ABIGROUP LTD v SANDTARA PTY LTD; WENKART v PITMAN; ABIGNANO v ABIGROUP LTD SUPREME COURT OF NEW SOUTH WALES COURT OF APPEAL MASON P and POWELL JA 17 April 1998 [1998] NSWCA 3 Mason P The Court is of the view that the application for a stay should be refused. Given the lateness of the hour I will necessarily be brief in the statement of the reasons which I offer in support of my conclusion to that effect. Judgment stands reserved in relation to an appeal and an application for leave to appeal which in combination challenge an order of Hunter J that Dr Wenkart pay $1.3 million to Mr Pitman on certain terms. The complexities of the issues debated in the appeal are such that it will take some time to resolve the appeal. Nothing which I am saying today should indicate any conclusion that the appeal lacks substance. There are related proceedings which unfortunately were not heard at the same time as the appeal. They have been set down for hearing in mid June before a similarly constituted court. It is obvious that judgment will not be given until the second half of this year in relation to the various matters. There were directions about the filing of evidence in relation to the stay application. The evidence that was filed on Dr Wenkart's behalf was that of his solicitor Mr Maxwell who provided the evidence on information and belief. ParaS of Mr Maxwell's affidavit of 27 March said: "5. Dr Wenkart has no assets presently held by him either legally or beneficially which would enable him at this time to raise the amount of the judgment debt in the Court below. He is at this time unable to obtain or give security for that amount, because all assets which might otherwise be available to him for the obtaining or giving of such security are fully encumbered." Dr Wenkart's counsel invited the Court to proceed on the basis that Dr Wenkart is unable to pay the money he has been ordered to pay. I am content to proceed on that basis. It seems likely to be the case although I am not in a position to form any conclusion given the complexity of Dr Wenkart's financial position and some of the uncertainties raised by evidence given by Dr Wenkart in a recent examination proceeding. The principles relating to a stay application are set out in Alexander v Cambridge Credit Corporation Ltd (1985) 2 NSWLR 685. A stay is not available simply for the asking. The applicant must demonstrate an appropriate case to warrant the exercise of the discretion in his or her favour. A factor, not an exclusive one, is whether the refusal of the stay would render the appeal right nugatory. A plethora of execution processes have been set in train to enforce the declaration and orders announced by Hunter J. There has been execution upon personal property. There have been over 50 garnishment notices. There has been an examination summons. And there have been three successive bankruptcy notices issued. 2 UNREPORTED JUDGMENTS Counsel for Dr Wenkart frankly and I think correctly acknowledged that the first three items do not themselves present a strong basis for an application for a stay. After all, the examination process is a necessary and appropriate way of enabling the party that is at the moment the judgment creditor to unravel some very complex and on the face of it difficult financial transactions. The garnishment notices have been set in train. It would appear that although the net has been cast wide not a great deal has been latched onto except some fairly small amounts of salary. The property execution has not produced much. The real concern has been frankly acknowledged to be the bankruptcy proceedings that have been foreshadowed. Two bankruptcy notices have been set aside. The third notice that has been issued is the subject of a challenge by Dr Wenkart, alternatively an application for extension of time for compliance by him. One of the complications in relation to both this application and application for leave to appeal is the fact that there has been what has variously been described as an assignment or a release or some other transaction whereby Mr Pitman (who makes no secret about his personal insolvency) has purported to assign in favour of Mr Abignano his rights under the order of Hunter J. The validity of that action and its impact upon the order itself is a matter in issue in the appeal and the application for leave, but we were informed that the execution processes in this Court and the bankruptcy notices have been issued in the name of Mr Abignano and perhaps Genallco Pty Ltd, a company with which he is associated, on the basis of the assignment being asserted to be valid. The first two bankruptcy notices have been set aside. The validity of the third is a hotly contested issue which will be before the Federal Court as early as next Tuesday. There having been no stay in place at the time the current bankruptcy notice was issued, the Official Receiver was not on that account precluded from issuing the bankruptcy notice by virtue of s41(3)(b) of the Bankruptcy Act 1966. If this Court were to stay execution of the orders under challenge, that in itself would not invalidate the bankruptcy notice or lead to its extension or dictate the dismissal of any ensuing bankruptcy petition. All of those matters would be issues properly determined by the Federal Court in the exercise of its bankruptcy jurisdiction. It has been submitted by counsel for Dr Wenkart that there is a real prospect that the third bankruptcy notice will be set aside on the ground that it was issued on the application of a person who was not the creditor who obtained against Dr Wenkart the relevant final judgment or final order: cf s41(1) of the Bankruptcy Act. I think it inappropriate that I should express no view on that submission other than to note it and to note that it is a matter which the Federal Court is well seized of and not lacking in some guidance in the light of earlier litigation both in recent times and some years ago involving some of the parties presently before the Court. I therefore do not see how a stay would greatly assist Dr Wenkart in relation to the proceedings in the Federal Court. Matters of comity and in one sense full faith and credit suggest to me that this Court should stay out of a matter which can properly be resolved by the Court that has jurisdiction to decide it. If however execution on the order of Hunter J is not stayed and if the appeal is dismissed then it seems to me that there is a prospect of prejudice being suffered by the judgment creditor or his assignee. In saying this I am doing no more than recognising the material showing the complexity and extent of Dr Wenkart's financial dealings. The proceedings that culminated in the orders by UIRIGROUP LTD v SANDTARA PTY LTD; WENKART v PITMAN; ABIGNANO v ABIGROUB LTD (Mason P) Hunter J were initiated against Dr Wenkart in August 1996, and he would in any event have been well aware of them prior to that, having regard to his relationship with Mr Pitman as found by his Honour. Given the extent of the sum covered by the order and the complexity of the financial dealings revealed in the evidence, some of which lie off shore, then it is relevant I think to take into account the interest of the person who after all is a judgment creditor as matters presently stand to be able to at least present a bankruptcy petition in order to be in a position to challenge antecedent transactions occurring within a fixed period of time prior to that date. Should the bankruptcy notice not be set aside there would still need to be a lapse of time for compliance followed by the time within which a petition would be heard and determined. There would be the opportunity for application to be made for the adjournment of that petition or for the petition to be defended on the basis of the very challenge to indebtedness which will be determined at least to the level of the Court of Appeal when judgment is given in the outstanding litigation. If one accepts, as we are invited to do, at face value the statement in paraS of the solicitor's affidavit, Dr Wenkart is unable to obtain or give security for the amount ordered to be paid. That inability has been demonstrated by his failure to provide security notwithstanding the fact that earlier stays have been granted for periods of time by Hunter J and subsequently by Stein JA on the condition that security be provided. I think it is relevant to take into account that there were earlier contested stay applications in which such a stay was granted on such a condition and the condition was not taken up. Again that may only establish the inability to pay which Dr Wenkart asserts in any event. But that inability alone even when added to an arguable case does not on the facts of this case satisfy me that it is appropriate that a stay be granted. There are as I have said countervailing factors and much of the prejudice if not all of the prejudice which Dr Wenkart asserts he fears is prejudice which can be properly negated or limited through the ordinary processes of the proceedings in the Federal Court. For those reasons I would refuse the application and dismiss it with costs. Powell JA Although I accept that the grounds of appeal which have been advanced in support of the appeal and the submissions advanced in support of the application for leave to appeal are far from unarguable, I am not satisfied that the circumstances of this case justify a departure from the prima facie rule that one who has or at least claims to have the benefit of a judgment should be kept from the fruits of that judgment pending the determination of the appeal. I therefore agree with the president that the application should be dismissed with costs. Mason P That is the order of the Court. Appeal dismissed with costs.