DAVRIDGE PTY LIMITED vy COMMONWEALTH BANK OF AUSTRALIA SUPREME COURT OF NEW SOUTH WALES — COURT OF APPEAL MAHONEY JA 5 February 1996 [1996] NSWCA 143 Mahoney JA. This is a difficult application. It arises from the fact that a judgment was given by Giles J, Chief Judge of the Commercial Division, on 9 November 1995 against Davridge Pty Limited and three individuals. They are now the claimants for a stay of execution on the judgment. Mr O' Loughlin for the applicants, and Mr Bell for the Bank, have, if I may say so, approached this matter in a very practical way and a very sensible way, and what they have said has given me a clearer picture than would appear from the multitudinous documents that have been (necessarily) placed before the Court. They will, no doubt, correct me in relation to any errors that I make in the statement of the facts and of the position which emerges from them. Put broadly, the position appears to be that a number of securities were given by Davridge Pty Limited and other companies, and by the three persons concerned, to support indebtedness to the Bank in respect of building activities carried on by Mr Gregory Malouf, and by associated persons and companies. The building activities proved, ultimately, financially unsuccessful to the extent that the Bank commenced to call upon its securities. Contests were raised in relation to some at least of them and the Bank brought the proceedings, which culminated in the judgment given by his Honour, to which I have referred. Subject relevantly to one matter, his Honour appears to have upheld the indebtedness to the Bank by the relevant parties of the group and the securities which have been given by way of mortgages, guarantees and otherwise. The one exception which it is relevant to note is that, as Mr Bell has properly pointed out, the judge upheld a defence of George Tewfic Malouf (to whom I shall refer to conveniently as 'the doctor') in relation to one mortgage; he reduced the amount of what otherwise would be the indebtedness to an amount of some $537,031.19. The material order is that contained in par 10 of the judge's orders. An appeal has been lodged against the orders which were made by the learned judge, and the grounds of appeal in that appeal are long and detailed. The appeal raises a number of matters in respect of each of the present applicants. It is suggested that the judge erred in respect of a large number of matters, and it is sought that the orders that have been made be set aside. I may take it, I think, that if the appeal were successful and the orders set aside then, of course, there would be no security relevant to be executed upon as far as the present application is concerned. I emphasise the concluding phrase of what I have said. There may be other securities on which execution may be able to be pursued — I express no opinion upon that — but I am dealing with the securities of various kinds which are the subject of the present application. The present application has been confined to the particular securities to which Mr O'Loughlin has referred in his argument. 2 UNREPORTED JUDGMENTS I come now to the essential question, namely whether execution of the judgment should be stayed to the extent and in respect of the matters to which Mr O' Loughlin has referred. He has pointed out that no objection has been taken to execution upon various securities given by Davridge Securities Pty Limited; no objection has been taken to the execution of the judgment essentially to the effect of the following. It has been said that the residences of the doctor and of, as I shall conveniently describe them, 'Gregory and Tammy', and perhaps the land adjacent to that residence, should not be taken in execution of the judgment. It is said that the residences should not be executed upon pursuant to the relevant securities, and it has been suggested that execution should be stayed generally to achieve the result that pending the appeal none of the three individuals should be put in a position where they may be made bankrupt. It is essentially to these matters that the arguments have been addressed. I do not, in saying that, confine the effect of what Mr O'Loughlin has said, but I think that in the main these are the matters in question. The Notice of Appeal raises, and it is accepted, a genuine contest in relation to the matters in question; I mean by this that there is a genuine contest as to matters such that, if the appeals were upheld, then there could be no execution upon the securities in respect of the properties here in question, nor would there be a basis for bankruptcy proceedings. There is, it has been accepted, a genuine appeal in relation to those matters. As I have said on previous occasions, the broad approach adopted by the Court in relation to stays of execution is, as follows. If there has been a judgment in favour of a party, prima facie, that party is entitled to execute upon the judgment. The fact that a Notice of Appeal has been filed does not, as such, effect a stay of execution. However, the Court has a discretion, to be exercised according to all the circumstances, to stay execution of a judgment pending the determination of an appeal. Where there is a genuine contest on the appeal in respect of matters such that, if the appeal succeeds, the judgment should not be executed upon, then the Court leans to the conclusion that execution should be stayed pending the appeal. I have put thematter deliberately in a vague sense because what the Court does in a particular case must be affected by the circumstances of that case, and it is proper to emphasise and to keep emphasising that. However, the tendency is to grant a stay where there is a genuine contest. Mr Bell did not contest these general propositions. His submission was that in the present case, when the judgment is examined, there is little prospect of the appeal being successful and that therefore the Court should not grant a stay. The Court has said on many occasions, in other applications, that if the prospect of success is such that it is not really appropriate to grant a stay, then the stay will be refused. Mr Bell has submitted — I put the matter generally — that in the present case the decisions on various issues made by the trial judge turned upon his acceptance of the credibility of witnesses, and that in following the principle in Abalos v Australian Postal Commission (1990) 171 CLR 167, there is little, if any, prospect of the appeal succeeding in relation to these matters. There is, I think, considerable force in what Mr Bell has said. But, in the end, I am not satisfied to the appropriate extent that the appeals have remained not substantial or genuine appeals, such that there is insufficient prospect of them succeeding. UBAVRIDGE PTY LIMITED v COMMONWEALTH BANK OF AUSTRALIA (Mahoney JA) 3 A formal notice of an appeal has been filed which raises contests in relation to each of the issues. I am conscious of the bases of the finding of the judge, but in the circumstances I think it is open to the parties to raise a sufficiently arguable contest in relation to the issues that they have raised. The issues are arguable to such an extent that it is appropriate not to pre-empt, in the relevant sense, the outcome of these issues on the appeal. I do not think that I should pre-empt the decision in that regard. It is proper, parenthetically, to refer to some aspects of the argument in relation to the various matters in question. It is said that in relation to the property owned as a home by Gregory and Tammy, that property is the subject of a first mortgage to another bank. The security of the Commonwealth Bank of Australia is a second mortgage and it has been saidthat, without limiting the Commonwealth Bank's option in that regard, it has no present intention — I infer that to be a proper statement of the position as put to me — to execute upon the securities. That does not apply, of course, to the adjacent piece of land which is also the subject of the Bank's charges. The Bank may see fit to execute upon that land and it is not in the same position as the residence. In relation to the residence of Gregory and Tammy, the position is that the Bank does not presently have a registered first mortgage and, no doubt, if it sought to execute upon the residence it would have to move in a way which would bring the matter to the notice of the applicant parties and enable them to make appropriate applications. So far as the home of the doctor is concerned, that is the subject of a security, but the amount of the security was — I put the matter in a general way — reduced by the judge by virtue of the finding which he made in favour of the doctor on one of the issues in the proceedings. The Bank is not restricted in its execution upon that particular property, to the extent of the amount secured upon it. The third matter that arises is the possibility of bankruptcy proceedings being taken against the parties. The likelihood of bankruptcy proceedings being taken is something which I am of course not able to estimate with certainty. There is always a possibility of bankruptcy proceedings being taken against persons against whom substantial judgments have been obtained. In the present case the judgments are of the order of $9 million or thereabouts. However, whether proceedings are proposed to be taken immediately or directly does not appear. I am not satisfied that there is a present threat in relation to that particular matter. In all the circumstances, I think the proper order to be made is to grant a stay in relation to the home of Gregory and Tammy, and in relation to the home of the doctor. I think it is inappropriate, in the circumstances, having regard to the existing appeal and the contest raised by it, to permit execution upon those properties at the moment. I do not make any order in relation to the block of land adjacent to the home ofGregory and Tammy. I think that no useful purpose would be served by granting a stay in relation to that and there would be no relevant prejudice if that were sold, and ultimately the appeal were upheld in relation to it. In relation to the matter of bankruptcy the position is more difficult. I have considered whether I should make an order to the effect that no proceedings be taken which could result in the parties being made bankrupt pending the hearing of the appeal. In the circumstances, I do not think that that form of order should now be made. As I have said, I do not know whether there is a present intention to move to bankruptcy, and the evidence does not satisfy me in that regard. I will 4 UNREPORTED JUDGMENTS leave that matter outstanding. If in fact proceedings are taken by the Bank, which are apt to result in bankruptcy orders, the matter can be the subject of more definitive consideration. But I would not make a specific order in relation to that aspect of the matter at the present time. The order for stay that I would make, therefore, relates to the two properties to which I have referred, and I would indicate that I would propose to stay the execution of the judgments in relation to those matters. The form of the stay will require consideration, and I will direct that the parties bring in short minutes of order to give effect to the views which I have expressed. I would also reserve to the parties liberty to apply in relation to the orders that have been made and the stays which have been granted or refused should the circumstances change to the extent which would make it appropriate to make such an application. I will, if the short minutes are in appropriate form, make the final orders in chambers. This will avoid the need for further court appearances. If the form of the short minutes is significantly in contest, the matter may be relisted for argument. In the circumstances I think it is appropriate that the applicants pay the costs of the present application to date and I would direct that that be so. Orders accordingly.