Nom De Plume Pty Ltd (ACN 006 750 090) v Fingal Developments Pty Ltd (ACN 071 927 225)and Ascot Vale Self Storage Centre Pty Ltd (ACN 092 643 939) (Receivers and Managers Appointed) (in Liquidation)

[2015] VSCA 129

SUPREME COURT OF VICTORIA

COURT OF APPEAL

S APCI 2015 0041

NOM DE PLUME PTY LTD (ACN 006 750 090)

Applicant

v

FINGAL DEVELOPMENTS PTY LTD
(ACN 071 927 225)
and

ASCOT VALE SELF STORAGE CENTRE PTY LTD (ACN 092 643 939) (RECEIVERS AND MANAGERS APPOINTED) (IN LIQUIDATION)

First Respondent

Second Respondent

---

JUDGES:	MANDIE and KYROU JJA
WHERE HELD:	MELBOURNE
DATE OF HEARING:	29 May 2015
DATE OF JUDGMENT:	29 May 2015
MEDIUM NEUTRAL CITATION:	[2015] VSCA 129	1st Revision 1 June 2015;  para [12]
JUDGMENT APPEALED FROM:	Fingal Developments Pty Ltd v Nom De Plume Nominees Pty Ltd [2015] VSC 44 (Sifris J) Fingal Developments Pty Ltd v Nom De Plume Nominees Pty Ltd [No. 2] [2015] VSC 146 (Sifris J)

---

PRACTICE & PROCEDURE – Application for stay of execution of judgment pending the determination of an application for leave to appeal – Whether appeal would be rendered nugatory if a stay were not granted – Application dismissed.

---

APPEARANCES:	Counsel	Solicitors
For the Applicant	Mr P J Bick QC with Mr B Gibson	SBA Law
For the First Respondent	Mr D J Williams QC with Mr N McAteer	Jane Underwood Lawyers
For the Second Respondent	Piper Alderman – excused from the hearing

MANDIE JA:

1. The applicant (‘NDP’) seeks a stay of orders made in the Trial Division on 23 April 2015 pending the hearing and determination of a proposed appeal against the judgment that contains those orders.  An application for leave to appeal has been filed but is not before the Court on the hearing of this stay application.  This application is opposed by the successful plaintiff below (‘Fingal’). 

1. The Court’s judgment given on 23 April 2015 contained a number of declarations together with consequential orders that are the subject of the stay application.  In particular, NDP was ordered to pay Fingal the sum of $886,309.50 together with interest on that sum in the amount of $294,107.17, such amount to be held by the solicitors for the second defendant below (‘AVSS’) in a separate interest bearing account pending further order.  There was a further order for an account and inquiry to be taken before an associate judge as to the amount owing to Fingal by AVSS and as to related matters.  NDP was also ordered to pay the costs of Fingal to the date of judgment including reserved costs.  A stay as sought by NDP would prevent enforcement of the orders for the payment of money and costs and for the taking of accounts.

Procedural and factual background

1. The detailed facts are contained in the reasons for judgment delivered below on 20 February 2015.[1]  The reasons for the orders made are elucidated in reasons for judgment given on 23 April 2015.[2]

   [1]Fingal Developments Pty Ltd v Nom De Plume Nominees Pty Ltd [2015] VSC 44 (Sifris J).

   [2]Fingal Developments Pty Ltd v Nom De Plume Nominees Pty Ltd [No. 2] [2015] VSC 146 (Sifris J).

1. The proceeding was instituted in the Commercial Court on 8 March 2012.  Fingal’s claim appears from the further amended statement of claim filed 24 October 2012.  Fingal alleged that it was the holder of a registered charge (‘the Fingal  Charge’) over the property of AVSS.  AVSS, a company now in liquidation, is the trustee of a unit trust that was developing land in Ascot Vale for residential apartments.  NDP had a charge over the property of AVSS (‘the NDP Charge’) — this was a prior encumbrance to the Fingal Charge.  Fingal alleged that the NDP Charge had been satisfied, but that NDP had paid out monies to various persons and entities that should have been paid to Fingal as a subsequent encumbrancer.  Fingal claimed declarations that various liabilities of AVSS that were paid out by NDP were not secured by the NDP Charge (or by a related mortgage).  Fingal claimed a declaration that certain payments and other conduct by NDP were in breach of a duty owed by NDP and that there should be accounts and inquiries in relation to amounts that NDP had paid in breach of that duty and in relation to some other matters and transactions.  Fingal finally claimed an order on such account and inquiry that NDP pay to Fingal the amount that the Court found was due to Fingal, compensation and/or damages.

1. The trial took place in September and October 2014.  According to the applicant, it was a trial as to liability only, although it was set down for trial generally.  The judgment made declarations as to specific amounts and ordered that NDP pay a specified sum plus interest to Fingal (see above).  NDP complains of this, arguing that the trial was supposed to be as to liability only.  Fingal disputes the absolute nature of that contention and there seems to be some substance in Fingal’s position.  The judgment declared, inter alia, that the Fingal Charge was valid and enforceable and that Fingal had standing to recover amounts paid to NDP in excess of the amounts secured by the NDP Charge.  The judgment also declared what those amounts were.  A number of other declarations were made, together with the consequential orders referred to above.

1. The somewhat comprehensive proposed grounds of appeal challenge the judgment below both as to fact and law.  The proposed grounds raise issues as to the duty of secured creditors to account directly to other secured creditors and as to the standing of a secured creditor to recover alleged overpayments directly from another secured creditor.  The grounds also challenge a number of specific findings by the learned trial judge.

Stay pending application for leave to appeal or appeal

1. Rule 64.39 provides: 

Stay of execution

Except so far as the Court of Appeal otherwise orders—

(a) an application for leave to appeal or appeal shall not operate as a stay of execution or of proceedings under the decision appealed from; and

(b) no intermediate act or step shall be invalidated.

1. Rule 66.16 provides:

The Court may stay execution of a judgment.

1. As the Court said in Maher v Commonwealth Bank of Australia:[3]

   [3][2008] VSCA 122 [19]–[27] (citations omitted). See too Neate v Thoroughbred International Marketing Pty Ltd (2012) 34 VR 318, 319–21 [4]–[8] (‘Neate’).

19The principles governing a stay of execution of judgment pending the hearing and determination of an appeal are well established. 

20Prima 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.

21In 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.

22Young 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.

23The Court has a wide discretion, which is not circumscribed by rigid rules.  It should take into account all the circumstances of the case.

24In 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.

25In 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’.

26An 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.

27 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.

1. In Neate[4] the Court referred to authorities that stated that an applicant for a stay must show that there are reasonably arguable grounds for an appeal, or that the appeal enjoys reasonable prospects of success and went on to say:[5]

We note that on an application for a stay in a heavy factual case such as the present, this court will usually not have the evidentiary materials necessary to consider the merits of the grounds of appeal in any detail (and that is the situation here). Indeed, unless it appears that there is no reasonable ground of appeal or that the appeal is not bona fide, the court will generally focus on the matters relevant to the enforcement of the judgment in question rather than matters relevant to its validity or correctness.   

[4](2012) 34 VR 318.

[5]Ibid 321 [8] (citations omitted).

Application of principles to the present case

1. The judgment below is, with respect, comprehensive and well-reasoned.  Nevertheless, as a matter purely of first impression, there appear to be some arguable grounds of appeal.  I do not wish to pre-empt the question that must be decided by the Court hearing the application for leave to appeal, namely, whether the proposed appeal has a real prospect of success.  The case is of considerable factual complexity and some legal complexity.  It is therefore appropriate in my view to consider the circumstances, as appear from the evidence, that are relevant to the question of justice and the balance of convenience, in order to decide how the discretion to grant a stay should be exercised.

1. An affidavit in support of the application has been sworn by Richard John Leggo,[6] a director of NDP and AVSS.  Mr Leggo deposes that NDP has not complied with the order for payment of money, and that Fingal has served upon NDP a creditor’s statutory demand for payment thereof.  Mr Leggo deposes that NDP is a bare trustee which has acted in the past in relation to the matters the subject of the proceeding on behalf of various lenders consisting of himself, his family members and entities associated with his family (‘Lenders’).  Mr Leggo says that NDP has ‘no assets or income of its own and therefore no ability to raise funds from financial institutions or other independent lenders’ and therefore it is reliant on the Lenders for funding. 

   [6]Sworn 21 May 2015.

1. Mr Leggo then deposes:

17. … the Lenders (other than myself) are seeking their own independent advice on the effect of the decision [below] on them and are unlikely to advance or to consider advancing further funds to NDP until the application for leave to appeal and the appeal (if leave is granted) has been determined.

18. I believe that I (as a Lender in my own right) will be able to raise for NDP from my own resources sufficient further loan funds to enable it to prosecute the appeal.  However, I am unable as my personal finances currently stand to raise, for NDP, sufficient further loan funds to enable it to comply with [the order for payment below] and prosecute the appeal. 

19.In the circumstances, should [the order for payment below] not be stayed… it is likely that Fingal will take steps consequent on non-compliance with the order to have the appeal stayed or brought to an end, thereby preventing NDP from prosecuting the appeal and rendering it nugatory.

1. In the circumstances and based on the above affidavit, NDP submits that, by serving a statutory demand, Fingal has foreshadowed the commencement of proceedings to wind up NDP and that an order for the winding up of NDP was likely to render the appeal nugatory.  NDP further submits that, as a result, there would be considerable prejudice to NDP if a stay were not granted, whereas Fingal would not be prejudiced by a stay (given that it has no immediate right to actual payment of the judgment sum) and, moreover, ‘no interest in the payment amount until the quantum of its loss and damage has been determined in the taking of accounts’.

1. An affidavit in opposition to the application has been sworn by Antony John Shaw Melville,[7] the sole director of Fingal.  Mr Melville says that the trial of the proceeding was on both liability and quantum in respect of a number of specific claims.

   [7]Sworn 27 May 2015.

1. Mr Melville exhibits to his affidavit, inter alia, a true copy of an executed Acknowledgment of Trust and Deed of Indemnity between NDP and the Lenders dated 11 June 2009 (‘Deed of Indemnity’) that was tendered at trial.  Mr Melville points to clause 1 of the Deed of Indemnity which provides that the Lenders ‘indemnify NDP… against any liability, expenses, costs, loss or damage arising from the said trusteeship’.  The Deed of Indemnity identifies the Lenders as at 11 June 2009 as Glenvue Nominees Pty Ltd ($1,100,000), Flapley Pty Ltd ($1,005,331), R J Leggo ($1,098,655) and R J Leggo and L M Leggo ($446,499).  The affidavit shows that Mr Leggo is (or was) a director of Glenvue Nominees Pty Ltd, that Mr Leggo and his wife, Louise Mary Leggo, are equal shareholders of Flapley Pty Ltd of which Mr Leggo is the sole director.

1. In his affidavit, Mr Melville refers to the statement by Mr Leggo as to his

inability to raise funds to enable NDP to comply with the judgment below.  In that regard, Mr Melville exhibits material relating to the assets and liabilities of Mr Leggo and his wife that was tendered at trial.  The material shows assets (principally real estate) valued at $13.7 million (and superannuation assets of a further $3 million), liabilities of $3.25 million resulting in net worth of $13.45 million.  There is also reference in the same material to Flapley Pty Ltd which is described as a private investment company with net assets of over $1 million.

1. In the light of that evidentiary material, Fingal submits that the assertions by Mr Leggo in his affidavit, as to NDP’s inability to pay the judgment sum or to raise the funds to do so, should not be accepted.  Fingal submits that Mr Leggo has not provided the terms of the trust nor any relevant financial information to support his assertions.  Fingal further relies upon the terms of the Deed of Indemnity.

1. I would generally accept Fingal’s submissions.  I am not satisfied, on the basis of the material provided by NDP, that if no stay were granted there would be a real risk of the appeal being rendered nugatory.  Nor am I persuaded on that material that there is a real risk of a winding up in fact happening.  It is true that neither respondent will have the benefit of the money ordered to be paid until after the taking of accounts and inquiries, but Fingal is entitled to the fruits of its judgment despite that limitation and I do not think that NDP has advanced a good reason for granting any stay. 

1. For the foregoing reasons, I would dismiss the application with costs.

KYROU JA:

1. I agree.

———