WANARI PTY LTD v MERCY AND SONS PTY LTD SUPREME COURT OF NEW SOUTH WALES COURT OF APPEAL CLARKE, MEAGHER and HANDLEY, JJA 26 August 1991 [1991] NSWCA 276 Clarke JA The court has before it an application for a stay of orders made by Cole J on 16 August 1991 pending the hearing of an application for leave to appeal from those orders. On that date, that is 16 August 1991, Cole J granted the stay in respect of a judgment entered by Brownie J on Friday 15 March 1991 upon a number of conditions, including one which required the payment by the claimant of the sum of $400,000 to the opponent on or before 5 pm on 19 August 1991. His Honour also said that in the event of any of the conditions not being complied with the stay was to immediately cease. It is clear that no moneys were paid by the claimant to the opponent prior to 5 pm on 19 August 1991 and in accordance with his Honour's judgment the stay immediately ceased. The order made by his Honour is not without complications, but the present application has been pursued upon the basis that the stay then granted terminated at about 19 August 1991 with the consequence that there is no stay presently in existence. In effect, the present application is for a stay of the judgment entered by Brownie J pending the determination of the leave to appeal from Cole J's decision. Although no formal application of that nature has been filed the court has proceeded upon the basis that that is the application presently being considered by it. The facts which led up to the present situation are set out in some detail in the judgments of Brownie J of 27 February 1991 and 15 March 1991 and the judgment of Cole J of 16 August 1991. In these circumstances it is necessary only to offer a short summary. The claimant engaged the opponent as its builder to construct a retirement village for it. The contract was dated 9 August 1987 and it would appear that on 20 May 1988 the claimant terminated the contract. Following that termination the dispute between the parties was referred to arbitration and a preliminary conference was conducted on 18 August 1988. Both parties were, it seems clear, guilty of delays and, in the event, the arbitration did not take place until July 1990. The opponent propounded a claim in excess of $600,000 on that day. Although the claimant had indicated an intention to mount a substantial counter-claim nothing was done in the July hearing to develop that expressed intention. There had been no points of counter-claim filed, nor had the claimant any evidence present to establish the counter-claim. The arbitration proceeded simply upon a determination of the claim made by the opponent. Notwithstanding the arbitration proceeded for a number of days and on 12 October 1990 the arbitrator published a document which his Honour Brownie J recorded as appearing to be, on its face, an award. In this document the arbitrator 2 UNREPORTED JUDGMENTS recited the failure of the claimant to lodge its claim within the set down dates and that the claimant finally lodged a cross-claim but did not produce the necessary evidence to support it. There then appears this statement: "This award is issued on the understanding that if the cross-claim does not proceed on the date set down for preliminary hearing on Tuesday, 27 November 1990 the award is to take effect immediately." On 17 October, following representations from one of the parties, the arbitrator sought to publish a further award which omitted the paragraph referring to the prosecution of the cross-claim on 27 November. In any event, no hearing took place on 27 November and the claimant did not seek then or later to prosecute its cross-claim. The opponent later sought to have the arbitrator's award entered as a judgment in this court, and during the proceedings which followed there was argument as to the validity of the second alleged award. Brownie J ruled that the second award was not valid and that the first document, that is that of 12 October 1990, was valid. Having made that determination his Honour turned his attention to the further prosecution of the cross-claim before the arbitrator and stood the proceedings over until 1 March 1991. There were further hearings before his Honour, at the end of which his Honour entered the judgment to which reference has already been made, and directed the parties to confer with a view to obtaining an appointment for the hearing of the arbitration. His Honour also stayed the judgment which he had entered until 15 July 1991 and reserved liberty to either party to apply on two days notice. The evidence before this court indicates that steps were taken by the claimant to obtain detailed evidence to support the cross-claim, but in the event it had not secured a hearing date for the determination of that cross-claim or obtained a detailed statement of its claim with particulars in necessary detail to enable the claim to be arbitrated by that date. Notwithstanding, no attempt was made to secure an extension of the stay which Brownie J had already ordered. The next event which relevantly occurred was the hearing of the contested summons which was brought by Turner Corporation Ltd to wind up the claimant. During that hearing the opponent was substituted as the petitioning creditor and the proceedings were adjourned 20 August 1991. Following that hearing Cole J made the order which is the subject of the application for leave to appeal. On 20 August 1991 the liquidation proceedings resumed before Master McLaughlin and, for reasons upon which it is unnecessary to elaborate, were adjourned by him until 27 August of 1991; that is, the application stands adjourned for hearing tomorrow. The main thrust of the claimant's application today is that unless a stay of execution on the judgment is granted it will be deprived of its opportunity to litigate a substantial claim, said to be in excess of $7 million, against the opponent. I will return to that matter in a moment. In addition the claimant submits that it is in an impecunious situation solely as a consequence of the breach of contract which was the subject of its cross-claim. In support of this claim it relies on a statement in Brownie J's judgment of 15 March to the following effect: "In a sense one can read the affidavit evidence adduced on behalf of the proprietor as demonstrating, at least a prima facie case, that this is so." URJ WANARI PTY LTD v MERCY AND SONS PTY LTD (Clarke JA) 3 There, therefore, is at least some substance, as I would read what his Honour said, in the claim that is made, but then his Honour proceeded to say: "It seems to me that the reality is that the capacity of the proprietor to continue in existence is dependent on the capacity of Dr Nemeth, who owns nine of the ten issued shares in the company, to fund the litigation and if leave were given to enforce the interim award, to satisfy that award." That statement, together with evidence that Dr Nemeth has already funded the claimant to a significant degree, is particularly pertinent to the claim that the claimant will be deprived of its opportunity to continue with the arbitration unless a stay is granted. I say this for the reason that it is patently clear that the only way the arbitration can continue is the provision of funds by Dr Nemeth to secure the attendance of lawyers and witnesses at that arbitration. The evidence is fairly clear, and indeed it is the basis of the application, that the claimant has no funds of its own. Any funds necessary for the arbitration must be supplied by Dr Nemeth. In a sense, therefore, whether or not the arbitration continues is in her hands. Clearly if a stay were granted she would proceed to provide the necessary funds to ensure the arbitration proceeds, but so far as I can see if this Court declines a stay no reason would appear why Dr Nemeth cannot continue with what otherwise has been indicated to be her intention, to fund the arbitration. She has said in evidence that she has invested all her and, I apprehend, her family's money in this venture, that she has worked very hard and is continuing to work very hard to ensure it is not a complete failure, and has been completely frustrated by the knowledge that the problems plaguing the venture flow from the conduct of the opponent. She has also said that she is now, to an extent, physically and mentally drained and that if the company is wound up she would not have the personal resources to continue funding the arbitration. One can have sympathy for her in the predicament in which she now finds herself, but the reality of the situation is not that the liquidation would make a dramatic change to the ability of the claimant to prosecute its claim in the arbitration. It is clear that, as a matter of preference, Dr Nemeth will not provide the funds for that to take place. It perhaps sounds harsh to describe this as a matter of preference, but the situation simply stated is that she will, so she indicates, fund the arbitration if the company is not wound up but not fund it if it is wound up. In those circumstances, I do not think it can be said that if this Court declines to grant a stay it will be frustrating the claimant's ability to prosecute its claims. The claimant also submitted that the opponent had been guilty of extensive delay and that this was a relevant factor for two reasons: (1) as explaining the present predicament of the claimant, and, more relevantly; (2) as a factor to be weighed in the balance with the claimant's own delay. That last subject matter is not without importance for, on any view of this case, the claimant has been guilty of gross delay. According to the arbitrator's finding, and putting to one side a cross-claim which was never brought forward at any relevant time, the opponent has been owed in excess of $600,000 since 1988. Whether that be a correct way to look at the matter or not there is no doubt that it has been owed that sum since October last year. In the three years since the preliminary hearing of the arbitration the claimant's cross-claim has progressed at a snail's pace, and even now it does not appear to me to be in a state ready to be litigated. 4 UNREPORTED JUDGMENTS In all those circumstances it is my view that it would be erroneous for this Court to stay execution on a judgment which was entered in March and which, in itself, reflected an award made last October. In all the circumstances therefore I conclude that the application should be refused. Motion dismissed. 6 Meagher JA I agree Handley JA I also agree. CLARKE JA: The motion will be dismissed with costs. Counsel for the Appellant: R ANGYAL, Instructed by: RAYMOND L WHITTEN AND CO Counsel for the Respondent: J MACONACHIE QC AND LV STAPLETON, 15 Instructed by: DW ALEXANDER AND CO