FITZPATRICK v WATERSTREET SUPREME COURT OF NEW SOUTH WALES — COURT OF APPEAL PRIESTLEY JA 30 May 1997 [1997] NSWCA 108 Priestley JA. Miss Fitzpatrick and a company she owned and controlled brought proceedings as plaintiffs against Mr Waterstreet and Mr and Mrs Johnson as defendants in which the plaintiffs made various claims against the defendants related to real and personal property. The proceedings were heard by Brownie J. In them the plaintiffs charged the defendants with fraudulent conduct of various kinds. There was a major contest about the credibility of Miss Fitzpatrick, Mr Waterstreet and Mr Johnson in regard to material issues in the case. The proceedings were heard in September 1995 and February 1996. In his reasons for judgment Brownie J made adverse findings about Miss Fitzpatrick's credibility, and, to a considerable extent, apparently, on the basis of these findings, found against the plaintiffs, and on 15 March 1996 dismissed their proceedings. He ordered the plaintiffs to pay the costs of the defendants, those costs to be assessed on an indemnity basis in respect of work done on and after 18 September 1995. Miss Fitzpatrick and her company appealed. Appeal books have now been prepared. There are six volumes of them, and I was told from the Bartable that there are two supplementary volumes of documents. The appeal is ready to proceed. Pursuant to Brownie J's orders for costs, Mr and Mrs Johnson proceeded to have their costs assessed. The assessment was completed on 27 February 1997 in the sum of $150,525. The assessment was lodged in the District Court of New South Wales and became the judgment of that court. Mr and Mrs Johnson then made demand upon Miss Fitzpatrick and the company for payment. No payment was made, and the first steps in bankruptcy proceedings against Miss Fitzpatrick and winding up proceedings against the company have been taken. In this motion the plaintiffs seek a stay of Mr Justice Brownie's costs orders against them pending the hearing of the appeal. On the hearing of the motion, there were three sets of representation, one for the appellants, one for Mr Waterstreet, and one for Mr and Mrs Johnson. For Mr Waterstreet it was said that although he opposed the granting of the stay he had no present intention of seeking to enforce the costs orders in his favour. For Mr and Mrs Johnson it was made plain that they opposed the stay and intended to continue with the bankruptcy and winding up proceedings with all proper speed. As I understood the arguments put to me, it was common ground that the almost inevitable result of the refusal of the stay would be that the appeal would not proceed. In the absence of a stay, Miss Fitzpatrick would be made bankrupt and the company would be wound up. No-one suggested that anyone would then be in a position to provide Miss Fitzpatrick's trustee in bankruptcy or the company's liquidator with the funds and usual indemnities necessary for either of 2 UNREPORTED JUDGMENTS those persons to continue with the appeal. Thus as apractical matter the motion was brought before me on the basis that a decision on it would decide whether the appeal would proceed. The attitude of the defendants was that they regarded the appeal as hopeless, that its continuance would be a waste of time and money and that they would incur costs in defending it which they could never recover. It became clear in the course of argument that Mr and Mrs Johnson at least opposed the granting of the stay so that they could continue with their bankruptcy and winding up proceedings with the object, not of recovering their costs from Miss Fitzpatrick, which they seem to have regarded as a lost cause, but to ensure that the appeal would not go forward. At one stage in the argument there was a suggestion that this attitude on the part of Mr and Mrs Johnson amounted to an abuse of the court's process. I do not think this can be so, at least when it is based on the view that the appeal is hopeless. In such circumstances, I cannot see that opposition by parties in whose favour an order has been made to a staying of that order can be criticised as an abuse. There might just possibly be something more in the argument in the courts where the bankruptcy and winding up proceedings are being taken, but there again, I would think that if the view that the appeal is hopeless is a properly arguable one, then it might be difficult to maintain the abuse of process argument, particularly as that argument would only arise in the context where this court had not stayed enforcement of the costs orders. Considerations of this kind emphasise the importance in the present case of considering the force of the submission by the defendants that the plaintiffs" appeal is hopeless. On the proper approach generally, it was submitted that a leading authority giving guidance to the discretionary considerations which should be taken into account in a case of this kind is Alexander v Cambridge CreditCorporation (1985) 2 NSWLR 685. There was no debate about this submission, and I act on it, and take into account the matters dealt with in that case which bear upon the present one; see especially at pp 693-695. One matter which the court in Alexander referred to as an important principle was that, .. although courts approaching applications for a stay will not generally speculate about the appellant's prospects of success, given that argument concerning the substance of the appeal is typically and necessarily attenuated, this does not prevent them considering the specific terms of a stay that will be appropriate fairly to adjust the interest of the parties, from making some preliminary assessment about whether the appellant has an arguable case. This consideration is protective of the position of a judgment creditor where it may be plain that an appeal, which does not require leave has been lodged without any real prospect of success and simply in the hope of gaining a respite against immediate execution upon the judgment.' (at 695) Another matter to be taken into account is the possibility that the refusal of a stay would deprive an appellant of the means of prosecuting the appeal. As already mentioned, the application for a stay was debated before me on the footing that the likely result of a refusal would be the inability of the appellants to prosecute the appeal. For Mr and Mrs Johnson it was said that that was all to the good, because the appeal was hopeless. URJ FITZPATRICK v WATERSTREET (Priestley JA) 3 Additionally, they submitted that they would be likely to incur further costs, if the appeal goes to hearing, in excess of $22,950. The basis on which this figure was arrived at appears in par 17 of Mr Wakefield's affidavit of 22 May 1997. It is of interest that more than half of the estimated amount is ascribed to senior counsel's fees. This gives rise to what seems to me to be the natural enough question, why brief senior counsel to defend a hopeless appeal? Mr and Mrs Johnson of course have every right to brief experienced senior counsel to protect their interests in the Court of Appeal, but I doubt whether the expense thereby suffered is of much weight in their favour in my considering whether an appeal should be allowed to go forward which they submit is manifestly hopeless. There are other, more material considerations. One is that much the greater part of the expense of the proceedings commenced by Miss Fitzpatrick and her company, both of the trial and the appeal, looked at in aggregate, has already been incurred. Another is the fact that the appellants have a right of appeal; see Alexander at 693E to 694B. An obvious way of trying to deal fairly with the situation as it stands at the present stage would be to order Miss Fitzpatrick and her company to provide security for costs of the appeal, but, subject to that, stay the execution of the costs orders pending decision of the appeal. Such a course would protect the defendants from further losses in the way of costs and expenses if, as they confidently expect, they succeed in the appeal. If the court were to consider orders of that kind, before they could be made the court again would have to consider very closely whether the effect of requiring the security would have the result of preventing the appeal going forward, and if so the weight that should be given to that consideration. However, it is not necessary for me to consider the matter of security any further, because counsel for Mr and Mrs Johnson made it clear they were not asking for any such condition to be imposed. They simply wanted to be able to enforce their costs orders. Counsel for Mr Waterstreet did not raise any question of security. I now turn to Brownie J's reasons for judgment, which I have had the opportunity of considering since hearing oral argument. It is obvious that one aspect of them in particular will cause the appellants considerable difficulty on the appeal. That is the aspect stressed by counsel for the defendants, namely the number of factual findings relevant to the decision of material issues in the defendant's favour which rested upon the assessment of the credibility. The problems appellants face because of findings of this sort are well known. Counsel for the plaintiffs sought to counter this, which was the basic argument for the defendants in the motion, by contending that there were materials in the case not dependent on the credibility findings or affected by them which would enable the plaintiffs to demonstrate error on the part of the trial judge. In making this contention, counsel gave a brief outline of the materials and arguments he would be relying on. In attempting to form a view about the contention that the appeal is hopeless, in light of the trial judge's reasons and the approach explained to me as being that which the plaintiff's will take in arguing the appeal, I have not gone into my consideration in any depth. In light of the passage abovecited from Alexander, my consideration is 'necessarily attenuated,' and should not be more than a 'preliminary assessment about whether the appellant has an arguable case'. It 4 UNREPORTED JUDGMENTS seems to me that this must be the approach of the court to an application such as the present. To go any more deeply into the prospects of appeal would come close to making the motion the occasion for something like the hearing of the appeal itself, but, in the present case, by a single judge. This would seem to me rather to subvert a satisfactory and efficient use of the appeal process. There are cases where a single judge has taken the view that because of the hopelessness of an appeal an extension of time, for example, should not be granted or that a stay of proceedings should be refused, but those have been cases in which it has become very clear that there is not an arguable prospect of the appeal succeeding and the appeal process is really being used by the appellant for the purpose of delaying an otherwise inevitable result. On my 'preliminary assessment' of the chances of success of the appeal, my view is that they are doubtful, but not so clearly hopeless as to justify me, in effect, deciding the appeal, adversely to the plaintiffs, by deciding this motion against them. Further, I see no sign in the present case of the plaintiffs being desirous of going on with the appeal simply for the delay that will bring about in the consequences of the judgment being carried out against them. I have reached the conclusion that I should grant the stay sought by the plaintiffs. I make orders 1 and 2 sought in the notice of motion filed on 19 May 1997. I order that the costs of the motion be costs in the appeal. Orders accordingly.