Porges v Adcock Private Equity Pty Ltd

[2018] NSWCA 285

Court of Appeal

Supreme Court

New South Wales

Medium Neutral Citation:	Porges v Adcock Private Equity Pty Ltd [2018] NSWCA 285
Hearing dates:	19 November 2018
Date of orders:	23 November 2018
Decision date:	23 November 2018
Before:	Macfarlan JA
Decision:	(1)   Order that order (1) of the orders made by McDougall J on 7 September 2018 be stayed until determination of the appeal or until further order. (2)   Order that orders (1) to (3) of the orders made by McDougall J on 30 October 2018 be stayed until determination of the appeal or until further order. (3)   Order that the costs of this application be costs in the appeal.
Catchwords:	APPEAL – enforcement of primary judgment stayed – risk that appeal would have been rendered abortive if no stay
Legislation Cited:	Bankruptcy Act 1966 (Cth), s 60(2) Corporations Act 2001 (Cth), s 206B(3) Uniform Civil Procedure Rules 2005 (NSW), r 51.44
Cases Cited:	Alexander v Cambridge Credit Corporation Ltd (1985) 2 NSWLR 685
Category:	Procedural and other rulings
Parties:	Stephen Robert Porges (Applicant) Adcock Private Equity Pty Ltd (Respondent)
Representation:	Counsel: Ms S Mirzabegian / Mr A Jordan (Applicant) Mr C McMeniman (Respondent)     Solicitors: Clayton Utz (Applicant) Maddocks (Respondent)
File Number(s):	CA 2018/299894
Decision under appeal	Court or tribunal: Supreme Court Jurisdiction: Equity – Commercial List Citation: [2018] NSWSC 1363 Date of Decision: 5 September 2018 Before: McDougall J File Number(s): SC 2017/80166

Judgment

1. HIS HONOUR: This is an application by Mr Stephen Porges for a stay of a judgment entered against him on 10 September 2018 in favour of Adcock Private Equity Pty Ltd (“APE”), the present respondent, in the amount of $1,110,594.23. Mr Porges also seeks a stay of consequential costs orders made against him on 30 October 2018.

2. The reasons for judgment of McDougall J, sitting in the Commercial List in the Equity Division, were published on 5 September 2018 ([2018] NSWSC 1363). The proceedings before his Honour were for damages resulting from Mr Porges’ allegedly misleading and deceptive conduct which induced APE to purchase from him shares in SecureOne Corporation, a company incorporated in the British Virgin Islands. Mr Porges has appealed against McDougall J’s decision and APE has conceded, for the purposes of the present application, that the appeal is arguable. It is listed for a one day hearing before this Court on 14 February 2019.

3. On 22 October 2018 APE served a Bankruptcy Notice on Mr Porges. In response, Mr Porges applied to the Federal Court for an order extending the time for compliance with the Notice until 28 days after the determination of the appeal to this Court. That application is listed for hearing on 28 November 2018, the time for compliance with the Notice having been extended, on an interim basis, until that date.

4. On the present application, Mr Porges contends that if a stay is not granted, there is a risk that his appeal will prove abortive.

5. The commencement of an appeal does not automatically stay orders made below but the Court has a discretion to grant a stay (r 51.44 of the Uniform Civil Procedure Rules 2005 (NSW) (“UCPR”)). It is not necessary that the applicant for a stay establish special or exceptional circumstances but it is necessary for it to demonstrate a reason why the stay should be granted (Alexander v Cambridge Credit Corporation Ltd (1985) 2 NSWLR 685 at 694). It is relevant that the applicant for a stay has an arguable case on its appeal, as is accepted here, and that “there is a risk that the appeal will prove abortive if the appellant succeeds and the stay is not granted” (ibid at 695).

6. At the hearing of his application, Mr Porges read affidavits of his solicitor who gave evidence on information and belief as to Mr Porges’ assets. The only asset of a size that is significant, bearing in mind the magnitude of the judgment against Mr Porges, comprises shares in a company known as Verrency Holdings Ltd. It is incorporated in Singapore and is not listed on any public stock exchange. It is a technology start-up company and is currently attempting to raise capital. I accept that these shares are not readily realisable.

7. APE submitted that Mr Porges’ disclosure of assets was unsatisfactory, including because he only disclosed some of the assets after an affidavit had been filed on behalf of APE referring to their existence. Whilst this was unsatisfactory, it does not lead me to reject Mr Porges’ evidence concerning his asset position as the additional assets were not of a value that is significant in the present context. I am prepared to infer that their late disclosure occurred through oversight or a belief as to their immateriality.

8. Another point made by APE is that the relative paucity of Mr Porges’ present assets is surprising in light of his undoubted success over many years as a high profile businessman. That observation does not however assist APE on the present application as it does not provide a basis for concluding that there are other assets which have not been disclosed. Mr Porges’ current financial position may have come about through losses he incurred or through disposals of assets he made to family members or other persons. The apparent absence of a reflection in his list of assets of the amount of $941,703.38 which APE paid him in 2015 for the purchase of shares in SecureOne Corporation is capable of explanation in the same way.

9. For the following reasons, I have concluded that the stay sought by Mr Porges should be granted.

10. First, there is a substantial risk that if a stay is not granted, the Federal Court might not extend the time for compliance with the Bankruptcy Notice served on Mr Porges.

11. Secondly, if the time for compliance with that Notice is not extended, it is likely that Mr Porges will be unable to comply with it and, as a result, will commit an act of bankruptcy. This would cause him some reputational damage and would provide the foundation for APE to commence bankruptcy proceedings.

12. Thirdly, in light of the communications between the parties, it is likely that APE will take prompt action to commence bankruptcy proceedings if Mr Porges commits an act of bankruptcy.

13. Fourthly, if such proceedings are commenced, there is a substantial risk that they might be determined, and a sequestration order therefore made, before the appeal to this Court is heard and determined.

14. Fifthly, if Mr Porges is declared bankrupt, he will lose control of the appeal because it will be for his trustee in bankruptcy to elect whether to prosecute or discontinue the appeal (see s 60(2) of the Bankruptcy Act 1966 (Cth)).

15. Sixthly, there is a substantial risk that such a trustee in bankruptcy would not elect to proceed with the appeal.

16. Seventhly, if Mr Porges is declared bankrupt, he will automatically be disqualified from taking part in the management of any corporation (see s 206B(3) of the Corporations Act 2001 (Cth)). Mr Porges would also be likely to suffer significant damage to his reputation.

17. Eighthly, there is no evidence that APE will suffer significant prejudice if a stay is granted. For example, there are no assets which Mr Porges presently has which could now be attached to satisfy the judgment (if it were not stayed) and which might not be available in the future when the stay is lifted. Indeed, the fact that APE has chosen to issue a Bankruptcy Notice, rather than take any other enforcement step, tends to confirm its unawareness of any presently realisable assets that Mr Porges has.

18. Ninthly, the stay will only be for a limited period as the appeal has been fixed for an early hearing, on 14 February 2019.

19. Tenthly, it is not appropriate, as APE seeks, for the stay to be conditional on Mr Porges paying the whole, or indeed any significant part of, the judgment amount into Court. The evidence does not suggest that he would be able to fulfil such a condition.

20. For these reasons, I make the following orders:

1. Order that order (1) of the orders made by McDougall J on 7 September 2018 be stayed until determination of the appeal or until further order.

2. Order that orders (1) to (3) of the orders made by McDougall J on 30 October 2018 be stayed until determination of the appeal or until further order.

3. Order that the costs of this application be costs in the appeal.

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Decision last updated: 23 November 2018