RYDE JOINERY PTY LTD (ADMINISTRATOR APPOINTED) v ZISTI SUPREME COURT OF NEW SOUTH WALES COURT OF APPEAL BEAZLEY JA 22 July 1996, 22 July 1996 [1996] NSWCA 461 Beazley JA This is a notice of motion for a stay pending the hearing of an appeal and also for expedition of the appeal. Expedition is neither consented to nor opposed. However, the application for a stay is opposed. Counsel for the opponents conceded at the outset of the hearing of the notice of motion that the claimants have an arguable case on the appeal but submits correctly that that of itself is not sufficient for the Court to grant a stay. The application for a stay has to be considered in light of the fact that the claimants do not offer, and as I understand their position, oppose any order imposing the giving of security as a condition of the stay. The second and third claimants, referred to as the second and third appellants in the notice of motion, are the principals of a joinery business, Ryde Joinery Pty Ltd (Administrator Appointed), which is the name of the first appellant on the notice of motion and is a party to the appeal. It is not strictly a party to this notice of motion, save in respect of the application for expedition. Ryde Joinery Pty Ltd has been in operation for over 20 years. It currently employs about 28 full time employees and the second and third claimants are themselves employed in the business. As I understand the evidence, their salaries from that business are their only source of income. The family home of the second and third claimants is subject to a contract of sale at a price of $1.307 million. According to the terms of the contract, settlement is to be on 6 September 1996. In para3 of his affidavit sworn 19 July 1996 the second claimant has specified the manner in which he proposes to deal with the proceeds of sale of that home. The usual expenses of sale, including agent's fees and solicitor's costs, will need to be deducted. In addition, it is proposed to pay Metway Bank the sum of $590,000 by way of partial discharge of a mortgage which is secured over the family home by way of a first registered mortgage as well as being secured over the business premises of the first claimant, leaving a balance owing to Metway Bank of About $500,000. It is also intended to discharge a mortgage to the State Bank which secures an overdraft facility of about $180,000. The second and third claimants propose to retain from the proceeds of sale an amount which will enable them to purchase a new property, but also pay legal costs which they owe, as well as contribute the sum of $150,000 by way of operating capital into the business of the first claimant. This would leave a sum of approximately $300,000 which they would seek to use to purchase a new family home. Mr Patane, in his affidavit of 19 July, has sworn to an understanding that Metway Bank will in fact permit the balance of the $500,000 which it is owed to be secured against the property owned by the first claimant, which is valued at between about $850,000 to $900,000. 2 UNREPORTED JUDGMENTS He says, however, that if Metway called in the total debt he would be required to sell the Punchbowl property from which the factory business is conducted. He deposes to the fact that that would cause a substantial interruption to the business of the company, but it would appear from the way in which the case has been argued on his behalf that he asserts effectively that the business would have to go out of operation. He does specify in his affidavit that he would not be able to afford the relocation costs of the factory premises. I should also add that the second claimant has been served with a bankruptcy notice and that a bankruptcy notice appears to have been issued against the third claimant but not yet served, although attempts at service have been made. From the evidence before the Court it is clear that the only source of moneys out of which the claimants could pay the judgment debt would be the balance of the proceeds of their home. Essentially they ask the Court to make an order which will enable them to preserve that fund for their own accommodation rather than to pay it to the opponents in satisfaction of the judgment debt. The claimants offer an extensive undertaking to the Court if the Court is prepared to grant a stay. That undertaking has been the subject of considerable discussion during the course of the hearing. As I understand its terms, in combination with the evidence before me, the effect of the undertaking would be to preserve a fund of $300,000 for any indebtedness of the second and third claimants in the sense that it would be transformed into equity in any other family home which the second and third claimants might purchase. The opponents, for their part, offer a bank guarantee in the sum of $200,000 to secure the repayment to the claimants, should the claimants be successful. The opponents have not adduced any evidence of hardship should a stay be granted, save that counsel for the opponents has submitted that the fact that any judgment creditor kept out of the proceeds of a judgment obviously suffers hardship. Counsel for the claimants submitted that unless a stay was granted it was likely that the appeal would be rendered nugatory. He referred me to the principles which should be applied in determining whether or not a stay should be granted, which are gathered together in a decision of this Court in Alexander and Ors v Cambridge Credit Corporation Ltd (Receivers appointed)(1985) 2 NSWLR 685. The real issue for determination in this case is, it seems to me, having regard to the principles referred to in Alexander and Ors v Cambridge Credit Corporation Ltd (Receivers Appointed), whether on the evidence itself in support of the notice of motion the claimants have demonstrated that this is an appropriate case for a stay, or whether, to use the words of Mahoney JA in Middle Harbour Investments Ltd (In Liq), unreported Court of Appeal, 15 December 1976, the situation has been left in "the state of speculation or of mere argument". This case comes close to the latter description. However, I am satisfied on balance that reasons have been established for the grant of a stay; namely, the uncertainty of the position with Metway, notwithstanding the second claimant's understanding that Metway will agree to a partial discharge of the mortgage only. Whilst there is no evidence that Metway will act otherwise, commercial reality involves at least the recognition of a possibility that it will not. A further factor which is relevant to determining whether a stay should be granted, and which points in favour of a stay, is that if the second and third claimants are left effectively without assets other than mere personal assets, their ability to negotiate lending terms either for the purposes of the purchase of a URJRYDE JOINERY PTY LTD (ADMINISTRATOR APPOINTED) v ZISTI (Beazley JA) 3 home, or for the purposes of raising moneys to finance an appeal, or for the purposes of raising further funds to support the business enterprise of the first claimant may be hindered. In making those comments I am mindful of what I have already said, that as I understand the intent of the claimants' undertakings, it is to preserve a fund of about $300,000 in a form which is not secured or which is not used to provide security for any borrowings and that that will remain the case subject to some alteration in the undertaking which is given to the Court. In determining whether or not I should grant a stay in this matter, I have been influenced by the fact that the extensive undertaking which I have before me has been given. The giving of the undertaking, of course, is not a reason for granting the stay, but I should indicate that had such an undertaking not been given or had the second and third claimants not been prepared to accept terms along the same lines, I would not have been disposed to grant a stay. In all the circumstances and upon the second and third claimants, Robert John Patane and Carol Anne Patane, giving to the Court the undertakings contained in the document headed "Claimants' Undertakings" as initialled by me, I order that the orders of Young J made 12 June 1996 be stayed pending determination of the appeal. The claimants also seek an order that the appeal be expedited. During the course of considering the application for a stay I have also given consideration to that matter. It seems to me that this is an appropriate matter for expedition and accordingly I further order that the appeal be placed in the Expedition List for appropriate directions and orders to be made by the Expedition Judge. I order that the costs of the notice of motion be costs in the appeal. Counsel for the claimant: S Rares SC Solicitors for the claimant: Messrs CP White and Hetherington Counsel for the opponent: M Walton Solicitors for the opponent: Messrs Clapin and Carvone