Almona Pty Ltd v Parklea Corporation Pty Ltd (No 6)

[2020] NSWSC 1895

Supreme Court

New South Wales

Medium Neutral Citation:

Almona Pty Ltd v Parklea Corporation Pty Ltd (No 6) [2020] NSWSC 1895

Hearing dates:

5 June 2020, final submissions received 19 November 2020

Date of orders:

21 December 2020

Decision date:

21 December 2020

Jurisdiction:

Equity

Before:

Robb J

Decision:

Order that order 1 made by the Court on 5 June 2020 be stayed until the date on which the Court of Appeal proceeding 2020/197106 is determined.

Catchwords:

CIVIL PROCEDURE — Stay of proceedings pending appeal – where orders are made against two defendants that they pay the same amount of damages to the plaintiff –– where both defendants apply for a stay of execution of the judgment pending the determination of an appeal –– where one of the defendants is primarily liable to the plaintiff –– where that defendant was deregistered in the British Virgin Islands before the hearing commenced –– where the registration of that defendant was reinstated after judgment was given –– where the effect of reinstatement is that the defendant is deemed always to have existed –– where although reinstated that defendant was in the course of being wound up –– where the full amount of the judgment is paid into court on behalf of the defendant who is primarily liable as a condition of a stay of execution of the judgment against that defendant by consent of the plaintiff –– where the payment was not made from the funds of that defendant –– where the other defendant has reasonable prospects of success on appeal – where the financial circumstances of the plaintiff give rise to a real risk that a successful appellant will not be able to recover any amount of the judgment paid to the plaintiff –– unqualified stay of execution of judgment granted to defendant not primarily liable pending determination of appeal

Legislation Cited:

Civil Procedure Act 2005 (NSW)

Cases Cited:

Alexander v Cambridge Credit Corporation Ltd (Receivers Appointed) (1985) 2 NSWLR 685

Almona Pty Ltd v Parklea Corporation Pty Ltd [2019] NSWSC 1868

Almona Pty Ltd v Parklea Corporation Pty Ltd (No 2) [2020] NSWSC 167

Almona Pty Ltd v Parklea Corporation Pty Ltd (No 3) [2020] NSWSC 226

Almona Pty Ltd v Parklea Corporation Pty Ltd (No 4) [2020] NSWSC 553

Almona Pty Ltd v Parklea Corporation Pty Ltd (No 5) [2020] NSWSC 1514

International Bulk Shipping and Services Ltd v Minerals and Metals Trading Corporation of India [1996] 1 All ER 1017

In the matter of Dyamond Developments Pty Ltd (in liq) [2020] NSWSC 591

Kingston Futures Pty Ltd v Waterhouse (2013) 1 Qd R 507; [2012] QSC 212

Stergiou v Citibank Savings Ltd [2005] ACTCA 15

TCN Channel 9 Pty Ltd v Antoniadis (No 2) (1999) 48 NSWLR 381; [1999] NSWCA 104

Woolworths Ltd v Strong (No 2) (2011) 80 NSWLR 445; [2011] NSWCA 72

Category:

Procedural and other rulings

Parties:

Almona Pty Ltd (plaintiff)
Parklea Corporation Pty Ltd (first defendant)
PT Limited (third defendant)

Representation:

Counsel: D Williams SC / E Bishop / ND Riordan (plaintiff)
K Andronos SC / S Keizer (first defendant)
EAJ Hyde / T Epstein (amicus curiae and later second defendant)
J Taylor (third defendant)

Solicitors: Bartier Perry (plaintiff)
Norton Rose Fulbright (first defendant)
King & Wood Mallesons (amicus curiae and later second defendant)
Corrs Chambers Westgarth (third defendant)

File Number(s):

2018 / 317496

Judgment

1. These reasons for judgment are the sixth in a series in these proceedings [1] .

   1. Almona Pty Ltd v Parklea Corporation Pty Ltd [2019] NSWSC 1868; Almona Pty Ltd v Parklea Corporation Pty Ltd (No 2) [2020] NSWSC 167; Almona Pty Ltd v Parklea Corporation Pty Ltd (No 3) [2020] NSWSC 226; Almona Pty Ltd v Parklea Corporation Pty Ltd (No 4) [2020] NSWSC 553; Almona Pty Ltd v Parklea Corporation Pty Ltd (No 5) [2020] NSWSC 1514.

2. In conformity with earlier convention I will refer to the earlier judgments as Almona 1 to Almona 5 respectively and use the same terms and abbreviations.

3. The purpose of these reasons is to explain why the Court made certain orders on 5 June 2020 as final orders in these proceedings, and to deal with a number of outstanding matters, particularly the terms upon which Parklea and SAP are to be granted a stay of judgment pending the determination of the appeals from the orders made in these proceedings.

4. The orderly preparation of these reasons was disrupted by an extraordinary event that has led to considerable delay, and the need for the Court to substantially revise the reasons for judgment that it had proposed to deliver at an earlier time.

Revelation of the deregistration of SAP

5. That event was that it was discovered shortly before the hearing that occurred on 5 June 2020 that the principal defendant, the second defendant, SAP, did not exist, and had not existed at any time during the course of the proceedings. SAP was incorporated in the British Virgin Islands. It was struck off the register of companies and dissolved on 28 August 2018. A notice of appearance was filed in these proceedings by the solicitors who purported to act for SAP on 24 October 2018, and a spirited defence was conducted on behalf of the illusory defendant.

6. Consequently, as matters stood at the time of the 5 June 2020 hearing, every step taken by or against SAP in these proceedings was a nullity: Stergiou v Citibank Savings Ltd [2005] ACTCA 15 at [20], citing International Bulk Shipping and Services Ltd v Minerals and Metals Trading Corporation of India [1996] 1 All ER 1017.

7. Notwithstanding that disturbing development, counsel who had previously purported to appear for SAP took part in the 5 June 2020 hearing as amicus curiae. That provoked some opposition from counsel for Almona, but I permitted it to occur so that the Court could learn the possible consequences of that development from the perspective of the legal representatives of the party that no longer existed. I did that to facilitate the proper management and completion of these complex proceedings.

8. The Court was informed that steps were being taken to have SAP reregistered, and that it was expected that, if reregistration occurred, the effect would be that, under the law of the British Virgin Islands, SAP would regain its status as an incorporated entity for all purposes and at all times, as if it had not been deregistered and dissolved. The process was being impeded by the present worldwide pandemic, but it was thought that reregistration may occur in a couple of weeks.

9. At the time these reasons for judgment will be delivered, the registration of SAP has been reinstated retrospectively, although it remains in a state of being wound up. That event happened much later than was anticipated.

10. At the hearing on 5 June 2020, counsel appearing as amicus curiae referred the Court to the decision of Applegarth J in the Supreme Court of Queensland in Kingston Futures Pty Ltd v Waterhouse (2013) 1 Qd R 507; [2012] QSC 212. In that case, his Honour decided, based upon evidence concerning the effect of the relevant British Virgin Islands legislation, that, where a corporation incorporated in that Territory had been struck off the register before it commenced proceedings in the Queensland Supreme Court, but it was reregistered before the Court was asked to rule that all of the steps that it had taken in the proceedings were a nullity, the effect was to reinstate the existence of the plaintiff retrospectively for all purposes. Consequently, Applegarth J declined to make an order that the proceedings be struck out and orders that had been made in the meantime set aside.

11. It was not clear then whether the result in Kingston Futures Pty Ltd v Waterhouse would apply in the present case, if SAP was reinstated as a corporation under the law of the British Virgin Islands. Counsel for Almona observed that it was thought that SAP had been dissolved after the making of a winding up order, rather than that it had been struck off the register for non-compliance with administrative requirements.

12. As it has happened, after the registration of SAP was reinstated, SAP has provided expert legal opinion to Almona that has apparently satisfied Almona that SAP’s existence has retrospectively been confirmed for the purposes of its participation in these proceedings and the making of orders for and against it by the Court.

13. The purpose of the hearing on 5 June 2020 was to make final orders at first instance in these proceedings. That had become a pressing need, because some of the parties had indicated an intention to appeal, and Almona was subject to the usual undertaking as to damages to support its caveat against the title to the Land. The Land is subject to a mortgage that the Court has been told is accruing interest at the rate of 22% per annum.

14. In some respects, the position of Parklea, and what was thought to be SAP, were the same for purposes connected to the institution of appeals, and it was plainly desirable that final orders be made for and against all of the parties, so that the time allowed for the commencement of appeals would start to run from the same date. Parklea submitted that the Court should defer making final orders until the position concerning the status of SAP was known so that, if in fact the incorporated status of SAP was restored, final orders could be made at the same time, so that any appeals would run together.

15. Almona opposed that course. It relied upon its exposure under the usual undertaking as to damages, which is a potential liability that it may have to Parklea alone.

16. Because of the doubt about the timing of possible administrative steps being taken in the British Virgin Islands concerning the reinstatement of SAP, and the further possibility that the restoration of SAP may have led to further legal disputes in these proceedings, I accepted the position taken by Almona and ruled that, in the unexpected circumstances that prevailed, I should only make orders in the proceedings in-so-far as they involved Almona, Parklea and PT.

Orders made on 5 June 2020

17. On 5 June 2020, the Court made the following orders for the purpose of the disposition of these proceedings (substituting the abbreviated parties’ names):

1. Judgment for Almona against Parklea in the sum of $5,225,714.43 (being judgment in the principal sum of $4,250,000 plus interest up to judgment of $975,714.43 for the period from 22 March 2016 to 5 June 2020) and with interest accruing at the daily rate of $551.57 until the date of payment.

2. Grant leave to Almona to revive the question of its application for an inquiry and account on giving seven days’ notice to SAP (in the event that SAP is reinstated), such leave to remain open to Almona until 28 days after determination of any appeal without prejudice to SAP's entitlement to apply for orders requiring Almona to specify the basis of the proposed inquiry.

3. Grant leave to Almona to amend prayer 3(f) of the further amended statement of claim and any particulars relating to prayer 3(f) by filing and serving a Second Further Amended Statement of Claim and Amended Particulars.

4. Order that Almona's claims against PT be dismissed.

5. Otherwise dismiss Almona's claims as against Parklea and PT as made in the Further Amended Statement of Claim Prayers A, B, 3(g), 3A, 4, 5, 6, 6A, 7, 8, 9, 9A and 10 without prejudice to Almona's entitlement to seek leave to amend its prayers for relief in relation to the taking of accounts as against SAP if reinstated.

6. Order that Almona pay the costs of PT as agreed or assessed plus interest on the costs as and from the date on which each of the costs were paid by or on behalf of PT provided such order is without prejudice to PT's lump sum costs application.

7. Order that the amount of $140,000 paid by Almona into Court as security for PT's costs of the proceedings be released forthwith to PT.

8. Prayer 1 of Almona's notice of motion dated 7 April 2020, being Almona's application that Parklea and SAP pay PT's costs of the proceedings, is dismissed

9. There be no order as to costs between Almona and Parklea on the basis that they pay their own costs.

10. Order that the amount of $200,000 paid by Almona into Court as security for Stages 1 and 2 of SAP's costs of the proceedings be paid forthwith to Almona together with any interest on the said amount from 21 December 2018 to the date of these orders

11. Grant leave to Almona to make such application as it thinks fit arising from the dissolution of SAP.

12. Order that order 1 be stayed up to and including the date of determination of Parklea's stay application.

Explanation of reasons for some of the orders

18. It is not necessary to explain all of the orders, as many of them are simply an outworking of the determinations made in the earlier judgments.

Almona’s application for an inquiry and accounting

19. Almona asked the Court to make an order substantially in the form of order 2. From the beginning of these proceedings, Almona has maintained a claim against SAP for an inquiry and the taking of accounts concerning the exercise by SAP of its rights as mortgagee over the Land at the time the Land was owned by Almona. Almona wished to defer pursuing the inquiry so that its resources could be directed to pursuing the appeal that it proposed to institute from the primary rulings against it in Almona 1. I have been sympathetic to that proposal, even though it seemed to me that Almona's right to an inquiry and an accounting from SAP, and possibly also the receivers, was logically independent of the outcome of the appeal.

20. Almona asked the Court to make an order that would have the effect that it could defer taking steps to prosecute the inquiry and accounting until a short time after the determination of the appeal that it proposed to commence.

21. I permitted counsel who appeared as amicus curiae to make a submission concerning the terms of the order. That submission was to the effect that Almona should not be permitted simply to defer the further prosecution of its application for an inquiry and an accounting until sometime after the determination of its appeal. The reason given was that the completion of the sale of the Land to Parklea and the repayment of the debt secured by SAP's mortgage occurred on 22 March 2016, more than four years ago, and the receivers retired on 1 November 2017. Counsel informed the Court that the firm to which the receivers belonged no longer existed as a separate entity and had been merged into a larger firm of accountants. Counsel made the point that Almona should at least be required to specify the basis and nature of the inquiry and accounting that it wished to pursue, including to the extent of identifying the issues with sufficient clarity to enable both SAP, if it was reconstituted, and the receivers, to understand the nature of the case and to be able to preserve all evidence that may be relevant to the inquiry and accounting.

22. I was sympathetic in principle to the propositions put by counsel appearing as amicus curiae, and consequently I added, in chambers, to order 2 the words "without prejudice to SAP's entitlement to apply for orders requiring the plaintiff to specify the basis of the proposed inquiry".

23. Now that the registration of SAP has been reinstated, but it remains in a state of being wound up, it may be necessary for Almona to consider its position concerning the proposed inquiry and accounting, and if it wishes to pursue those procedures, it may be appropriate for Almona to relist the proceedings for directions after the appeal has been determined.

Proposed alternative approach to order 9

24. The second aspect of the orders that requires some explanation is order 9, which has the effect that each of Almona and Parklea will be required to bear their own costs of the proceedings. The same order would have been made in respect of SAP's costs had it remained in existence at the time.

25. I dealt with the question of the costs of the proceedings in Almona 4 at [93]-[241]. For the reasons given, I expressed the conclusion at [233] that, on the information available to the Court, the proper costs order as between Almona, Parklea and SAP was that the Court should make no order as to costs, with the effect that each of those parties would bear their own costs.

26. However, at [234]-[241], I raised a possible alternative approach to the proper determination of the parties' entitlement to costs orders. As I explained, the reason why I took the unusual step of suggesting a possible alternative approach was that I had qualms about the application of the usual broad brush impressionistic approach to be adopted by the Court, because I considered a substantial proportion of the 'litigious effort' in the proceedings to have been invisible to the Court. I considered that to be a significant issue, given the very substantial amount of legal costs that all of the parties had incurred over a relatively short period of time, having regard to the periods when the legal contest was actually occurring.

27. The alternative that I raised as a possibility was that the Court make an order, in appropriate terms, referring the issue of costs to be determined by a referee.

28. As it has happened, Almona opposed that course and Parklea embraced it. SAP’s legal representatives also embraced the alternative while they thought SAP still existed.

29. It should be recorded that, at the hearing on 5 June 2020, I explained to the parties that, while I remained open to being persuaded that the unusual course of referring the costs to a referee should be adopted, I would only take that course if I was satisfied that the costs issues could be defined with sufficient precision, and that the process could be implemented in a cost effective way, that would have a real chance of leading to a more fair and just outcome than the adoption of the broad brush and impressionistic approach that had been the only course available to the Court. Furthermore, I would need to be satisfied that there was a real likelihood that the reference could be conducted efficiently, and would not generate a time-consuming and expensive collateral dispute that might achieve no more than had the argument before the Court.

30. In the face of this explanation, Parklea withdrew its application for the appropriate costs order as between itself and Almona to be dealt with by means of a reference.

31. Consequently, I made a costs order in conformity with [233] of Almona 4.

Effect of the reinstatement of SAP to the register

32. After the orders on 5 June 2020 were made, the only remaining issue was whether a stay of judgment should be ordered in favour of Parklea and SAP, and if so on what terms.

33. As I understand it, Almona's position at the hearing was that a stay of judgment should only be made in favour of both defendants if they each paid the full amount of order 1 into court, and that an amount of $2,500,000 should be paid out to Almona to assist it in funding its appeal and resisting the appeal that were then proposed by the defendants.

34. Parklea resisted the contention that it should be ordered to pay any amount as a condition to the making of an order staying the judgment.

35. By their written submissions prepared when they understood that they were retained by SAP, counsel who ultimately appeared as amicus curiae had said that SAP would, if necessary, offer to pay into Court the sum of $1,000,000 as effective security for being granted the stay of execution. Counsel said at the hearing that SAP, even if it had remained in existence, was a foreign corporation with no presence or assets in Australia. The bringing onshore and the payment into court of $1,000,000 would in those circumstances be advantageous to Almona.

36. The expectation that SAP would be reregistered quickly was disappointed by events. So long as SAP did not exist, it was necessary for the Court to prepare its judgment on the basis that Parklea was the only defendant that had been ordered to pay the sum the subject of order 1 to Almona. Parklea's application for a stay of execution would have to be dealt with on the basis that Parklea would not get the subsidiary benefit of SAP having paid $1,000,000 into court.

32. The Court reserved its judgment and proceeded with the preparation of its reasons on the assumption that SAP had been deregistered. As it happened, the reasons were almost ready to be delivered when the Court was informed that SAP had finally been reregistered, and SAP had the benefit of expert legal opinion that the effect of the law of the British Virgin Islands was that SAP was deemed never to have ceased to exist and had continued to exist for all purposes.

33. However, the Court was also informed that SAP remained in a state of being wound up.

34. The Court was initially given to understand that SAP would lodge an appeal and proceed with expedition so that SAP's appeal could be heard by the Court of Appeal at the same time as the hearing of the other appeals that had been lodged, which had been fixed to commence in November 2020.

35. As a result of the this change in circumstances, it became necessary for the Court to make final orders on Almona's claim against SAP, and to deal with SAP's claim for an order staying execution against it. It also became necessary for the Court to revise the reasons for judgment that had been prepared on the basis that Parklea was the only defendant against which the Court had made an order for the payment of substantial damages in favour of Almona. This was necessary because, in practical terms, the effect of the reasons in Almona 1 was that SAP was the primary wrongdoer, and the terms of any stay of execution made in favour of Parklea could be influenced by the basis upon which a stay of execution was made in favour of SAP.

Orders made on 24 September 2020

41. The Court made final orders on Almona's claim against SAP on 24 September 2020.

42. By order 1, for more abundant precaution, the Court made an order under s 471B of the Corporations Act 2001 (Cth) that Almona had leave to proceed against SAP nunc pro tunc.

43. By order 2, judgment was given for Almona against SAP in the same terms as order 1 made on 5 June 2020 against Parklea.

44. Order 3, expressed to be for the avoidance of doubt, made it clear that Almona was only entitled to recover from Parklea and SAP one amount of the judgment given by order 1 made on 5 June 2020 and order 2 made on 24 September 2020.

45. Orders 4 and 7 were equivalent to orders 9 and 5 respectively made on 5 June 2020.

46. By order 8, SAP was ordered to pay Almona's reasonable costs of SAP's applications made necessary by its reinstatement.

47. Although SAP reinstated its application for a stay of order 2 made on 24 September 2020, that application would have to be determined on the basis that, although SAP's registration has been reinstated, so that it is deemed to have been in existence at all relevant times, it remained in a state of being wound up. That was a factor that would have obvious significance in the determination of any conditions that should be imposed upon the making of a stay order.

48. Consequently, SAP determined that it could only realistically pursue its application for a stay of order 2 if it agreed to the Court making the following additional order:

1. Order 2 be stayed until 21 days after the date on which the Court of Appeal proceeding 2020/197106 (Appeal Proceeding) is determined, conditional upon SAP paying the sum of $5,286,938.70 into Court, as security for the judgment sum, which sum is to abide any order that the Court of Appeal may make in the Appeal Proceeding concerning its release consequent upon the outcome of the Appeal Proceeding.

   49. Finally, I also noted that counsel for Almona and Parklea would provide additional short written submissions by 25 September 2020

Events after 24 September 2020

50. The Court has been informed that SAP satisfied the condition in order 5 made on 24 September 2020 by paying the sum of $5,286,938.70 into court.

51. After the receipt of supplementary submissions from Almona and Parklea, and information that SAP had paid the amount of order 2 into court, the Court sought information from the parties as to whether the money paid into court had been paid by SAP itself, or whether instead it had been paid by some party related to SAP. The reason for that enquiry was that the Court had been told that SAP remained in the course of being wound up, and that gave rise to the risk that the security provided to Almona by the payment of the money into court might be undermined by the rights of creditors of SAP in the winding up process. It is not necessary to consider the issue in detail, but there is authority for the proposition that the Court of Appeal, in considering what order it should make concerning the payment out of the money paid into court, should have regard to the possibility that creditors in the winding up of SAP may be disadvantaged by the order, if the money had been paid into court by SAP itself, while being in the course of being wound up: see In the matter of Dyamond Developments Pty Ltd (in liq) [2020] NSWSC 591 at [30].

52. The solicitors for SAP provided the following information to the Court by email dated 15 October 2020:

1. The funds were paid into Court on 30 September 2020. Please see attached a copy of the receipt we received from the Court Revenue & Trust Account Coordinator.

2. We are instructed that the funds paid into Court were not the property of the Second Defendant.

   53. Almona responded to this email by making a request that one of SAP's liquidators provide an affidavit setting out the details of the circumstances in which the money was paid into court by a third party on behalf of SAP. Almona required the disclosure of the name and address of the person or entity that paid the money into court, and the terms of any arrangement, or agreement and the reasons why the payee made the payment, as well as any right or claim that the payee may have against SAP or any third party in relation to the repayment of the money paid into court.

   54. I have decided that it is proper for the Court to resolve this dispute about the circumstances in which the money was paid into court by accepting the statement made by SAP's solicitors to my Associate in their email dated 15 October 2020.

   55. I do not consider that the Court is required to give Almona the opportunity to investigate the identity of the party who was directly responsible for paying the money into court. The money is in court, and there are no reasonable grounds for suspecting that the party who paid $5,286,938.70 is insolvent.

   56. The consequence is that the Court must deal with the outstanding issues in relation to the applications for stays of order 1 made on 5 June 2020 and order 2 made on 24 September 2020 on the basis, first, that the stay order in favour of SAP has now been made, and secondly, on the basis that Parklea's application has the benefit that the full amount of order 1 made on 5 June 2020 has now been paid into court by SAP.

   57. The Court has been told that SAP did not ultimately lodge an appeal against order 2 made by the Court on 24 September 2020.

   58. That being the case, I take it that SAP has resisted Almona's appeal against order 5 made on 5 June 2020, whereby the Court dismissed the balance of Almona's claims against SAP.

   59. If Almona succeeds on appeal in reversing the Court's order dismissing its other claims against SAP, the result should be that the Contract for the sale of the Land and the transfer of the Land to Parklea will be set aside. The consequence of an order to that effect would be that the purchase price payable by Parklea to SAP under the Contract would not be payable. It would cease to be relevant that Parklea and SAP between them had acted in a manner that caused the price to be reduced by $4,250,000. Consequently, Almona would cease to be entitled to the benefit of order 1 made on 5 June 2020 and order 2 made on 24 September 2020.

   60. The significance of these matters to the present reasons is that any issues that remain between Almona and SAP concerning the terms of the stay of execution of the judgment against SAP must be determined on the basis that it is possible that the outcome of the appeal will be that the judgment against SAP in order 2 will be set aside.

   61. Finally, as the Court of Appeal has now heard the appeals, Almona's argument that part of the money paid into court should be paid out to it to assist it to fund its appeal has now largely been overtaken by events.

Legal principles

62. The parties were generally agreed concerning the principles that govern the circumstances in which the Court will grant a stay of execution on a judgment pending the determination of an appeal. The Court is given a discretion under s 135(1) of the Civil Procedure Act 2005 (NSW) to give directions, by order, with respect to the enforcement of its judgments and orders.

63. The following principles have been taken from, and largely use the language of, the judgment of the Court of Appeal in Alexander v Cambridge Credit Corporation Ltd (Receivers Appointed) (1985) 2 NSWLR 685 at 694-695, in-so-far as those principles may be relevant to the application now under consideration:

1. It is not necessary for the grant of a stay that special or exceptional circumstances should be made out.

2. It is sufficient that the applicant for the stay demonstrates a reason or an appropriate case to warrant the exercise of the discretion in the applicant's favour.

3. The onus is upon the applicant to demonstrate a proper basis for a stay that will be fair to all parties.

4. The filing of an appeal will not by itself provide a reason for granting a stay, nor will it discharge the onus falling upon the applicant.

5. The Court has a discretion whether to grant a stay and, if it does, as to the terms that would be fair.

6. The Court will weigh considerations such as the balance of convenience and the competing rights of the parties.

7. Where there is a risk that the applicant for the stay will dispose of its assets if the stay is granted, that will be a ground to refuse the grant.

8. In an appropriate case, the Court may make it a condition of the grant of a stay that the applicant pay the whole or part of the amount of the judgment to the successful party, or that it pay an appropriate sum into court, or that it provide the successful party with security for the amount of the judgment.

9. As the effect of the grant of a stay will be to deprive the successful party of the fruits of the judgment, the Court should be careful to protect that party, including in respect of the accumulation of interest and to compensate it for delays in recovery.

10. While the Court will not generally speculate about the appellant's prospects of success, the Court may, in an appropriate case, make a preliminary assessment about whether the appellant has an arguable case in determining whether or not to grant a stay.

Significance of doubt as to Almona’s financial position

64. There was some controversy between Almona and Parklea concerning the significance of uncertainty about the capacity of a plaintiff to repay the amount of the judgment in its favour if a stay were not granted. Parklea referred to observations made by members of the Court of Appeal in TCN Channel 9 Pty Ltd v Antoniadis (No 2) (1999) 48 NSWLR 381 at [15]; [1999] NSWCA 104 and Woolworths Ltd v Strong (No 2) (2011) 80 NSWLR 445 at [67]; [2011] NSWCA 72 regarding the "risk that the plaintiff will be unable to repay the money without difficulty or delay if the appeal were to succeed". I do not think that it is necessary to resolve the dispute between the parties concerning the precise significance of these observations. They are matters to be taken into account in the exercise of the general discretion reposed in the Court. The Court should take into account evidence that suggests that a successful plaintiff will not be able, in a sure and timely way, to repay the amount of the judgment debt, if the defendant succeeds on appeal in obtaining an order setting aside the judgment. It is material that, even though the plaintiff may have assets, there is doubt about the value of the assets, or whether they may be encumbered, and whether recovery of the amount of the judgment debt, if paid to a plaintiff before a successful appeal, will be time-consuming and costly by reason of the need to execute orders for the sale of numerous properties owned by the plaintiff.

Parklea’s prospects on appeal

65. There was a debate between Almona and Parklea as to whether Parklea has sufficient prospects on appeal to justify the Court in granting a stay of order 1 made against it.

66. It is neither necessary nor in fact feasible for the Court to attempt to resolve this debate in detail. Parklea’s position was that, because of the relatively narrow factual basis for the Court’s finding that it was a participant in the fraud perpetrated by SAP on Almona in respect of the concealment of the Occupancy Condition, there was a real prospect that it would succeed on appeal. Almona adopted the contrary stance that Parklea had little prospects of succeeding because, when all of the evidence that came to light concerning the relationship between the parties that stood behind Parklea and SAP was given proper weight, Parklea could not expect to establish on appeal that it did not know about Almona’s ignorance of the Occupation Condition, given that Almona had made the forensic decision not to call any witnesses who may have been able to prove that alleged fact.

67. I am satisfied that the Court should proceed upon the basis that Parklea has demonstrated a sufficient prospect that it will succeed on appeal to require the Court to proceed with a consideration of all of the factors that go to the balance of convenience and fairness that may be involved if the Court makes an order staying the enforcement of order 1. The merits of Parklea’s appeal are a neutral factor in this consideration. The fact is that, as a result of the forensic choices made by Parklea and SAP, witnesses who may have been able to give direct evidence of what was done, said and known concerning the Occupation Condition and Almona’s knowledge of the circumstances, as well as the reasons for the Second Deed of Variation, were not called. Consequently, the Court was required to act upon inferences drawn in making judgments about such a serious matter as the honesty of the parties. The drawing of inferences based upon incomplete evidence and the significance of the absence of witnesses who may have been able to give direct evidence of crucial facts is an exercise upon which reasonable minds may differ. This Court should therefore allow for a real possibility that the Court of Appeal may be persuaded by Parklea to take a different view concerning the proper process of reasoning and judgment than did this Court.

Almona’s financial position

68. The thrust of Parklea’s evidence and submissions was to seek to demonstrate that Almona’s solvency is highly questionable, the value of its remaining assets is dubious, and it is most improbable that Almona will be able to readily repay the amount of the judgment in order 1, if Parklea is required to pay that amount to Almona and Parklea subsequently succeeds on appeal in having order 1 set aside.

69. The evidence and Parklea’s submissions satisfy me that Almona’s financial position is sufficiently doubtful that the Court should grant a stay of execution to Parklea, at least to the extent that Parklea should not be required to pay the whole of the amount of the judgment in order 1 to Almona. Almona has a paid up capital of four dollars. There is no evidence that it trades or otherwise has a regular or substantial source of income. I have not given significant weight to Parklea’s evidence that 10 separate applications were made to wind up Almona in the period between 2007 and 2016, as those applications generally related to the period before the events that led to the Court ultimately making order 1 against Parklea. As of 16 October 2017, according to the receivers, Almona held total funds of $55,082.82. Since that time, default judgment has been entered three times in the Local Court of New South Wales against Almona for unpaid council rates owed to Newcastle City Council, in July 2018, July 2019 and February 2020.

70. The evidence does not establish with any clarity the significance of the CreditorWatch report that recently gave Almona a credit score of 1 point on a scale from 0 to 850 points, where 1 point signifies the least credit-worthy entities that remain in existence, and 0 points is applicable to deregistered companies. However, there was no objection to the evidence, and it clearly does not encourage confidence about Almona’s credit-worthiness.

71. I accept the evidence referred to in par 24 of Parklea’s written submissions, concerning the occasions in these proceedings where Almona was not able to comply with timetables fixed by the Court, or was not apparently able to fund its proper legal representation, because its funds were inadequate for those purposes. Proved inability of Almona to properly fund its own prosecution of these proceedings is telling when the question is whether it is probable that Almona will readily repay a sum of over $5,000,000 if it loses on Parklea’s appeal.

72. Parklea’s written submissions dated 22 May 2020 referred to the fact that searches conducted in December 2018 disclosed that Almona was the registered proprietor of nine Torrens Title lots in or about the City of Newcastle. Caveats lodged against those titles at that time have now been removed, but all nine titles are now the subject of a first registered mortgage. As at the date of Parklea’s submissions, there was no information available to it concerning the value of the properties or the amount of the mortgage.

73. In his 4 June 2020 affidavit, Mr Constantine, the principal of Almona, referred to the nine properties owned by Almona. He gave evidence that the amount of the mortgage secured on the properties was $650,000. Mr Constantine listed the titles to the nine properties in par 7, and then exhibited land value searches from the website of the NSW Valuer General that give a combined land value for the properties of $3,093,000. Mr Constantine exhibited indicative valuations of two of the properties issued by online valuation services of $550,000 to $850,000 and $900,000 to $1,000,000. A residential house was erected on one of these properties and the other was vacant property with a commercial zoning. Mr Constantine gave evidence that another of the properties included a residential house but no online valuation range was available. Mr Constantine said that one of the properties included a single story licensed leagues club. There was no admissible evidence of the value of that property. Mr Constantine expressed a belief that all of the properties would have a higher value if sold to a property developer in one line rather than separately.

74. Mr Constantine claimed that Almona is entitled to the sum of approximately $354,000 from Parklea as rent received from stallholders at the Parklea Markets that Almona claims should have been paid to it. As I understand it, that claim is contested by Parklea.

75. Mr Constantine also claimed that Almona was, at the date of his affidavit, owed approximately $4,600,000 by Newcastle United Sports Club Ltd. Mr Constantine exhibited to his affidavit a letter dated 19 November 2018 addressed to him by a person who described herself as being part of “Accounts Administration” at the Club, which confirmed that the Club owed Almona $4,285,000 as at 30 June 2018, plus interest accruing at the rate of 5% per annum. The letter stated that the advances had been made from 2001 to 2018 inclusive. In the absence of evidence to the contrary, the Court would infer that, if these advances were made by Almona to the Club, they would be repayable on demand. The capacity of the Club to repay the debt referred to in the letter was not established. It is not clear whether or not any part of the alleged debt is now statute-barred. The authority of the writer of the letter to bind the Club to an acknowledgement of debt was not established.

68. Mr Constantine gave evidence concerning Almona’s present liabilities in his affidavit. He explained that the amounts of the default judgments for unpaid rates obtained against Almona by the Newcastle City Council had been paid in full.

69. Mr Constantine explained that the receivers had sold two properties owned by him that were mortgaged to SAP to secure Almona’s liability to SAP in respect of the loan over the Land the recovery of which has given rise to these proceedings. The properties realised $2,000,000 and $11,001,000. Almona is liable, as principal debtor, to repay those amounts to Mr Constantine.

70. According to Mr Constantine’s affidavit, the only liabilities of Almona were the debt of $650,000 to the mortgagee in respect of the nine properties, and its liability to Mr Constantine referred to in the preceding paragraph.

71. By further affidavit made on 5 June 2020, Mr Constantine made a number of corrections to his earlier affidavit. He said that he had overlooked an outstanding liability of Almona for legal costs of approximately $156,000, and the additional costs of the appearances on 5 June 2020, which were unknown. Mr Constantine had also not acknowledged Almona’s liability to PT for its costs under. Those costs have also not yet been quantified. Finally, Mr Constantine noted that Almona was entitled to the amounts of $140,000 and $200,000 that had been paid into Court as security for the costs of PT and SAP. The first of those amounts will be paid out to PT under order 7 in reduction of Almona’s costs liability to that company. The second amount will be paid out to Almona under order 10.

72. It should be recorded that Parklea received Mr Constantine’s two affidavits so late that it was unable to investigate the veracity of the evidence given by Mr Constantine. Parklea accepted that the affidavits could be received into evidence, on the basis that Parklea had not been given an opportunity to verify the evidence, and that the evidence should not be given any greater weight than would be justified having regard to the form of the evidence, particularly in respect of the values that Mr Constantine attributed to the properties owned by Almona.

73. The effect of Mr Constantine’s evidence is that Almona is, subject to Mr Constantine’s voluntary and informal day-to-day forbearance of repayment by Almona of the $13,000,000 debt due to him, hopelessly insolvent.

74. Any payment made by Parklea to Almona in accordance with order 1 made on 5 June 2020 would immediately be at risk of being irrecoverable if Parklea succeeded on its appeal.

75. Mr Constantine said in par 36 of his 4 June 2020 affidavit that, if the amount of the judgment in order 1 made on 5 June 2020 were paid to Almona, then he would cause Almona to pay those funds into a bank account. He said that he has no intention of causing Almona to use those funds other than for these proceedings.

76. It is not now necessary to decide whether the Court should accept the assurance given by Mr Constantine that is referred to in the previous paragraph. As I understand it, the principal purpose for Almona's submission that part of the damages should be paid out to it was to facilitate its funding of the appeal. Because of the extraordinary course that these proceedings have taken and the delay that has ensued, it has become necessary for me to decide the question of what conditions should be made to orders for the stay of execution of judgment after the appeal has been heard. Consequently, Almona must have funded its appeal from resources other than a part payment of the amount of damages ordered in its favour.

77. There is therefore no longer any reason to subject Parklea or SAP to the risk that any amount paid into court will be dissipated if paid out to Almona and become irrecoverable if the outcome of the appeal is that order 1 made on 5 June 2020 or order 2 made on 24 September 2020, or both of them, are set aside.

Consideration

86. Although I have considered it to be necessary to set out the somewhat complicated history of these proceedings, I am able to give my reasons for my decision as to the terms upon which stays of execution of judgment should be granted in favour of Parklea and SAP in relatively simple terms.

87. As SAP has satisfied the condition for the operation of order 5 made on 24 September 2020 by causing the sum of $5,286,938.70 to be paid into court, the Court has already made an order staying execution against SAP and determined the condition for the stay.

88. That order was made by consent, and, consequently, I accept SAP's submission that the order should not be disturbed or varied by making a new order that some portion of the money paid into court be paid out to Almona. If Almona had wished to obtain the additional benefit of the payment to it of a portion of the money paid into court, then it should not have consented to order 5 being made without the issue of the partial payment out being determined first.

89. Further, I accept SAP's submission that, even though it has not appealed from the making of order 2 made on 24 September 2020, if Almona's appeal succeeds, and the transfer under the Contract of the Land to Parklea is set aside, then a necessary consequence will be that order 2 will also be set aside. There therefore remains a possibility that SAP will become entitled to an order that the money paid into court be paid out to the party that paid the money into court.

90. As the appeal has now been heard, and given my findings above as to the financial circumstances of Almona, there is no warrant for the Court to place any of the money paid into court at risk by ordering that portion of it be paid out to Almona.

91. A consequence of the full amount of order 2 made on 24 September 2020 being paid into court on behalf of SAP is that I have decided that the stay of execution sought by Parklea should be granted, without any requirement that Parklea pay any additional amount into court.

92. I cannot see any realistic way that the outcome of the appeal could have the result that SAP becomes entitled to an order that the money paid into court on its behalf be paid out but Parklea remains liable to pay to Almona the damages the subject of order 1 made on 5 June 2020.

93. The position is that, in practical terms, Almona now has adequate security for the damages orders made in its favour against Parklea and SAP.

94. It is also relevant that, as a matter of substance, SAP is primarily liable for the loss suffered by Almona.

Order

95. I will hear from the parties on the issue of the costs of the application. The parties should submit draft short minutes of order to my Associate to provide for submissions on costs.

96. I make the following order:

1. Order that order 1 made by the Court on 5 June 2020 be stayed until the date on which the Court of Appeal proceeding 2020/197106 is determined.

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Endnote

Decision last updated: 21 December 2020