Mann v Paterson Constructions Pty Ltd
[2019] VSCA 17
•11 February 2019
SUPREME COURT OF VICTORIA
COURT OF APPEAL
S APCI 2018 0055
| PETER MANN | First applicant |
| and | |
| ANGELA MANN | Second applicant |
| v | |
| PATERSON CONSTRUCTIONS PTY LTD (ACN 135 579 770) | Respondent |
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| JUDGES: | KYROU and McLEISH JJA |
| WHERE HELD: | MELBOURNE |
| DATE OF HEARING: | 7 February 2019 |
| DATE OF JUDGMENT: | 11 February 2019 |
| MEDIUM NEUTRAL CITATION: | [2019] VSCA 17 |
| JUDGMENT APPEALED FROM: | Mann v Paterson Constructions Pty Ltd [2018] VSC 119 (Cavanough J) |
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PRACTICE AND PROCEDURE – Stay – Order of Victorian Civil and Administrative Tribunal requiring applicants to pay to respondent amount calculated on quantum meruit basis – Appeal to Trial Division dismissed – Further appeal to Court of Appeal dismissed – While application to High Court for special leave to appeal pending, stay granted on terms – Terms not satisfied – Stay lapsed – Special leave to appeal granted – Further application for stay pending hearing and determination of appeal to High Court – Application granted on new terms.
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| APPEARANCES: | Counsel | Solicitors |
| For the Applicants | Mr T J Margetts QC with Mr G F Hellyer and Mr A Roe | Telford Story & Associates |
| For the Respondent | Mr I D Martindale QC with Mr A J Laird | Kalus Kenny Intelex |
KYROU JA
McLEISH JA:
Introduction and summary
On 12 September 2018, this Court published its reasons for dismissing the applicants’ appeal against an order of a judge of the Trial Division, which in turn dismissed an appeal against an order made by the Victorian Civil and Administrative Tribunal (‘VCAT’) (‘principal reasons’).[1] On the same day, this Court made an order dismissing the appeal from the judge’s order and requiring the applicants to pay the respondent’s costs of the appeal.
[1]Mann v Paterson Constructions Pty Ltd [2018] VSCA 231.
On 3 October 2018, the applicants applied to the High Court for special leave to appeal against this Court’s order.
On 8 October 2018, the applicants applied to this Court for a stay of the order of the Trial Division and this Court’s costs order, pending the hearing and determination of their application for special leave to appeal.
The order that the Court made on 22 November 2018 in relation to that application (‘stay order’) was in the following terms:
1The order made by the Victorian Civil and Administrative Tribunal on 12 December 2016 (‘VCAT order’), paragraphs 2 and 5 of the order of Justice Cavanough made on 21 March 2018 (‘Justice Cavanough’s order’) and paragraph 3 of the order made by this Court on 12 September 2018 (‘this Court’s costs order’) are stayed until 4:00 pm on 20 December 2018 or until further order.
2 Subject to:
(a)on or before 4:00 pm on 29 November 2018, the applicants applying to the High Court for a direction that their application for special leave to appeal be given such expedition as the High Court considers appropriate;
(b)on or before 4:00 pm on 20 December 2018, the applicants paying to the respondent $250,000 on account of the amount of $652,534.41 ordered to be paid pursuant to the VCAT order as amended by paragraph 2 of Justice Cavanough’s order (‘judgment debt’);
(c)the applicants using their best endeavours to obtain on or before 4:00 pm on 13 December 2018 the written consent of the registered mortgagee of their properties known as units 1 and 2, 6 Langtree Court, Blackburn (‘properties’) to the grant to the respondent of a mortgage over each of the properties to secure payment of the judgment debt together with interest on the judgment debt and the costs ordered to be paid by the applicants under paragraph 5 of Justice Cavanough’s order and this Court’s costs order (‘interest and costs’), or such part thereof as remains outstanding from time to time; and
(d)within 7 days of obtaining the written consent referred to in paragraph 2(c) of this order, the applicants granting to the respondent a mortgage over each of the properties to secure payment of the judgment debt, interest and costs, or such part thereof as remains outstanding from time to time,
the VCAT order, paragraphs 2 and 5 of Justice Cavanough’s order and this Court’s costs order are stayed from 4:00 pm on 20 December 2018 until the hearing and determination of the applicants’ application to the High Court for special leave to appeal (or the appeal, if special leave is granted) or until further order.
3Other than for the purpose of securing a loan to enable the payment of the amount of $250,000 referred to in paragraph 2(b) of this order, the applicants must not deal with, dispose of, further encumber or otherwise diminish their equity in either of the properties without the written consent of the respondent or its solicitors or until further order.
4Subject to further order, during any period that a stay is in force in accordance with this order, the respondent must not:
(a)take any step which results in the applicants being in breach of the bankruptcy notice dated 20 April 2018;
(b) commence any bankruptcy proceeding against the applicants;
(c)take any step to enforce any mortgage granted pursuant to paragraph 2(d) of this order; or
(d)otherwise seek to enforce payment by the applicants of the judgment debt, interest and costs.
5 Liberty to apply is reserved.
6 The applicants pay the respondent’s costs of this application.
The Court published reasons for the costs order on the same day (‘stay reasons’).[2]
[2]Mann v Paterson Constructions Pty Ltd [2018] VSCA 313.
On 14 December 2018, the High Court granted the applicants’ application for special leave to appeal on all of the proposed grounds. It is expected that the appeal will be heard in the second or third week of April 2019.
Pursuant to the liberty to apply reserved in para 5 of the stay order, on 19 December 2018 the applicants applied for a variation to the stay order. The intended effect of the proposed variation was to continue the stay without condition (b) in para 2 of the stay order. The applicants submitted that they had complied with conditions (a) and (c) but, despite using their best endeavours to raise funds, they were not able to comply with condition (b).
The applicants could not comply with condition (d) until the Commonwealth Bank of Australia (‘CBA’), the mortgagee of units 1 and 2, 6 Langtree Court, Blackburn, consented to the grant of a second mortgage to the respondent. On 6 February 2019, CBA consented to a particular form of mortgage that was prepared by the respondent.
As the applicants did not comply with condition (b) in para 2 of the stay order, the stay lapsed at 4:00 pm on 20 December 2018.
On that day, this Court made the following order (‘procedural order’):
1The applicants file and serve any new application for a stay of the order made by the Victorian Civil and Administrative Tribunal on 12 December 2016, paragraphs 2 and 5 of the order of Justice Cavanough made on 21 March 2018 and paragraph 3 of the order made by this Court on 12 September 2018 by 4:00 pm on 23 January 2019 together with affidavits and written submissions in support of the application.
2The respondent file and serve affidavits and written submissions in opposition to any such application by 4:00 pm on 30 January 2019.
3Subject to further order, such application be heard at 9:30 am on 7 February 2019.
4The costs of the applicants’ application to extend the stay in this Court’s order dated 22 November 2018 pursuant to the liberty to apply reserved in that order be reserved.
5 Liberty to apply is reserved.[3]
[3]Paragraphs 2–5 of the procedural order were inadvertently omitted when the Prothonotary authenticated the order. The error was corrected on 29 January 2019.
The ‘Other Matters’ section of the procedural order stated the following:
This order is made on the basis that the parties will seek an order by consent from the Federal Circuit Court extending the time for compliance with the bankruptcy notice dated 20 April 2018 until 4:00 pm on 8 February 2019 and that, prior to that time, the respondent will not take any steps to enforce the judgment in the amount of $652,534.41 set out in paragraph 2 of the order of Justice Cavanough made on 21 March 2018.
In accordance with para 1 of the procedural order, on 23 January 2019, the applicants filed a new application for a stay. They seek an unconditional stay until the hearing and determination of the appeal to the High Court on the following ground:
There is a real risk that if the applicants’ appeal to the High Court were successful it would not be possible for the applicants to be restored to their former position if the orders against them were executed.
For the reasons that follow, we have concluded that a further stay should be granted to the applicants conditional upon them granting a second mortgage to the respondent in respect of units 1 and 2 by 4:00 pm on 14 February 2019.
As the nature and history of this proceeding are set out in the Court’s principal reasons and stay reasons, these reasons use the same terminology as those previous reasons and assume familiarity with them.
Important events since the granting of the stay order
On 28 November 2018, the applicants signed an exclusive auction authority with a real estate agent for the sale of unit 1 by auction on 23 February 2019. The amount owing by the applicants under the mortgage to CBA as at 6 February 2019 was $1,044,779. Unit 1 has been valued at an amount that would be more than sufficient to discharge that mortgage.
In a letter to the respondent’s solicitors dated 18 December 2018, the applicants’ solicitors stated the following:
We confirm that from the proceeds of the sale of unit 1, our clients would pay the balance to your client, after the discharge of the mortgage to [CBA] and payment of the selling costs.
On the same day, and consistent with para 3 of the stay order, the respondent consented to the sale of unit 1. Also on the same day, the Federal Circuit Court extended the time for compliance with the respondent’s bankruptcy notice dated 20 April 2018 (which demanded payment by the applicants of the judgment debt of $652,534.41) until 14 February 2019 and adjourned the further hearing of the proceeding before that Court to that day.
Evidence
The applicants have filed affidavit material which sets out their current financial position and the steps they have taken to obtain a loan from financial institutions and friends to enable them to pay the amount of $250,000 set out in the stay order, or the lower amount of $100,000 that was mentioned during the hearing on 19 November 2018.
The applicants engaged a mortgage broker, Kris Court of Court Financial Services Pty Ltd. In his affidavit dated 18 December 2018, Mr Court stated:
I carried out a detailed assessment of the applicants’ financial position, including by reference to our ‘FLEX’ software and made enquiries of various financial institutions — National Australia Bank, Bankwest, Citibank and Australian Finance Group. Unfortunately, I was not able to obtain such funding and I am of the opinion that it would not be possible for the applicants to obtain a loan at this time from any licensed financial institution for the sum of $250,000.
The applicants have also sought funding through a mortgage broking business operated by a solicitor. That application was rejected because the business was not licensed to assist the applicants with the type of loan that they sought.
In her affidavit dated 23 January 2019, Mrs Mann exhibited a draft profit and loss statement for MAA for the period 21 January 2018 to 21 January 2019. The statement showed income of $211,690, cost of sales of $84,895.65, gross profit of $126,794.35 and net profit of $70,471.61 from the conduct of a golf tournament in January 2019. Pursuant to a call made by the respondent, the applicants produced MAA’s bank statement for the period 1 October 2018 to 31 December 2018 and a list of MAA’s bank transactions for the period 1 January 2019 to 5 February 2019. These documents showed regular debit and credit items during those periods, with an opening balance of $30,463.64 on 1 October 2018 and a closing balance of $1,746.47 on 5 February 2019.
In their respective affidavits dated 23 January 2019, the applicants stated:
It would cause [them] to suffer irreparable detriment if [they] were:
(a)required to sell unit 2 to pay the amount of [VCAT’s] order as varied, and;
(b)subsequently the High Court were to hear and determine [their] appeal and to allow [their] appeal.[4]
[4]Mrs Mann’s affidavit uses the phrase ‘find [their] appeal was successful’ instead of ‘allow their appeal’.
The respondent filed an affidavit of Mr Paterson dated 31 January 2019, which provided an update on his and the respondent’s financial positions. The main changes since 8 November 2018 are:
(a)In respect of a current building project, the respondent received $69,361 in December 2018 and is due to receive further payments of $62,424.99, $41,616.66 and $242,763.85 by 8 February 2019, 28 February 2019 and 30 April 2019 respectively.
(b)Much of the abovementioned funds will need to be spent on purchasing materials and paying contractors.
(c)The respondent must pay $97,694 to the ATO by the end of February 2019.
(d)There are outstanding accounting fees of $10,000 and legal fees of $152,000.
In his affidavit, Mr Paterson stated the following about the abovementioned tax liability:
I will attempt to enter into a payment arrangement with the ATO.
If I am unable to do so, I will sell the [Marian Court investment property].
Legal principles governing the current application
In the stay reasons, this Court discussed in detail the legal principles relating to the grant of a stay of an order pending the hearing and determination of an application to the High Court for special leave to appeal against that order. We will not repeat that discussion.
The applicants submitted that the test to be applied by this Court now that the High Court has granted special leave to appeal is different to the test that was applicable prior to the grant of special leave, and which the Court applied in its stay reasons. They contended that they no longer have to establish exceptional circumstances. They relied on the following statement of Mason CJ in Smith v New South Wales Bar Association:
[Counsel] for the respondent submits that no stay should be granted unless exceptional circumstances are shown to exist and that means that the applicant must show that the subject matter of the appeal will be destroyed unless a stay is granted. He relies on the judgment of Brennan J in Beljajev v Director of Public Prosecutions. Beljajev was a criminal case in which a stay was sought pending the hearing of a special leave application at a stage when it is clearly established that exceptional circumstances must be shown to exist. The position is different, in my opinion, in a case such as the present when special leave has been granted and an appeal is pending. In such a case, the court has a discretion to grant a stay unqualified by the restraint of exceptional circumstances.[5]
[5](1991) 104 ALR 386, 387–8 (citations omitted) (‘Smith’).
According to the applicants, the test that the Court must now apply is that stated by Dawson J in Federal Commissioner of Taxation v Myer Emporium Ltd (No 1), namely, ‘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’.[6] They submitted that it is implicit in the above statement that the question of the balance of convenience, which informed the Court’s stay reasons, is not a relevant consideration once special leave to appeal is granted.
[6](1986) 160 CLR 220, 223 (‘Myer’).
The applicants argued that their affidavit material satisfies the test in Myer.
The respondent submitted that there is a distinction between the preconditions that enliven a court’s jurisdiction to grant a stay and the factors that are relevant to the exercise of the court’s discretion to grant a stay once the jurisdiction is enlivened. It contended that the requirement of special circumstances falls within the former category. According to the respondent, even if special circumstances need not be established, once the High Court grants special leave to appeal, the absence of that requirement does not affect the factors relevant to the exercise of the discretion to grant a stay.
The respondent submitted that the precise nature of the test to be applied by the Court is not material in the present case because the Court has already determined that the applicants have established special circumstances and the Court’s jurisdiction to grant a stay is thus enlivened. Accordingly, the respondent did not oppose the grant of a stay but contended that the stay must be on terms. The respondent argued that the only issue for the Court to decide is the terms upon which the stay is to be granted.
The respondent contended that the question of the balance of convenience is a factor relevant to the exercise of a court’s discretion to grant a stay whether or not special circumstances need to be established. That was said to be because the discretionary nature of a stay imports consideration of the balance of convenience and fairness to both parties.
As we are satisfied that the Court’s jurisdiction to grant a stay to the applicants continues to be enlivened, it is not necessary for us to embark on a detailed examination of the authorities dealing with the grant of a stay of an order in respect of which the High Court has granted special leave to appeal.
Contrary to the applicants’ submission, Dawson J in Myer did not purport to outline a test for the grant of a stay once the High Court grants special leave to appeal. Dawson J dealt with the types of circumstances that may constitute special circumstances. This is made clear by the following discussion, which includes the statement upon which the applicants have relied:
It is well established by authority that the discretion which [the relevant Court Rule] confers to order a stay of proceedings is only to be exercised where special circumstances exist which justify departure from the ordinary rule that a successful litigant is entitled to the fruits of his litigation pending the determination of any appeal … Special circumstances justifying a stay will exist where it is necessary to prevent the appeal, if successful, from being nugatory … Generally that will occur when, because of the respondent’s financial state, there is no reasonable prospect of recovering moneys paid pursuant to the judgment at first instance. However, special circumstances are not limited to that situation and will, I think, 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.[7]
[7]Myer (1986) 160 CLR 220, 222–3 (citations omitted).
We reject the applicants’ submission that, once the High Court grants special leave to appeal, the question of the balance of convenience becomes irrelevant. The Court retains the discretion to grant a stay on terms. In determining the nature of the terms to be imposed it is necessary for the Court to consider the interests of both parties and, in an appropriate case, the public interest.
There is nothing in Smith or any other authority upon which the applicants have relied[8] that is inconsistent with the above analysis. In Smith, the High Court granted the appellant special leave to appeal and a stay of the primary order — that his name be removed from the roll of barristers —upon his undertaking not to accept any new briefs. After the appellant had completed all of his extant briefs, he applied for an order discharging the undertaking on the basis of financial hardship. In refusing to make such an order, Mason CJ took into account not only the appellant’s interests but also public interest considerations.
[8]See Edelsten v Ward (No 2) (1988) 63 ALJR 346; Rahme v Commonwealth Bank of Australia (1993) 117 ALR 618.
The respondent has properly conceded that the applicants continue to meet the requirements for the grant of a stay and that the sole issue for the Court is the terms upon which such a stay is to be granted. A key consideration in resolving that issue is the balance of convenience.
Nature of the terms upon which a stay should be granted
In its stay reasons, the Court discussed in detail the circumstances informing the balance of convenience for the purpose of determining the terms to be imposed on the stay it granted in favour of the applicants. In resolving the present application for a stay, we will proceed on the basis that the terms set out in the stay order should be retained unless we are satisfied on the evidence that there have been material factual changes that warrant a departure from those terms.
Condition (a) in para 2 of the stay order is no longer necessary because not only have the applicants applied to the High Court for special leave to appeal, their application has been successful.
Condition (c) is also no longer necessary, as CBA has consented to the applicants’ grant of a second mortgage to the respondent.
Conditions (b) and (d) remain relevant and were the subject of extensive submissions by the parties, with arguments on the balance of convenience being made in respect of each of them, particularly condition (b). We will discuss those conditions separately.
Should a stay be subject to payment of $250,000 or any other amount?
The applicants submitted that if, contrary to their primary contention, the balance of convenience remains relevant notwithstanding the grant of special leave to appeal, the balance of convenience is strongly in favour of the Court not imposing a term requiring them to make any payment to the respondent. This was said to be because the evidence demonstrated that the applicants do not have the cash resources to enable them to make any payment to the respondent and, having used their best endeavours to borrow funds, they have not been able to secure any loan.
The applicants also submitted that the fact that the High Court has granted special leave to appeal in respect of all of their proposed grounds means that if their appeal is entirely successful and the proceeding is remitted to VCAT, it is likely that the amount that VCAT finds is payable to the respondent will be significantly less than $250,000.
The applicants also relied on the fact that they have placed unit 1 on the market for the purpose of raising funds. It will be recalled from [16] above that the applicants’ solicitors have informed the respondent’s solicitors that the net proceeds of the sale of unit 1 (after the CBA mortgage is discharged and selling costs are met) will be paid to the respondent.
Finally, the applicants submitted that in exercising its discretion in relation to any terms to be imposed on the grant of a stay in the present case, the Court should take into account that part of the judgment debt includes amounts that involved breaches by the respondent of s 23 of the Domestic Building Contracts Act 1995 (‘Act’). That section deals with prime cost items and imposes a criminal penalty for breach.
The respondent submitted that there has not been any material change in either the applicants’ or the respondent’s financial circumstances which would warrant departure from the Court’s assessment on 22 November 2018 that the balance of convenience favoured the imposition of a term that the applicants pay the amount of $250,000 to the respondent.
The respondent contended that the applicants have not used their best endeavours to obtain a loan. In particular, the respondent argued that notwithstanding discussion at the hearing on 20 December 2018 concerning the possible availability of loan funds from second and third tier financiers, the applicants have not applied for funding from any such institution.
The respondent submitted that the applicants have not made full and frank disclosure of their financial position or that of MAA. In relation to MAA, the respondent emphasised that, although the company received $126,794.35 from conducting a golf tournament in January 2019, that amount does not appear in MAA’s bank records.
According to the respondent, its financial position and that of Mr Paterson remain essentially unchanged, with a real prospect that the Marian Court investment property will have to be sold.
The respondent submitted that the existing arrangement between the parties, namely that any surplus funds from the sale of unit 1 will be paid to the respondent, should be formalised by an order of this Court.
In our opinion, on the current state of the evidence, it is no longer in the interests of justice for the applicants to be required to pay $250,000 or any other amount to the respondent as a condition of a stay. We have formed this view because of the following material changes since the stay order was made:
(a)The High Court has granted the applicants special leave to appeal and that appeal is likely to be heard in approximately two months. The fact that the special leave extends to all of the applicants’ grounds of appeal makes it more difficult to estimate the minimum amount that VCAT may award to the respondent if the High Court upholds all of the grounds and remits the proceeding to VCAT.
(b)The applicants have placed unit 1 on the market. If unit 1 is sold, it is likely that there will be some surplus funds which will be paid to the respondent.
(c)The cash flow of the applicants and MAA is insufficient to enable them to make any meaningful payment to the respondent.
(d)The attempts the applicants have made to obtain a loan, albeit limited in scope, have been unsuccessful.
(e)The applicants have addressed many of the evidentiary deficiencies that the Court identified in the stay reasons.
(f)The respondent’s current financial position does not appear to be as precarious as it was in November 2018. The main pressing financial obligation is the payment of $97,694 that must be made to the ATO by the end of February 2019. Although Mr Paterson has deposed that he will sell the Marian Court investment property if he is unable to enter into a payment arrangement with the ATO, there is no evidence before the Court as to the prospects of the ATO agreeing to such an arrangement.
We do not accept the respondent’s criticism of the financial information relating to MAA. That criticism is based on the erroneous assumption that, as MAA conducts a golf tournament in January of each year, all of the company’s income is received in that month.
The applicants’ submission based on s 23 of the Act is without merit. As there has not been any finding that the respondent has breached that section, the applicants’ allegation of a breach made at this stage of the proceeding cannot inform the exercise of the Court’s discretion to grant a stay on terms.
We accept the respondent’s submission that the existing arrangement between the parties regarding the payment to the respondent of any surplus funds arising from the sale of unit 1 should be formalised in an order of the Court.
Should applicants be required to grant a second mortgage to respondent?
Conditions (c) and (d) in para 2 of the stay order were included because, at the hearing on 19 November 2018, the applicants offered to grant a second mortgage to the respondent. At that hearing, the applicants’ senior counsel stated:
Finally, just in relation to conditions of the stay, we would, I’m instructed, consent to a second mortgage, but … we don’t know really how that would work because there is already an undertaking not to encumber the property or deal any further with the property. We see in relation to the second mortgage, we’d have to obtain the consent of the first mortgagee and it might take some time.[9]
[9]Transcript of Proceedings (19 November 2018) 89.
Notwithstanding this previous offer, the applicants submitted that it is no longer appropriate to impose a term that they grant a second mortgage to the respondent. This was said to be because such a mortgage would potentially remain on the title to unit 2 (and unit 1 if it is not sold) for an indeterminate period if the appeal to the High Court is successful and the proceeding is remitted to VCAT, and this could pose difficulties for the applicants. In the alternative, the applicants submitted that the Court should order that any second mortgage granted to the respondent be discharged if they succeed in the High Court and the VCAT decision is, in substance, overturned.
The applicants also contended that the terms of condition (d) in para 2 of the stay order are too wide because the security is not confined to the judgment debt but extends to interest and costs. The applicants contended that the inclusion of costs was tantamount to granting the respondent security for costs in circumstances where it has never applied for such security. They further contended that difficulties may arise in circumstances where costs are secured if, after the resolution of the applicants’ appeal to the High Court and any resulting remitter to VCAT, the parties have competing costs orders.
The applicants also submitted that, if this Court is minded to order that a second mortgage be granted, the grant of the mortgage should be specified as a condition of a stay rather than as an obligation that is independent of the grant of a stay.
The respondent submitted that the applicants have not demonstrated any sound reason why this Court should dispense with the requirement that they grant a second mortgage as a condition of a stay. They contended that security for a judgment customarily extends to interest on the judgment and the costs of obtaining the judgment. The respondent also argued that, as it is prepared to undertake not to enforce the judgment debt, interest and costs until the hearing and determination of the appeal to the High Court, there is no difficulty in this Court making separate orders granting a stay and requiring the applicants to grant a second mortgage.
The respondent also contended that it is not necessary for this Court’s order to provide for the discharge of the mortgage if the appeal to the High Court is successful, as the High Court will be in a position to decide what should happen to the mortgage in the light of that Court’s decision on the appeal.
We agree with the respondent’s submission that the applicants have not demonstrated any sound reason why this Court should dispense with the requirement that they grant a second mortgage as a condition of a stay.
The applicants volunteered to grant a second mortgage to the respondent. Moreover, the application that the applicants made on 19 December 2018 to vary the stay order was confined to condition (b) of para 2. They did not complain either about the condition that they grant a second mortgage to the respondent or the inclusion of interest and costs in the secured amounts.
Contrary to the applicants’ contention, there is a material difference between, on the one hand, a mortgage that is required to be provided as a condition of the grant of a stay of a judgment already obtained and which includes costs, and on the other, an order for the provision of security for costs of a proceeding which has not yet been determined.
We also agree with the respondent’s submission that it is not necessary for this Court to order that the second mortgage be discharged in any particular circumstances. If the appeal to the High Court is successful, the High Court will be able to order that the second mortgage be discharged if it considers that such an order is appropriate in the light of the outcome of the appeal. Further, liberty to apply will be reserved, which will enable the applicants to seek a discharge of the second mortgage if there is a change in circumstances which warrants such a discharge.
However, we agree with the applicants’ submission that the grant of a second mortgage should be a condition of a stay rather than being the subject of an independent order.
In our opinion, the possibility of competing costs orders in the future is not a persuasive reason for the exclusion of costs from the scope of the second mortgage. The fact that costs are secured would not prevent competing costs orders from being offset against each other. Further, any costs orders made in relation to the applicants’ applications for a stay will not be secured by the second mortgage. That is because no stay has been sought in respect of such orders.
Conclusion
For the above reasons, we will grant a stay pending the hearing and determination of the appeal to the High Court, conditional upon the applicants granting to the respondent a second mortgage over unit 1 and unit 2 by 4:00 pm on 14 February 2019.
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