WENKART v PITMAN SUPREME COURT OF NEW SOUTH WALES COURT OF APPEAL STEIN JA 28 October 1997 [1997] NSWCA 336 Stein JA These are complex commercial proceedings involving multiple parties, including related external litigation which occurred prior to the hearing of the suit by Hunter J. A brief understanding of the litigation is as follows: Sandtara Pty Ltd (Sandtara) is a company which was the plaintiff before Hunter J. It was the landlord of premises let to a company Cenrin Pty Ltd. Cenrin Pty Ltd went into liquidation and the liquidation disclaimed the lease. The lease was guaranteed by Abigroup Ltd (Abigroup), the defendant in the proceedings. Abigroup is liable to be indemnified by Mr Gennaro Abignano and a company with which he is associated, Genallco Pty Ltd (Genallco). They, that is Mr Abignano and Genallco, are liable to be indemnified by Mr Alan Pitman who, in turn, claimed an oral indemnity from Dr Thomas Wenkart. On 25 September 1997 Hunter J gave reasons for judgment and made orders on 29 September. The orders with which we are primarily concerned, other than as to costs, are as follows: The first order is that the defendant, Abigroup Ltd, pay the plaintiff, Sandtara, $1,307,537.10, which I will subsequently refer to as the "said sum"; second, a declaration that Mr Abignano and Genallco Pty Ltd are liable to indemnify Abigroup Ltd for its liability to the plaintiff; third, an order that Mr Abignano and Genallco pay Abigroup Ltd the said sum; fourth, a declaration that Mr Pitman is liable to indemnify Abignano and Genallco for their liability to Abigroup Ltd; fifth, an order that Mr Pitman pay to Abignano and Genallco the said sum; sixth, a declaration that Dr Wenkart is liable to indemnify Mr Pitman; and lastly, an order that Dr Wenkart pay to Mr Pitman the said sum. Hunter J's decision has led to three appeals. In proceedings numbered 40673 of 1997, Dr Wenkart has appealed. The appeal is essentially confined to the finding of his Honour that there was an oral indemnity given by the appellant to Mr Pitman. The second limb of the appeal is the refusal of his Honour to grant leave to amend the pleadings to allow Dr Wenkart to bring a cross-claim against Mr Pitman. At this point of time, the Notice of Appeal does not raise any issue as to whether the plaintiff mitigated its damages, although on behalf of Dr Wenkart, Mr Hammerschlag has indicated that it is intended to amend the appeal to add grounds related to mitigation. A second appeal was filed yesterday by Abignano and Genallco, confined to the issues of mitigation of damage and interest. I am informed by counsel that a third appeal was filed yesterday afternoon by Abigroup, and that it is in essentially similar form to the Notice of Appeal by Abignano and Genallco. 2 UNREPORTED JUDGMENTS The motions before the court are threefold. First, by Dr Wenkart, who seeks a stay of the relevant orders concerning him, namely orders number 10, 11 and 12 made by his Honour on 29 September. It should perhaps be pointed out that the relevant paragraph of the Notice of Motion is much wider than that, although the stay application is narrowed to the orders that directly concern Dr Wenkart. The second stay application is by Abignano and Genallco to stay any orders against them on the first cross-claim, and lastly, Abigroup have filed an application for a stay the orders concerning it on the basis of the appeal filed yesterday which mirrors that of Abignano and Genallco. The positions of the parties on these notices of motion are, very briefly, as follows. Dr Wenkart's counsel submits that it is appropriate to grant a stay the orders with which he is concerned pending the appeal. Until this morning no offer of any security was made. One of the principal grounds upon which the application is put is the evidence to be found in the transcript of the impecuniosity of Mr Pitman. It is submitted that if no stay is granted and the judgment is paid by Dr Wenkart to Mr Pitman in accordance with the order, then in the event of the appeal being successful, Dr Wenkart will lose the benefit of the appeal because he will likely never be able to obtain any monies back from Mr Pitman. That is, it is argued that the appeal, if successful, may be rendered nugatory. A number of other arguments are raised by Mr Hammerschlag in his submission, including the strength of the appeal. Other than to say that all other parties, especially Abignano and Genallco, oppose the application by Dr Wenkart, I will not recount their reasons. The stay application made by Abignano and Genallco is opposed by counsel for Abigroup, for the reasons that have been given by its counsel and set forth in short written submissions. Lastly, the stay sought by Abigroup is opposed by the plaintiff in the court below, Sandtara, on a number of bases. Partly because it is said to be a weak appeal; that Abigroup has no independent appeal but, rather, relies upon the appeal and argument by Abignano and Genallco, as well as other objections more fully set out in some short written submissions handed up by Abigroup's counsel. The principal hearing on these motions occurred yesterday morning, and, at the conclusion of the hearing yesterday, I stood the motions over to 9:30 this morning to enable the appellant's counsel to obtain instructions upon any offer of security for a stay. This morning I was informed that security was offered by Dr Wenkart of interest on the judgment debt, calculated to be around $11,000 per month. There is some issue between the parties as to the amount of interest, being calculated as $11,284 on a certain basis, which is different to the interest calculated by the other parties, but that really is neither here nor there in terms of the overall application, so far as I am concerned. The other parties seeking a stay also elaborated on the question of security, as it affects their clients. The primary position of Genallco and Abignano was opposition to the need for security, but offering, if necessary, that security would be provided. Indeed, security was offered in the affidavit in support of the application for a stay, and I am informed this morning by Mr Barry QC that his clients could give security, in the nature of a bank guarantee, of around $900,000 within fourteen days. As to Abigroup, it was submitted that it is inappropriate and unnecessary that Abigroup 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 URJ WENKART v PITMAN (Stein JA) 3 of bank guarantee, Abigroup agrees that security can be provided. I should add perhaps for completeness that counsel for Sandtara submits that Abigroup should provide security for a stay for the reasons already referred to. There needs to be some case management of these appeals, quite apart from the issues relating to security. It is apparent to me that the three appeals raise different issues and different subject matter and it is appropriate that Dr Wenkart's appeal, confined essentially to the question of the oral indemnity and the amendment of the pleadings relating to a cross-claim against Mr Pitman, should be heard separately and prior to the two appeals by Gennaro Abignano, Genallco and Abigroup, which are concerned with the issues of mitigation of damage and interest. So far as security in relation to Dr Wenkart's appeal is concerned, and having considered the submissions made by all parties, I am not convinced that Dr Wenkart has established that a stay should be granted on the O10, O11 and O12 unless security is provided. I have doubts as to the strength of his appeal, although I appreciate the concerns over Mr Pitman's alleged impecuniosity and the possible effect that that may have on Dr Wenkart's ability to recover the money paid, if he is successful in the appeal. In my view, the security proposed this morning by Dr Wenkart is inadequate. I have come to the conclusion that: The judgment should be stayed, pending the appeal, on condition that Dr Wenkart provide a bank guarantee to the Registrar of the court within fourteen days in the said sum of the judgment which I referred to earlier. I see no reason to nominate the sum of the guarantee in any sum less than the judgment. I direct that Dr Wenkart's appeal be expedited and that it should be placed in the earliest available call over. At present I am not in a position to know when that is, but I will leave it to the parties to that appeal to determine when they can get the matter moving. I have in mind, also, the indication that there may be amendment to the appeal, but I make no orders in relation to any additional question that may be involved in the appeal at this point, because there is no additional question. As to the stay application by Abignano and Genallco, as well as the stay application by Abigroup, I say no more at this point of time other than that 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. Again, I see no reason why the amount of the bank guarantee should be in any SD less than the judgment sum. I grant liberty to the parties to apply on seven days' written notice. Costs will be costs in the appeals.