Alessandro Zollo and Iolanda Zollo v National Australia Bank Ltd; National Australia Bank Ltd v Alessandro Zollo and Iolanda Zollo No. Scgrg-93-1026, Scgrg-93-1794 Judgment No. 6208 Number of Pages 3 Practice and..

[1997] SASC 6208

IN THE SUPREME COURT OF SOUTH AUSTRALIA

DOYLE, CJ

Practice and procedure - principles relevant to exercise of discretion to grant stay - stay of Full Court of Supreme Court order pending application for special leave to appeal. Smith Kline and French v Secretary for the Department of Health (1991) 99 ALR 417; Rahme v Commonwealth Bank (1993) 117 ALR 618; Jennings Constructions Limited v Burgundy Royale Investments Limited (1986) 161 CLR 681; Bryant v Commonwealth Bank (1996) 134 ALR 460, applied.

ADELAIDE, 12 June 1997 (hearing), 12 June 1997 (decision)

#DATE 12:6:1997

#ADD 9:7:1997

Appearances:

Appellants Alessandro Zollo and Iolanda Zollo:

Counsel: Mr S Walsh QC with Mr S Ryan

Solicitors: Floreani Coates & Co

Respondents National Australia Bank Ltd, National & General Insurance Company Ltd And National Australia Financial Management Ltd:

Counsel: Mr N Swan with Ms M O'Brien

Solicitors: Finlaysons

Order: hearing stayed.

DOYLE CJ

I accept that the appeal in this case had been instituted bona fide. In my opinion, the enforcement of the judgments in favour of the bank in each of the relevant actions would, in some respects, have the effect of rendering substantially nugatory an appeal by Mr and Mrs Zollo should special leave to appeal be granted by the High Court. I say this because the loss of the family home is likely to impose costs and consequences upon Mr and Mrs Zollo for which it would be difficult to fix adequate compensation. It may be that some of the consequences would not be compensable at all.

As to the loss of other properties, which appear to be held by way of an investment only, the position is by no means so clear. The loss of possession of these will deprive the Zollos of income and that will have adverse consequences for them. On the other hand, should they ultimately succeed, the payment to them of any profits made by the bank from the income of the properties, and the payment to them of the value of the properties, were they to be sold, and interest on that amount, would substantially restore to the Zollos what they have lost.

However, I also have to bear in mind that the refusal of a stay would prejudice the Zollo's ability to prosecute the appeal due to lack of funds, or possibly intervening insolvency.

I consider that I must also consider the impact upon the bank of the stay. The amount claimed by the bank is substantial and appears to be far in excess of the value of the properties. The inability of the bank to take possession of its security or to realise its security means that the debt continues to grow. Mr Zollo's affidavit indicates that there is not much prospect of him making payment beyond the value of the securities. Bankruptcy seems likely to follow if the Zollos fail. The bank has a real interest in recouping what it can as soon as it can.

In short, this is a case in which the refusal of a stay will in some respects make it difficult for the High Court to grant the relief sought, although I emphasise "in some respects", and difficult rather than impossible.

It is also a case in which the grant of a stay will, if the bank finally succeeds, increase the loss that it would otherwise suffer. In this context, I note also that the properties are at present not insured by Mr Zollo and apparently need maintenance. I also note that Mr Zollo is deriving an income from the properties in the meantime. I conclude that the impact on the Zollos of the refusal of a stay is such as to provide a basis for the exercise of the jurisdiction that they invoke, that is, the jurisdiction to preserve the subject matter of the litigation.

To say that is to treat the various properties as the subject matter of the litigation. They are the subject matter in a sense. In another sense, the real subject is the indebtedness of the Zollos to the bank. In that sense, preservation of the subject matter of litigation means, I consider, not so much the preservation of the property in specie, but the ability of the Zollos to receive compensation for a wrongful exercise of powers under the mortgages if it should turn out that that is what has happened.

So, the impact of the enforcement of the judgment is such as to give rise to a discretion to grant a stay, but other matters have to be considered before I do so.

I turn to the prospects of success of the application for special leave to appeal. As it is my own judgment which is under review, there is not much point in me saying a lot about that. In my opinion, the Zollos have a moderate prospect of obtaining a grant of special leave to appeal. There are some points of principle involved in the case which might attract a grant of special leave. There are also grounds upon which the application might ultimately succeed. The case is in some respects a difficult one. My assessment of the situation is, as I have already said, that there is a moderate prospect of obtaining a grant, but I would put it no higher than that.

I turn now to the balance of convenience on which I have already touched. As I have already said, the grant of a stay will ultimately cause loss to the bank if the Full Court judgment remains undisturbed. It is difficult to balance the loss likely to be suffered by the Zollos against the loss likely to be suffered by the bank, but it seems to me that, at least in relation to the residence of the family, the practical impact will be much greater in the case of the Zollos.

In my opinion, the consequence for the Zollos of the bank being granted possession of the investment properties is not such that, weighing up the prospects of success and the balance of convenience, a stay should be ordered. The consequences for the Zollos, including their ability to obtain compensation in due course, are not such as to amount to a destruction of the subject matter in the case of the investment properties - by that I mean not such as to be equated to a total destruction of the subject matter.

In that context, I refer to Smith Kline and French v Secretary for the Department of Health (1991) 99 ALR 417 at 421, the judgment of Mason CJ. Should the bank propose to sell the properties or take steps to sell the properties, as distinct from taking possession of them, the Zollos can apply for relief against that, if so advised, and in that context I refer to the decision of Rahme v Commonwealth Bank (1993) 117 ALR 618 at 621.

At this stage my view is that the bank should be allowed to take possession of the investment properties. Should the bank take steps to sell the properties before the hearing of the special leave application which, at this stage, is likely to be in September, other issues arise. As I have said, it is open to the Zollos to make an application to this court for an order preventing sale taking place should that be threatened before the special leave application is heard. I make no forecast of the outcome of that application.

I reach the opposite conclusion in relation to the family home. There I consider that the balance of convenience does favour a stay.

In arriving at the conclusion which I have indicated, I have attempted to apply the law stated in the two cases cited by me and also in Jennings Constructions Limited v Burgundy Royale Investments Limited (1986) 161 CLR 681 and Bryant v Commonwealth Bank (1996) 134 ALR 460.

Accordingly, I order a stay pending the hearing by the High Court of the application for special leave to appeal, the stay to be limited to the property in Certificate of Title Register Book Volume 3161 Folio 56. I grant liberty to apply in the event of the application for special leave not being heard in September, or in the event of the bank taking steps to sell the properties in respect of which I declined to order a stay.