be invalidated.

5 The power under r 64.25 to order a stay of execution is discretionary. Generally speaking, the onus of demonstrating that a stay is justified rests upon the party applying for the stay.[1]

6 The leading authority in this State remains Cellante v G Kallis Industries Pty Ld.[2] In Cellante it was held, applying the judgment of Adam J in Scarborough v Lew's Junction Stores Pty Ltd,[3] that the power to order a stay of execution under the then rule of court corresponding to r 64.25 is to be exercised only where special or exceptional circumstances exist; but that, without limiting the circumstances which might be found to be special or exceptional, such circumstances will exist where there is a real risk that the appeal, if successful, would be rendered nugatory. Even in such circumstances the grant of a stay remains discretionary. Young CJ (with whom Brooking J agreed) referred with approval to the following passage from the judgment of Dawson J in Federal Commissioner of Taxation v Myer Emporium Ltd (No 1):[4]

It is well established by authority that the discretion which [the relevant rule] confers to order a stay of proceedings is only to be exercised where special circumstances exist which justify departure from the ordinary rule that a successful litigant is entitled to the fruits of his litigation pending the determination of any appeal ... . Special circumstances justifying a stay will exist where it is necessary to prevent the appeal, if successful, from being nugatory ... . Generally that will occur when, because of the respondent's financial state, there is no reasonable prospect of recovering monies paid pursuant to the judgment at first instance. However, special circumstances are not limited to that situation and will, I think, exist where for whatever reason, there is a real risk that it will not be possible for a successful appellant to be restored substantially to his former position if the judgment against him is executed ... .

7 In Ninety-Fourth Highwire Pty Ltd v State Electricity Commission of Victoria,[5] Ormiston J noted that the relevant principles were as stated in Scarborough and in Myer Emporium, and observed:

Thus it appears that there is a discretion to be exercised according to the justice of the particular case. The few reported cases are but examples of circumstances leading to one conclusion or another and should not be treated as restrictive of the Court's powers.

8 In Maher v Commonwealth Bank of Australia[6], Redlich and Dodds-Streeton JJA acknowledged the continuing authority of Cellante and commented as follows:[7]

The prospect that the appeal may be rendered nugatory must be balanced against the principle that the successful party is entitled to the fruits of the judgment. A stay should not be granted unless there is at least an arguable ground of appeal, although otherwise speculation as to the ultimate prospects of success is usually inappropriate.

We would respectfully adopt those comments. Citing the New South Wales case of Andrews v John Fairfax & Sons,[8] the respondent submits that an applicant for a stay must show that there are 'reasonably arguable' grounds for an appeal. If there be any difference between that approach and the approach commended in Maher we would follow the latter. In Seifert v Chaudhary, it was said by Weinberg JA (with whom Kyrou AJA agreed), that '[b]asically ... the applicant for the stay must satisfy the Court that the appeal enjoys reasonable prospects of success...'.[9] We note that on an application for a stay in a heavy factual case such as the present, this Court will usually not have the evidentiary materials necessary to consider the merits of the grounds of appeal in any detail (and that is the situation here). Indeed, unless it appears that there is no reasonable ground of appeal or that the appeal is not bona fide, the Court will generally focus on the matters relevant to the enforcement of the judgment in question rather than matters relevant to its validity or correctness.[10]

9 In the respondent's written outline of submissions dated 20 March 2012 it was contended, in effect, that if (as here) the application for a stay is principally based on professed concern about the willingness or ability of the respondent, after a successful appeal, to return amounts handed over in pursuance of a judgment for debt or damages, the applicant must show, as a minimum, that there is 'no reasonable prospect of reimbursement'.[11] The respondent cited IOOF Building Society Pty Ltd v Foxedon Pty Ltd[12] in support of that contention. However, in oral submissions, the respondent acknowledged that the true threshold is not so stringent. The respondent acknowledged that the law in this State remains as it was stated in Cellante, including in the passage set out above from the judgment of Dawson J in Myer Emporium which was quoted with approval in Cellante. According to that passage, special circumstances are not limited to the situation where there is no reasonable prospect of recovering moneys paid pursuant to the judgment at first instance. Rather, they will exist where for whatever reason there is a 'real risk' that it will not be possible for a successful appellant to be restored substantially to the appellant's former position if the judgment is executed.[13] To the extent that, in other jurisdictions, Cellante has been doubted or not followed, the suggestion has not been that the principles stated in Cellante were unduly liberal, but rather that the requirement to identify special or exceptional circumstances at all was unduly strict.[14]

10 In the respondent's written outline of submissions[15] it was further contended that in J C Scott Constructions v Mermaid Waters Tavern (No 1)[16] a 'test' was stated to the effect that 'there must be something in the affidavits or in the results of a commercial investigation to suggest that the respondent is in financial difficulty', whereas, so it was submitted, the evidence in the present case is to the effect that the respondent, although a small trading concern, is trading profitably and well. J C Scott is a decision given by Master Lee QC of the Queensland Supreme Court in 1984. It does not state a 'test' of the suggested kind. Rather, Master Lee merely noted that there was no affidavit before him which went to the financial position of the plaintiff or which showed any prejudice or harm to the defendant; that there were commercial means available to a defendant of search and inquiry; and that, contrary to the defendant's submission, it could not be inferred from the reasons of the trial judge that the trial judge in any way concluded that the plaintiff was in a position of financial difficulty. In all of those circumstances, Master Lee considered himself required to assume that if the money was paid over to the plaintiff and the appeal was successful, the defendant 'will be able to get it back'. That was a conclusion on the facts of the particular case. Master Lee did not purport to state a universal test that there must be evidence that at the time of the application for a stay the plaintiff is in financial difficulty. His Honour could hardly have done so. The question is not whether the respondent is in financial difficulty at the time of the application for the stay but whether there is a real risk of non-repayment after the outcome of the appeal is known. Depending on the size of the judgment, the present and likely future resources of the plaintiff and other factors, there may be a real risk of non-repayment whether or not the plaintiff is in financial difficulty at the time of the application for a stay. In the end, the respondent did not really press any submission to the contrary.

11 Another proposition advanced in the respondent's written submissions[17] is that the applicant must show 'that the grant of a stay will not cause serious injustice to the respondent'.[18] It is true that, even after the threshold of special or exceptional circumstances has been crossed by the applicant, a discretion falls to be exercised. If, despite the special or exceptional circumstances, the grant of a stay would cause serious injustice to the respondent, the Court might well refuse a stay. But if refusing a stay would cause even greater injustice to the applicant, the Court might decide to grant the stay. As already mentioned, generally speaking the onus of establishing that a stay should be granted rests with the applicant. However, if special or exceptional circumstances have been demonstrated by the applicant and there is nothing before the Court to suggest that a stay will cause injustice to the respondent apart from the ordinary detriment assumed to be involved in being kept out of the fruits of the respondent's victory for a period, the applicant is not obliged to prove, also, the absence of specific, further injustice. Knowledge of any specific, further injustice will lie particularly with the respondent. For the purposes of the exercise by the Court of the residual discretion, the respondent can reasonably be expected to at least raise any matter of specific injustice before the applicant is called upon to counter it. In Ninety-Fourth Highwire Pty Ltd v State Electricity Commission,[19] Ormiston J appeared to be of the view that once sufficient was shown to suggest that there was a real risk that the applicant would not be able to recover any moneys paid, the onus effectively shifts to the respondent to show that it will be financially capable of repaying the judgment sum.[20] However that may be, in this context it can at least be said, as Lord Mansfield said long ago:[21]

It is certainly a maxim that all evidence is to be weighed according to the proof which it was in the power of one side to have produced, and in the power of the other to have contradicted.

12 Finally, as will be seen, one of the several orders made by Judge McInerney in this case, namely an order against the second applicant for payment of a particular money sum, is not intended to be a subject of the proposed appeal. Nevertheless the applicants contend that this Court has the power to stay that order as well as the orders that will be the subject of the appeal. The justification advanced for doing so is that the second applicant has raised a counterclaim against the respondent for sums which are said to exceed the amount of the order, and intends to pursue that counterclaim on the appeal. We accept that in these circumstances this Court has power to grant a stay which extends to the non-impugned part of Judge McInerney's judgment.[22] Whether such a stay should be granted or not will be considered in due course.

13 In the County Court proceeding, which occupied ten hearing days, the present respondent, Thoroughbred International Marketing Pty Ltd, was the plaintiff. It trades under the business name Independent Stallions Victoria. We will refer to it hereafter as 'ISV'. The director and sole controller of ISV is Michael Becker. The business of ISV is that of a thoroughbred stud master and stallion syndicate manager.

14 The present applicants, David Neate and Tara Farm Pty Ltd, were the first and second defendants respectively in the County Court proceeding. Mr Neate is the sole principal of Tara Farm Pty Ltd. Rather confusingly, he personally owns a property known as 'Tara Farm'. A substantial number of broodmares are kept at Tara Farm. From time to time during the relevant period some of them were sent to stallions stood by ISV. In the County Court proceeding there was a major issue as to whether liability for the relevant service fees lay with Mr Neate personally or with Tara Farm Pty Ltd. There were also major disputes concerning the respective rights and interests (if any) of the parties in relation to the syndication of two stallions, 'Beckett' and 'Denon'.

15 As described by Judge McInerney, the proceedings arose from the disintegration of the business relationship between Mr Becker and Mr Neate and involved an assessment of the manifestations of their relationship between 2004 and January 2010. It seems that Mr Becker and Mr Neate conducted their business relationship in a most informal manner. His Honour said that Mr Becker appeared to conduct himself on a handshake basis without any proper recording of contracts or any proper recording of business communications. He said that Mr Neate was a person with a commerce degree and was an experienced business person who in other enterprises carried out the task of an audit committee chair and described himself as a person with 'extensive corporate experience', but in this instance determined to conduct his passion of horse breeding on a basis which would not conform to the minimum audit requirement.

16 In the County Court proceeding ISV claimed the sum of $297,000 plus interest against Mr Neate, alternatively against Tara Farm Pty Ltd, for service fees for mares served by the stallion Artie Schiller in the 2007 and 2008 breeding seasons. Judge McInerney gave judgment on this claim in the sum of $150,149 plus interest of $29,333.69 against Mr Neate personally and otherwise dismissed the claim. ISV also claimed the sum of $74,069.84 plus interest against Tara Farm Pty Ltd pursuant to certain miscellaneous invoices. By an amendment made during the trial, the amount of this claim was increased to $85,018.84 and it was also brought in the alternative against Mr Neate. Judge McInerney gave judgment on this claim against Tara Farm Pty Ltd in the sum of $54,537 plus interest of $19,352. Certain counterclaims had been brought by Tara Farm Pty Ltd against ISV, mainly in relation to the syndications of Beckett and Denon. They were dismissed.

17 The authenticated order of the County Court dated 23 December 2011 provides:

1. Judgment for the plaintiff (here the respondent) against the first defendant (here, the first appellant) in the sum of $150,149 together with interest of $29,333.69.
2. Judgment for the plaintiff against the second defendant (here the second appellant) in the sum of $54,537 with interest of $19,352.
3. The counter claim of the second defendant be dismissed.
4. The defendants to pay the plaintiff's costs, including any reserved costs, on a party-party basis, on County Court Scale D, in default of agreement.

18 As the draft notice of appeal states, the applicants seek to appeal from orders numbered 1 and 3 only. Tara Farm Pty Ltd does not seek to appeal against order 2, by which it is required to pay ISV $54,537 plus $19,352 interest.

19 The orders the applicants seek on the appeal are set out as follows in the draft notice of appeal:

1. Order number 1 made by his Honour Judge McInerney on 23 December 2011 be set aside and in lieu thereof it be ordered that there be judgment for the first appellant [Mr Neate] against the respondent [ISV] with costs to be taxed.

1. Order number 3 made by his Honour Judge McInerney on 23 December 2011 be varied so as to provide that there be judgment for the second appellant [Tara Farm Pty Ltd] in respect of paragraphs 23 to 25, 26(aa), 26(a), 26A to 26E of its third amended counterclaim dated 29 July 2011 in the sum of $99,000, further or alternatively that there be an order for a taking of accounts in relation to Denon.

D. The respondent pay the costs of this appeal.

Any such further or other order as this Honourable Court deems appropriate.

1. The learned trial judge erred in fact and law in holding that the contract in respect of the serving of mares by the stallion Artie Schiller was entered into between the respondent and the first appellant personally when it should have held that that contract was entered into between the respondent and the second appellant.
2. The learned trial judge erred in fact and law in holding that the second appellant had no standing to bring a counterclaim in respect of the respondent dealing with shares in the stallion Denon that were owned by the second appellant or he ought to have held that the second appellant had standing to bring a counterclaim in respect of the respondent dealing with those shares.
3. The learned trial judge erred in fact and law in holding that, in regard to Denon, there was no contract between the respondent and the second (or first) appellant or he ought to have held that there was a contract in regard to Denon between the respondent and the second appellant and that the respondent breached that contract.
4. The learned trial judge erred in fact and law in holding that the second appellant's counterclaim that the respondent had converted three shares in Denon that were owned by the second appellant be dismissed and he ought to have given judgment in favour of the second appellant on that part of its counterclaim.
5. The learned trial judge erred in law in giving no reasons, or no sufficient reasons, for dismissing the second appellant's counterclaim that the respondent had converted three shares in Denon that were owned by it.

21 Essentially, the applicants seek to raise two issues on the appeal.

22 First, the applicants contend that the contract in respect of the serving of mares by the stallion Artie Schiller was entered into between ISV and Tara Farm Pty Ltd and that Judge McInerney erred in holding that that contract was entered into between ISV and David Neate. They say that if this part of the appeal is upheld the judgment against Mr Neate (for $150,149 plus interest of $29,333.69 plus costs) would have to be set aside and in lieu thereof there would be judgment for Mr Neate against ISV with costs. The applicants acknowledge that another consequence would be that Tara Farm Pty Ltd (instead of Mr Neate) would become liable to pay or account to ISV for the sum of $150,149 (plus interest) on the claim.

23 Secondly, Tara Farm Pty Ltd seeks to renew its counterclaim in relation to Denon, although not in relation to Beckett. Tara Farm Pty Ltd asserts, among other things, that ISV wrongfully dealt with and converted three shares in Denon, each said to be worth $33,000, which it says were its property; and that ISV also wrongfully dealt with and converted valuable nomination rights for Denon which also allegedly belonged to Tara Farm Pty Ltd. Judge McInerney was satisfied that ISV had engaged in unauthorised dealings in relation to Denon, but denied relief to Tara Farm Pty Ltd on the ground that Tara Farm Pty Ltd had no standing to complain about those unauthorised dealings. His Honour determined that the only entity with the requisite standing was a company called Sire Custodians Pty Ltd in its capacity as 'manager' or 'promoter' of the syndication of Denon. The applicants challenge that view. We were told that the maximum quantum of the second applicant's extant claims in relation to Denon is about $192,000, plus interest of about $80,000, making a total of about $272,000.

Arguable grounds/reasonable prospects of success

24 We consider that all five grounds of appeal are 'arguable',[23] or 'reasonably arguable'.[24] If the applicants are required to demonstrate 'reasonable prospects of success',[25] they have done so.

25 As to ground 1, there is a basis for Mr Neate to argue that the Judge should not have found him personally liable for the Artie Schiller service fees. The relevant communications were mainly oral. The few relevant documents appear to be inconclusive. In fact, at least one document issued by ISV is apparently inconsistent with its claim that Mr Neate was personally liable.[26] Further, some of ISV's accounts were sent out to 'Tara Farm', which could be construed as a reference to the company.[27] ISV was aware of the existence of Tara Farm Pty Ltd by the beginning of the 2007 breeding season.[28]

26 The respondent submits that the trial judge 'has clearly rejected Neate's evidence on several occasions and preferred the evidence of Becker'.[29] However, the trial judge also rejected the evidence of Becker on other occasions.[30] Further, his Honour found that some of Becker's evidence about the terms of the Artie Schiller arrangements themselves was contradicted by contemporaneous documents and was unacceptable for that reason.[31] In any event, Mr Neate challenges the inferences drawn by the learned trial judge, rather than his Honour's findings of primary fact. Accordingly, contrary to the respondent's submission, we are not persuaded that this is a case in which Mr Neate will need to show on appeal 'that the trial judge has palpably misused his advantage'.[32] We are satisfied that Mr Neate has reasonable prospects of success on ground 1.

27 We turn to grounds 2 - 5. The trial judge's findings indicate that Denon was owned in Europe; that in about August 2005 Tara Farm Pty Ltd and Limerick Lane Pty Ltd (a company controlled by a Mr Ryan) purchased the southern hemisphere breeding rights for Denon as to 50 per cent each for a total outlay of about $500,000; that in about September 2005, the European owners of Denon agreed to syndicate him (as to the southern hemisphere breeding rights); that Mr Becker was somehow involved in the syndication arrangements; that Mr Becker, believing (wrongly) that ASIC approval was necessary for the syndication because of the proposed size of the syndicate, approached Sire Custodians Pty Ltd, the only company approved by ASIC to syndicate stallions; that Sire Custodians Pty Ltd attended to the syndication documentation; that pursuant to a written agreement[33] Sire Custodians Pty Ltd was appointed to manage and operate the syndicate for the benefit of the owners; that in the written agreement ISV was referred to as the owner, but in fact the true owners were Tara Farm Pty Ltd and Limerick Lane Pty Ltd; that ISV acted as a trustee for those two companies; that pursuant to the agreement the manager's powers to operate the syndicate were delegated to ISV; that in its role as delegated manager ISV advised Sire Custodians Pty Ltd about the details of the shareholding and accounted to Sire Custodians Pty Ltd for moneys received in its capacity as delegated manager for sales of shares and other things; that there were to be 40 shares in the syndicate; that ISV did not apply for any shares; that at the end of the first year of the syndication, there were six shares remaining unsold and they were held by ISV as trustee for the owners; that Mr Becker gave evidence that four of those six unallocated shares were subsequently given to him by Mr Ryan following a discussion in 2005, in return for Mr Becker agreeing to pay outstanding VAT on the leasing of Denon; that the amount of VAT involved was only $36,692 and Mr Becker did not make that payment until some time in 2008; that Mr Becker was aware that the value of a Denon share in 2005 was $30,000 plus GST, a total of $33,000; that it follows that Mr Becker's claim is that Mr Ryan gave him four shares which both knew to be worth a total of some $132,000 in return for Mr Becker promising to pay the sum of $36,692; that Mr Ryan was not called to give evidence by Mr Becker; that the Court was told by Mr Becker's counsel that Mr Ryan was in France at the time of the trial; that Mr Becker acknowledged under cross-examination that at no time did he receive approval from Mr Neate (or Tara Farm Pty Ltd) to make the VAT payment, much less to 'deed' himself four shares in the Denon syndication.

28 The trial judge did not accept Mr Becker's evidence about the four shares. His Honour observed that it made no commercial sense. He did not consider that Mr Becker was lying, but was satisfied that either Mr Becker was confused about the circumstances or that Mr Becker concluded from Mr Ryan's alleged approval that the matter was also approved by Mr Neate. In 2008, Mr Becker purported to sell two of the four shares in question to third parties 'for $30,000'.[34] His Honour found that these were sales which Mr Becker had no authority to make.[35]

29 Further, Mr Becker apparently sold or traded nomination rights in relation to all of the six shares in Denon which were in the ISV name. This was done between 2005 and 2008 for prices ranging from $12,000 per nomination initially down to $9,900 per nomination subsequently. His Honour again found that Mr Becker must have believed that he was entitled to do this, because Mr Becker recorded the dealings in information provided to Sire Custodians Pty Ltd. However, his Honour was satisfied that Mr Becker had no authority in fact to sell or trade the nominations.

30 Nevertheless, as mentioned above, his Honour did not uphold the claim by Tara Farm Pty Ltd against ISV in relation to the Denon shares. His Honour's explanation for this conclusion is a little cryptic. His Honour said only this:

1. I accept however the submission of [counsel for ISV] that the accounting for the cost of shares, that is those four shares, the sale of such shares or the nomination fees pursuant to the syndication agreement, are matters for Sire Custodians as the syndicate managers on behalf of all of the owners, and it is at their option whether any recovery is taken on behalf of all shareholders in the syndicate. No doubt the second defendant could instruct them to do so.
2. I find that the second defendant has no standing in this regard as to the counterclaim it makes in Clause 26(aa), 26(a), 26(c) and 26A, B, C, D and E.

31 His Honour does not otherwise set out or refer to the terms of the relevant agreement or agreements or to the provisions of any other document to support the proposition that Tara Farm Pty Ltd has no standing to sue in respect of the conduct of ISV. Nothing of that kind has been shown to us by the respondent for the purposes of the present application. In its written submissions, the respondent says no more than that ISV was retained by Sire Custodians Pty Ltd to exercise the syndicate manager's powers and operate the syndicate (as stated in the reasons for decision) and that '[i]n those premises, it only rests with Sire Custodians (and not the individual syndicate members) to take issue with ISV's performance. Any contract was between ISV and Sire Custodians, not between ISV and each of the individual syndicate members'. This represents little more than repetition of the trial judge's conclusion. Nor did the respondent's counsel throw any further light on the matter in the course of oral submissions.

32 On the face of things, the trial judge's own findings seem to indicate that at least three of the six unallocated shares as at 2005 were the property of Tara Farm Pty Ltd. ISV has purported to sell at least two of the six shares in question without the authority of Tara Farm Pty Ltd or any agent for Tara Farm Pty Ltd. The applicants allege that ISV converted not merely two but three shares owned by Tara Farm Pty Ltd. Although there is no reference in the trial judge's reasons to the sale of a third share, counsel for the respondent accepted, as we understood him, that a third share had been sold. On the face of things then, ISV may have misapplied three shares in Denon belonging to Tara Farm Pty Ltd worth some $99,000 in total and may have misapplied the proceeds of the relevant nominations to Denon worth tens of thousands of dollars. When the whole of the evidence that was before the County Court is examined, a very different light may be cast on these matters, but at this stage we are satisfied that grounds 2 to 5 of the proposed notice of appeal are sufficiently arguable.

33 In our view, special or exceptional circumstances (tending to justify the grant of a stay) exist in this case.

34 As indicated above, ISV presently has judgment against Mr Neate for $150,149 plus $29,330.65 interest plus costs, and against Tara Farm Pty Ltd for $54,537 plus $19,352 interest plus costs. That represents a total of a little over $253,000 plus costs. The applicants seek a stay of execution in relation to the whole. They do so notwithstanding that on 20 December 2011, some five days after the trial judge delivered his judgment in oral form, one or other of the applicants paid the sum of $104,211 to ISV in respect of ISV's Artie Schiller claim. Initially, the respondent submitted to us that this indicated that the applicants had no real concern about their future ability to recover moneys from ISV in the event of a successful appeal. However, we were told by the applicant's counsel, without contradiction by the respondent's counsel, that this payment was made only to fulfil an undertaking that had been given by the applicants to ISV prior to the trial as part of a larger, separate arrangement. The undertaking was to pay over the sum of $100,000 plus any accrued interest on that sum upon the pronouncement of the County Court's decision, if that decision was in favour of ISV to the extent of $100,000 or more. The undertaking was given without prejudice to the applicant's entitlement to appeal against any such award. Because of the undertaking, the applicants do not seek to repossess that sum of $104,211 before the outcome of the appeal is known. On the other hand, they remain entitled to point to the entire judgment sum as representing the amount of their risk without a stay. Indeed, the fact that the respondent will have the immediate benefit and use of the sum of $104,211 despite the pendency of the appeal is a factor in favour of the grant of a stay of the judgment as a whole (assuming that there be a real risk that the respondent will be unable to repay the amount of the judgment in the event of a successful appeal).

35 Another relevant feature of the financial relationships between the parties should be mentioned before we come to the question of 'real risk'. As indicated above, the trial judge determined that ISV had acted without authority in giving itself four shares in the Denon syndication.[36] It seems that at least three of those four shares belonged to Tara Farm Pty Ltd either directly or indirectly. Further, there is a finding that, for the four breeding seasons between 2005 and 2008, ISV wrongfully sold or traded nominations to Denon referable to those four shares and that, in 2008, ISV wrongfully sold at least two of those shares to third parties. There is no suggestion that ISV will cross-appeal from or otherwise challenge the finding that it engaged in these unauthorised transactions. Hence, for many years ISV has had the benefit of large sums of money - seemingly well in excess of $100,000 - to which it has not been entitled. Sooner or later, ISV must account to someone for those sums of money. Despite finding that Tara Farm Pty Ltd did not have standing to enforce these claims directly, the trial judge appears to have considered that Tara Farm Pty Ltd was the party to which ISV would ultimately be required to account. In [179] of his reasons, the trial judge referred to Tara Farm Pty Ltd as 'the shareholder'. In [202], referring to the moneys wrongfully gained by ISV in respect of the Denon shares, his Honour said:

I would imagine that good sense would see an assessment of that figure and that that could be set off against moneys that Mr Neate [sic] owes to the plaintiff . ...

36 The final preliminary matter (before coming to the question of 'real risk') is to note that, regardless of the outcome of the appeal, ISV will remain entitled as against one or other of the applicants to credits totalling the abovementioned sum of $257,222. As against that, there seems to be little or no doubt that ISV is presently obliged to pay or account to or for the benefit of Tara Farm Pty Ltd an amount of at least $100,000, up to some $272,000. So, without a stay on at least part of the judgment, the applicants would be required to hand over to ISV considerably more money than ISV would ultimately be entitled to retain on any view.

37 We come now to the question of real risk. In our view, there is a real risk that ISV would not be in a position to return the judgment sums (totalling about $253,000) in the event of a successful appeal.

38 ISV is wholly owned and controlled by Mr Becker. It owns no real estate in Victoria. Since about July 2010 it has conducted its business from a rented farming property on which it pays only nominal rent to the elderly owner. It is expected to improve and maintain the property in lieu of paying rent. As Mr Becker conceded during the trial, after the outbreak of equine influenza in about August 2007, the respondent experienced financial difficulties. There is material in the applicant's evidence to suggest that the respondent's business has not fully recovered since 2007. The respondent has not challenged evidence suggesting that ISV stood only two stallions in 2010, Arazi and Brief Truce, which were both coming to the end of their stud careers and did not command a high service fee.

39 It is true that the respondent stood the far more successful stallion, Artie Schiller, in 2008, 2009 and 2011. However, the owners of Artie Schiller did not send it to the southern hemisphere for the 2010 breeding season and it is not certain whether Artie Schiller will be sent out for the 2012 season.

40 By reference to an affidavit of Michael Becker sworn 20 February 2012 and an affidavit of the respondent's solicitor, Robert Hession, sworn 17 February 2012, the respondent's counsel submits that ISV has been profitable in every year since it commenced business in 2004, save in 2007, when equine influenza struck and the entire breeding industry was badly affected. Counsel submits that the respondent made a profit of $29,491 in the 2008/2009 financial year and $189,658 in the 2009/2010 financial year. He submits that ISV's profit for the 2010/2011 financial year was $46,972. It seems to be common ground that ISV has received approximately $275,000 in gross income from the stallion fees of Artie Schiller in the financial year 2011/2012. ISV claims to anticipate a net profit of $250,000 in the 2011/2012 financial year. It says that it will remain profitable in the forthcoming breeding season (ie the 2012 breeding season which commences on 1 August 2012) as it intends to exercise its first right of refusal over the services of Artie Schiller as a stallion.

41 Mr Becker swore a further affidavit on 20 March 2012 in which he states that, in addition to the stallion income of $275,000 derived from the services of Artie Schiller, ISV has agistment income of $174,473 for the period 1 July 2011 to 20 March 2012 and projected agistment income of $11,500 for the balance of this financial year, together with livestock income of $47,000 for the period to 20 March 2012 and projected livestock income of $95,000 for the balance of the financial year; that ISV had expenditure of $178,743 for the period 1 July 2011 to 31 January 2012 and has projected expenditure of $72,630 for the period 1 February 2012 to 30 June 2012. On the basis of that evidence, ISV submits that the Court should not be satisfied that there is a real risk of non-reimbursement.

42 During the hearing of the stay application, counsel for the applicants subjected the financial statements produced by the respondent to a close and penetrating analysis which persuaded us that there were real question marks about the respondent's ability to repay the money in question in the event of a successful appeal. The respondent's own accounts report substantial losses in 2006-2007 and 2007-2008. The respondent provides no explanation as to how it funded those losses. No balance sheet for any period later than the 2009-2010 financial year has been produced. There is not a great deal in the respondent's material to gainsay the evidence adduced by the applicants to the effect that the respondent presently has relatively little in the way of assets. The respondent's reported liabilities as at 30 June 2010 were $953,425. The respondent has not adduced any evidence stating its current total liabilities.

43 The respondent has not produced any tax return in respect of the 2010/2011 financial year.

44 There are some indications in the incomplete financial statements produced by the respondent that it has switched between accounting on a cash basis and accounting on an accrual basis between relevant years, with the possible effect that what may appear to be a profit in one or more of the years was in fact a loss. Counsel for ISV strongly disputed this suggestion. We cannot get to the bottom of the matter on this hearing but we think that the applicant's suggestion cannot be wholly discounted.

45 A striking feature of the respondent's figures for the current financial year is that wages and salary expenses are projected to be only $84,000 as compared with approximately $250,000 in the previous year. The respondent claims that it has been able to dispense with labour because it is heavily reducing or eliminating its agistment activities. If that is so, then presumably it will have little or no agistment income next financial year. ISV has apparently been selling down its livestock. Its projected profit seems to be largely dependent on Artie Schiller. It will not be able to offer agistment in respect of mares sent to Artie Schiller. They will have to be serviced on a walk in - walk out basis. It is not certain that Artie Schiller will come to Australia at all for the 2012 breeding season.

46 The evidence before us indicates that the respondent may not have been able to pay its own legal fees of the County Court action while it was in progress and that its fees may have been ultimately met from the amount of $104,211.40 paid over by the applicants to ISV on 23 December 2011.

47 If ultimately the proposed appeal is allowed, ISV may be required to meet substantial claims for costs by the applicants and by its own solicitors.

48 ISV is a one man company. It may possibly have significant liabilities. Even if it achieves a substantial income this year and in the next two years, without a stay it would probably be free legitimately to apply the judgment sums to the ordinary current expenses of its business or to accrued liabilities.[37] The judgment sums could be put beyond the reach of the applicants without any disposition intended to defraud creditors.[38] ISV has not offered any form of security to the applicants.

49 For all of these reasons, it seems to us that there is a real risk that the respondent will not be in a position to return any judgment sums in the event of a successful appeal.

50 At the hearing before us, counsel for the applicants proffered the following proposed undertaking:

The appellants by their counsel undertake that by 4.00 pm on Friday 13 April 2012, they will pay the sum of $149,160.29 to the respondent's solicitors, Hardys, such sum to be held by Hardys in an interest bearing trust account pending the determination of the appeal or further order.

The figure of $149,160.29 was said by the applicants to represent the difference between the total of the judgment sums and the amount already paid. Without accepting that the arithmetic is completely accurate, the amount proposed is reasonable. The proffering of this undertaking disposes of the faint suggestion in the written submissions of the respondent that the applicants may not be in a position to pay the balance of the judgment sums to ISV.

51 Finally, it is necessary for us to stand back and consider the matter as a whole and to weigh up the 'real risk' that the applicants have identified against the fact that the respondent will be kept out of part of the judgment sum for the period before the final outcome of the proposed appeal is known. It is true that ISV has been kept out of some $154,000 in service fees for Artie Schiller for a considerable period already (about four years for the earliest fees), and that the respondent has also been kept out of the (no longer disputed) sum of $54,537 for some time. However, it has now received some $104,000 towards those amounts. Moreover, ISV itself has benefited from its unauthorised dealings in the Denon shares for an even longer period (commencing in 2005), to the detriment of the applicants. ISV has still not accounted to anyone for the large sums of money involved, being sums which may even exceed the total amount of the judgments it has obtained against the applicants.

52 In all of these circumstances, we consider that the proper and just course is to grant the stay sought by the applicants, subject to the giving of an undertaking along the lines of the proffered undertaking. We note that the stay will have no effect with respect to the sum of $104,211 already paid over to ISV.

53 Subject to hearing any submissions to the contrary, we consider that the costs of these applications should be costs in the proposed appeal.

54 Subject to any submissions as to the appropriate form of order or as to costs, we propose to make orders to the following effect:

(1) Time be extended until 4.00pm on Friday 20 April 2012 for the applicants to file and serve a notice of appeal from the judgment and orders of his Honour Judge McInerney given and made on 23 December 2011 in County Court case number CI-10-00184 in which the applicants were the defendants and the respondent was the plaintiff, such notice of appeal to be generally in accordance with the draft notice of appeal comprising exhibit 'RBW2' to the affidavit of Robert Bernard White sworn 31 January 2012 herein.

(2) Upon the applicants by their counsel undertaking that by 4.00pm on Friday 20 April 2012 they will pay the sum of $149,160.29 to the respondent's solicitors, Hardys, such sum to be held by Hardys in an interest bearing trust account pending the determination of the proposed appeal or further order, execution upon the said judgment and orders of his Honour Judge McInerney be stayed pending the hearing and determination of the proposed appeal or further order.

(3) The costs of the applicant's summons filed 31 January 2012 be costs in the proposed appeal.

[1] Gangemi v Osborne [2008] VSCA 221, [13] (Warren CJ and Neave JA).

[2] [1991] VicRp 99; [1991] 2 VR 653 (Young CJ and Brooking J).

[3] [1963] VicRp 20; (1963) VR 129, 130.

[4] [1986] HCA 13; (1986) 160 CLR 220, 222-3. (Citations omitted).

[5] Supreme Court of Victoria, (Unreported, Ormiston J, 31 August 1991) BC 9100628 at 8.

[6] [2008] VSCA 122.

[7] [2008] VSCA 122, [27].

[8] [1979] 2 NSWLR 184, 189.

[9] [2012] VSCA 17, [14].

[10] J C Scott Constructions v Mermaid Waters Tavern (No 1) [1983] 2 Qd R 243,t 248 and cases there cited.

[11] Submissions, [6(2)] and [11(3)].

[12] [2006] VSCA 202, [15].

[13] See, in addition to Maher, supra, Sopov v Kane Constructions Pty Ltd [2009] VSCA 216, [52] (Mandie JA and Beach AJA); 1-5 Grantham Street Pty Ltd v Glenrich Builders Pty Ltd [2008] VSCA 222, [14] (Redlich JA and Hargrave AJA); Apostilidis v Kalenik [2010] VSCA 80, [29] (Redlich JA and Hansen AJA); McMahon v National Foods Milk Ltd [2008] VSCA 237, [2] (Maxwell P and Buchanan JA); Gangemi v Osborne [2008] VSCA 221, [13] (Warren CJ and Neave JA).

[14] See, for example, Henderson v Amadio Pty Ltd (No 3) (1996) 65 FCR 66 (Heerey J).

[16] [1983] 1 Qd R 243, 249.

[18] Citing Seifert v Chaudhary [2012] VSCA 17, [14].

[19] (Unreported, Supreme Court of Victoria, Ormiston J, 31 August 1991), BC 9100628, at 11.

[20] But see Interactive Network Services Pty Ltd v NPV WA Securities Pty Ltd [2006] VSCA 225, [31] (Neave JA), [36]-[37] (Maxwell P).

[21] Blatch v Archer [1774] EngR 2; (1774) 1 Cowp 63, 65; [1774] EngR 2; 98 ER 969, 970. See also Swain v Waverley Municipal Council [2005] HCA 4; (2005) 220 CLR 517, 525-526 [17] (Gleeson CJ).

[22] Apostilidis v Kalenik [2010] VSCA 80, [28] (Redlich JA, with whom Hansen AJA agreed).

[23] Maher v Commonwealth Bank of Australia [2008] VSCA 122, [27].

[24] Andrews v John Fairfax and Sons (1979) 2 NSWLR 184, 189.

[25] Seifert v Chaudhary [2012] VSCA 17, [14].

[26] Exhibit 4. See reasons of Judge McInereny, [185]-[187]. No copy of this document has been made available to us.

[29] Respondent's written submission dated 20 March 2012, [19].

[30] See for example [123] and [160] of the Reasons.

[32] Compare written submissions, [6(4)].

[34] It is not clear whether the sale was for $30,000 per share or in total.

[37] See and compare Ninety-Fourth Highwire Pty Ltd v State Electricity Commission of Victoria (Unreported, Supreme Court of Victoria, Ormiston J, 31 August 1991), BC 9100628 at 11.

[38] Cf Interactive Network Services Pty Ltd v NPV WA Securities Pty Ltd [2006] VSCA 225, [37].