RATCLIFFE v OCEANIC LIFE LTD SUPREME COURT OF NEW SOUTH WALES — COURT OF APPEAL PRIESTLEY JA 21 October 1997 [1997] NSWCA 259 COMPETING CONSIDERATIONS IN STAY APPLICATION Priestley JA. From the materials before me and from what I have been told by counsel, I can make the following summary of the events that have led to this application for a stay of judgment. On | August this year judgment was entered for Oceanic Life Limited against Glowtide Pty Limited and two individuals who had been guarantors of Glowtide's obligation in respect of which Oceanic Life succeeded. With interest, the amount of the judgment was in the order of $17 million. On 28 August the guarantors filed a notice of appeal. Glowtide did not. On 9 and 12 September the guarantors were served with bankruptcy notices. I have been told that the time for compliance with those bankruptcy notices has been extended in the Federal Court and will shortly expire. On 19 September a liquidator was appointed to Glowtide. On 22 September the liquidator sent out notices to the guarantors intheir capacity as directors of Glowtide seeking the books of the company and a report upon the company's affairs in accordance with the requirements of the Company Law. From letters put before me coming from the liquidator's office it appears that on 25 September there was some discussion with the guarantors concerning arrangements to comply with the statutory requirements, but it also appears that those requirements have not yet been complied with. On 1 October a notice of motion for stay of the judgment of 1 August was filed. On 14 October the Registrar of the Court of Appeal, over the opposition of Oceanic Life, extended the time within which the guarantor appellants should file the index to the appeal papers for the appeal. Yesterday, I heard argument at some length upon the materials which were before me concerning whether or not it was appropriate for a stay to be granted, and I adjourned until today in order to give my decision. The nature of the case before the trial judge concerned financing arrangements which Glowtide had entered into in order to carry out what appears to have been a major project in Queensland. The guarantors appear to have been the principal persons behind Glowtide in its operations. The proceedings concerned a claim by Oceanic Life for recovery of money due to it pursuant to the financing arrangements. The original financier had been another party which, using for the moment what is intended to be a neutral word, transferred its rights to Oceanic Life in return for payment to it of theamount then owing to it under the financing arrangements. The argument for Glowtide did not contest the liability under the amount owing but relied on a cross-action which failed. For the guarantors, arguments were relied on which brought into question the precise legal character of what it was that had happened when the first financier had transferred its rights to Oceanic Life. The guarantors" submission was that 2 UNREPORTED JUDGMENTS the legal consequence of the sequence of events was that the liability which they had had as guarantors to the original financier had not been successfully transferred for the benefit of Oceanic Life. In support of their application for a stay the guarantors did not put any satisfactory evidence of their present financial position before the Court. For that matter, I had no evidence either of Oceanic Life's present position, although that is of less materiality than the position of the guarantors. This brief recital of events since the judgment in my view supports the inference that there is some element on the part of the guarantors, in their present attitude to the proceedings and their present application, of stalling for time against a feared result. The basis on which the guarantors seek their stay was quite concisely put by their counsel yesterday. His submission was that the appeal was not a frivolous one, that there was a right of appeal, and that the prospects of the guarantors being able to carry the appeal through would be impeded, if not prevented, if no stay were granted. He also told the Court that the guarantors would submit to such terms as the Court thought appropriate if a stay were tobe granted. For Oceanic Life it was said that the prospects of the appeal succeeding were slight. At one point I think it was said that they were virtually non-existent. But counsel made it clear that what Oceanic Life was relying on was the combination of what were said to be the poor or very poor prospects of the guarantors on appeal, the evident signs on their part that they were simply playing for time, and the lack of evidence of their present financial position. He also pointed out that the onus was on the guarantors to make a case for a stay, not upon Oceanic Life to show why a stay should not be granted. He also submitted that the refusal to grant a stay would not necessarily bring the appeal proceedings to an end. He asserted, correctly so far as the law is concerned, that it would be open to a trustee in bankruptcy of the guarantors if a stay were refused and consequentially they became bankrupt to carry on the appeal if he thought it was sufficiently worthwhile and if he could obtain funds for it to be carried on. There is no doubt that Oceanic Life's reply to the guarantors" case is a strong one, but I think I should nevertheless accede to the application on terms. It seems to me that the guarantors should have the opportunity for their appeal to be heard. Looked at as a practical matter, it seems to me likely that if a stay were to be refused the appeal would not go forward. That is, the refusal to grant a stay could have the effect in reality of deciding the appeal. It does not seemto me that it is for a single judge to participate in such a result unless it is very clear that the appeal would not succeed. Involved in my conclusion is the view that the appeal is not a frivolous or vexatious one, although I should make it clear that in my view the chances of success are not high. In saying that I should stress that I am not in a position — and I have not sought to get into a position — to express any concluded opinion on what will happen in the appeal itself. The application for stay presents a difficult task of trying to balance the respective claims of the party which has obtained judgment, takes the view that the appeal will fail and seeks to recover the fruits of judgment or to make the best it can out of the fruits of judgment as quickly as possible, against the fact that guarantors have a right of appeal which, since in my view it is not frivolous or vexatious, they should within reason be allowed to pursue. The fact that there are the defects in the guarantors" application which I have earlier indicated as well URJ RATCLIFFE v OCEANIC LIFE LTD (Priestley JA) 3 as my tentative view of their chances of success not being high leads me to think that the best way to balance the competing claims is to take such steps as I can to ensure that the appeal goes on as quickly as possible and that Oceanic Life should at least be protected in respect of the costs of the appeal. I therefore propose to order that the appeal be expedited and that it be placed in the Registrar's next call-over list for the fixing of dates, which I understand to be 5 November 1997, with a view to its being given the greatest expedition possible in light of the state of the list. That may mean that it canbe heard in December, although I think it more likely that it will be heard early next year. I also propose to order that the stay be conditioned on the provision by the guarantors to the satisfaction of the Court of Appeal Registrar of security for the respondent's costs of the appeal. That security should be provided to the Registrar's satisfaction no later than the date of the call-over, which, as I have said, I think will be on 5 November next. STOOD DOWN TO 1.50PM (Terms handed up.) HIS HONOUR: I will strike out the square brackets and change the (10) to (11). I initial those changes and initial the orders. I make orders in terms of the short minutes of order dated today initialled by me and left with the papers. Orders accordingly. Counsel for the appellant: V GRAY Solicitors for the appellant: GYE ASSOCIATES LAWYERS Counsel for the respondent: JE MARSHALL/R PEPPER Solicitors for the respondent: CLAYTON UTZ