Westgyp Pty Ltd v Northline Ceilings Pty Ltd
[2018] WASCA 199
•9 NOVEMBER 2018
JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
TITLE OF COURT : THE COURT OF APPEAL (WA)
CITATION: WESTGYP PTY LTD -v- NORTHLINE CEILINGS PTY LTD [2018] WASCA 199
CORAM: MURPHY JA
HEARD: 26 OCTOBER 2018
DELIVERED : 9 NOVEMBER 2018
FILE NO/S: CACV 85 of 2018
BETWEEN: WESTGYP PTY LTD
Appellant
AND
NORTHLINE CEILINGS PTY LTD
First Respondent
GIUSEPPE CRUPI
Second Respondent
ON APPEAL FROM:
Jurisdiction : SUPREME COURT OF WESTERN AUSTRALIA
Coram: VAUGHAN J
Citation: WESTGYP PTY LTD -v- NORTHLINE CEILINGS PTY LTD [2018] WASC 244
File Number : CIV 2552 of 2016
Catchwords:
Practice and procedure - Application for continuation of interim stay - Turns on own facts
Legislation:
Nil
Result:
Application granted
Category: B
Representation:
Counsel:
| Appellant | : | Mr N Van Hattem |
| First Respondent | : | No Appearance |
| Second Respondent | : | Mr A P Hershowitz |
Solicitors:
| Appellant | : | J King Legal |
| First Respondent | : | No Appearance |
| Second Respondent | : | Forbes Kirby |
Case(s) referred to in decision(s):
Eastland Technology Australia Pty Ltd v Whisson [2003] WASCA 307; (2003) 28 WAR 308
Mercanti v Mercanti [2015] WASCA 206
T v B [2018] WASCA 157
Westgyp Pty Ltd v Northline Pty Ltd [2018] WASC 244
MURPHY JA:
Introduction
This is an application by the appellant (Westgyp) for a continuation of the stay of the orders originally made by Vaughan J following the delivery of his decision in Westgyp Pty Ltd v Northline Pty Ltd.[1]
[1] Westgyp Pty Ltd v Northline Pty Ltd [2018] WASC 244 (primary decision).
The first respondent is Northline Ceilings Pty Ltd (Northline). Northline is in liquidation and is not participating in this appeal. The second respondent is Mr Giuseppe Crupi (Mr Crupi). Mr Crupi is the sole director of Northline.[2] He is resisting the appeal.
[2] Primary decision [6].
In broad terms, Westgyp, as plaintiff, brought proceedings (primary proceedings) to recover an outstanding amount of approximately $860,000, plus interest and costs, in relation to the supply of plaster products to Northline. Westgyp also claimed that, by virtue of a charging clause under the relevant contract, it was entitled to an equitable charge over Mr Crupi's interest in certain properties.[3]
[3] Primary decision [2]
Westgyp had caveated its claimed interest in certain of Mr Crupi's properties (see [9] - [12] below).
On 15 August 2018, Vaughan J ordered, amongst other things, that:
1.Westgyp's claim against Mr Crupi is dismissed; and
2.'subject to any other order of the Court', Westgyp's caveats lodged against titles to various properties registered in Mr Crupi's name are due to lapse at 4.00 pm on 12 September 2018.
The second order relates to the Properties referred to in [9] below.
On 7 September 2018, Westgyp filed a stay application, seeking the following orders (Application):
1.Interim orders pursuant to rule 44 of the Supreme Court (Court of Appeal) Rules 2005 (WA) that the orders of the Hon Justice Vaughan dated 15 August 2017 [sic - 2018] in proceeding CIV 2552 of 2016 be stayed until further order.
2.An injunction restraining the respondents from taking any steps to remove the caveats referred to in the order of 15 August 2017 [sic - 2018] until further order.
3.An injunction restraining the respondents from dealing with the properties referred to in the order of 15 August 2017 [sic - 2018] until further order.
4.Costs.
An interim stay was granted by this court on 12 September 2018. Westgyp effectively seeks a continuation of that stay.
Background
Mr Crupi is, jointly with his wife, the registered proprietor of properties in Ledge Point, Mindarra and Gabbadah.[4] He is the registered proprietor, jointly with his wife, in respect of a half share as tenants in common in a property in Marangaroo. He is the registered proprietor, jointly with Mr Gutta, of a property in Red Gully. He is also the registered proprietor of a property in Erskine.[5] On 4 and 12 July 2016, Westgyp lodged caveats against these properties (the Properties).[6] The Properties, other than Red Gully and Marangaroo, are mortgaged to a bank.
[4] Affidavit of Jamie King sworn 7 September 2018, pars 3, 4.
[5] Affidavit of Jamie King sworn 7 September 2018, pars 3, 4; affidavit of Giuseppe Crupi sworn 28 August 2017, pars 12 ‑ 13, annexure 'GC1'.
[6] Affidavit of Jamie King sworn 7 September 2018, par 7.
Mr Crupi was also the registered proprietor of a property in Stirling and, jointly with his wife, the registered proprietor of a property in Balcatta (Other Properties).[7] On 4 July 2016, Westgyp lodged caveats against the Other Properties.[8]
[7] Affidavit of Jamie King sworn 7 September 2018, par 5.
[8] Affidavit of Jamie King sworn 7 September 2018, pars 7, 8.
On or about 25 July 2017, Mr Crupi lodged lapsing notices against the caveats on the Properties and the Other Properties.[9] This led to other proceedings between the parties in CIV 2316 of 2017.
[9] Affidavit of Jamie King sworn 7 September 2018, par 20.
In May and June 2018, prior to the determination of the primary proceedings, Mr Crupi entered into contracts for the sale of the Other Properties. This led to further proceedings in CIV 2283 of 2018. Caveats over the Other Properties were withdrawn pursuant to the orders of Pritchard J in those proceedings.
CIV 2552 of 2016 (the primary proceedings)
As noted earlier, Westgyp brought proceedings to recover a debt of approximately $860,000, which it claimed had been guaranteed by Mr Crupi. Westgyp claimed that the debt arose in respect of goods supplied pursuant to the terms of a credit application dated 9 December 2009 (2009 Credit Application), to which Mr Crupi was a party as a guarantor.[10]
[10] Primary decision [1].
Westgyp alleged that by virtue of a charging clause in the 2009 Credit Application, Westgyp was entitled to an equitable charge over Mr Crupi's interest in certain properties to secure his liability as guarantor.[11] Westgyp sought a declaration that it was entitled to an equitable charge over Mr Crupi's interest in certain properties, together with consequential orders for judicial sale or the appointment of a receiver.[12]
[11] Primary decision [2].
[12] Primary decision [19].
Mr Crupi fought the claim on the basis that any debt arose under the terms of a subsequent credit application referred to as the 2012 Credit Application, which, he alleged, did not contain a personal guarantee.[13]
[13] Primary decision [3].
Westgyp denied that the 2012 Credit Application applied, but also alleged that if it did, that contract also imposed personal liability on Mr Crupi, secured by an equitable charge. Westgyp also had certain claims for misleading or deceptive conduct.[14]
Primary decision - issues
[14] The claims for misleading or deceptive conduct were dismissed. It is unnecessary to refer to them further as they form no part of the appeal.
Relevantly for present purposes, Vaughan J summarised the issues for determination in terms to the following effect:[15]
[15] Primary decision [27].
1.Did Westgyp and Northline enter into an agreement in terms of the 2012 Credit Application such that, after about 30 March 2012, the terms of that agreement governed the supply of goods by Westgyp to Northline? (Issue 1)
2.If yes to Issue 1:
(a)Does the guarantee and indemnity under the 2009 Credit Application nevertheless continue to apply to the post‑30 March 2012 supply of goods by Westgyp to Northline in any event? (Issue 2(a))
(b)Alternatively, does the agreement in terms of the 2012 Credit Application itself impose any personal liability on Mr Crupi to pay to Westgyp amounts owing by Northline? (Issue 2(b))
3.If no to Issue 1, does the guarantee and indemnity under the 2009 Credit Application continue to apply to the post-30 March 2012 supply of goods by Westgyp to Northline? (Issue 3)
5(b).Is Westgyp entitled to maintain the caveats it has lodged in relation to the properties in which Mr Crupi holds an interest? (Issue 5(b))
Primary decision - determination of issues
The primary judge's findings were as follows.
As to issue 1, yes. Westgyp and Northline entered into an agreement in terms of the 2012 Credit Application. The terms of the 2012 Credit Application governed the supply of goods by Westgyp to Northline so far as the outstanding debt is concerned.[16]
[16] Primary decision [255].
As to issue 2(a), no. On its proper construction Mr Crupi's guarantee and indemnity under the 2009 Credit Application only covers debts, including costs, as to goods supplied under the terms of the 2009 Credit Application. It does not extend to debts arising pursuant to the supply of goods under the 2012 Credit Application, such as those that are claimed in the primary proceedings.[17]
[17] Primary decision [268].
As to issue 2(b), no. Mr Crupi signed the 2012 Credit Application solely as a director of Northline and not in a personal capacity. In the absence of an objective common intent that Mr Crupi was to be personally bound, he is not a party to the 2012 Credit Application.[18]
[18] Primary decision [297].
Issue 3 did not arise.[19]
[19] Primary decision [299].
As to issue 5(b), the determination of Issues 1, 2(a) and 2(b) in a manner adverse to Westgyp precludes it from maintaining the caveats it has lodged in relation to the properties in which Mr Crupi holds an interest. The 2009 Credit Application does not apply to the outstanding debt; and the cl 2(d) charging clause in the 2012 Credit Agreement does not bind Mr Crupi personally. Accordingly, Westgyp is not entitled to the equitable charge it claims over Mr Crupi's interest in the Properties.[20]
[20] Primary decision [333].
Grounds of appeal
Westgyp relies upon three grounds of appeal as follows:[21]
1.The trial Judge erred in finding that the 2012 Credit Application was accepted by [Westgyp's] conduct (an error of mixed fact and law, at paragraphs [242] - [255]).
2.The trial Judge erred in holding the 2009 Credit Agreement by its terms, did not continue to impose personal liability upon Mr Crupi (an error of law at paragraphs [260] - [268]).
3.The trial Judge erred in holding that the 2012 Credit Agreement, by its terms and proper construction, did not impose personal liability on Mr Crupi (an error of law at paragraphs [269] - [298]).
[21] See amended appellant's case filed 3 October 2018.
Included in the 'orders wanted' in the amended appellant's case are orders to the effect that Westgyp is entitled to an equitable charge over the Properties, and, in effect, for the execution by Mr Crupi of a legal mortgage over the Properties. Westgyp also seeks an order that it is entitled to be paid the debt from the proceeds of sale of the Properties.
The Application
Westgyp's evidence and submissions
Westgyp relies on affidavits sworn by its solicitor, Jamie King, on 7 and 10 September 2018, and an affidavit of Mr Crupi sworn 28 August 2017 in CIV 2316 of 2017.
Westgyp submits, in effect, that:
1.If the stay is not continued and the Properties are sold, the appeal would be rendered nugatory because it would be left as an unsecured creditor, and the debt claimed by Westgyp would likely be irrecoverable.[22]
[22] Application ts 15 - 18.
2.The appeal has reasonable prospects of success. In particular, the third ground of appeal could be 'prioritised' as having the 'strongest prospect of success'.[23]
3.The balance of convenience favours Westgyp in that:
(a)the Properties are encumbered;
(b)Mr Crupi's total equity in the Properties is 'less than' $1.4 million;[24]
(c)Westgyp's claim is for $950,000 plus interest and costs;[25]
(d)there was evidence Mr Crupi has other unsecured debts and the equity in the Properties would be insufficient to pay off all creditors in full;[26]
(e)Mr Crupi had acknowledged that he was in financial difficulties in his affidavit of 28 August 2017;[27]
(f)Mr Crupi has not sought to sell any of the Properties since the Application was filed, and there is no evidence that he would suffer detriment if the interim stay were continued;[28] and
(f)in his affidavit of 28 August 2017, Mr Crupi said that he had 'no difficulties' in allowing the caveats on the Mindarra, Ledge Point, Gabbadah and Erskine properties to 'remain in place'.[29]
[23] Application ts 20.
[24] Appellant's revised outline of submissions, par 8.
[25] Appellant's revised outline of submissions, par 9.
[26] Application ts 20.
[27] Application ts 18 ‑ 19; affidavit of Giuseppe Crupi sworn 28 August 2017, pars 19 ‑ 30.
[28] Appellant's revised outline of submissions, par 10.
[29] Application ts 19; affidavit of Giuseppe Crupi sworn 28 August 2017, par 30.
Westgyp has filed an undertaking as to damages.
Mr Crupi's evidence and submissions
Mr Crupi relied on affidavits sworn by his solicitor, Mitchell Terry Tolcon, on 11 September 2018 and 24 October 2018. The second of those affidavits annexes a copy of the caveats over the Properties. The caveats indicate that the interest claimed by Westgyp arose under the 2009 Credit Application and not the 2012 Credit Application.
Mr Crupi submits, amongst other things, that:
1.The primary relief sought in the primary proceedings was for the payment of money. The claim for declarations to maintain caveats was introduced well after the commencement of the primary proceedings. Westgyp's primary claim in the appeal 'will remain intact in the event that no suspension order … [is] granted'.[30]
2.Westgyp has not demonstrated any obvious error in Vaughan J's reasoning such as to satisfy the requirement of reasonable prospects of success.[31]
3.Further, the ground of appeal which is said by Westgyp to be the strongest ground, ground 3, does not relate to the caveats over the Properties. That is because the caveats over the Properties were lodged on the basis of 2009 Credit Application, not the 2012 Credit Application.[32]
4.There is no good evidence that Mr Crupi would be unable to pay the claim if successful on the appeal. His acknowledgement that he had 'no difficulties' in keeping caveats on the Mindarra, Ledge Point, Gabbadah and Erskine properties in his affidavit of 28 August 2017 was an acknowledgement made in the context of litigation between the parties at that time, and prior to his successful resistance of Westgyp's claim in the primary proceedings.[33]
5.No special circumstances have been shown to justify a departure from the ordinary rule that Mr Crupi is entitled to enforce the judgment pending the determination of any appeal.[34]
[30] Second respondent's submissions in opposition to the application filed 12 September 2018, pars 19 - 20.
[31] Second respondent's submissions in opposition to the application filed 12 September 2018, par 27.
[32] Application ts 26.
[33] Application ts 28.
[34] Second respondent's submissions in opposition to the application filed 12 September 2018, par 36.
Principles
The relevant principles, for present purposes, were outlined recently by this court in T v B.[35] In that case, the court referred to Mercanti v Mercanti,[36] where the court said:[37]
The exercise of this court's discretion to grant an injunction pending the determination of an appeal requires an assessment to be made of the decision under appeal and also the balance of convenience, including whether refusal of the injunction would render the appeal nugatory. See Paringa Mining & Exploration Co Plc v North Flinders Mines Ltd [1988] HCA 53; (1988) 165 CLR 452, 460. The nature of the criteria which are ordinarily relevant to the exercise of this court's discretion to grant an injunction, pending an appeal, are analogous to those which are relevant to the grant of a stay. Although it is ordinarily necessary to establish that the appellant has reasonable prospects of success on the appeal, the appellant's prospects are, to some extent, interdependent with the balance of convenience. See Apache Northwest Pty Ltd v Agostini [2009] WASCA 147 [10].
The general principles which apply to an application for a stay are not materially different from those which apply to an application for a suspension order under s 15 of the Civil Judgments Enforcement Act 2004 (WA). Those principles were summarised in Eastland Technology Australia Pty Ltd v Whisson [2003] WASCA 307; (2003) 28 WAR 308 [9]. See also Ladang Jalong (Australia) Pty Ltd v Callander [2005] WASCA 203 [3].
[35] T v B [2018] WASCA 157.
[36] Mercanti v Mercanti [2015] WASCA 206.
[37] Mercanti [16] - [17].
In T v B, the court also referred to Eastland Technology Australia Pty Ltd v Whisson,[38] where the court outlined the relevant principles in the following terms:
1.The successful litigant at first instance will ordinarily be entitled to enforce the judgment pending the determination of any appeal.
2.It is for the applicant for a stay to move the court to a favourable exercise of its discretion.
3.It will not do so unless special circumstances are shown justifying the departure from the ordinary rule.
4.The central issue will be whether the grant of a stay is perceived to be necessary to preserve the subject matter or the integrity of the litigation, or where refusal of a stay could create practical difficulties in respect of the relief which may be granted on appeal. It is often put shortly that it will first and foremost be necessary to establish that without the grant of a stay, the right of appeal, whether upon the grant of leave or special leave or not, will be rendered nugatory.
5.If that can be demonstrated, the stay will generally still be refused unless it can be established that the appeal process, whether upon the grant of leave or special leave or not, has ultimately reasonable prospects of success so as to result in the grant of relief to the appellant.
6.If that hurdle can be overcome, the stay may still be refused where it appears that the balance of convenience does not lie in favour of the applicant; where, for example, the grant of a stay will occasion hardship to the respondent which may not be alleviated by the terms upon which the stay may be granted.
[38] Eastland Technology Australia Pty Ltd v Whisson [2003] WASCA 307; (2003) 28 WAR 308 [9].
Disposition
In my opinion, the following matters are most particularly relevant.
A material aspect of Westgyp's claim in the appeal (as it was below) is that it is entitled to an equitable charge over the Properties. I accept that if the application were not granted, and the Properties were sold pending the disposition of the appeal, the subject matter, or at least the integrity of the litigation, would be imperilled. Westgyp would lose the security to which it claims it is entitled. I also accept that, at least in relation to the properties owned by Mr Crupi or by Mr Crupi and his wife jointly (where no third party interests are involved other than the mortgagee), there is, practically speaking, the ready opportunity for sale and the risk that one or all of those properties may be sold prior to the disposition of the appeal, including through potential pressure from the mortgagee.[39] In these circumstances, I accept that the fourth matter referred to in [32] above is satisfied.
[39] See the affidavit of Giuseppe Crupi sworn 28 August 2017, pars 19 - 29.
I also accept that the appeal has reasonable prospects of success in the relevant sense. In this context, I acknowledge that counsel for Westgyp indicated that ground 3 (regarding the proper construction of the 2012 Credit Application) was Westgyp's 'strongest' ground and that, as counsel for Mr Crupi submitted, the caveats are drawn by reference to the 2009 Credit Application. Nevertheless, if ground 3 succeeds, Westgyp, prima facie, would be entitled to an equitable charge over the Properties, in which case it would be irrelevant that the caveats have been drawn with respect to the 2009 Credit Application.
As to the balance of convenience, it seems to me that it is finely tipped in favour of Westgyp for the reasons and to the extent indicated below.
Counsel for Westgyp could not point to any evidence to support the submissions referred to in [27.3(b)] and [27.3(d)] above. I am unable to infer that it is more likely than not that without the continuation of the stay, Westgyp would not recover its claimed debt if successful in the appeal. Nevertheless, just as I accept that there is some risk that at least some of the Properties may be sold pending the disposition of the appeal, I also accept that, given the evidence of Mr Crupi's financial difficulties, there is some risk that without recourse to at least some security, Westgyp may not, in due course, be paid in full if it succeeds in the appeal. How to weigh that risk, bearing in mind the onus of proof on Westgyp, in the overall balance of convenience is not an easy matter.
Ultimately, it seems to me that Mr Crupi's evidence, to the effect that he had no difficulties allowing the caveats on the Mindarra, Ledge Point, Gabbadah and Erskine properties to remain in place, weighs most significantly in the balance. Even though that evidence was given in an affidavit prior to the determination of the primary proceedings, it was tendered in this application without objection, and there is no contradiction of that evidence by Mr Crupi in the affidavit material filed by him.
I also take into account that Westgyp has filed an undertaking as to damages.
Viewing the evidence as a whole, on balance, in my view, the interests of justice would be served in granting the application with respect to the Mindarra, Ledge Point, Gabbadah and Erskine properties.
Conclusion
The interim stay should be continued until disposition of the appeal or further order with respect to the Mindarra, Ledge Point, Gabbadah and Erskine properties.
I certify that the preceding paragraph(s) comprise the reasons for decision of the Supreme Court of Western Australia.
CL
ASSOCIATE TO THE HONOURABLE JUSTICE MURPHY9 NOVEMBER 2018
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