Overton Investments Pty Ltd v The Minister (No.4)

[2000] NSWLEC 247

Land and Environment Court

of New South Wales

CITATION:	Overton Investments Pty Ltd v The Minister (No.4) [2000] NSWLEC 247
PARTIES:	APPLICANT Overton Investments Pty Ltd RESPONDENT The Minister administering the Environmental Planning & Assessment Act 1979
FILE NUMBER(S):	30178 of 1995
CORAM:	Sheahan J
KEY ISSUES:	Orders :- application for stay - appeal pending - discretion - conditions
LEGISLATION CITED:	Corporations Law Land Acquisition (Just Terms Compensation) Act 1991 Supreme Court Rules Part 44 Rule 5
CASES CITED:	Alexander & Ors v Cambridge Credit Corporation Ltd (receivers appointed) & Anor (1985) 2 NSWLR 685; Rosengrens Ltd v Safe Deposit Centres Ltd [1984] 3 All ER 198; Trlin v Marac Finance Aust Ltd (Court of Appeal, 4 March 1985)
DATES OF HEARING:	24/11/2000
DATE OF JUDGMENT:	11/30/2000
LEGAL REPRESENTATIVES:	APPLICANT Mr J Webster (Barrister) SOLICITORS Gadens Lawyers RESPONDENT Mr T Hale SC (Barrister) SOLICITORS Minter Ellison

JUDGMENT:

IN THE LAND AND Matter No: 30178 of 1995

ENVIRONMENT COURT Coram: Sheahan J

OF NEW SOUTH WALES 30 November 2000

OVERTON INVESTMENTS PTY LTD

Applicant

v

THE MINISTER ADMINISTERING THE ENVIRONMENTAL PLANNING AND ASSESSMENT ACT 1979

Respondent

JUDGMENT

Introduction

1. This is an application for a “ stay ” of this court’s orders, pending the conclusion of an appeal to the Court of Appeal.

2. By Notice of Motion dated 11 October 2000, the applicant seeks an order that “ Order 1 of the Minute of Orders of the Court dated 24 September (sic) 1998 be stayed until the determination of the appeal by the Applicant of the decisions of Justice Sheahan of 24 April 1998 and 24 December 1998 ”.

3. In fact, the court’s “ final ” orders in this matter were entered on 24 December 1998, and taken out on 25 January 1999.

4. The case concerned a claim for compensation for land resumed by the Minister on 2 August 1995 for a market value of $650,000, plus $77,500. When the applicant objected to the valuation and commenced its proceedings, the Minister paid over, on 10 November 1995, 90% of the assessed compensation, namely $654,750, pursuant to s 34(1)(b) of the Land Acquisition (Just Terms Compensation) Act 1991 (“ the Act ”).

5. In my principal judgment, dated 24 April 1998, I arrived at a market value of $105,000 and zero for severance. In the judgment dated 24 December 1998, I allowed an amount of $81,031.54 for disturbance. As at the date of those judgments, the applicant owned real property at 33 Bernard Road, Padstow Heights, and conducted thereon a retirement village business.

6. The applicant sought in its appeal to this court compensation of between $965,000 and $4,190,000 in respect of market value. The respondent contended for a value between $84,000 and $250,000. In respect of disturbance the applicant claimed $91,900 and the Minister allowed $13,000.

7. The final determination of compensation by this court was a total of $186,031.54, and each party was ordered to pay its own costs.

8. The applicant has appealed that decision, and the appeal is likely to be heard in the early part (possibly March-April) of 2001.

9. On 9 September 2000, it came to the attention of the Minister that the applicant may have sold its interest in the retained land, and divested itself of the management of the retirement village.

10. Property inquiries disclosed that the land had been sold on 29 June 2000 for $6.5M, that the memorandum of transfer had been registered on 9 August 2000, and that, out of the proceeds of the sale a charge over the applicant’s assets, to Medical and Educational Trustees Limited, had been discharged, in the sum of approximately $3M.

11. The applicant retains a first mortgage over the land in the sum of $2M, repayable 15 months from 29 June 2000.

12. It is unclear whether the applicant company owns any other real property, or conducts any other business.

Pre-payment and re-payment - corporations law

13. Section 48(4) of the Act provides that:

A person who receives an advance payment of compensation which exceeds the amount of compensation to which the person is entitled must repay to the authority of the State the amount of the excess.

14. Section 48(6) provides that:

Any amount due to an authority of the State under this section may be recovered as a debt in any court of competent jurisdiction.

15. The parties agree that the amount of any such “ overpayment ” cannot be the subject of recovery action in this court. The statutory “ debt ” must be pursued in another court.

16. During 1999, the Minister’s solicitors served on the applicant a letter of demand for repayment of the difference between the amount of prepayment and the amount of my compensation order, and the applicant’s solicitors responded that their client would “ not pay any moneys… as an appeal had been lodged with the Court of Appeal ”.

17. It was correctly pointed out by the solicitors for the Minister that the mere lodgment of an appeal against the judgment of this court does not operate as a stay of execution of the orders made by this court at first instance.

18. The Minister instructed his solicitors to advise the applicant that they would serve a “ statutory demand under the Corporations Law ” on the applicant, “ unless you seek a stay of execution of the above proceedings in the Land & Environment Court ”. A draft statutory demand was forwarded, for an amount of $468,718.46, calculated by subtracting from an advance payment ($654,750) the amount of the compensation ordered on 24 December 1998 ($186,031.54), as required by s 48(6).

19. After the making of a statutory demand under s 459E of the Corporations Law, its recipient must determine whether to make “ an application to set aside Statutory demand ” under Division 3 of the Corporations Law (commencing at s 459G).

20. Such an application would normally be made to the Supreme Court, and must be made within 21 days of the service of the demand. Section 459H, and following, deal with this procedure, and the statutory demand has no effect while an order setting it aside is on foot pursuant to s 459H or s 459J.

21. Section 459J provides that, on an application under s 459G:

the Court may by order set aside the demand if it is satisfied that:

(a) because of a defect in the demand, substantial injustice will be caused unless the demand is set aside; or
(b) there is some other reason why the demand should be set aside.

22. Any such Supreme Court proceedings would be expected to result in the exposure, in and to that court, of the subject company’s total financial position.

Stay application - the competing submissions

23. Part 44 of the Supreme Court Rules operates in this court, and Rule 5 of Part 44 provides: “ The Court may, on terms, stay execution of a judgment or order”. Such power is stated, by Ritchie’s Supreme Court Procedure (at par 44.5.1), to be “ in addition to the power conferred to grant a stay pending an appeal ”.

24. The Minister’s expressed concern is that, with the retained land and the improvements thereon, in the form of a retirement complex and nursing home facility, having been disposed of, enforcement of a statutory obligation to repay the difference, even leaving aside all questions of interest, may well be in doubt, in the event that Overton loses its appeal to the Court of Appeal.

25. The Minister maintains that he is not able to assess the true financial position, and therefore, the “ solvency ” of the applicant company. Such solvency is not established merely by the company’s status as a mortgagee. It has sold its only realty and discharged a major charge on the proceeds of the sale. It would appear to him that the company may be in the process of being wound down.

26. The Minister does not wish to be left as an unsecured creditor, and wishes to have a degree of “ security ” for the repayment, such as would be afforded by a bank guarantee. If the statutory demand proceeds and is challenged, the Supreme Court would look at the total financial position of Overton Investments and, in the result, the status of the Minister as a creditor may be downgraded.

27. The consistent position of the Minister, at least since his solicitor’s letter dated 22 September 2000, is that the Minister would not oppose the stay if it were granted on the following conditions:

(a) that the repayment of the sum currently owed to the Minister, and interest, are secured; and
(b) an undertaking is given by the applicant to do all that is necessary to expedite the current appeal.

28. Ms Rodgers, solicitor for the Minister has now deposed (21 November 2000 par 18) that she would consent, on the Minister’s behalf, to a stay of the judgment on the following terms:

(a) the Respondent be given an unconditional bank guarantee from an Australian Trading Bank in the sum of $468,718.46; Alternatively that the sum of $468,718.46 be paid by the Applicant into a controlled money account in the names of the Applicant’s and Respondent’s respective solicitors;
(b) the Applicant files in the Court an affidavit setting out its assets, liabilities and financial transactions in a form to be agreed upon by the parties;
(c) the Applicant undertakes to the Court not to dispose of any assets before the hearing of the appeal or a further order of the Court; and
(d) the Applicant to pay the costs of the stay application.

29. During the hearing of this application for a stay, Mr Webster, Counsel for the applicant, tendered a letter from the company dated 24 November 2000, and indicated that the applicant company’s solicitors would also give an undertaking to the court to honour the spirit of that letter ( Exhibit O2 ), which is in the following terms:

Overton Investments Pty Limited (Overton) gives an irrevocable undertaking to your client to do the following if a stay of execution is granted for the recovery of the compensation paid by your client that exceeded the determination of Justice Sheahan:
(1) Overton will instruct Gadens Lawyers to act for it in the discharge of the first mortgage in the amount of Two Million Dollars ($2,000,000.00) it has obtained from the purchaser of the Heritage Retirement Village, located on Lot 10 in Deposited Plan 850969 (the mortgage).
(2) The principal sum of the mortgage will be applied in one of the following manners:
(a) If judgment in the appeal proceedings (the Judgment) has been handed down prior to the discharge of the mortgage, Overton will apply so much of that money that is owing to your client at that time less the amount of $14,890.00 which represents the agreed amount of costs payable by your client to Overton in the class 4 proceedings.
(b) If the Judgment has not been handed down prior to the discharge or partial discharge of the mortgage or prior to repayments of that sum made before the end of the mortgage term, Overton will provide Gadens Lawyers with a direction to pay so much of the money received upon the discharge or upon each partial discharge or upon repayments of that sum made before the end of the mortgage term as is required into a controlled money account to be retained for the purpose of distributing any amount of money owing to your client following that judgment less the amount of $14,890.00 which represents the agreed amount of costs payable by your client to Overton in the class 4 proceedings.
(c) If Overton is successful on appeal, any money held in the controlled account will be released to Overton and Overton will require your client to pay to Overton the amount of $14,390.00 which represents the agreed amount of costs payable by your client to Overton in the class 4 proceedings, at the time the Judgment is handed down.
(3) Overton will instruct Gadens Lawyers to open a controlled money account in accordance with the Legal Profession Regulations for the purpose of holding the money received by Overton from the discharge or partial discharge of the mortgage or upon any repayments of that sum made before the end of the mortgage term.
(4) If Gadens Lawyers is dissolved before the mortgage is discharged, Overton will instruct its solicitors to notify your client immediately.

30. Mr Webster accepts that the granting of the stay is a discretionary matter. He relies on Rosengrens Ltd v Safe Deposit Centres Ltd [1984] 3 All ER 198, which is authority for the proposition that:

… the court has a duty to preserve the rights of both parties even-handedly until the appeal has been heard … The Court’s sole function is to ensure that the security given adequately protects the plaintiff, and so long as that protection is achieved it does not matter what form the security takes. Accordingly, there is no reason in principle why a banker’s guarantee should not secure the sum so ordered.

31. Parker LJ said (at 200-201):

So long as the opposite party can be adequately protected, it is right and proper that the security should be given in a way which is the least disadvantageous to the party giving that security.

It may take many forms. Bank guarantee and payment into court are but two of them. Frequently security is considered wholly adequate when it is provided merely by a London solicitor’s undertaking. So long as it is adequate, then the form of it is a matter which is immaterial.

32. Donaldson MR said (at 199):

Security can be provided in a large number of different ways, the most common of which is paying money into court or providing a bank guarantee. Where a court is trying to preserve a position pending a further investigation either of a counterclaim or a possible appeal, it is rightly concerned to make certain that the thus far successful party shall not by the passage of time lose the potential fruits of his judgment. That is what security is all about. The court is not concerned to take steps against the unsuccessful party with a view to punishing him in any way or to disadvantage him to any greater extent than is necessary to do justice to the plaintiff”.

33. Overton is concerned that a bank guarantee would cost it money, and complains that the tactics of the Minister, in seeking to expose the company to some “ jeopardy ” in a Supreme Court review of its position, justify the exercise of the court’s discretion in its favour.

34. While the context of the suggested undertakings is noted, the Minister does not regard that as security, as the company may be the subject of other demands, and, if a liquidator were brought in, all its debts would be frozen and repayment would be out of the Minister’s control, leaving the Minister to fight for his money as an unsecured creditor. Alternatively, if the “ debt ” were to be now paid, the Minister would risk being regarded as a preferential recipient. The Minister cannot assess the level of security offered by the outstanding mortgage, in the absence of knowledge about other possible calls on the funds, and an assurance that there were no defects in the mortgage itself.

35. The Minister’s position is that if Overton is indeed financially sound, it would succeed in getting a bank guarantee, and the question of its cost would not be relevant. There is absolutely no reason in these circumstances for the Minister to take the risk, rather than Overton or its bankers. The effect of the continuation of the current arrangement is that the Government has made to Overton an interest free loan. If the court were to accept the undertakings, the Minister’s only right in the case of default would be to sue for breach of the undertaking.

The relevant case law in NSW

36. Both parties took the court to the decision of the NSW Court of Appeal in Alexander & Ors v Cambridge Credit Corporation Ltd (receivers appointed) & Anor (1985) 2 NSWLR 685.

37. Cambridge had succeeded in winning a verdict of $145M on the basis that Alexander and others were negligent in failing to require provision to be made in the annual accounts of Cambridge for the year ended 30 June 1971 against a debt owned to Cambridge by Hunter Purchases Ltd.

38. An appeal and a cross appeal were lodged, but all parties proceeded on the basis that the orders proposed by Rogers J were valid, and no objection was raised to the judgment being entered in those terms by Foster J. It was common ground that there were serious questions to be considered on the appeal, and the parties agreed that any sums recovered pursuant to execution upon the judgment, would not be disbursed, but would be held, pending the appeal, in a fund to secure interest, which would then accrue to the benefit of the claimants, and be available to them in the event that they were ultimately successful at the end of the appeal process.

39. On 18 April 1985, Clarke J granted a stay of execution, pending the determination of the appeal. Relevant conditions included one that each of the opponents should, before a specified date, file and serve an affidavit listing and describing assets, liabilities etc, and any dealing with any such asset or liability, “ otherwise than for full consideration, in the ordinary course of business or professional practice, or to meet ordinary revenue expenses ” (at 688).

40. The Court of Appeal made it clear (at 693) that “ a judgment creditor is entitled to the ‘fruits of his victory’ unless the appellant can show ‘special’ or ‘exceptional’ circumstances which warrant the imposition of a stay ”, but considered there were three reasons for that basic rule and test to be reviewed:

(1) “ there is no suggestion in the rule that ‘special’ or ‘exceptional’ circumstances must be established before the discretion conferred upon the Court will be exercised. The Rules did not reflect such a view and “ The absence of such a provision implies, at least in the practice of this Court, that no such requirement exists ”.
(2) appeals were more common rather than exceptional, particularly in commercial matters where large sums are at stake.
(3) there was a trend in the authorities against the need for special or exceptional circumstances in order to justify a stay.

41. The Court of Appeal said (at 694):

In our opinion it is not necessary for the grant of a stay that special or exceptional circumstances should be made out. It is sufficient that the applicant for the stay demonstrates a reason or an appropriate case to warrant the exercise of discretion in his favour.

and went on to indicate other principles which should be kept in mind, such as:

(a) The applicant must demonstrate a proper basis for a stay fair to all parties.
(b) An appeal of itself does not provide a reason or demonstrate an appropriate case, nor discharge the onus upon the applicant.
(c) The court has a discretion whether or not to grant a stay and, if so, as to the terms. In being “ fair ” the court will exercise consideration such as the balance of convenience and the competing rights of the parties.
(d) Where there is a risk that if a stay is granted the assets of the applicant will be disposed of, the court may refuse.
(e) The court may impose upon the applicant the payment of the whole or the part of the judgment to the judgment creditor.
(f) The court may insist upon the appellant giving to the judgment creditor security in terms defined by the court as appropriate to the fair adjustment of the rights of the party. (The court referred to Trlin v Marac Finance Aust Ltd (Court of Appeal 4 March 1985) where, as a condition of continuance of a stay, the court ordered the applicant to pay into a joint trust account, jointly administered by the solicitors for the parties, a sum equivalent to the interest payable under the mortgage which was the subject of the dispute, to be held on trust and available for disposition at the conclusion of the appeal).

42. The Court of Appeal further noted that, where there is a risk that the appeal will prove abortive if the appellant succeeds and a stay is not granted, the courts would normally exercise their discretion in favour of granting a stay. Although a court approaching applications for a stay will not generally speculate about the appellant’s prospects of success, it will still look for appropriate terms, fairly to adjust the interest of the parties, ie terms protective of the position of a judgment creditor.

43. On the basis of the principles discussed in Cambridge Credit , the Respondent Minister finally argued before me that a short stay could be granted and that the applicants could be directed to file affidavits as suggested in par 18(b) of Rodgers’ affidavit. Any stay granted could be the subject of an application for amendment at a later date by either of the parties. Any conditions must not put the capital sum at risk and should provide for interest.

Conclusion

44. Having considered all the circumstances in this case, and the principles in both Rosengrens and Cambridge Credit , I believe that the outcome “ fair to all parties ” is to agree that the applicant is entitled to have the orders of 24 December 1998 stayed until further order, but that the respondent is entitled to have the level of comfort provided by its preferred conditions, namely those set out in par 28 above:

(a) the Respondent be given an unconditional bank guarantee from an Australian Trading Bank in the sum of $468,718.46; Alternatively that the sum of $468,718.46 be paid by the Applicant into a controlled money account in the names of the Applicant’s and Respondent’s respective solicitors;
(b) the Applicant files in the Court an affidavit setting out its assets, liabilities and financial transactions in a form to be agreed upon by the parties;
(c) the Applicant undertakes to the Court not to dispose of any assets before the hearing of the appeal or a further order of the Court; and
(d) the Applicant to pay the costs of the stay application.

45. The court so orders.

46. The exhibits should remain on the court’s file until further order.