Dagenham Nominees Pty Ltd v Shanks (No 3) - [2013] SADC 57

DISTRICT COURT OF SOUTH AUSTRALIA
(Civil: Application)
DAGENHAM NOMINEES PTY LTD v SHANKS (NO 3)
[2013] SADC 57
Reasons for Ruling of His Honour Judge Stretton (ex tempore)
22 July 2011
APPEAL AND NEW TRIAL - APPEAL - PRACTICE AND PROCEDURE - SOUTH AUSTRALIA - STAY OF PROCEEDINGS
Application for a stay of execution of the judgment of this court, pending appeal. The plaintiff lost a third trial in the District Court and has appealed a third time to the Supreme Court. The case involves complex factual issues surrounding the construction and subsequent failure of a mast. The plaintiff is a small family company. It has spent $800,000 on legal costs to date and would be insolvent unless the judgment is stayed pending the outcome of the appeal. The solicitor for the plaintiff did not provide adequate material, support or instructions to counsel for the stay application, which was inadequately and unsatisfactory argued.
Held: It is impossible to determine the strength of the appeal or its likelihood of success due to inadequate submissions by its counsel. The plaintiff is a small family company who has spent $800,000 in legal costs to date. The plaintiff will be insolvent and the appeal rendered nugatory in the absence of a stay. The law no longer requires special circumstances to stay execution of judgment. It is highly unsatisfactory that the fate of the claim and the continued existence of the plaintiff depends on the inadequate material presented. On balance the judgment is stayed pending the appeal. Costs of the application to abide the outcome of the appeal.

DAGENHAM NOMINEES PTY LTD v SHANKS (NO 3)
[2013] SADC 57

In this matter an application has been made by the plaintiff in the matter, now the appellant, for a stay. There is currently an appeal against a judgment in this court and the appellant seeks a stay pending the hearing and determination of that appeal in the Supreme Court.
The matter has a long history, it commenced many years ago. The case first went to judgment on 19 December 2002. A former judge of this court gave judgment for the defendant over the dispute involving the supply of a mast made by the plaintiff for the defendant.
That decision was overturned by the Full Court in 2003 based on a range of issues, the accuracy of factual findings and whether the appropriate parameters of the case were addressed. The case was sent back to the former judge of this court for further hearing.
That judge delivered another judgment on 23 September 2005, again for the defendant. The plaintiff again appealed and the judgment of this Court was again overturned, this time on 29 June 2007. On that occasion the Full Court found that the facts had been inadequately analysed and that aspects that required resolution had not been adequately addressed. The matter was again remitted to this Court.
A new judge of this court tried the matter and judgment was again entered for the defendant on 2 June 2011.
That judgment deals in great length with what are plainly complex technical issues involving the construction of the mast in question, its suitability for purpose and the circumstances of its failure. Also dealt with in that judgment at great length was the complex issue of the appropriate requirements for such a mast, factual and evidential issues over what actually occurred in the construction of the mast, whether the construction of the mast was reliably documented, what happened on the water, and so on. To say that the issues are extensive is an understatement.
The plaintiff has appealed to the Supreme Court for a third time. It has appealed on a range of grounds which again include the correctness of the factual findings, the cause of the failure of the mast, how the mast was built and a range of other matters relating to its fitness for purpose. The complaints include the treatment of the conflicting expert evidence in the case and also raise the issue of the burden of establishing the fitness and merchantability of the mast, given the contractual nature of the claim.
Each party claimed moneys from the other in the original action. The plaintiff claimed the remainder of the outstanding moneys it said it was owed for the mast it had supplied. The defendant claimed a return of the moneys it had paid on the basis that the mast was not of the contracted quality. Even the burden of proof in relation to the fitness and merchantability of the mast was an issue.
I received three affidavits. The first affidavit from the plaintiff, Mr Banwell, essentially seeks to argue some of the grounds of appeal in lay terms. This is of limited assistance. I have relied on the more extensive submissions, albeit limited for reasons I will soon mention, made by counsel for the plaintiff, Ms Scragg.
A second affidavit of Mr Banwell is to the effect that the plaintiff company is a longstanding trustee of the family trust. It has carried on business as a marine fittings manufacturer over some years. Subsequent to the events that gave rise to this litigation, it was forced to cease trading in around 2003 due to a refusal by its insurer to continue insuring it.
On the material before the court the plaintiff is a legitimate plaintiff who was conducting the business of mast supply. It is not a front or a shell for the litigation. In other words it is not a two dollar company shielding the real litigant.
The further thrust of Mr Banwell’s affidavit is that a large amount of the company’s property and resources have been expended pursuing the litigation and significant liability has been incurred in pursuing the litigation. The effect of paras.11-12 of Mr Banwell’s most recent affidavit are that it owes some $800000 to the company’s directors and the University of Adelaide on account of funding the litigation.
It also says that but for these proceedings, the plaintiff would be solvent. It is clear that the creditors I have mentioned have not enforced their debt. It is not absolutely clear whether the debt is currently payable, that will depend on the terms of the credit that has been extended.
The reality is that if I do not order a stay in this matter it is plain that the judgment debt will be immediately payable. I conclude from Mr Banwell’s second affidavit that the company has no ability to pay. Accordingly it will become insolvent immediately.
Upon insolvency there is an immediate legal obligation for the company to go into administration. When in administration, the administrator must make a decision whether to attempt to negotiate to comprise the debts and reach an arrangement, or go into liquidation. In the course of that, either the administrator or the liquidator would need to consider the possibility of pursuing the appeal. These ex tempore reasons are not really the place to make any more complex an observation than that a liquidator is significantly less capable or likely to pursue an appeal for all the considerations that a liquidator needs to take into account. Those considerations include the personal liability of the liquidator for costs and the obvious difficulties it will have funding the appeal. Both of those considerations present considerable obstacles. In essence, it is highly likely that the plaintiff’s practical ability to pursue the appeal will cease upon a refusal of the stay.
I do take into account Mr Mackey’s affidavit which is to the effect that were the judgment sum to be paid and were an appeal to be allowed, that sum could be returned.
I return to the appeal itself. Counsel for the appellant has convinced me that there are arguments based on the grounds of appeal filed. On the limited assistance I have received it is very difficult to form an assessment of their likelihood of success. Counsel have taken me to one or two aspects of the judgment, against a background of what they submit was the factual matrix facing the trial judge, and addressed only some of the grounds of appeal.
Counsel for the appellant has been hamstrung by the fact that she was not the trial counsel who is, for some reason, not here. She only has some notes provided by him. She has not had access to the transcript, and she has been limited in what she can put to me about what transpired before the trial judge. I assume from her submissions that she did not draft the notice of appeal.
It is therefore very marginal whether I could be satisfied that there is an arguable ground of appeal. Without criticising her personally, because I appreciate the difficulties she has faced, the argument put to me has been inadequate and unsatisfactory.
I am cognisant however that there are real parties behind this litigation and that the plaintiff’s appeal will be rendered nugatory if the stay is not granted.
I am aware from Mr Banwell’s second affidavit that the company is essentially a family company involving him and his wife. The plaintiff is the trustee of the family trust. The family is out of pocket by some $600,000 in terms of the moneys Mr Banwell is owed by what would otherwise become an insolvent company if I do not order the stay.
I take into account the authorities cited to me.
I have to determine what is fair in all the circumstances of the case, balancing the interests of both parties. I accept the law no longer requires special circumstances or some exceptional feature for the favourable exercise of the discretion to stay. It is plain that the appeal will be rendered nugatory by the winding up of the plaintiff should I not grant the stay. It is highly unsatisfactory that the whole fate of the plaintiff as an entity, and the financial interests of the defendant in this application depend on such inadequate submissions to this court.
In all those circumstances, with some reluctance, I err on the side of preserving the plaintiff to enable it to pursue its appeal. In the final analysis it should not be liquidated due to the failings of its legal representation. I order that the judgment be stayed until further order. I indicate that I have done this “only just”, and I have done it on an interim basis and so should circumstances change or counsel wish to re-ventilate the matter in any more detail before the Supreme Court that can obviously occur.
I was tempted to grant the stay limited in time to encourage the plaintiff to vigorously pursue its appeal; however the defendant tells me there is no point doing that given that the time limits applicable to the ventilation of the appeal over the road will have that same effect upon the plaintiff. Yes, any submissions as to costs?
MS SCRAGG: I don’t make any submissions.
HIS HONOUR: Ms Scragg, my order is very much at the far edge of the discretion which I think I can legally exercise. Your client has been lucky to get a stay. I do not think I should order costs in your favour notwithstanding the success of your application.
MR MACKEY: It might be a bit rich for the defendant to seek its costs in the circumstances of the plaintiff being successful in its application.
HIS HONOUR: What I will do, Mr Mackey, is I will reserve the question of costs and, in my view, the costs of this should abide the outcome of the appeal.
MR MACKEY: Thank you.
HIS HONOUR: So that if you are successful in the appeal you should have your costs of today. No comment, Ms Scragg, on that proposition?
MS SCRAGG: No, that’s satisfactory with me, thank you.