ESANDA FINANCE CORPORATION LIMITED vy TONG AND TONG SUPREME COURT OF NEW SOUTH WALES — COURT OF APPEAL PRIESTLEY JA 21 May 1996 [1996] NSWCA 173 Priestley JA. This matter was before me on Monday of last week, when I heard quite full argument in support of and in opposition to the application by Esanda for orders staying certain orders made by Grove J on the 19th of last month. I then said I would deliver judgment on the matter this morning, having first been informed of the situation concerning certain parties to the proceedings before Grove J who were not parties to the stay application. Stated very shortly, the case before Grove J concerned claims by Esanda for recovery of money lent by Esanda and enforcement of securities taken in connection with the lending. Two parties, who I will simply call the Tongs, had guaranteed money lent to other parties and that guarantee had been secured by a mortgage on real property to Esanda. The Tongs sought orders before Grove J setting aside the mortgage, which his Honour granted. His Honour granted relief to Esanda against various of the other parties. The orders that he made in relation to the Tongs were a declaration that the mortgage given by the Tongs as security for the guarantee to Esandaof the loans to other parties was unjust; an order that Esanda be restrained from enforcing the mortgage against the Tongs; an order that Esanda deliver up the certificate of title, the mortgage, and a discharge of the mortgage duly executed to the Tongs; an order that Esanda pay the amount equivalent to the registration fee in respect of the discharge of the mortgage; and an order granting liberty to the Tongs to apply for ancillary orders necessary to terminate the operation and effect of the mortgage. The last three orders that I have mentioned became orders 3, 4 and 5 in the minutes of orders that were prepared and made after Grove J had delivered his judgment in the overall proceedings. Other orders were made against other parties concerning claims and cross-claims that had arisen out of the basic transaction of loan. The application for a stay by Esanda was that orders 3, 4 and 5 that I have referred to be stayed pending the determination of an appeal filed by Esanda against the orders made by Grove J in favour of the Tongs. Other parties to the proceedings before Grove J were a principal in a firm of solicitors and a solicitor employed by that firm against whom Esanda had brought a cross-claim for damages. Grove J had ordered that there be judgment for Esanda against those two solicitors. Damages remained to be assessed in respect of Esanda's cross-claim against those solicitors. His Honour made orders providing for the trial between Esanda and the two solicitors of the question of the amount of damages. When the matter was before me last week I was interested to find out the position in regard to those proceedings. It had been suggested that the solicitors might seek to appeal at this stage of the cross-claim against them. Since the 2 UNREPORTED JUDGMENTS judgment against them is interlocutory, it would seem that leave would be needed for an appeal against his Honour's judgment to be entertained at this stage. I was informed this morning by the legalrepresentatives of the solicitors that their intention is to seek leave to appeal against the interlocutory judgment. The application for leave has not yet been filed and is presently out of time. The argument last week concerning whether or not the stay should be granted involved submissions on the one hand for Esanda, which I will return to, and on the other hand for the Tongs, which were to the effect that they had the benefit of a final judgment against Esanda and Esanda had shown no sufficient reason why that judgment should not be enforced pending the appeal. The principles upon which stays are granted or refused were discussed and, in particular, there was reference to the decision of the Full Court of this Court in Alexander v Cambridge Credit, in which the various considerations are set out in some detail. For Esanda, the principal submission was that the subject matter of their appeal is in a substantial sense the mortgage which was granted to Esanda by the Tongs. It was submitted that if no stay were granted then the mortgage would be discharged and a significant part of the subject matter of the appeal would disappear. It could then be difficult for Esanda, if Esanda succeeded in the appeal, to be restored to its position as a secured creditor of the Tongs. An undertaking for damages was offered by counsel for Esanda on Esanda's behalf as a condition Esanda would fulfil as part of being granted the stay that it sought. Part of the submission in opposition to Esanda's application required a look at the reasons for judgment of Grove J. It is plain from those reasons that his decision against Esanda and in favour of the Tongs was based in very large part on factual findings he made relating to disputed matters of fact where credibility of witnesses was involved. It was therefore quite forcefully submitted on behalf of the Tongs that there was no real prospect of Esandasucceeding on appeal in light of the line of authority in which Abalos and Devries are amongst the best-known cases. There is considerable strength in this submission. However, having had the opportunity of considering the judgment further and the grounds of appeal relied on, it does not seem to me that the appeal could be put in the category of a hopeless appeal or an appeal bound to fail. It is an appeal that obviously has problems for the appellant and it may be that the appellant's chances of success are less, and perhaps noticeably less, than the appellant's chances of failure. However, the position is not so clear that I can safely act on the basis that the appeal is certain or substantially certain to fail. For me to take another view at this stage would be virtually to decide the appeal in a practical sense because refusing the stay would mean the end of the mortgage which is the subject of the appeal. The preservation of the subject matter of an appeal pending its decision is a very weighty matter in exercising discretion in regard to applications such as this. I have come to the conclusion, therefore, that I should grant a stay. It will be on terms of the undertaking being given by Esanda. Also last week I mentioned the question of expedition of the hearing of the appeal. Esanda caused a Notice of Motion for expedition to be filed, returnable this morning. There was discussion last week of whether or not such an application would be granted. In my opinion, it should be but I am not in a position to give a day at this point. The order will be that the matter will be URJESANDA FINANCE CORPORATION LIMITED v TONG AND TONG (Priestley JA) 3 expedited and will go into the expedition list which is now maintained by the Court and a date will be granted in due course. The position concerning the solicitors" application for leave to appeal and possibly the consequential appeal is not clear at the moment. If their application proceeds and is successful it may well be that it would be desirable for their appeal to be dealt with at the same time as Esanda's appealagainst the Tongs. I do not decide that at this moment, however. It seems premature to me. I would therefore propose that, as well as making orders today in accordance with the Notices of Motion before me, I would also stand over the present proceedings for a period of five weeks, to be mentioned before me on 25 June 1996 at 9.30am in order for the position then to be reviewed, to see what has happened concerning the solicitors" intention to appeal and, if possible, to make any necessary orders that may then seem desirable concerning the consolidation of appeals or otherwise and the fixing of a date for the hearing of the appeal by Esanda against the Tongs. Upon Esanda Finance Corporation Limited by its counsel undertaking to the Court that it will bear any damages caused to the Tongs arising out of the stay I am about to grant, I order that the orders in paragraphs 3, 4 and 5 of the orders made by Grove J on 19 April 1996 be stayed until the sooner of the determination of the appeal which has been commenced by Esanda or further order of the Court. T also grant liberty to apply on two days" notice to the Tongs to vary the stay or otherwise seek relief in regard to the stay in the event of circumstances arising making it expedient for the Tongs to seek some relief or variation in regard to the stay orders. I order that the appeal be expedited and that for that purpose it go into the expedition list. I also order that the matter be mentioned before me at 9.30am on Tuesday 25 June 1996. In giving the brief reasons I gave earlier I omitted to mention that it is possible that circumstances may arise in which the Tongs wish to deal with their mortgaged property. Without indicating and without being able to indicate what attitude a court would take if an application of some kind were made to lift or otherwise vary the stay, it seems reasonable to me to grantthem liberty to apply as I have already ordered in regard to the stay in case some practical reason for their wishing to deal with their mortgaged property arises and in case it is then possible for some arrangement to be arrived at which will both safeguard Esanda's interests pending the appeal and enable the Tongs some flexibility in their dealing with their property. Ihave in mind also that on the date five weeks from today I should be informed what the position is concerning the solicitors" intended appeal and if at that stage it should happen that leave to appeal has been granted then those proceedings also ought to be listed at the same time so they can all be looked at together. I will reserve the costs of the application, thus leaving it open for the Court when the appeal is disposed of, if it should think it desirable to do so, to make some special order in regard to the costs of today. Therefore, I reserve the costs of today and of the stay application. Orders accordingly.