FEDERAL COURT OF AUSTRALIA Nicol v PGLE Pty Ltd [2006] FCA 1826 PRACTICE AND PROCEDURE – application for stay of order pending appeal – grounds of appeal not arguable – application dismissed. Jennings Construction Limited v Burgundy Royale Investments Pty Limited (1986) 69 ALR 265 cited COLIN MCINTOSH NICOL & SAMUEL CHARLES DAVIES AS JOINT & SEVERAL RECEIVERS & MANAGERS OF THE PROPERTY OF GUISEPPE ANTONIO MERCORELLA & THE SCHEME & AS JOINT & SEVERAL LIQUIDATORS OF THE SCHEME v PGLE PTY LTD, KYTARA PTY LTD, MERBEL PTY LTD, MERCORELLA (PIRIE STREET) PTY LTD, SANCAT PTY LTD, T & G MERCORELLA PTY LTD, MZF PTY LTD, OPEY PTY LTD, UNLEY FINANCIAL STRATEGIES PTY LTD, WOL PROPERTIES PTY LTD, PACIFIC PLACE HOLDINGS PTY LTD, TULLOCH LODGE LIMITED, TULLOCH LODGE SYNDICATIONS PTY LTD, ZMMF PTY LTD, ZAPAC PTY LTD, GUISEPPE ANTONIO MERCORELLA, RAINWAY PTY LTD, SALISBURY MAUSOLEUM PTY LTD AND SALISBURY MAUSOLEUM DEVELOPMENT PTY LTD SAD 185 OF 2005 LANDER J 15 DECEMBER 2006 ADELAIDE IN THE FEDERAL COURT OF AUSTRALIA SOUTH AUSTRALIA DISTRICT REGISTRY SAD 185 OF 2005 BETWEEN: COLIN MCINTOSH NICOL & SAMUEL CHARLES DAVIES AS JOINT & SEVERAL RECEIVERS & MANAGERS OF THE PROPERTY OF GUISEPPE ANTONIO MERCORELLA & THE SCHEME & AS JOINT & SEVERAL LIQUIDATORS OF THE SCHEME Applicant AND: PGLE PTY LTD First Respondent KYTARA PTY LTD Second Respondent MERBEL PTY LTD Third Respondent MERCORELLA (PIRIE STREET) PTY LTD Fourth Respondent SANCAT PTY LTD Fifth Respondent T & G MERCORELLA PTY LTD Sixth Respondent MZF PTY LTD Seventh Respondent OPEY PTY LTD Eighth Respondent UNLEY FINANCIAL STRATEGIES PTY LTD Ninth Respondent WOL PROPERTIES PTY LTD Tenth Respondent PACIFIC PLACE HOLDINGS PTY LTD Eleventh Respondent TULLOCH LODGE LIMITED Twelfth Respondent TULLOCH LODGE SYNDICATIONS PTY LTD Thirteenth Respondent ZMMF PTY LTD Fourteenth Respondent ZAPAC PTY LTD Fifteenth Respondent GUISEPPE ANTONIO MERCORELLA Sixteenth Respondent RAINWAY PTY LTD Seventeeth Respondent SALISBURY MAUSOLEUM PTY LTD Eighteenth Respondent SALISBURY MAUSOLEUM DEVELOPMENT PTY LTD Nineteenth Respondent JUDGE: LANDER J DATE OF ORDER: 15 DECEMBER 2006 WHERE MADE: ADELAIDE THE COURT ORDERS THAT: 1. The application for a stay be dismissed. 2. The applicant on the notice of motion pay the respondent to the notice of motion's costs. Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules. IN THE FEDERAL COURT OF AUSTRALIA SOUTH AUSTRALIA DISTRICT REGISTRY SAD 185 OF 2005 BETWEEN: COLIN MCINTOSH NICOL & SAMUEL CHARLES DAVIES AS JOINT & SEVERAL RECEIVERS & MANAGERS OF THE PROPERTY OF GUISEPPE ANTONIO MERCORELLA & THE SCHEME & AS JOINT & SEVERAL LIQUIDATORS OF THE SCHEME Applicant AND: PGLE PTY LTD First Respondent KYTARA PTY LTD Second Respondent MERBEL PTY LTD Third Respondent MERCORELLA (PIRIE STREET) PTY LTD Fourth Respondent SANCAT PTY LTD Fifth Respondent T & G MERCORELLA PTY LTD Sixth Respondent MZF PTY LTD Seventh Respondent OPEY PTY LTD Eighth Respondent UNLEY FINANCIAL STRATEGIES PTY LTD Ninth Respondent WOL PROPERTIES PTY LTD Tenth Respondent PACIFIC PLACE HOLDINGS PTY LTD Eleventh Respondent TULLOCH LODGE LIMITED Twelfth Respondent TULLOCH LODGE SYNDICATIONS PTY LTD Thirteenth Respondent ZMMF PTY LTD Fourteenth Respondent ZAPAC PTY LTD Fifteenth Respondent GUISEPPE ANTONIO MERCORELLA Sixteenth Respondent RAINWAY PTY LTD Seventeeth Respondent SALISBURY MAUSOLEUM PTY LTD Eighteenth Respondent SALISBURY MAUSOLEUM DEVELOPMENT PTY LTD Nineteenth Respondent JUDGE: LANDER J DATE: 15 DECEMBER 2006 PLACE: ADELAIDE REASONS FOR JUDGMENT 1 This is an application by the applicant for a stay of an order made by Mansfield J on 4 December 2006 in which he ordered that an amount of moneys of about $1.4 million presently in the Minter Ellison Trust Account be paid to the joint receivers and managers of the property of Guiseppe Antonio Mercorella and the unregistered management investments scheme operated by Guiseppe Antonio Mercorella and as joint liquidators of the scheme and the corporate entities which were party to the scheme as the relevant parties entitled to receive such moneys. 2 The application is made pursuant to O 52 r 17 which empowers the Court to order a stay of execution under a judgment under appeal. There are two competing principles on this application. First, there is the principle that a person ought not to be deprived of the fruits of a judgment whilst the losing party appeals against that judgment. There is the further principle where a party who has an arguable right of appeal ought not to have the appeal rendered nugatory by the successful party at trial being allowed to dissipate the fruits of the judgment. That second principle was considered by Brennan J in Jennings Construction Limited v Burgundy Royale Investments Pty Limited (1986) 69 ALR 265. The judgment was handed down by Mansfield J on 4 December 2006 and on that occasion at the behest of the applicant, his Honour stayed the order until yesterday. Yesterday the applicant lodged his notice of appeal and made this application. The application could not be heard last night and has been heard during today. The moneys still remain in Minter Ellison's Trust Account. 3 The applicant seeks an order restraining the joint receivers, managers and liquidators from paying out those moneys to themselves pending the hearing of the appeal. 4 It is likely, I think, that the appeal could not be heard before May of next year. 5 The proceeding concerns a claim by the applicant that he advanced $750,000 in two separate loans to Mr Mercorella. He claims that those loans were advanced in March and April of 2004 and that Mr Mercorella agreed to repay the loans together with interest on each of the loans at the rate of $20,000 per month. The interest that was payable under each of the loans seems to have no relationship to any interest rate because it is asserted that, in relation to each of the loans, Mr Mercorella was to pay $20,000 per month by way of interest apparently, notwithstanding whatever the amount of the principal then outstanding. The interest rate is in the order of 60 per cent per annum. 6 The joint receivers and managers and liquidators were appointed on 8 August 2005. On 19 July 2005 Mr Sobey had registered a caveat over a property at 22 Jerningham Street, North Adelaide claiming to be entitled to an equitable interest in the property by reason of these loans and a loan agreement said to be dated 19 July 2005. 7 Shortly after their appointment, the joint receivers and managers and liquidators wrote to Mr Sobey on 12 August 2005 requesting him to provide evidence of the transaction so that they might determine whether or not he was entitled to claim the security which was said to arise out of the loan agreement. In fact, Mr Sobey and his solicitors did not reply to that letter and further requests were made. On 13 December Mr Sobey's solicitors produced documentation which they said evidenced the security over the property. The documentation was an undated loan agreement and a memorandum of mortgage. 8 At the same time, they produced a draft application and a draft affidavit which they said would be issued on behalf of Mr Sobey to establish his entitlement to the security over the property. That application was never issued nor was the affidavit ever sworn. Instead, after some considerable delay on the part of the applicant, on 23 August 2006 the joint receivers and managers and liquidators of themselves brought an interlocutory application for directions in relation to Mr Sobey's claim. The matter was managed by Mansfield J, who was also the trial Judge. He gave certain directions with which Mr Sobey did not comply. 9 As a result of Mr Sobey's failure to comply with Mansfield J's directions, a hearing date which had been set for 6 November was vacated and a further hearing date was arranged for 24 November. On 24 November, Mr Sobey's counsel sought an adjournment of the proceeding so that he might bring in evidence from a psychologist to the effect that Mr Sobey was not in a position to conduct the proceedings. He relied for his application on an affidavit of Mr Sobey's solicitor sworn on 21 November 2006 to which was annexed a report dated 20 November 2006 of Dr Wright, who is an occupational physician treating Mr Sobey. 10 The report and other medical evidence shows that Mr Sobey underwent surgery in August 2006 and complications developed. One of those complications was a pulmonary embolism and that gave rise to a chest infection which required drainage. Dr Wright was specifically asked whether Mr Sobey could give detailed instructions in relation to the action. He said that Mr Sobey was not medically fit to provide detailed instructions. He passed no opinion on whether or not he could give general instructions in relation to the matter. 11 His report does indicate that Mr Sobey would not be medically fit to undergo cross-examination of half a day. The trial Judge refused the application for the adjournment and proceeded to hear the matter. In refusing the adjournment his Honour had regard to the history and the delay by Mr Sobey in the institution of any proceedings and in relation to Mr Sobey's refusal or neglect in complying with any directions. He was not satisfied that Mr Sobey's solicitors could not address the matters which were under consideration and, therefore, refused the application for an adjournment. 12 He then decided the matter on the evidence which was adduced by the liquidator and determined that there was not sufficient evidence to establish, as Mr Sobey claimed in his solicitor's letter of 13 December 2005, that Mr Sobey had an equitable interest in the property. He, therefore, made the orders to which I have referred and which are now sought to be stayed pending the appeal. 13 Whilst there are a number of grounds of appeal in the notice of appeal, essentially two matters are raised. First, it is said that the trial Judge was wrong to refuse the adjournment. Secondly, it is said that if the trial Judge was right to allow the adjournment, the trial Judge was wrong to conclude that Mr Sobey's claim of an equitable interest failed. 14 As to the first, the applicant has sought to support that claim by tendering on this application a report of a psychologist, Mr Tony Walsh. That report was obtained after the hearing on 4 December 2006. In that report, Mr Walsh has concluded that Mr Sobey has limitations in his ability to give instruction and this will continue for a period of three months or so. No explanation has been made, I think, as to how then, in those circumstances, instructions were given to Mr Sobey's solicitors to lodge the notice of appeal or to bring this application. 15 There is evidence that today Mr Sobey gave his wife a power of attorney. No explanation has been given as to how he might be in a position to give those instructions to his solicitor to prepare the power of attorney or that he would understand the terms of the power if, in fact, he has limitations on giving instructions. 16 I am not satisfied that the first ground is arguable. I am not satisfied that anything has been put that would suggest that the trial Judge erred in relation to the exercising of a discretion in refusing the adjournment. 17 As to the second ground, likewise, I am not satisfied that the ground is arguable. The evidence before the trial Judge which he has detailed in his reasons, coupled with the absence of evidence from Mr Sobey, clearly indicated that there were serious inconsistencies in the claim brought by Mr Sobey. I am not satisfied, therefore, that that ground either is arguable. 18 In the circumstances, I am not disposed to grant any further stay of the order made by Mansfield J on 4 December 2006 and, for those reasons, the application for a stay is dismissed. There will be an order that the applicant pay the respondent's costs of the application. I certify that the preceding eighteen (18) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Lander. Associate: Dated: 22 December 2006 Counsel for the Applicant: Mr Lazarevich Solicitor for the Applicant: Miranda Ball and Co Counsel for the Respondents: Mr Hoffmann QC Solicitor for the Respondents: Minter Ellison Date of Hearing: 15 December 2006 Date of Judgment: 15 December 2006