Seiwa Pty Ltd v Owners Strata Plan 35042

Alexander v Cambridge Credit Corporation Limited (Receivers Appointed) (1985) 2 NSWLR 685 CASES CITED : Park v Brothers [2003] NSWSC 1054 Seiwa Australia Pty Limited v The Owners Strata Plan 35042 [2006] NSWSC 1157

PARTIES : Seiwa Pty Ltd (plaintiff) Owners Strata Plan 35042 (defendant)

COUNSEL : Mr M W Young (plaintiff) Mr M A Bradford (defendant)

SOLICITORS : Dixon Holmes du Pont Lawyers (plaintiff) Alex Ilkin & Co (defendant)

IN THE SUPREME COURT OF NEW SOUTH WALES EQUITY DIVISION

4205/05 Seiwa Australia Pty Limited v The Owners Strata Plan 35042 JUDGMENT (ex tempore) 1 HIS HONOUR: On 6 November I gave judgment in these proceedings [Seiwa Australia Pty Limited v The Owners Strata Plan 35042 [2006] NSWSC 1157]. I ordered that by 6 February 2007, the defendant properly maintain and keep in a state of good and serviceable repair the common property in the strata plan by repairing the waterproof membrane on the patio of the plaintiff's unit to the standard that a repeat water test, conducted under specified conditions, resulted in no penetration of water into unit 14. I gave judgment that the defendant pay the plaintiff $150,000 damages for loss of use of the unit for the period August 2004 to February 2007, and reserved liberty to the plaintiff to apply, after 6 February 2007, for dissolution of the mandatory injunction and substitution of a judgment for further damages, in lieu of that injunction, of $250,000, representing the impact on the value of the unit of the defective water membrane. I ordered that the defendant pay the plaintiff's costs. 2 The defendant has filed a Notice of Appeal without appointment (a so-called "holding appeal"). By notice of the motion filed in Court today, the defendant seeks a stay of those orders, both in respect of the monetary judgment and in respect of the mandatory injunction.

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 Limited (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]].

4 So far as seriously arguable grounds of appeal are concerned, although no grounds of appeal have yet been formulated, it may be accepted that it is arguable that the waterproof membrane, which I found to be defective and ordered the defendant to repair, is not common property, but part of the plaintiff's lot. Needless to say, I have concluded otherwise, but my conclusion to the contrary does not mean that the defendant's position on that issue was unarguable. If, ultimately, the defendant were to succeed on the appeal on that issue, then the mandatory injunction would be dissolved and the damages would be reduced by about $90,000, from $150,000 to about $60,000.

5 The defendant also contends that there is a reasonably arguable ground of appeal concerning the assessment of damages, not only in respect of the period of 30 months allowed (as I have indicated, about $60,000 of that $150,000 is attributable to the first year and to the defective steel work, and the balance of $90,000 to the ensuing 18 months, for which the water penetration problem alone was responsible), but also on my adoption of the figure of $5,000 per month as the appropriate rate.

6 I am not prepared to find that that ground is reasonably arguable. At this stage, at least, I do not think that any basis has been shown upon which it might have been inappropriate to have regard to the actual dealings between the plaintiff and the occupants of the unit, albeit that they were related, as a relevant indication of the benefit to the plaintiff of the use of the unit; nor to disregard what might have been obtained by way of rent in a general market when there was evidence of what the plaintiff was in fact earning.

7 That said, it follows that I proceed on the basis that there is an arguable ground of appeal as to whether the mandatory injunction should stand, and as to whether about $90,000 of the $150,000 damages should stand.

8 It is then necessary to consider the respective position of the parties pending appeal.

9 This is not a case in which the failure to grant a stay would render a successful appeal nugatory. If the appeal succeeds, then, subject to questions of the plaintiff's financial position to which I shall return, the defendant will be able to obtain restitution of any damages which it has paid in the meantime, and of the expenses which it might incur in complying with the mandatory injunction.

10 Nor is this a case in which there is a reasonable apprehension, on the evidence before me, that it will not be possible to obtain restitution by reason of the financial position of the plaintiff. The onus of making out a case for a stay falls fairly and squarely on the applicant for a stay. The applicant for a stay, here the defendant, has sought to demonstrate that the plaintiff is not in a position to give restitution if so ordered as a result of any successful appeal. That contention was based initially on material obtained on a search from ASIC, which showed the financial position of the plaintiff company as at 30 June 2000 as being a deficiency of funds of $2.75 million dollars. However, the plaintiff has tendered its most recent financial report, which is for the year ended 30 June 2003. Although it shows a deficiency of funds at that date of $3.9 million, those accounts were prepared on an historical cost, not a market valuation basis. Amongst the assets were a freehold investment property at Walker Street (being the unit the subject of these proceedings), shown in the accounts as worth $1 million, and a freehold investment property in Berry Street, shown in the accounts as worth $6.8 million. The defendant's treasurer, Mr Grogan, estimates the re-sale value of the subject unit, in a reasonable state of repair, as being $2.1 million: and the plaintiff's solicitor has given evidence that he is instructed that it has a current market value of $2.3 million, based on a valuation carried out in June 2005. That represents an increase over its balance sheet value of between $1.1 and $1.3 million. The Berry Street property was sold for $14 million in September 2003 and the proceeds applied to the reduction of debt. That represents an increase of $7.2 million over the book figure.

11 Accordingly, when those properties are revalued to market from historical cost, the result is that the company has an excess of assets over liabilities of about $4.5 million. That at least is the best evidence before me of its current financial position.

12 The judgment is for $150,000, potentially at worst $400,000 and the costs of the rectification works, as the evidence disclosed, was in the order of $110,000.

13 It is true, as has been submitted, that the plaintiff has overseas connections. However, it has real property in Australia, and indeed in the defendant's building, and in those circumstances, I do not think that the overseas connections provide sufficient reason to think that the defendant would be unable to obtain restitution after a successful appeal.

14 It was pointed out that the plaintiff is involved in other litigation. So far as the evidence goes, that other litigation is litigation in which the present plaintiff is engaged as a plaintiff, not a defendant. The evidence does not permit any further inferences to be drawn as to the risks, benefits or amounts in issue in those proceedings. Although it was submitted for the applicant that it would have been easy for the respondent plaintiff to lead evidence on these issues, this application has been brought on, on short notice, and the onus is borne by the applicant. Had the applicant desired more information, then subpoenas, notices to produce and the like could have been issued. I am, therefore, unsatisfied that there is a serious or significant risk that the defendant will be unable to obtain restitution if the orders are enforced in the meantime but ultimately held to be wrong on appeal.

15 On the other hand, there is no evidence of the financial position of the defendant. The defendant does proffer an undertaking as to damages, but provides no evidence as to its ability to fulfil that undertaking. Even if I were to assume that it is likely that it would be able to do so, more significantly, it adduces no evidence of any inability to pay the amount of damages presently in question, or to fund the carrying out the works in question.

16 In short, no prejudice to the defendant from enforcing the orders at this stage, which will not be remediable by an order for restitution consequent on the appeal if it succeeds, has being identified.

17 For those reasons, assuming that there is an arguable ground for appeal relating to whether the waterproof membrane is or is not common property, a stay is in any event, inappropriate.

18 I order that the notice of motion be dismissed with costs.

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