Scrivener v Cappello

Scrivener v Cappello - [2021] NSWCA 239 - NSWCA 2021 case summary — Zoe

Judgment

The parties to the present stay application and the appeal in which it is filed were parties to proceedings in the Equity Division concerning an agreement for the consolidation and possible development of three adjoining parcels of land. Following judgments of 7 December 2020 and 2 March 2021, Stevenson J ordered Mr Scrivener and a company with which he is associated, Tuscany Corporation Pty Ltd ("Tuscany"), to pay to Shaka Holdings Pty Ltd ("Shaka"), a company associated with Mr John Cappello, equitable compensation in the amount of $6,203,689.48, inclusive of interest. Mr Scrivener has appealed to this Court against that judgment and his appeal is fixed for hearing on 28 October 2021. Tuscany has not appealed but was joined by Mr Scrivener as the third respondent to his appeal.
The form of the judgment entered by the primary judge flowed from his Honour's finding (and consequent declaration) that there was a partnership between the two companies and that Mr Scrivener was liable as an accessory in respect of breaches by his company, Tuscany, of the partnership agreement or of fiduciary duties to which it gave rise. Mr Scrivener's appeal challenges the finding that he had accessorial liability and, by a Notice of Cross-Appeal, Mr Cappello and Shaka contend that if Mr Scrivener is found not to have accessorial liability, he is liable as a principal because he was a party to the partnership agreement in his own right. Two alternatives are advanced in the Notice of Cross-Appeal - either the two individuals and their companies were the parties to the partnership agreement or the partnership agreement was between the two individuals only, with Tuscany acting as trustee for the partners (and breaching its duties as trustee by not accounting to the partners for the partnership property).
On Mr Scrivener's application to this Court for a stay of the judgment below, his counsel accepted that, whilst special or exceptional circumstances need not be demonstrated in order to obtain a stay, nevertheless an applicant bears an onus to establish a reason why the stay should be granted (see Alexander v Cambridge Credit Corporation Ltd (1985) 2 NSWLR 685). Failing discharge of that onus, the other party is entitled to obtain the fruits of its victory.
One of the reasons for a stay relied on by Mr Scrivener was that permitting the judgment against Tuscany to be enforced would potentially prejudice his interests as a director of Tuscany, on the basis that it might give rise to some liability on his part in relation to the affairs of Tuscany.
This is not however a relevant matter. Tuscany has elected not to appeal against the judgment against it and Mr Scrivener does not have standing to challenge it. Insofar as it relates to Tuscany, the judgment does not impose any obligation on Mr Scrivener and he has understandably therefore not purported to challenge it in his Notice of Appeal. That he might suffer some disadvantage in other than his personal capacity (that is, as a director of Tuscany) is not a basis upon which the Court would, on his application, grant a stay of a judgment that is not personally binding on him and that he has not sought to challenge.
This is not to say that Tuscany might not have been able on its own application to obtain a stay in this Court, or might not yet obtain a stay in the Equity Division in relation to the statutory demand that Shaka has issued against it. Its argument in such a context would be that whilst it has not sought to appeal against the judgment, it is a respondent to an appeal which may result in the judgment against it being varied, albeit not on his application. This could come about if Mr Scrivener's appeal against the finding of his accessorial liability were upheld and the cross-appeal were also upheld. If that occurred, it is difficult to see why there would not still be a judgment against Tuscany for the relevant amount for breach of its duties as trustee. However, the judgment creditor might be different (Mr Cappello or alternatively Mr Cappello and Shaka jointly, rather than Shaka alone). Such a change might not concern Tuscany but it might well be important from the judgment creditor's point of view.
Rejection of the relevance of this matter in my view leaves Mr Scrivener without any basis for a stay. He contended that he and Tuscany did not have any significant assets but the evidence he called in support of that proposition was unsatisfactory. In particular, it was not supported by any evidence from Mr Scrivener himself and left out of account the assets of a self-managed superannuation fund under his control. His counsel accepted that because of Mr Scrivener's age he would be able to draw on that fund if he wished but the amount in it was left completely in the realms of speculation. His counsel contended that superannuation funds are not established for the purpose of funding litigation but, as Mr Scrivener sought the Court's exercise of its discretionary power to grant a stay, it was incumbent upon him to identify the resources that were available to him. In these circumstances, Mr Scrivener's counsel could not, and understandably did not, contend that Mr Scrivener was entitled to a stay because he had demonstrated that the absence of a stay would result in the appeal being stultified.
Mr Scrivener further submitted that "Shaka itself is in an unknown financial position" but did not contend, at least not at the forefront of his argument, nor did he prove, that a stay was warranted because any recovery by Shaka under the judgment might be dissipated and unavailable for recoupment to Mr Scrivener in the event that his appeal succeeded. To the extent that there might however be any concern in this respect, or that the absence of a stay might result in bankruptcy proceedings against Mr Scrivener which took the conduct of the appeal out of his hands, Mr Cappello and Shaka indicated that they were prepared to give undertakings to the Court that would address those risks.
For these reasons, I have concluded that Mr Scrivener has not made out his case for a stay, at least not in circumstances where the undertakings referred to below are proffered by the first and second respondents. The orders that I make are therefore as follows: 1. Upon the first and second respondents undertaking to the Court within 7 days (a) that any proceeds of enforcement of the subject judgments will be paid into the trust account of their solicitors, RJI Legal, pending final orders being made disposing of the appeal and cross-appeal in these proceedings and (b) that neither of them will cause a Bankruptcy Notice to be issued or served on the appellant prior to final orders being made disposing of the appeal and cross-appeal in these proceedings, the appellant's Notice of Motion seeking a stay is dismissed. 2. Order (1) is to take effect upon the first and second respondents filing in the Court signed undertakings to the Court as described in that order. 3. Leave is granted to the appellant to relist his motion for further hearing in the event that the undertakings referred to in Order (1) are not filed within 7 days of the date of these orders.
The parties agreed that if I took the course set out in the previous paragraph, an order should be made that the costs of the motion for the stay should be the first and second respondents' costs in the appeal. I accordingly make that order also.

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Judgment (4 paragraphs)

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