Bartley v Myers

[2001] SASC 212
BARTLEY V MYERS
Civil

LANDER J. There are two applications before me. First an application for a stay of execution of a judgment given in the District Court on 28 September 2000. Secondly an application to extend the time within to set down an appeal. The appeal was filed on 12 October 2000. If an appeal is not set down within six months it lapses: r 95.11.
The applicants were the defendants in the Court below. The first and second respondents were the plaintiffs. The third respondent was a defendant.
Judgment was given in favour of the first respondent against the applicants in the sum of $101,753. The second respondent’s claim against the applicants was dismissed. The third respondent recovered a judgment on a counterclaim against the first respondent in the sum of $5,495. There were orders for contribution between the applicants and the third respondent.
The applicants were ordered to pay the costs of the first respondent. The first respondent was ordered to pay the third respondent her costs. An order was made that the first respondent recover from the applicants two thirds of the costs which she is liable to pay to the third respondent.
I have been provided with a copy of the reasons for judgment. The first respondent’s action against the applicants was for professional negligence in respect of services they provided her as their accountants. It was also claimed that the applicants failed to make disclosure to the first respondent of information in their possession which would have borne upon her decision to purchase a business.
The notice of appeal seeks the overturning of the judgment in favour of the first respondent and an order that the first and second respondents pay the applicants’ costs of action and of the appeal. In the alternative the notice of appeal seeks a reduction in the award of damages in favour of the first respondent.
On 26 October 2000 the first and second respondents lodged a cross appeal. They seek an order that the damages awarded in favour of the first respondent should also be awarded in favour of the second respondent, and that the sum be increased to $152,629.
They also seek a variation of the costs order made in favour of the first respondent by requiring the applicants to indemnify the whole of the first respondent’s liability for costs to the third respondent.
The third respondent has taken no interest in the appeal or cross appeal. Her rights will not be affected one way or the other.
On 6 February 2001 the applicants applied for an order staying the execution of the judgment and on 16 February 2001 Olsson J, by consent, ordered:
1.Until further order, Susan Myers, Susan Myers Pty Ltd (plaintiff/respondents) and Evelyn Neis (defendant/respondent) be restrained from executing the judgment of His Honour Judge Lunn made in District Court of South Australia Action 901 of 1997 on 28 September 2000 (judgment) in determination of the appeal to the Full Court of the Supreme Court of South Australia in this action (appeal).
2.On or before 31 January 2001 Paul Bartley (former Popowski) and Unite Pty Ltd collectively pay a total of $15,000.00 to Susan Myers being part of the money payable by them to her pursuant to the judgment.
3.On or before 2 March 2001 Paul Barley (formerly Popowski) and Unite Pty Ltd collectively pay into Court a total amount of $86,753.00 (the sum), being the balance of the money payable by them to Susan Myers pursuant to the judgment.
4.The sum be paid into Court to the credit of this action to be held in an account entitled “No. 978 of 2000 - Bartley & Another v Myers & Others”.
5.The Registrar is hereby directed to invest the sum in a common fund pursuant to r 109.06(b) and to keep the sum and all interests earned thereon invested in a common fund until further order.
6.That no part of either the sum or any interest earned thereon may be paid out of Court to any person or party until a further order relating to such payment is first made by the Court giving directions relating to such payment out.”
The applicants complied with para 2 of the order but not para 3.
On 7 May 2001 this application was made and the following orders are sought:
“2.An order pursuant to s 48 of the Limitations of Actions Act and/or Rule 95.11 extending the time for setting down of the appeal herein.
3.A declaration that the order in paragraph 1 of the order of the Honourable Justice Olsson dated 16 February 2001 remains in force. In the alternative, an order in the terms of paragraph 1 of that order.
4.An order that the Creditor’s Statutory Demand of the respondent Susan Myers dated 24 April 2001 directed to the second appellant be set aside.
5.Such further incidental and ancillary orders and directions as may be necessary to facilitate the setting down of the appeal.”
The applicants were insured with FAI General Insurance Co Ltd (FAI).
When they were served with these proceedings they sought indemnity from FAI under their professional indemnity insurance contract.
Indemnity was offered and the applicant’s solicitors were instructed to act on behalf of the applicants and FAI.
The professional indemnity insurance contract provided that the applicants had to pay a deductible of $1,000, but thereafter FAI would be responsible for any judgment sum and costs and would indemnify the applicants in respect of their own costs.
After judgment was entered by the District Court Judge the applicants were advised by their solicitors that FAI had instructed those solicitors to appeal.
The applicants received a letter from their solicitors on 12 October 2000 confirming that an appeal had been lodged and enclosing a copy of that notice of appeal.
The applicants next heard from their solicitors on 8 December 2000.
They were then advised that FAI was prepared to pay the judgment sum, pending the outcome of the appeal, by payment of $15,000 to the first respondent and by payment of the balance into Court. The solicitors sought payment of the deductible of $1,000, which the applicant paid on 21 December 2000.
The applicant heard nothing further from the solicitors until February when he was asked to amend the cheque which he had sent on 21 December 2000 to make it payable to “Supreme Courts Suitors Fund”.
Sometime before 28 March 2001 FAI went into provisional liquidation.
On 28 March the applicant spoke to his solicitors who advised him that the provisional liquidators had told him they would not be instructing him to take any further steps in relation to the appeal.
The applicant was advised that he needed to consider the further conduct of the matter. That advice was confirmed in a letter dated 28 March 2001.
The first applicant was due to leave Australia on 3 April 2001 and to be out of the country until 11 April. He was not advised at any time prior to his departure that the appeal had to be set down by 12 October.
The applicant’s wife was diagnosed as suffering from cancer in October 2000. Her condition deteriorated rapidly and she had intermittent bouts in hospital after October culminating in a period in hospital between 1 April 2001 and 13 April 2001.
She died on 5 May 2001.
In late April 2001 the applicant received a letter from the first respondent’s solicitors dated 24 April 2001 attaching a creditors’ statutory demand for payment of the debt.
He sent that statutory demand to his solicitors on 27 April 2001.
The applicant says he overlooked instructing his solicitors in relation to the setting down of this appeal between the date of his return from overseas and receiving that statutory demand.
The first applicant has been the victim of circumstances. His insurer did not comply with the orders made by Olsson J. It then went into liquidation. He was not advised that it was necessary to set this appeal down within six months of the notice of appeal being filed.
He has also had to suffer the loss of his wife during that same period.
However, it is not only the applicant’s circumstances that must be considered.
The first respondent has recently been diagnosed as suffering from chronic fatigue syndrome and depression. She has to spend a lot of time in bed. The stress is associated with these proceedings and this appeal has caused her health deteriorate even further. She is unable to work. She now depended upon income from investments. Those investments total only about $150,000.
In April 1997 she borrowed money from the ANZ Bank to fund the purchase of the business which was the subject matter of these proceedings. The loan was secured over her residential property. When the business failed she was unable to make repayments on the loan and in July 1999 she was obliged to sell her house to pay out the ANZ Bank.
Since these proceedings commenced she has paid $125,000 to her former solicitors for legal fees. She is still indebted to those solicitors in the sum of approximately $87,000.
Those solicitors have taken a charge over shares which the first respondent has in Southcorp. Those shares comprise about two thirds of her investments.
She has committed herself, by deed, to pay the outstanding amount owing to her former solicitors by the latest 31 August 2001.
The first respondent is in a parlous position. She needs to recover the judgment and the costs associated with the judgment.
I requested that the applicants disclosed their financial circumstances.
The first applicant asserts that he has few assets and considerable liabilities. The home in which he resides is owned by a trustee company of the John Paul Edmund Bartley Family Trust. However the first applicant and his late wife borrowed the money to purchase the property.
His late wife’s estate has been directed to that family trust for the benefit of the children or to the children directly.
The home contents were owned by his wife.
He has an income of less than $25,000 per year. In summary he has little or no income, no assets and considerable liabilities.
The second applicant had a licence from the trustee of the family trust to operate a practice of which the first applicant was an employee.
That licence was revoked on 31 March 2001. In lieu thereof a company called Unite Accountants Pty Ltd has operated the practice from 1 April 2001 under licence from the trustee of the family trust.
It may be therefore that the second applicant is insolvent.
The trustee of the first applicant’s family trust has structured its affairs so that the second applicant would not be in a position to meet the judgment debt.
I am not satisfied the applicants have been fully frank about their financial circumstances. I am not satisfied that either applicant has been candid about their assets. I find it difficult to accept that the male applicant has only the income available to him to which he deposes having regard to his and his late wife’s liabilities. However, in the end result the applicant’s disclosure of their assets and income has not impacted upon the decision relating to the stay.
It would appear from the applicant’s own affidavits that neither applicant could meet the judgment debt in the event they were called upon so to do.
It is asserted that the applicants will be entitled to receive 90 cents in the dollar from the fund established by the Commonwealth Government. It is said that both applicants would qualify because both would satisfy an income test which has been proposed by the Commonwealth Government and both operate a small business that has 50 employees or less.
I am not so sure that the applicants will qualify in respect of that scheme. The first applicant does not conduct a small business. The second applicant no longer conducts a small business.
The applicants, as I have said, seek both a stay and an order extending the time within which to set down the appeal.
In my opinion, the stay would only be granted if I was mindful to allow an extension of time within which to set down the appeal.
If the applicants are not entitled to prosecute the appeal then there could be no question that they should not be entitled to a stay.
If, on the other hand, I believe that the applicants are entitled to an extension of time within which to set down the appeal then that does not necessarily mean that a stay would follow.
Logically I should deal with the question of the extension of time first.
Rule 95.11 provides that where an appeal has not been set down within six months of its institution the appeal shall lapse, unless the time for setting down has been extended, prior to the expiration of six months. Also, where in special circumstances only such time has been extended after the time limited by the rule has expired.
In this case neither applicant sought an extension of time within the time for setting down. In those circumstances they are only entitled to an extension of time to set this matter down for hearing if they can establish special circumstances.
The applicants filed their notice of appeal within time. Different considerations apply where a party seeks an extension of time within which to appeal, from where a party seeks an extension of time within which to conform with the procedure, having brought the appeal within time: Jackamarra v Krakouer (1998) 72 ALJR 819 at 821.
Where an appeal has been lodged within time but some procedure has not been complied with it is not usually relevant to assess the merits of the appeal; Jackamurra v Krakow (supra) at 821. The matters which fall to be considered are the length of time over which the procedural breach has continued; the reasons for the breach; and whether the respondent would be prejudiced if an indulgence was granted. It is also relevant to determine whether the administration of the court’s business would be prejudiced.
In this case the length of time over which the breach continued was not long. I have outlined the reasons for the breach. As I have said the applicants were the victims of circumstance in a number of respects. The first respondent would not be prejudiced by allowing the appeal, already lodged, to continue. It would not prejudice the administration of justice nor would it inconvenience the Court by allowing the time to be extended.
In my opinion, the applicants have established special circumstances and there should be an extension of time for setting down the appeal. I shall hear the parties as to the precise terms of that order.
As I have said, however, because the applicants are entitled to an extension of time does not mean that they are also entitled to a stay of execution.
In my opinion the first respondent’s circumstances are more relevant in regard to this application than they were on the application which I have just considered.
Rule 95.16 provides that an application for leave to appeal or an appeal does not operate as a stay of execution of the judgment given in the court appealed from. Rule 95.16 does not itself authorise the granting of a stay of execution or of the proceedings, the subject of the appeal.
It merely provides that an appeal does not operate to stay either execution on the proceedings. The power to grant a stay derives from the inherent jurisdiction of the Court. It is incidental to the right of appeal and allows the Court to do justice pending an appeal: Dwyer v National Companies & Securities Commission (1988) 15 NSWLR 285.
The norm is that there should not be any stay of execution pending on appeal but there is a judicial discretion to grant a stay. That means the party seeking the stay has the onus of satisfying the Court that the stay should be granted.
Earlier decisions suggested that a party seeking a stay would have to make out exceptional circumstances before a stay was granted. Later decisions, with which I respectfully agree, suggest that it is not necessary to show exceptional circumstances but it is enough to show that the justice of the case requires that a stay be granted: Alexander v Cambridge Credit Corporation Ltd (1985) 2 NSWLR 685; Duke Group Limited (In Liquidation) v Pilmer & Ors (No. 9), S6716, 15 June 1998, Mullighan J; Technilock (Australia) Pty Ltd & Ors v Mondami Pty Ltd (1999) SASC 94.
In my opinion it is not useful to require a party to establish exceptional circumstances before a judicial discretion can be exercised in favour of that party. Formulation of such a test, in my opinion, would be inconsistent with the Rules of Court. The Rules of Court do not provide that a stay may only be granted in exceptional circumstances. Indeed they are silent as to the granting of a stay. In my opinion, in those circumstances the test should be no more than the ordinary considerations of justice. If justice requires the granting of a stay then it should be made.
In my opinion, the appropriate test in circumstances such as this is whether in all of the circumstances of the case the justice of the case requires that a stay be granted pending the hearing of the appeal.
In my opinion the justice of the case does not require the making of a stay in this matter.
One of the parties will be disadvantaged by either the granting of a stay or the refusal to grant a stay. One of the parties will suffer hardship and in particular financial hardship.
In my opinion it would not be appropriate to require the first respondent to suffer any further financial hardship even though the refusal of a grant of stay will require the applicants to suffer financial hardship.
If I refuse a stay then the first respondent will be entitled to proceed to execute on the judgment. In those circumstances the applicants will be entitled to seek whatever indemnity to which they are entitled under the government assistance scheme relating to HIH.
In those circumstances if the applicant’s contentions are correct and they are entitled to indemnity then they will not be embarrassed by the refusal of a grant of stay. Indeed all that will occur is that they will have their claim for indemnity advanced.
In those circumstances I make the following orders:
1I extend the time for setting down the appeal for a further fourteen days from today.
2I refuse the application for a stay.
I shall hear the parties as to costs.

[2001] SASC 212

25 June 2001