Civil and Allied Technical Construction Pty Ltd (ACN 077 924 120) v A1 Quality Concrete Tanks Pty Ltd (ACN 095 210 683)

[2018] VSCA 12

SUPREME COURT OF VICTORIA

COURT OF APPEAL

S APCI 2017 0118

CIVIL AND ALLIED TECHNICAL CONSTRUCTION PTY LTD (ACN 077 924 120)	Applicant
v
A1 QUALITY CONCRETE TANKS PTY LTD (ACN 095 210 683)	Respondent

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JUDGES:	TATE JA and McDONALD AJA
WHERE HELD:	MELBOURNE
DATE OF HEARING:	1 February 2018
DATE OF JUDGMENT:	1 February 2018
MEDIUM NEUTRAL CITATION:	[2018] VSCA 12

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PRACTICE AND PROCEDURE – Appeal – Application for stay of execution of judgment – Respondent entered into litigation funding agreement with third party – Third party entitled to judgment sum – Respondent potentially liable to pay significant costs of County Court proceedings if appeal successful – Applicant offered to pay judgment sum into court – Expedited hearing of appeal – Stay granted.

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APPEARANCES:	Counsel	Solicitors
For the Applicant	Mr R Fenwick-Elliott	Sykes Bidstrup Solicitors and McKean Park Lawyers
For the Respondent	Mr M Clarke SC with Ms C Pierce	M P Lanza Lawyers

TATE JA:
McDONALD AJA:

1. On 25 October 2017, a County Court judge ordered the applicant (‘CATCON’) to pay the respondent (‘A1’) the sum of $266,863.36, inclusive of interest.  In addition, the judge ordered CATCON to pay A1’s costs of the proceeding, including costs on an indemnity basis from 9 August 2013 to 25 October 2017.

1. CATCON seeks a stay of the judgment pending determination of its application for leave to appeal.  CATCON contends that if a stay is not granted and its appeal is successful, there is a real risk that it will be unable to recoup the judgment sum from A1.  CATCON relies upon two matters.  First, the fact that A1 has charged its interest in the judgment sum in favour of a litigation funder, Blaxon Investments Pty Ltd (‘Blaxon’).  Second, it points to the most recent financial statements discovered by A1 during the County Court proceedings.  Those statements for the 2010 and 2011 financial years disclosed that A1 had made insubstantial profits: $1,533 for 2010 and $29,914 for 2011.

1. A1 opposes the application for a stay.  An affidavit sworn by A1’s director, Paul Geaboc, sworn 8 December 2017, is to the following effect:

(a)       A1’s assets include cash at bank of $341,692.84;

(b)      A1 is entitled to payment in the sum of $367,404.55 from North East Water on account of outstanding payment claims, and to an additional sum of $195,807.56 representing a cash bond posted by A1 in an account maintained by Westpac Banking Corporation on behalf of North East Water;

(c)       A1 expects to derive significant revenue from a contract it has made with Goulburn Valley Regional Water Corporation which provides for a contract sum of $3,398,841.14, excluding GST and provisional sums;

(d)      Blaxon, which has provided litigation funding to A1, is entitled to receive approximately $354,976.54 from A1.

1. A1 contends that there is no evidence before the Court providing any basis for an apprehension that it would dissipate its assets in such a way as to render nugatory CATCON’s appeal, if its appeal is successful.

1. The principles governing the grant of a stay of execution of judgment pending the hearing and determination of an appeal are well settled.  In Maher v Commonwealth Bank of Australia,[1] Dodds-Streeton JA summarised the principles as follows:

   [1][2008] VSCA 122 (‘Maher’).

Prima facie, a successful party is entitled to the benefit of the judgment obtained below and the presumption that the judgment is correct.  The applicant for a stay therefore bears the onus of demonstrating that a stay is justified.

In Cellante and Ors v G Kallis Industries Pty Ltd (‘Cellante’), Young CJ (with whom Brooking J agreed), cited with approval the observation of Mahoney JA (with whom Moffit P and Glass JA agreed) in Re Middle Harbour Investments Ltd (in liq) that:

…where an applicant for a stay has not demonstrated an appropriate case but has left the situation in the state of speculation or of mere argument, weight must be given to the fact that the judgment below has been in favour of the other party.

Young CJ concluded that an applicant for a stay under Rule 66.16 must show special or exceptional circumstances to take the case out of the general rule that an appeal does not operate as a stay.

The Court has a wide discretion, which is not circumscribed by rigid rules.  It should take into account all the circumstances of the case.

In Scarborough’s v Lew’s Junction Stores Pty Ltd (approved in Cellante), Adam J recognized that special circumstances might exist where a successful appellant would be deprived of the fruits of the appeal if a stay of execution were not granted.  In such a case, the appeal might be rendered nugatory.

In Cellante, Young CJ stated that special circumstances would ‘exist where for whatever reason, there is a real risk that it will not be possible for a successful appellant to be restored substantially to his former position if the judgment against him is executed’.

An appeal could be rendered nugatory in that sense in a variety of ways.  The test could be satisfied where a defendant appeals and there is a real risk that the plaintiff would remove the proceeds of the judgment from the jurisdiction.  Similarly, special circumstances may be recognised where, for example, although the respondent is solvent, the subject matter of the appeal is, in substance, irreplaceable.

The prospect that the appeal may be rendered nugatory must be balanced against the principle that the successful party is entitled to the fruits of the judgment.  A stay should not be granted unless there is at least an arguable ground of appeal, although otherwise speculation as to the ultimate prospects of success is usually inappropriate.[2]

[2]Ibid [20]-[27]; see also Bisognin v Hera Project Pty Ltd [2017] VSCA 195 [43]; Neat v Thoroughbred International Marketing Pty Ltd (2012) 34 VR 318 [5]–[7]; and Ribbera v Eagle Fuels Pty Ltd [2014] VSCA 173 [8]–[15].

1. A1 does not dispute that, pursuant to the terms of its funding agreement with Blaxon, it is required to make payment to Blaxon of the judgment sum.  However, A1 contends that the financial records which are annexed to the affidavit of Mr Geaboc establish that it has adequate finances to meet any orders which may be made in favour of CATCON in the event that its appeal is successful.  The evidence before the Court supports a finding that A1 is currently in a stronger financial position than was the case in 2010/2011.  Nevertheless, the effect of the litigation funding agreement is analogous to the proceeds of the judgment being removed from the jurisdiction. This is one of the special circumstances identified by Dodds-Streeton JA in Maher as justifying the grant of a stay. Further, in the event that the appeal is successful, it is likely that the respondent may incur a substantial liability in respect of the proceeding in the County Court, which would exceed the judgment sum.  This matter was emphasised during the course of this morning's hearing by Mr Fenwick-Elliott. 

1. The Court has a wide discretion.  It is necessary to take into account all of the circumstances of the case.  Mr Fenwick-Elliott has this morning reiterated that his client is prepared to pay into Court forthwith an amount equivalent to the judgment sum.  Further, any prejudice to the respondent can be ameliorated by the hearing of the application for leave to appeal and the appeal itself being heard with such expedition and priority as the Registrar of the Court of Appeal is able to afford the matter.

1. In light of those reasons, the orders the Court proposes are the following:

1.On or before 8 February 2018, the applicant pay the judgment sum of $266,863.36, fixed by Judge McNamara in orders made on 25 October 2017 (‘the judgment sum’) into Court, in a form acceptable to the Senior Master, pending the determination of the application for leave to appeal, and, if leave is granted, the appeal or further order.

2.Upon payment into Court of the judgment sum, the orders made by Judge McNamara on 25 October 2017 be stayed, pending the determination of the application for leave to appeal, and, if leave is granted, the appeal or further order.

3.The application for leave to appeal be heard to together with the appeal, and they be listed for hearing with such expedition and priority as the Registrar of the Court of Appeal is able to afford the matter.

4.With respect to the costs of the application for a stay, it is proposed that the costs of the application for the stay be costs in the appeal. 

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