Wendy Wai Ying Leung Wan v McDonald, D.R.

[1992] FCA 143

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~JDG~JENT No.

IN THE FED ERA^ COURT OF A U S T ~ I A	)	1
QUEENSLAND DISTRICT REGISTRY	1
GENERnt DIVISION	1	No. QG 3 of 1990
B E T W E E N :

WENDY WAI YING LEUNG WAN

Applicant

And :  DONALD ROBERT MCDONALD

First Respondent

And :  RANALD MURRAY McDONALD

Second Respondent

And	t	DOTWEfiL INVESTMENT PTY.
- LTD.

Third Respondent

Coram:	Olney J
Place:	Brisbane
Date:	19 March 1992  ' 7 - - -

, ,--

F /

2 5 mR 1992

FEDERAL COURT OF

AUSTRALIA

MINUTE OF ORDERS PRINCIPAL REQISTRY

\ :'

THE COURT ORDERS that:	i
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1 .  i

1    Pending the hearing and determination of the appeals by

the first and second respondents or until further order l. .

I. I

and subject to paragraph 2 of this order execution and	i
I _
further proceedings against the first and second	[ '
respondents under the judgment entered on 8 January 1992	1:

be stayed: . ,

2.  The stay of execuLion arid proceedings agalnst the first respondent is granted upon the following terms, namely that during the continuance of the stay the first respondent will -

(a)	pay to the mortgagee or person entitled to receive the same, as and when due, all moneys falling due under mortgage K106468K in favour of Perpetual Trustee Company Limited and forthwith thereafter produce to the applicant or her solicitors evidence of such payment; and
(b)	subject to (a) above, not dispose of any asset or assets except in the ordinary course of the conduct of his practice as a solicitor, and in payment of his normal living expenses;

3.    The applicant have liberty to apply to set aside or vary this Order upon 24 hoursr notice in the event that the first respondent shall fail to observe the conditions upon which the Order is made;

4.   The application of the applicant filed on 6 March 1992 stand adjourned sine die with liberty to apply to relist same forthwith in the event that this Order be set aside or varied to permit it belng dealt with;

5.   The costs of the applicant's application filed 6 March

1992 (including reserved costs) and of the applications

of the first and second respondents filed 10 March 1992

l

I

and 11 March 1992 respectively be costs in the respective

appeals of those parties.

IN THE FEDERAL COURT OF AUSTRALIA )	I
QUEENSWD DISTRICT REGISTRY	1
GENERAL DIVISION	No. QG 3 of 1990
B E T W E E N f

WENDY WAI YING LEUNG WAN

Applicant

And :  DONALD ROBERT McDONALD

First Respondent

And r RANALD MURRAY McDONALD

Second Respondent

And :  DOTWELL INVESTMENT PTY.

Third Respondent

Coram:	Olney J
Placer	Brisbane

- Date r 19 March 1992

REASONS FOR JUDGMENT

The applicant in these proceedings has obtained judgment	againet the respondents in the sum of $306,000 with costs.
The trial judge gave his decision on 3 January 1992. The judgment was entered on 8 January 1992.
On 6 January 1992 the applicant's solicitors made demand on the first and second respondents for payment of the judgment and advised that enforcement proceedings would be taken upon entry of the judgment. At the same time undertakings were sought from the first and second respondents within 48 hours that they would not dispose of assets other than for the purpose of meeting the judgment, failing which it was said, an appropriate appiication wotild be made to the Court.
Undertakings substantially in the form sought were given within the time specified by the applicant's solicitors.
On 16 January 1992 a writ of fieri facias was issued against the first respondent at the instance of the applicant. It was lodged with the Registrar of Titles on 29 January 1992 and registered against the title to the first respondent's house property at 261 Main Street, Kangaroo Point on 21 February
1992.
In the meantime bankruptcy notices were issued against the first and second respondents (the date of issue is not disclosed) and served on the first respondent on 24 January
1992. The second respondent has not yet been served. The
bankruptcy notice required a response from the first respondent within 14 days but none has been forthcoming.
On 24 January 1992 the first and second respondents each lodged a notice of appeal against the decision of Burchett J. The appeals are likely to be listed for sittings of the Full Court scheduled to commence on 27 April 1992.
The applicant has taken no further steps towards executing

against the first respondent's real estate nor has a
c?editorfs petition for his bankruptcy been served.

On 6 March 1992 the applicant filed an application seeking orders for the appointment of receivers to the first respondent's practice as a solicitor and for the examination of the first and second respondents as to their means. The application was served on the first respondent on the afternoon of 9 March 1992, and was returnable at 9.30a.m. on 11 March 1992. Service was also effected on the second respondent through his solicitors.

The applicant and the first and second respondents appeared upon the return of the application. The first and second respondents complained of the short service of the application and opposed any abridgment of time. Both sought an adjournment. On 10 March 1992 the first respondent had filed an application for a stay of execution under the judgment and on the morning of 11 March 1992 the second respondent sought

hearing argument, I adjourned all 3 matters for hearing on 16	and was granted, leave to file a similar application. After
March 1992.
It is appropriate to deal first with the applications for stay brought by the first and second respondents.
For the first respondent, it is acknowledged that the lodging of d notice of appeal does not operate as a stay of proceedings under the judgment, and it is further acknowledged that the stay application was not brought until after the applicant had sought the appointment of receivers of the first respondent's practice. However, the first respondent submits that the failure to seek a stay earlier can be satisfactorily explained. At an early stage after the judgment the applicant indicated that enforcement proceedings would be instituted following entry of the judgment and in fact on 16 January 1992 a writ of fi. fa. was issued. The writ was not lodged at the Titles Office until 29 January 1992 (after the appeal had been instituted) and although registration took effect on 21 February 1992 no steps towards executing the writ have been taken. Similarly with the bankruptcy notice, which was served on 24 January 1992, the day the appeal was lodged. The applicant has been in a position since 8 February 1992 to petition for the first respondent's bankruptcy but has not done so.
Until the application for appointment of receivers was served
was not unreasonably of the belief that there was no need to on the first respondent on 9 March 1992, the first respondent
seek a stay of proceedings under the judgment. When requested, he had given an undertaking not to dispose of his asset&, an undertaking which he reasonably believed had been accepted by the applicant. The undertaking was of course given prior to the appeal being lodged but nevertheless, in the absence of any action on the applicant's part to pursue her several remedies against the first respondent, he was, in my opinion, entitled to think that an application for stay of proceedings under the judgment was unnecessary. The first respondent's application for stay ought therefore to be treated as being brought bona fide and no adverse inference should be drawn by reason of the apparent delay in bringing it.
From the affidavit material put before me I am satisfied that the first respondent's appeal has been properly brought, eithin time, and is being dealt with expeditiously. There is inevitably some delay, not of the parties' making, in getting an appeal on for hearing, but nothing in the present facts suggests other than that the matter is being dealt with by all concerned in a competent manner. Nor is there any suggestion that the appeal is not a genuine exercise by the first respondent of his right to test on appeal the decision of the trial judge.
The first respondent is a man of 61 years. He qualified as a
practice in Brisbane. His major asset is a house property solicitor in 1953 and since 1956 has conducted his own
which he says is worth in the vicinity of $800,000 but which a valuer engaged by the applicant (after an external viewing only and without knowing the number of rooms it contains or anything else about the interior) estimated would enter the market from $400,000, with the upper limit being unspecified.

he house is subject to a registered mortgage for $250,000.

The first respondent has had the contents of the house valued at $78,635. His only other asset of significance is his legal practice which he says is his sole source of income.

The evidence concerning the first respondent's earnings from his practice is unsatisfactory. Whereas he says his gross fees for the year ending 30 June 1990 were of the order of $300,000, they had fallen to $130,000 for the following year, a reduction attributed in part to the current economic climate, but mainly to the loss of a conveyancing clerk of 30 years' standing who was forced to retire due to ill health. Despite the reduced earnings the practice apparently supports a junior solicitor, 2 full-time secretaries, a part-time secretary and a clerk employed on outside work, as well as enabling the first respondent to service a monthly liability of approximately $4,000 on his mortgage and to live modestly. When cross-examined, the first respondent's assertions that he lacked knowledge concerning even the most fundamental details of the financial affairs of his practice lacked credibility. The suggestion put to him that he has some other undisclosed

the applicant has a writ of fi. fa. registered against the	source of income was denied. Be that as it may, given that
title to the first respondent's house, there is no real prospect that the first respondent could dispose of his only substantial asset without the knowledge of the applicant and withodt the applicant having access to the net proceeds of the sale in or towards satisfaction of the judgment.
The principles applicable to an application for a stay of proceedings pending an appeal are well established. Order 52 Rule 17 of the Federal Court Rules provides that an appeal to the Court shall not operate as a stay of execution or of proceedings under the judgment appealed from except so far as the Court: or a Judge may direct. Rules in similar form apply in a number of other jurisdictions. In NSW where a substantially similar rale applies the Court of Appeal decided in Alexander v. Cambridae Credit Corporation Ltd. (Receivers fiupointedl. ( 1985 ) 2 NSWLR 685 that a stay may be granted where the applicant for the stay demonstrates a reason or an appropriate case to warrant the exercise of the discretion in his favour, and that it is not necessary that special or exceptional circumstances should be made out. The principles which might be relevant to the exercise of the Court's discretion are discussed at pp. 694-5'

The Court has a discretion whether or not to grant the stay and, if so, as to the terms that would be fair. In the exercise of its discretion, the Court will weigh considerations such as the balance of convenience and the competing rights of the parties before its Attorney-General v Emerson (1889) 24

QBD 56. Where there is a risk that if a stay is granted, the the exercise of its discretion, refuse to grant a stay: cf assets of the applicant will be disposed of, the Court may, in

Clyne v Deputy Commissioner of Taxation (1982) 56 ALJR 857.

Sometimes as a condition of the grant of a stay, where funds are available, a court will impose on the applicant the payment of the whole, or part, to the judgment creditor: Andrews v John Fairfax & Sons Ltd I19791 2 NSWLR 184. ...

Two further principles can be mentioned. The first is that where there is a risk that the appeal will prove abortive if the appellant succeeds and a stay is not granted, courts will normally exercise their discretion in favour of granting a stay: Scarborough v L e w ' ~ Junction Store8 Pty Ltd (at 130); applied in Sun Alliance Insurance Ltd v Steiger (Full Court, Supreme Court of Victoria, 22 March, 1985, unreported). Thus, where it is apparent that unless a stay is granted an appeal will be rendered nugatory, this will be a substantial factor in favour of the grant of a stay2 Wileon v Church (No 2 ) (1879) 12 Ch D 454; Re Middle Harbour Investments Ltd (In ligJ (at 2). Secondly, although courts approaching applications for a stay will not generally speculate about the appellant's prospects of success, given that argument concerning the substance of the appeal is typically and necessarily attenuated, thie does not prevent them considering the specific terms of a stay that will be appropriate fairly to adjust the interest of the parties, from making some preliminary assessment about whether the appellant has an arguable case. This consideration is protective of the position of a judgment creditor where it may be plain that an appeal, which does not require leave, has been lodged without any real prospect of euccese and simply in the hope of gaining a respite against immediate execution upon the judgment.

The reasoning in Alexander was adopted by Gray J in Westaflex JAust.) Ptv. Ltd. v. Wood (1990) AIPC 90-666 at p. 36228. In my view the same principles are applicable to the present application.

The applicant contemplates 2 separate procedures to obtain payment, or part payment of the judgment by the first respondent. First, there is the writ of fi. fa. under which the first respondent's home, his major asset, may be sold. Second, there is the proposal that receivers be appointed to wind up his practice. In the event that these processes are continued, the first respondent would be left homeless and without a source of income and should his appeal be successful

Furthermore, the first respondent points out that the	it would be impossible to restore the status quo.
applicant is not resident in Australia and has no assets in ~ustralia. In the event that the judgment is satisfied in whole or in part and the first respondent's appeal succeeds, there could be problems associated with redeeming any money received by the applicant. On the other hand there is no real prospect that the first respondent could, pending the hearing and determination of his appeal, dispose of his assets in a manner that would be prejudicial to the applicant's rights. The balance of convenience lies heavily in favour of granting a stay. Further, without attempting to speculate on the outcome of the appeal, it seems from the issues raised in the notice of appeal that the appeal is at least arguable, and indeed, the contrary has not been said against the first-
respondent.
In my opinion, the first respondent has demonstrated a reason for the exercise of the Court's discretion in favour of granting a stay of proceedings and execution under the judgment. The stay should nevertheless be upon tens which will ensure that the applicant's position is not prejudiced by the stay.
As failure to continue to make payments under the mortgage would have the effect of diminishing the net value of the asset over which the writ of fi. fa. is registered, the stay
make, until the determination of the appeal, all payments due will be conditional upon the first respondent continuing to under the mortgage as and when they become due, and providing evidence of such payment to the applicant 'S solicitors . Further, it will be a condition of the stay that pending the hearing and determination of the appeal the first respondent will not dispose of or attempt to dispose of any of his assets except in the ordinary course of his practice as a solicitor, in payment of interest and other moneys due by him under the mortgage of his property at 261 Main Street, Kangaroo

Point and in payment of his normal day to day living expenses.

The application for a stay made by the second respondent is less contentious. There is some evidence that in the period after the trial judge reserved his decision and 3 January 1992 the second respondent sold some property of which he was formerly the registered proprietor and that he presently has no land registered in his name. The only other evidence that nlay possibly be adverse to the second respondent is that the applicant has had difficulty in serving a bankruptcy notice on him. On the other hand, the second respondent appeared through his solicitors upon the original return of the application for an order for his examination without personal service having been effected.

The same considerations apply to the second respondent as to the first respondent. No adverse inference can be drawn from the late application for stay nor does any of the evidence adduced suggest that he does not genuinely intend to prosecute

contemplated (apart from the bankruptcy notice) is the

his appeal. The only proceedings which are currently being

application for his oral examination and in my opinion it is inappropriate that this should be proceeded with pending the determination of his appeal. When asked at an early stage after the judgment had been handed down to give an undertaking not to dispose of his assets, the second respondent gave the undertaking and nothing has been said to suggest that he has not continued to honour the same. The second respondent

should be granted a stay of proceedings. The applicant submits that any stay granted to him should be on terms reqdiring the second respondent to report his current whereabouts from time to time. There is in my view no justification for such an order, the only purpose for which can be to aid the service of the bankruptcy notice. The applicant could if she so chose make application for an order for substituted service.

In the circumstances, having decided that the stay applications should be granted, the application by the applicant for the appointment of receivers to the first respondent's practice and the application for the oral examination of the first and second respondents do not fall for consideration on their merits. The applicant's application should stand adjourned sine die. I will however order that it may be relisted forthwith in the event that any variation of the stay order may permit it to be proceeded with.

I turn now to deal with the question of costs. Although the	first: and second respondents have succeeded in their
applications for stay and although the applications were opposed, I do not think that the applicant should pay their costs. The appropriate order is that the costs of the stay applications should be costs in the appeal.
The applicant's application for the appointment of receivers and for the oral examination of the first and second respondents was brought on without sufficient notice to the respondents and for that reason was adjourned. Upon the adjournment I reserved the question of costs. The application has been unsuccessful in that it has been stayed but it has not been considered on its merits. In the absence of any application for a stay it was not unreasonable for the application to be brought nor is it inappropriate that such an application be brought on short notice. In other circumstances an abridgment of time may well have been granted. The adjournment granted on the first return of the application was granted in reality to facilitate the applications for stay to be brought by the first and second respondents. In my opinion, justice will be done if the costs of the applicant's application to date, including any reserved costs, be costs in the appeal.

I certify that this and the

preceding 11 pages are a true copy of the Reasons for Judgment of the Honourable Mr. Justice Olney

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Dated: 19 March 1992

Heard:	16 March 1992
Place:
Judqment :	19 March 1992
Counsel for the applicant:	Mr. R.R. Douglas Q.C. and Mr. D.K. Smith
Solicitors for the applicant:	Marrinan & Allen
Counsel for the first respondent:	Mr. A.B. Crowe
Solicitors for the first respondent:	Sly & Weigall
Counsel for the second respondent:	Mr. H. Zillman
Solicitors for the second respondent:	Whitman & Co.