ABIGROUP LTD v SANDTARA PTY LTD; ABIGNANO v ABIGROUP LTD; WENKART v PITMAN SUPREME COURT OF NEW SOUTH WALES — COURT OF APPEAL PRIESTLEY JA, SHELLER JA and COLE JA 17 December 1997 [1997] NSWCA 6 Priestley JA, Sheller JA and Cole JA. The three above matters were listed for hearing before Priestley and Sheller JJA on 27 November 1997. In fact matter No. 40673/97 (Wenkart v Pitman) did not proceed, there being no appearance for either party in circumstances to which we will refer. Priestley and Sheller JJA heard argument in the two other matters. At the conclusion of the argument the Court raised the question whether the nature of the proceedings required three judges to sit. The view was taken that as the applications were for a review of a decision of Stein JA given on 28 October 1997 granting certain stays, it was necessary that they be dealt with by three judges. All parties then agreed that a third judge of appeal could consider the matter on the papers,including a transcript of the submissions before Priestley and Sheller JJA, upon the basis that if the third judge required further oral submissions that would be arranged but, absent that requirement, the Court could deliver its judgment without further hearing. Cole JA became the third judge and has considered all of the material advanced at the oral hearing. No further oral hearing is regarded as necessary. The parties have also addressed the matter upon the basis that, as this is a review of decision of a single judge of appeal, the onus is on the applicant to show that, in exercising discretion to grant a stay the single judge erred in principle in exercise of a power, or that the decision was plainly wrong.! We will approach the matter on that basis. BACKGROUND Sandtara Pty Ltd (Sandtara) leased certain premises to Cenrin Pty Ltd The obligations under that lease were guaranteed by Abigroup Ltd (Abigroup). Abigroup obtained an indemnity in respect of any liability under its guarantee from Gennaro Abignano and Genallco Pty Ltd, whom we will collectively refer to as 'Abignano'. Abignano obtained an indemnity in respect of its prospective liability under the lease from Allan Pitman (Pitman). Pitman claimed he had received an oral indemnity in respect of his prospective liability from Thomas Richard Wenkart (Wenkart). The guarantee of Abigroup was not in issue, nor were the indemnities of Abignano or Pitman. Wenkart disputed that he had given an oral indemnity to Pitman. Cenrin went into liquidation and the liquidator disclaimed the lease. Sandtara subsequently entered into a further lease with a company associated with Wenkart. Sandtara sued Abigroup on its guarantee, and in turn Abigroup sought indemnity from Abignano who sought indemnity from Pitman who sought indemnity from Wenkart. Hunter J in a judgment delivered 25 September 1997 upheld each claim. His Honour made orders on 29 September 1997. Briefly 1. Wentworth v Wentworth (1994) 35 NSWLR 726. 2 UNREPORTED JUDGMENTS stated, his Honour ordered Abigroup to pay Sandtara $1,307,537.10 (the judgment sum), plus costs. His Honour declared that Abignano was liable to indemnify Abigroup and made the further order: 5. Upon the undertaking to the Court which has been given by counsel for (Abigroup), to pay to the plaintiff the judgment sum, without deduction therefrom, immediately upon its payment to (Abigroup) by (Abignano), (Abignano) pay to (Abigroup) the judgment sum. Orders in similar terms were made as between Pitman and Abignano. As between Pitman and Wenkart, having made a declaration of liability of Wenkart to indemnify Pitman, his Honour further ordered: 12. Upon the undertaking to the Court of (Pitman), to pay to (Abignano) the judgment sum, without deduction therefrom, immediately upon payment to (Pitman) by (Wenkart), and so long as he holds such sum or any part thereof to receive and hold the same on trust for (Abignano), (Wenkart) pay to (Pitman) the judgment sum. Before Hunter J, Abigroup did not seek a stay of the judgment against it. However Abignano did and one was granted until the date of expiration of time to appeal. Expiration of that stay led to applications being filed in the Court of Appeal for stays of the orders against them by Wenkart, Abignano and Abigroup. Pitman did not seek a stay, he being impecunious. Those were the applications heard by Stein JA. Wenkart has appealed principally upon two bases. The first is a challenge to Hunter J's finding that there was an oral indemnity. The second is against Hunter J's refusal to allow Wenkart to plead a cross-claim against Pitman. Pitman has not appealed. Abigroup did not intend to appeal, however Abignano wished to challenge the trial judge's finding that Sandtara had failed to mitigate its loss. Abignano claimed that Hunter J should have found that Sandtara should have accepted what was said to be an offer by Abignano to re-lease the premises after the failure of Cenrin at a rental similar to that at which it was leased to Cenrin, and thus there would have been no loss to Sandtara and no reason for it to call upon the guarantee of Abigroup with the consequence of Abignano, Pitman and Wenkart being called upon their indemnities. It also wished to raised a question of interest. Once Abignano lodged a notice of appeal, so did Abigroup on identical bases. STEIN JA'S DECISION Stein JA granted a stay of the judgments against Abigroup, Abignano, and Wenkart upon the condition that each provided a bank guarantee in respect of the judgment sum. His Honour did so after adjourning the matter to allow the parties to consider the question of provision of security. Wenkart offered security only in respectof interest which was regarded by Stein JA as inadequate. Abignano and Abigroup agreed to provide security if required, and in fact have provided appropriate bank guarantees. By the time the matter was heard on 27 November 1997, Wenkart had not provided security and accordingly there is no stay operating in respect of Pitman's rights against Wenkart. Nor is there any stay operating in respect of Abignano's rights against Pitman, as Pitman has not sought any stay. Wenkart, not having provided the security required by the order of Stein JA, did not appear to challenge that order. Wenkart's appeal has, in one respect, been expedited and is to be heard in March 1998. UIRIGROUP LTD v SANDTARA PTY LTD; ABIGNANO v ABIGROUP LTD; WENKART 8 PITMAN (Priestley JA, Sheller JA and Cole JA) (Priestley JA, Sheller JA and Cole JA) Regarding the stay in favour of Abigroup and Abignano, counsel for Abigroup made clear at the hearing on 27 November 1997 that Abigroup's preferred position before Stein JA was that there be no stay.2 That is consistent with Abigroup's position that it had not intended to appeal and had no interest in any appeal unless and until Abignano appealed. Its secondary position was that if Abignano was granted a stay, it should have a similar stay. Such a stay was said to be necessary to 'maintain the fairness to the parties which was created by the original judgment' .3 Stein JA noted: As to Abigroup it was submitted that it is inappropriate and unnecessary that Abigroup Ltd provide security, given the evidence of its firm financial position. However, if the stay be granted only on the basis of provision of security, by way of bank guarantee, Abigroup agrees that security can be provided. I perhaps should add for completeness that counsel for Sandtara submits that Abigroup Limited should provide security for a stay for the reasons already referred to. His Honour did not otherwise address the entitlement of Abigroup to a stay. Regarding Abignano's stay application, Stein JA said: As to the stay application by Abignano and Genallco Pty Ltd, as well as the stay application by Abigroup, I say no more at this point of time other than I form the conclusion that the court should grant the stay upon them giving the same security to the Registrar for the sum of the judgment debt by way of a bank guarantee within fourteen days. Stein JA's judgment dealt primarily with the application of Wenkart for a stay, that being grounded on the allegation that Pitman was impecunious, that if Wenkart paid monies to Pitman which in turn went up the chain to Sandtara, but the appeal was successful, Wenkart would be unlikely to recover the sum from Pitman. Whilst Abigroup and Abignano are companies or persons of substance, Pitman was not. This argument seems to have moved his Honour to grant the stay in favour of Wenkart against Pitman. There may be difficulties with this argument, but we need not consider them, as Wenkart has not fulfilled the conditions of the stay granted to him, he thus no longer has any stay and there is no cause to review the decision of Stein JA in that respect. We think that the submission that Stein JA did not give any or any sufficient reasons for granting the stay in favour of Abigroup and Abignano should be upheld. The totality of his Honour's reasons in this respect has been quoted earlier. We are not able to discern the basis for his granting of those stays. APPLICABLE PRINCIPLES The principles upon which a Court should grant a stay are fully discussed in Alexander v Cambridge Credit Corporation Ltd'. In that case the Court referred to what Mahoney JA said in Re Middle Harbour Investments Ltd (In Liq): Where an application is made for a stay of proceedings, it is necessary that the applicant demonstrate an appropriate case. Prima facie, a successful party is entitled to the benefit of the judgment obtained by him and is entitled to commence with the presumption that the judgment is correct. These are not matters of rigid principle and a court asked to grant a stay will consider each case upon its merits, but where an 2. Trasncript, 27 November 1997, p.27. 3. Transcript, 27 November 1997, p.28. 4. (1985) 2 NSWLR 685 at 694. 5. Unreported, Court of Appeal, 15 December 1976). 4 UNREPORTED JUDGMENTS applicant for a stay has not demonstrated an appropriate case but has left the situation in the state of speculation or of mere argument, weight must be given to the fact that the judgment below has been in favour of the other party. The Court in Alexander also said: The onus is upon the applicant to demonstrate a proper basis for a stay that will be fair to all parties ... The mere filing of an appeal will not, of itself, provide a reason or demonstrate an appropriate case, nor will it discharge the onus which the applicant bears. Nothing was advanced before Stein JA, or this Court, regarding any proper basis for a stay of the judgment of Sandtara against Abigroup. Abigroup had given an undisputed guarantee. It did not intend to appeal. It preferred that there be no stay. It appealed only because Abignano did. If that appeal be successful it was not in contest that Sandtara would be in a position to repay the judgment debt. In our view there should not have been a stay in favour of Abigroup. Nor should there have been a stay in favour of Abignano. Its indemnity was not in issue. The substantive matter it wishes to raise on appeal relates to mitigation of loss. Hunter J found against it on grounds which include assessment of witnesses, and factual findings regarding characterisation of conduct and documents. Although we do not think that Abignano's appeal can be classified as unarguable, it does not strike us as being of sufficient strength, in the circumstances of this case, to be an adequate basis for the granting of a stay in accordance with the principles enunciated. For these reasons we think the order of Stein JA in respect of the stays granted in favour of Abigroup and Abignano should be set aside. 40718 /97 ABIGROUP LTD V SANDTARA PTY LTD 1. Orders of Stein JA dated 28 October 1997 set aside. 2. Summons for a stay dismissed. 3. Applicant to pay the costs of the notice of motion before Stein JA and of this review but to have, if qualified, a certificate under the Suitors Fund Act in respect of the costs of the review. 40760 /97 ABIGNANO V ABIGROUP LTD 1. Orders of Stein JA dated 28 October 1997 set aside. 2. Summons for a stay dismissed. 3. Applicant to pay the costs of the notice of motion before Stein JA and of this review but to have, if qualified, a certificate under the Suitors Fund Act in respect of the costs of the review. Orders accordingly.