DUGGAN v COMMONWEALTH BANK OF AUSTRALIA SUPREME COURT OF NEW SOUTH WALES — CouRT OF APPEAL MAHONEY JA 26 June 1995 [1995] NSWCA 134 Mahoney JA. This is an application for a stay of the orders made by Cohen J on 28 April 1995. The plaintiffs in the proceedings, Mr Duggan, Point Piper Marina Pty Ltd, the operating company of the marina, and Raffindale Pty Ltd, the land owning company in respect of the land on which the marina is conducted, brought proceedings against the Commonwealth Bank of Australia and Mr Peter Hedge whom the bank had appointed as a receiver of the operating company and agent to take possession of the land and Australian Guarantee Corporation Limited. The claims which the plaintiffs made against the bank and finance company and Mr Hedge are set out in detail in the judge's judgment which I have had the opportunity of reading during the course of the argument. There were various matters raised on behalf of the plaintiffs. His Honour resolved substantially all of the matters in favour of the defendants. On 28 April 1995 his Honour having made certain declarations gave judgment for possession of the land in favour of the bank, gave leave to issue a writ of possession in respect of the land at the expiration of twenty-eightdays from the date of the orders and gave judgment in favour of the bank and AGC for large amounts of money representing the debts that were then owing. The court has been informed by counsel, and I shall take the matter substantially from what has been put to the court, that about $1.3 million or more was owed to the bank and about $645,000 to AGC. I am told that the total of the amount owing including interest at the moment is of the order of $3.5 million and that in one year's time the amount which will be owing, taking into account the interest, will be something of the order of $4.1 million. I take these figures to be figures stated with a broad degree of generalisation but they give some indication of the amounts in question. An appeal has been brought to this Court against the judgment and the orders made by Cohen J. I shall not seek to set out in detail all of the matters that have been referred to or all of the grounds of the appeal. But the substantial matter that has been referred to in argument is this. It was claimed on behalf of the plaintiffs that the amount of money due in repayment of the relevant debt was due in or about March 1994. It was said that the bank was obliged to give some form of notice described as reasonable notice demanding repayment of the amount in question, that reasonable notice was not given and that by reason of this the appointment of the receiver was irregular or invalid. It has been said that because of the failure to give appropriate notice for payment of the amount in question, the practical position of the plaintiffs has been that they have not been able to raise from other possible and unspecified financiers the amounts of money which they might otherwise have been able to raise in order to pay off the indebtedness to the bank and presumably to AGC. That appears to be the nub of the money matter which now is in contest. 2 UNREPORTED JUDGMENTS Another matter has been referred to, a matter relating to the — as I shall describe it — Public Works Department. It had been said that the bank and/or receiver acted improperly in failing to give consent for the instalment of facilities which would have assisted in the income earning activities of the marina company and a claim is to bemade in respect of that. These matters were all found against the plaintiffs by the judge. I have been asked to make an order staying the order for possession made by his Honour and staying the execution of the writ of possession. Undertakings have been previously given to which I need not refer. The bank now seeks to execute upon the writ of possession which it has in existence or perhaps desires to have issued. An appeal has been brought to this Court against the orders in question. My disposition is, to put the matter very generally and in a pragmatic sense, that where a bona fide application has been made by way of appeal to set aside a judgment, the court should not allow orders to be executed in a way which will defeat the practical operation of the appeal. If an appeal is to be brought and it is to be pursued by the parties, the court will ordinarily be disposed — again I emphasise the generality of the statement — to allow an appeal to proceed and to prevent the appeal being defeated in terms or in a practical sense pending the determination of the appeal. For that reason I have attempted to explore the nub of the matter here in question and to ascertain whether a stay will in any relevant sense assist the plaintiffs, assist them in a way which will not inappropriately infringe the rights of the other parties. It is obvious that interest is accruing on these amounts and the longer the matter stands unresolved, the longer the bank and the finance company are kept out of their money, the more interest will accrue. One of the problems is, I mention collaterally, that doubts exist as to the extent to which by sale of the business and/or the land the amounts in question could be recouped. Various valuations and appraisals have been put before the court and I am grateful to all counsel for having put to me in a summary form on an application such as this the general effect of these valuations and appraisals. Inadequately summarised, the evidence in relation to that is that there is and has been a very wide range of opinion as to the amount which might have been and now can be raised by the sale of the assets in question. At the least, it is to be said that it isby no means clear that by disposal of the assets at present the parties to whom debts are owed will recover the amounts which presently are owing, amounts totalling something of the order of $3.5 million. The question then arises as to whether the court, as a matter of discretion, should hold in abeyance the formal exercise of the bank's rights (which means the sale of the assets) pending a hearing, perhaps an expedited hearing, of the appeal proceedings. Iam conscious of the importance of the matter to the plaintiff parties. It may be that the result of a refusal to give a stay will in a practical sense determine the issues between them as it may be that then the pursuit of the appeal will result only in damages. If damages are awarded it may be (I express no opinion) that they will be large in quantum but the result of refusal of a stay would be that the business would already have been disposed of and the land sold. However, I must look to the overall effect of the stay and its operation upon the rights of all of the parties. URJ DUGGAN v COMMONWEALTH BANK OF AUSTRALIA (Mahoney JA) 3 In any sense here relevant, there is no contest but that there is an amount owing of the order of $3.5 million. There is no present prospect of that being paid. Mr White has claimed, and there may or may not be force in this, that the reason why finance has not been able to be raised is because of the existence of the bank's receiver. But there is no evidence before me from anybody to indicate that, if the receiver had not been appointed, finance would have been available to pay off the indebtedness. There is nothing to deal with the fact that there must always have been a real possibility of the bank appointing a receiver (I put aside for this purpose the technical question as to whether reasonable notice or any other notice would have had to be given before a receiver could be appointed) and with whether that possibility would have had the effect that no financier would have been inclined to proffer finance to enable the plaintiffs to pay off the debts. I am asked to speculate in that regard and to act upon merely the suggestions that have been made by Mr White from the bar table. In the end I am not convinced by these submissions. Whether in fact finance would otherwise have been available to meet the indebtedness of the plaintiffs had the bank given the reasonable notice which it is claimed for the plaintiffs should have been given, I do not know. I am left in doubt as to that; I record that Iam simply not convinced that it would have been so. Even if it was the situation that, had some kind of reasonable notice been given, the plaintiff could have sought other finance, I am not satisfied that the finance would have been available or available in time such that the bank would not be entitled to appoint a receiver or take possession in the manner that it now seeks to do or has already done. It is not necessary for me, I think, further to elaborate the issues in this regard. In the end the position, as I see it, is simply that the debts are owing, that there is no present prospect of their being paid and there is no offer of payment. It is not suggested that money now is available to pay them off. The form of the appeal as far as I am able to speculate — and I emphasise these matter have been left as matters of speculation — will result essentially in the payment of damages by the bank or some other party because of, as it is suggested, failure by the bank to comply with the obligations suggested by the plaintiffs. I mean by that that the bank is owed a large sum and it is not suggested that the plaintiffs can pay it. It is not suggested that in view of what has happened, the plaintiffs can borrow money to pay off the bank's debt. What is, in essence, suggested is that the money did not become payable unless a demand was made for it and a reasonable time allowed for payment to be made, and that such notice was not given and such time allowed. If the appeal succeeded, notice and time could be given and the debt would then be due. I am not satisfied that the plaintiffs could then borrow money to pay the debt: as far as the evidence extends, I think they could not. Consequently, the bank would be able to obtain possession of the assets and to sell them. The plaintiffs, if successful in the appeal would, in a practical sense, recover such damages as were proved to have been suffered or appropriate because of anunauthorised appointment of the receiver. It has not been suggested — at least, I am not satisfied — that those damages would be sufficient to pay off the bank's debt. Accordingly, whatever be the formal result if the present appeal succeeded, the practical or substantial result would be that the bank would, by making a further demand, be in the position to take possession and sell the assets. In deciding whether to grant a stay, to allow further interest to accrue, and to put the parties in the position where, on sale, the assets would not cover the amounts secured on them, it is proper that I have regard not merely to the possible formal result of 4 UNREPORTED JUDGMENTS the present appeal but also the practicalities of the matter. It would be commercially ludicrous to do otherwise; I do not think that the law requires that that be done. In the end I do not think that any useful purpose would be served by the granting of a stay such as that sought by the plaintiffs. However that be, in all the circumstances, and in the exercise of my discretion, I do not think that this is a proper matter for the grant of the stay. I come to this conclusion with some regret because I can understand the effect of the refusal of the stay upon the plaintiffs in their desire to continue the business that they carry on in the subject premises. However, I do not think that in the circumstances I would be justified in granting the stay that is sought. I therefore dismiss the application for stay. It is therefore not necessary to deal with the application for expedition of the appeal proceedings. If an application is desired to be pursued for expedition, that is a matter which may be taken up with the Chamber judge in the ordinary course. I am conscious that I am dealing with this matter as a single judge and that there is a right of reference from me to the Court of Appeal if it is desired to pursue that right. I think it is appropriate for me to order that the orders which I now make are not to be entered for a period of seven days. This will allow the plaintiffs to consider their position and to take such steps as they may be advised. Technically I am merely dismissing an application for a stay and that does not prevent the bank inthe meantime taking possession of the land. The form of stay which I am indicating would not operate as a stay upon the bank's right for possession. However I have indicated by what I have said that I feel the plaintiffs should have a right to consider their position if they desire to take this application to the Court of Appeal fully constituted. They should have seven days for the purpose of considering that matter. That would mean, and I indicate to the bank, that it is my opinion that they should not take steps in the meantime. Without seeking an undertaking from them, they should know that if steps were taken in the meantime an urgent application would be entertained by the court. FORSTER: I have instructions to give undertakings for seven days in any event. HIS HONOUR: This is a matter in which my mind has wavered. However, in the end the conclusion to which I have come is a firm conclusion and I think the order I should make is to dismiss the application. I will, as I have said, preserve the rights of the plaintiffs to the extent that I have. The application is dismissed with costs. Orders accordingly.