PRACTICE AND PROCEDURE - Stay - Application for stay of orders - Order that family home be sold and proceeds distributed between parties - Order that plaintiff make payment to estate of father-in-law - Supreme Court Rules O64.25 - Whether success on appeal rendered nugatory - Whether arguable grounds of appeal - Whether special circumstances - Application granted.

1 For the reasons stated by Santamaria JA, I agree that the orders made on 27 March 2013 and 2 May 2013 should be stayed pending the hearing and determination of the appeal.

2 The facts that are the subject of dispute are complex. What follows is only a brief summary based on the findings of the trial judge.[1]

3 Francis Dean (Frank) Humphries ('Mr Humphries') and Aileen Elizabeth Humphries ('Mrs Humphries') lived at 30 Bayview Street, Williamstown ('the Williamstown property'). They were the parents of four children: two sons and two daughters. Their third child was Aileen Mary ('Mrs Sandri'). She married Stephen Sandri ('Mr Sandri'). Their fourth child is Elizabeth Ellen ('Mrs O'Driscoll'). She is married to Paul Robert O'Driscoll ('Mr O'Driscoll').

4 Around 1999, Mr and Mrs Sandri began discussions with the Humphries with a view to moving into the Williamstown property, renovating it and caring for the Humphries until their deaths.

5 Mr Sandri claimed that, in consideration for the selling of their existing Altona property, the demolition of the old house and the construction of a new house on the Williamstown property and their taking over the care of the Humphries in their old age, the Humphries had promised that the Sandris would become joint proprietors of the Williamstown property and, thus, its sole owners on the death of the last surviving of Mr and Mrs Humphries.

6 There was evidence of various attempts to document the agreement. Early drafts provided for the sale of the whole of the Williamstown property to the Sandris

with a lower than market price in consideration of the Humphries being entitled to live in an extension to that property.

7 In May 2001, the Sandris sold their Altona house with settlement to take place in August 2001.

8 Between January 2002 and June 2002, the Williamstown property was valued for the purposes of the parties and for those of a mortgagee.

9 In the second half of 2001, plans were developed for the demolition of the old home and for the construction of a new brick veneer home on the Williamstown property. In late 2001, the old house was sold and removed from the Williamstown property.

10 In March 2002, the Sandris entered into a building contract for the construction of a new house on the Williamstown property.

11 These costs of the new house (amounting to $342,000) were met by the Sandris, who took a mortgage over their share of the property.[2]

12 On 28 March 2002, the Sandris and the Humphries executed a written agreement ('the 2002 contract'). The full terms of the 2002 contract are not included in the reasons below. Whereas a draft contract dated 26 February 2002 seems to have provided for the sale of the whole of the property by the Humphries to the Sandris,[3] the actual contract dated 28 March 2002 is described by the judge as providing for 'the sale by the Humphries of a half interest in the Williamstown property to the Sandris for a price of $240,000'.[4] What is meant by a 'half interest' is not clear. The obscurity is not unimportant. The reasons go on to describe the transfer as being at odds with the contract. The transfer provided for the Williamstown property to be transferred into the names of Mr and Mrs Humphries and Mr and Mrs Sandri as joint proprietors. The trial judge says there was no explanation as to why the contract and the transfer differed in their description of the capacity on which the parties were registered.[5]

13 In the event, the half interest was transferred in 2002. All four persons were registered as joint proprietors of the Williamstown property.

14 The contract provided for a deposit of $70,000 to be paid with the balance of $170,000 to be paid not later than 12 months after death of the last surviving vendor.

15 The 2002 contract recited that the deposit had been paid.

16 At trial, Mr Sandri contended for an agreement broader than the 2002 contract.

17 Neither Mr Sandri nor Mr Humphries clearly recollected the amounts paid pursuant to the sale as their wives managed the financial matters.

18 In early October 2002, the Sandris and the Humphries entered into occupation of the new house on the Williamstown property.

19 Shortly after the new house was completed in 2002, it was substantially damaged by an intoxicated driver driving into the front of it. Mrs Sandri fractured her pelvis when she slipped whilst running from the house to see what had happened.

20 On 6 November 2002, Mrs Humphries, who had been badly shaken by the accident, died.

21 On 18 September 2003, Mrs Sandri, who had been battling cancer, died.

22 After this, relationships between Mr Sandri and Mr Humphries grew strained. The O'Driscolls took over Mr Humphries' care.

23 Notwithstanding the recital in the 2002 contract that it had been paid, by early 2005, Mr Humphries was trying to have the $70,000 deposit paid. He also retained a solicitor to change the title from a joint tenancy to tenants in common.

24 In 2007, a solicitor appointed by Mr Humphries applied successfully to the Titles Office for a new title the effect of which was to replace the joint tenancy with Mr Humphries and Mr Sandri as registered proprietors as tenants in common. This was done without Mr Sandri's knowledge.[6] When confronted in 2009, Mr Humphries, then aged 85 and very unwell, had no recollection of the change of the title for the Williamstown property.[7] The O'Driscolls' role in this matter is unclear.

25 In October 2008, Mrs O'Driscoll, as a power of attorney for Mr Humphries arranged to cut off the access of Mr Sandri to funds under the mortgage.

26 On 3 June 2009, Mr Humphries assigned the debt owing to him under the 2002 contract to Mrs O'Driscoll.[8]

27 Evidence was given of payments made by Mr and Mrs Sandri and, after her death, by Mr Sandri is respect of the house and to Mr Humphries.

28 On 3 January 2010, Mr Humphries died.[9]

29 Mr Sandri sought a declaration that the severance of the joint tenancy was invalid, and that the whole of the property was held by Mr Humphries' estate for him on constructive trust.

30 Mrs O'Driscoll counter-claimed that, as she was the assignee of Mr Humphries' rights under the 2002 contract, she was entitled to moneys owed by the Sandris, being the deposit and the balance of the purchase price. The O'Driscolls had alleged a similar claim prior to Mr Humphries' death, purportedly on his behalf. Mr Sandri claimed that no money was outstanding, and that the O'Driscolls were estopped from their claims.

31 The matter was heard by Judge Ginnane in the County Court. On 1 March 2013, his Honour delivered reasons for judgment. His Honour found that the substantive effect of the agreement was that the Sandris and Humphries were not joint tenants, but tenants in common. By orders made on 27 March 2013, Mr Sandri was required to pay Mrs O'Driscoll $246,730.55 (being the balance of the purchase price (but not the deposit) under the 2002 contract plus interest).[10] Further orders made on 2 May 2013 required the sale of the property and that the proceeds applied to the discharge of the mortgage, with the remainder divided between the Mr Sandri and the O'Driscolls.[11] The property is also encumbered by a caveat lodged 5 April 2013 by Mr Sandri's former solicitors in respect of unpaid fees. [12]

32 On 14 May 2013, Mr Sandri filed and served a notice of appeal against the whole of Judge Ginnane's decision and the orders.[13]

33 Ground 1-6 of the notice of appeal relate to the dismissal of the claim for proprietary estoppel, and, thus, to the orders of 2 May. Ground 7 relates to the money judgment the subject of the orders of 27 March. Ground 7 reads:

His Honour erred in failing to find that by the Sandri payments the Appellant and his wife had discharged the whole of any financial obligation owed by them to Mr and Mrs Humphries, whether the source of such obligation is the Contract or the agreement or understanding alleged by the Appellant.

34 During the hearing of the present application, it emerged that the appellant no longer presses ground 7. He accepts that he is under an obligation to meet the money sum which is the subject of the orders made on 27 March 2013. The fact that ground 7 has been abandoned only emerged when the appellant filed his Outline of Written Submissions pursuant to orders made by the Judicial Registrar. Parties who make interlocutory applications to the Court of Appeal should understand that the only material before the Court on the hearing of such an application is the material filed by the parties in respect of that application. The Written Outline dated # 2013 was not before us today.

35 By summons dated 20 August 2013, Mr Sandri has applied for a stay of execution pending the determination of the appeal.

(a) an affidavit of Damian Thomas Neylon sworn 20 August 2013;

(b) an affidavit of Mr Sandri sworn 20 August 2013.

37 The application is opposed by an affidavit of Roland Bernhard Müller sworn 6 September 2013. Mr Müller is the O'Driscolls' solicitor.

38 On 28 August 2013, the appellant filed (undated) written submissions. On 6 September 2013, the respondents filed written submissions of that date.

39 The power under r 64.25 of the Supreme Court (General Civil Procedure) Rules 2005 (Vic) to order a stay of execution is discretionary, and such an order will generally not be made except where 'special circumstances' are demonstrated.[14]

40 The onus is upon the applicant for a stay to satisfy the Court that the discretion should be exercised in its favour.[15]

41 The principles which describe the jurisdiction to grant a stay of execution and which inform the exercise of the judicial discretion are usefully set out in Maher v Commonwealth Bank of Australia.[16] They are very familiar.

42 The discretion, as explained in Maher, requires this Court to balance:

[t]he prospect that the appeal may be rendered nugatory [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.[17]

43 Mr Sandri submits that a stay should be granted as:

a. The property is his residence, and if his appeal is successful Mr Sandri would be entitled to the whole of the property.[18] Enforcing the May 2 Orders would render the appeal nugatory.

1. As he cannot offer the disputed property as security, Mr Sandri is unable to borrow to meet the judgment debt from the 27 March Orders, in whole or in part, pending the determination of the appeal.[19]

1. The O'Driscolls are not prejudiced by a stay because interest continues to accrue on the judgment sum.[20]

44 Mr Sandri has made extensive submissions on the substantive merits of his appeal, by way of demonstrating its prospects of success:

1. Judge Ginnane erred in construing the agreement by reference only to the contract between them and the building contract.[21] Instead, his Honour should have given greater consideration to his finding[22] that the contract did not represent the full extent of the agreement between the parties.[23]
2. His Honour erred in failing to find, despite relevant facts, that the Sandris had acted to their detriment sufficient to ground a claim of proprietary estoppel.[24]

1. His Honour erred in concluding that the Sandris had not discharged their financial obligations to the Humphries.[25]

45 Mr and Mrs O'Driscoll oppose the application for a stay of the March 27 orders,[26] but would conditionally consent to a stay of the May 2 Orders (for the sale of the disputed property).[27] The proposal includes Mr Sandri paying rent as well as immediately paying the balance of the judgment debt created by the March 27 Orders. Mr Sandri maintains such conditions are unacceptable.[28]

46 The O'Driscolls submit that no exceptional circumstances exist sufficient to support a stay of the March 27 Orders.[29] They submit:

1. Mr Sandri has done nothing to satisfy the judgment debt, and his submission that he is unable to borrow to do so is vague.[30] Mr Sandri has not suggested that he is impecunious.[31]
2. In his submission that he is unable to meet the judgment debt, Mr Sandri has omitted to mention his ownership of a second, unencumbered, property.[32] The O'Driscolls question the circumstances under which Mr Sandri's former solicitors have been granted a caveat over the disputed property.[33]

1. The evidence of Mr Sandri's circumstances show him to be less rather than more likely to meet his cost and judgment debt obligations, with that likelihood diminishing over time. If a stay is granted, the judgment sum may ultimately go unmet.[34] Mr Sandri's submission that any prejudice is offset by the accrual of interest on the judgment sum is therefore inaccurate.

47 The O'Driscolls further submit, but do not attach evidence, that they may be disadvantaged by any decline in value of the property resulting from a delay in sale,[35] and that without an undertaking from Mr Sandri to pursue his appeal expeditiously any delay may be extended.[36]

48 In oral argument, the respondents contended that, if there was to be a stay in the execution of the orders made 2 May 2013, such a stay should be made only on conditions. The conditions identified were (a) that there be the 'usual undertaking' as to damages, (b) that, in so far as the rights of the appellant to the Williamstown property had merged into the orders for sale and partition made by Judge Ginnane, the continued occupation of the property by the appellant should be subject to the payment of periodic rental (a sum of $450 was suggested on the strength of a valuation), and (c) that there be an undertaking to prosecute the appeal with all due expedition.

49 In oral argument, counsel for the appellant accepted that, in so far as ground 7 was no longer pressed, there was an unimpeached obligation to pay the judgment sum. He contended, however, that the appellant had to have the ability to use the Williamstown property as security to raise the necessary funds and that that was impossible so long as the property was burdened by the orders for sale and partition which were the subject of the balance of the notice of appeal.

50 Mr Sandri has made it clear that he is not at present able to pay the judgment debt.[37] The parties have been unable to agree to a stay on terms, and the Court must now decide whether or not to exercise its discretion to impose one. The presumption is against granting such a stay pending appeal, and this presumption operates to protect the interests of the judgment creditor.[38]

51 A relevant consideration when considering whether to depart from the presumption, is the risk that if execution proceeds and the appeal then succeeds, it may be impossible to restore Mr Sandri to his former position.[39] In Cellante,[40] Young CJ said that special circumstances would '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'.[41]

52 'Special circumstances' as contemplated by the authorities have typically encompassed situations where the respondent's assets have been put out of the reach of a successful appellant, or dissipated. But the phrase also extends to factual situations where, despite the solvency of the respondent, the subject matter of the appeal is, 'in substance, irreplaceable'[42] - such as may be the case with Mr Sandri's submission regarding the importance of his family home.[43]

53 It has not been suggested that the appeal is not in good faith. It is unnecessary to say anything about its prospects other than the appeal is not unarguable.

54 In a straightforward and attractive argument, counsel for the respondents drew the Court's attention to the judgment of Dodds-Streeton JA in Bresam Investments Pty Ltd v Shmee Pty Ltd[44] where, on an application for a stay of judgment, her Honour took into account the fact that the appellants' affidavit material was unsatisfactory 'in that it did not present a frank and complete account of their financial circumstances'.[45] Counsel pointed out that the applicant seemed to have managed to pay, and to be able to continue to pay, his own legal bills. But, the circumstances that Dodds-Streeton JA was referring to are quite different from those at hand. In that case, her Honour was dealing with the ability to pay a judgment debt, and she had not been persuaded that (those standing behind) the judgment debtor did not have the means available to them to meet that debt.[46] As her Honour said:

In view of the appellants' disposition of assets, the indications of their continuing access to, and command of, resources transferred to related parties and the selective application thereof to fund the defence and the appeal, the court is entitled (in the absence of clear evidence to the contrary) to regard the appellants' current impecuniosity as self-inflicted and their potential subjection to the relevant insolvency regimes as a matter of choice.[47]

55 There is a particular force in Mr Sandri's submission that, unless a stay is ordered, the appeal may be rendered nugatory. In considering whether to grant a stay where the judgment requires the payment of a money sum, particular consideration is given to whether there is reason to believe that, the sum having been paid, the judgment creditor may not be able to repay the money if the appeal is successful. There is an analogy here. It is not in dispute that the house or the Williamstown property is Mr Sandri's family home. He arranged for and paid for the costs of its construction; he was one of the mortgagors of the property. He lives there with one of his daughters. If the orders below are not stayed, the property must be sold and the proceeds distributed in accordance with those orders. The situation will become irretrievable; one of the principal things sought in the appeal will be lost before the appeal is heard. It is true that the estate will be kept out of the fruits of the judgment to which it is entitled. The entitlement of a judgment creditor to the fruits of the judgment should never be discounted. And, there are the beneficiaries of Mr Humphries's will who are entitled to enjoy the legacies that it contains. But, it is not uncommon for some time to pass before all disputes in relation to an estate can be resolved and, it seems to me that, in this case, fairness tips the scales in favour of a stay being granted.

56 The Williamstown property may be considered to be 'in substance irreplaceable' as that phrase was used in Maher.[48] The situation is quite different from that described in Ozden v Commonwealth Bank of Australia[49] where a bank loan had been used, in a conventional way, to fund the acquisition of a property. The protracted and difficult history of the acquisition by the Sandris of their interest in the Williamstown property takes the property beyond that of one with mere sentimental value. (Counsel for the respondent fairly disavowed any reliance on this aspect of Ozden.)

57 There is uncontradicted evidence that Mr Sandri is the registered owner of another property which is unencumbered. That property is located at Mitta Mitta. Counsel for the appellant told the Court that that property is little more than a country shack of no particular value.

58 In response to the claim that the appellant should be required to secure the position of the respondent, counsel for the appellant gave the Court two undertakings. The first was to the effect that, in the event that the appeal is unsuccessful, the appellant will not oppose the making of remedial orders by the Court of Appeal that will compensate the first respondent, in his capacity as personal representative of Mr Humphries, for any loss in the nature of rental suffered by the first respondent that result from the stay in execution of the orders made on 2 May 2103. The second was to prosecute the appeal with all due expedition. The exact terms of the undertakings will be confirmed with counsel before the Court makes orders.

59 In my opinion, the orders made by the trial judge on 27 March 2013 and on 2 May 2013 should be stayed pending the hearing and determination of the appeal.

[1] Sandri v O'Driscoll & Anor [2013] VCC 139 ('Reasons').

[2] For the purposes of the stay application, this summary will not detail the number of complex and often contradictory contractual arrangements that were engaged in by the parties over several years.

[6] The solicitor who effected the change was charged with offences arising from the application to the Titles Office however an appeal was later allowed and the charges were dismissed: Reasons [152]-[153], [173].

[10] The trial judge held that a claim for the deposit had not been made out: Reasons [335]; Exhibit DTN-2 attached to Neylon Affidavit sworn 20 August 2013 ('March 27 Orders').

[11] Exhibit DTN-3 attached to Neylon Affidavit, para (i) ('May 2 Orders').

[12] Exhibit RBM-6 attached to Müller Affidavit sworn 6 September 2013.

[13] Exhibit DTN-1 attached to Neylon Affidavit.

[14] Cellante v G Kallis Industries Pty Ltd [1991] VicRp 99; [1991] 2 VR 653, 656 (Young CJ) ('Cellante').

[15] Alexander v Cambridge Credit Corporation Ltd [1985] 2 NSWLR 685, 694 (Kirby P, Hope and McHugh JJA).

[16] [2008] VSCA 122 ('Maher').

[17] Ibid [27] (Redlich and Dodds-Streeton JJA). This approach has been confirmed by the Court of Appeal in Neate & Anor v Thoroughbred International Marketing Pty Ltd (2012) 34 VR 318, [8] (Mandie JA and Cavanough AJA).

[18] Appellant's Outline of Submissions [12]-[15] ('Sandri Submissions').

[19] Sandri Submissions [15], Sandri Affidavit [22].

[21] Sandri Submissions [18]-[19], [24]-[27].

[24] Sandri Submissions [35]-[38].

[25] Sandri Submissions [39]-[41].

[26] Respondents' Outline of Submissions [3] ('O'Driscoll Submissions').

[27] O'Driscoll Submissions [3], [25].

[28] See correspondence on this issue between solicitors for Mr Sandri and the O'Driscolls, Exhibit SS-1 attached to the Affidavit of Stephen Sandri ('Sandri Affidavit').

[29] O'Driscoll Submissions [3], [12].

[30] O'Driscoll Submissions [13]-[15].

[32] O'Driscoll Submissions [14]-[15]. See also Müller Affidavit [27].

[34] O'Driscoll Submissions [17]-[18].

[37] Sandri Affidavit [22]; Sandri Submissions[15].

[38] Federal Commissioner of Taxation v Myer Emporium Ltd (No 1) [1986] HCA 13; (1986) 160 CLR 220, 222 (Dawson J).

[39] Scarborough v Lew's Junction Stores Pty Ltd [1963] VicRp 20; [1963] VR 129, 130 (Adam J); Federal Commissioner of Taxation v Myer Emporium Ltd (No 1) [1986] HCA 13; (1986) 160 CLR 220, 223 (Dawson J); Alexander v Cambridge Credit Corporation Ltd (recs apptd) (1985) 2 NSWLR 685, 694 (Kirby P, Hope and McHugh JJA).

[40] [1991] VicRp 99; [1991] 2 VR 653.

[42] Maher v Commonwealth Bank of Australia [2008] VSCA 122, [26] (Dodds-Streeton JA).

[43] Sandri Affidavit [19]; Sandri Submissions [13].

[44] [2008] VSCA 251.

[46] Dodds-Streeton JA referred to Advanced Building Systems Pty Ltd v Ramset Fasteners (Aust) Pty Ltd [1997] HCA 24; (1997) 145 ALR 121.

[47] [2008] VSCA 251, [64].

[48] [2008] VSCA 122, [26] (Dodds-Streeton JA)

[49] [2013] VSCA 195.