Visnic v Sywak & Ors

LEGISLATION CITED : (NSW) Civil Procedure Act 2005

CASES CITED : Visnic v Sywak & Ors [2007] NSWSC 701 Visnic v Sywak & Ors [2007] NSWSC 823

Milan Visnic (plaintiff) Peter Orest Sywak (first defendant) PARTIES : Adellos Pty Limited (second defendant) Parlamartu Pty Limited (third defendant) Castlove Pty Limited (fourth defendant) Donovi Pty Limited (fifth defendant)

COUNSEL : Mr Higginbotham (sol) (plaintiff) Mr A E Maroya (first defendant)

SOLICITORS : Thomson Playford (plaintiff) Cosoff Cudmore Knox (defendants)

IN THE SUPREME COURT OF NEW SOUTH WALES EQUITY DIVISION

1278/03 Milan Visnic v Peter Sywak & 4 Ors JUDGMENT (ex tempore) 1 HIS HONOUR: On 3 July 2007 I made orders, for which I then gave reasons [[2007] NSWSC 823], the effect of which was that until today or further order, the liquidator of Adellos and Castlove was restrained from selling or taking any step to market or sell real property held by each of those corporations except upon having given seven days written notice of intention so to do to the solicitors for Mr Sywak. I adjourned the proceedings to today, extended time for filing of a Notice of Appeal up to and including today, and directed that if the defendants sought any continuation of those orders or any further stay in respect of the orders made on 15 June, they file and serve a Notice of Motion by 20 July, such motion to be returnable on 31 July at 9.30am before me. The first defendant duly filed a motion on 20 July 2007, seeking an order that the orders of 15 June 2007 be stayed pending the determination of the appeal or until further order.

2 When the matter came before me today, the parties proposed a regime, which would have extended until late August this year first, for the filing of a motion, the service of affidavits, and then the hearing of the motion, to set aside a Notice to Produce served by the plaintiffs on the first defendant, and thereafter for the hearing of the application for a stay. This would have involved at least two further appointments for hearing before the Court and presumably, a burden of not less than $10,000 in costs for the ultimately unsuccessful party. 3 In determining the course to be taken, I have had particular regard to (NSW) Civil Procedure Act 2005 Pt 6, Div 1 and the court duty to facilitate the just, quick and cheap resolution of the real issues in the proceedings. That duty, together with the command in s 59 to eliminate delay, and in s 60 to implement the practice and procedure of the court with the object of resolving issues in such a way that the costs are proportionate to the importance and complexity of the subject matter in dispute, requires the conclusion - when one appreciates what are the real issues in dispute - that the proposed adjournment of the hearing of the application for a stay and the associated arrangements which the parties proposed cannot be justified. 4 Were it necessary to have done so, in respect of the Notice to Produce, I would have held that the first four paragraphs ought not be set aside, because they plainly seek information and documents relevant to an issue which the defendant wishes to agitate in conjunction with his application for a stay; on the other hand, I would have set aside paragraphs 5, 6 and 7 of the Notice, on the basis that their purpose is to obtain evidence to support a proposed condition on any stay that Mr Sywak be required to provide security for costs of the appeal; as an application for security for costs of an appeal is made to the Court of Appeal and not to the trial judge, I would not have regarded it as appropriate to circumvent that course by imposing a condition in respect of security on any stay. 5 While the financial position of the second to fifth defendants might be of some relevance to a stay, in the context that the companies will remain in provisional liquidation even if the liquidation is stayed, I do not see how the companies' financial position could have influenced the outcome of the stay application. 6 Accordingly, I turn to the relevant considerations on an application for a stay. I outlined the considerations relevant to an application for a stay in the present context in my judgment of 3 July 2007. The first is whether the appeal raises serious issues for the determination of the appellate court. It is somewhat invidious for the trial judge to have to address that issue and, ultimately, my inclination is to determine the matter on questions of convenience and prejudice, rather than on this first limb of the test. But as I am required to, at least, form a view that there are serious issues for determination, I should touch on it. 7 The Notice of Appeal filed in the Court of Appeal on 27 July 2007 is in two parts. The first (Part A) is entitled "Grounds of Appeal relating to the 1996 transaction" and comprises grounds 1 - 12, which attack the conclusion that Mr Visnic's version of the 1996 transaction was more probable than Mr Sywak. I think those grounds sufficiently raise issues for determination of the appellate court that I may proceed to consider where the balance of prejudice and convenience lies. 8 Part B, entitled "Grounds of Appeal relating to the order for the winding up of the corporate respondents", contains grounds attacking the decision to order a winding up of the corporate respondents on the just and equitable ground without affording Mr Sywak a further opportunity to be heard on that issue. I am much less inclined to find that this part of the Notice of Appeal raises serious issues for the determination of the appellate court. 9 The suggestion that the question of the ultimate form of relief should be deferred and not dealt with at the same time as deciding what were the beneficial interests in the corporate respondents was raised for the first time by counsel for the defendants in the course of final oral submissions. As I recorded in the final judgment (at [121]), in the course of final submissions, when Mr Stevenson of Senior Counsel suggested that the question of remedy should be deferred, he said (at Tp 407): [Whether] a buy out is appropriate [depends] in large part on what conclusion your Honour comes to. [If] Mr Sywak is totally successful, it does not arise at all. If the result of your Honour's decision [is] that the situation remains as described in the deeds, [in Adellos] and Parlamartu, Mr Sywak has 6 and Mr Visnic 2. If your Honour accepted Mr Visnic's case, then in equity half of the shares transferred by the business [partners] in each of Parlamartu and [Adellos] are his and [the] buy out submission would have less weight.

10 Of course, I did accept Mr Visnic's case. Counsel for the plaintiff in his written submissions, has pressed for a winding up order and that position was maintained in his oral submissions. No evidence had been adduced in the trial up to that point that would have founded a "buy-out order" as opposed to a winding up order, and there was no explanation as to why any such evidence should not have been adduced up to that point when the case was, plainly enough, proceeding on all issues. Nor was there any explanation as to why there should be an opportunity after judgment to adduce further evidence. 11 The ground of appeal which challenges the conclusion that there was a total break down of trust and confidence between Mr Sywak and Mr Visnic such as to warrant the winding up of the corporate respondents is somewhat surprising, in the light of the evidence and the positions of the parties. 12 Although, for those reasons, I think it dubious whether the Grounds of Appeal in Part B of the Notice raise serious issues for the determination of the appellate court, and I take that into account in my ultimate decision on this stay application, I do not decline to consider the question of prejudice and convenience for that reason. 13 To my mind the determinative consideration is whether there is a real risk that the defendant will suffer prejudice or damage if a stay is not granted, which will not be redressed by a successful appeal. It is possible that if the real property of Adellos or Castlove was sold, the defendant might suffer prejudice. I say it is possible because particularly in the context that one of the properties is adjacent to a development zone in which values might be quite volatile in the near future - it is also possible that a sale would be in the interests of both parties. For that reason, I think it highly undesirable to foreclose until the hearing of the appeal, the question of whether or not an opportunity for a sale, if it arises, should be availed of or not by the liquidator. 14 The type of order which I pronounced on the last occasion prohibiting a sale except upon notice to the defendant would enable the merits of any particular sale to be considered first by the parties and, if necessary, by the Court. Such an order would occasion no prejudice to the plaintiff, and little inconvenience to the liquidator in the context that an appeal is pending. The defendant has not been able to articulate any substantial prejudice which would arise if such an order were in place; although reference has been made to the prejudice of there being a winding up order, I frankly do not see, from the perspective of these corporate defendants in the context that they do not trade, that there is any significant difference from that perspective as to whether they have a provisional liquidator appointed or whether they are in liquidation. The effect of the order preventing sale of the real properties without notice is that the windings up cannot be completed without notice and either the agreement of the parties or the further order of the Court. 15 It therefore seems to me that any stay beyond the type of order which I pronounced on the last occasion is not warranted, and the only remaining issue is the time frame of any notice which should be given. If the orders were simply limited to an order prohibiting sale, as distinct from one prohibiting taking any step to sell or market, a longer time frame than the current seven day period would be appropriate. However, the order that I made on the last occasion, and that I am invited to continue, requires the liquidation not to "take any steps to sell or market the property". In the present context, at least so far as the Oran Park property is concerned, it is conceivable that the liquidator might be well advised to act in a shorter time frame, and the interests of the parties would be served by the liquidator have the ability to take steps towards a sale more rapidly than on 21 days notice. Of course, there is the possibility, if not the likelihood, that a short notice application might result in an adjournment, but overall that is preferable to freezing the position in a potentially volatile market for 21 days. 16 I will, therefore, not depart from the seven days notice provision included in the earlier orders. I will not order that no further steps be taken in the winding up of Parlamartu and Donovi, but I will order that there be no distribution or finalisation of the winding up until further order. 17 My orders are:

(1) Upon the first defendant by his counsel giving to the Court the usual undertaking as to damages, order that until the determination of the appeal in the proceedings 40493/07 in the Court of Appeal or further order, Michael Jones, in his capacity as liquidator of Adellos Pty Limited, not sell or take any steps to sell or market the property described in Folio Identifier 293/708154A (being the property situate at and known as 1005 Cobbity Road, Oran Park, in the State of the New South Wales) except upon having given seven days written notice of his intention to do so to the solicitors for the first defendant. (2) Upon the first defendant by his counsel giving to the Court the usual undertaking as to damages, order that until the determination of the appeal in proceedings 40493/07 in the Court of Appeal or further order, Michael Jones in his capacity as liquidator of the Castlove Pty Limited not sell or take any steps to sell or market the property described in Folio Identifier 100/747233 (being the property situate and known as lot 100 Elizabeth Street Wetherill Park, in the State of New South Wales) except upon having given seven days written notice of his intention to do so to the solicitors for the first defendant. (3) Upon the first defendant by his counsel giving to the Court the usual undertaking as to damages, order that until the determination of the appeal in proceedings 40493/07 in the Court of Appeal or further order, Michael Jones, in his capacity as liquidator of Parlamartu Pty Limited and in his capacity as liquidator of Donovi Pty Limited, not effect any distribution of the assets of those corporations nor complete their windings up.

(4) Order costs of the motion filed 20 July 2007 be costs in the appeal.

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