PAN ASIA INTERNATIONAL GROUP PTY LTD v KEZARNE PTY LTD SUPREME COURT OF NEW SOUTH WALES — COURT OF APPEAL BEAZLEY JA 15 September 1998 [1998] NSWCA 168 Beazley JA. The claimant applies for a stay of two judgments of Bainton J dated 13 and 27 August 1998 upon undertakings being given to the Court that the appeal will be prosecuted with reasonable diligence and that security will be maintained of $900,000, lodged with the Court on 1 September 1998 in respect of the judgment for $604,739 and interest entered in favour of the first opponent and the order for costs made in favour of the first opponent. The second opponent is the principal of the first opponent. He appeared in person in this Court. The proceedings before Bainton J were Pt 72 r 13(1) proceedings for the rejection of portions of two reports to the court below by a referee under Pt 72 r 11. The reference to the referee was of proceedings brought by the opponent in respect of a building contract. The referee apparently prepared a number of reports, two of which were reports to the court under Pt 72 r 11. The first report, dated 28 April 1998, was subject to objections by the claimant under r 13, and Rolfe J referred six matters back to the referee for further consideration and report. The referee reported again on 8 July 1998. The claimant sought to have certain paragraphs of both the first and the second reports rejected. Bainton J rejected the application and ordered that the two reports be adopted (noting that the second report varied certain parts of the first report). The claimant has appealed from his Honour's judgment. Two principal issues are raised on the appeal. They are: 1. that Bainton J failed to consider certain of the claimant's submissions and thereby denied it natural justice; and 2. that his Honour erred in law in adopting the reports because there were errors on the face of the record in respect of certain calculations and in respect of the first opponent's entitlements to damages. Counsel for the claimant informed the Court that if it was successful on the appeal, its 'best position' was that the judgment sum would be reduced to a nominal amount. However, even if successful it was possible that the amount of damages specified by the referee in the second report (and adopted by Bainton J) might not be varied, or only reduced. The stay was sought as it was submitted that the first opponent's financial position was such that it was unlikely to be able to repay the monies should the claimant be successful in having the judgment sum varied or reduced to a nominal amount. The evidence which the claimant adduced to prove the financial position of the first opponent was contained in an affidavit of Mr Bailey, solicitor, itself an exhibit to JOBNAME: No Job Name PAGE: 2 SESS: 1 OUTPUT: Mon Feb 25 18:25:00 2008 /reports/caseml]/case/urj/9807986 UNREPORTED JUDGMENTS an affidavit of Mr Kuo, a director of the first opponent. That evidence was: 1. that the company records of the claimant reveal — (a) that it is a company with 3,003 $1 issued shares; (b) that its assets are subject to a fixed and floating charge to the State Bank of NSW and to a fixed charge in favour of another of Mr Akbarian's companies; and (c) that in each of February and March 1998 an application for a winding up order was filed in the Federal Court and in April 1998 an application for a winding up order was dismissed. 2. that in proceedings before the referee, counsel for the opponent stated: [A]s a result of the first defendant's non-payment of progress payments and non-issue of the progress certificate, the plaintiff has incurred substantial exposure to subcontractors of some $900,000. During last year, various demands were served on the plaintiff for payment of moneys owing to subcontractors and the plaintiff was put in the invidious position of not being able to meet all of those payments because of his $900,000-odd exposure. [T]he judge was so concerned about the plaintiff's position with its subcontractors that it required the hearing urgently.' The claimant relied upon this as an admission that the first opponent had indebtedness of $900,000; 3. that the first opponent had had proceedings commenced against it in the Local Court at Parramatta for $6,093.10 and had been subject to six statutory demands, totalling in all $320,000; 4. that a creditor (Metro Mix) had applied for default judgment against the first opponent in the sum of $176,740.68; and 5. that All Purpose Plumbing had judgment against the first opponent and against Mr Akbarian personally in the sum of $24,711.08 plus costs. Mr Akbarian responded to Mr Bailey's affidavit in an affidavit dated 27 August 1998, which affidavit was annexed to an affidavit he prepared in these proceedings. In that affidavit Mr Akbarian: 1. confirmed that the first opponent had an 'exposure' of $900,000 but explained that the first opponent had not had the opportunity to assess the claims comprising that sum and that: The claims against Kezarne include substantial amounts for variations that were not approved by the Referee and will not be payable to the subcontractors based on the Referee's reasons' ;2. stated, in relation to the statutory demands — (a) that five of the statutory demands referred to in Mr Bailey's affidavit 'are no longer valid'; (b) that agreements had been reached with creditors in respect of three of those five statutory demands. The agreements were to the effect that the first opponent JOBNAME: No Job Name PAGE: 3 SESS: 1 OUTPUT: Mon Feb 25 18:25:00 2008 /reports/caseml]/case/urj/9807986 URPAN ASIA INTERNATIONAL GROUP PTY LTD v KEZARNE PTY LTD (Beazley JA) 3 would pay the sums claimed from the proceeds of any judgment in its favour against the claimant, on a pro rata basis; and (c) that one of the statutory demands had been set aside. 3. denied that the first opponent is indebted to Metro Mix and was in the process of applying to set aside any default judgment; 4. stated that the first opponent has creditors of $2,200,000; a judgment creditor owing a judgment debt of $97,000 plus costs; and has two bank guarantees in place in a total sum of $780,000. Counsel for the claimant objected to those paragraphs of the affidavit of Mr Akbarian from which the matters in (4) above are derived on the basis that such material was so general as to be meaningless. Given the nature of the application and the manner in which it was conducted by both parties, I will admit that evidence. Mr Akbarian is the managing director of the first opponent. The first opponent is in effect his company and it was apparent from the evidence he presented in Court and the manner in which he conducted the case that he has an intimate knowledge of its affairs. Ishould add that portions of the evidence of indebtedness relied upon by the claimant was adduced by way of information and belief. Two issues were agitated on the hearing of the application for a stay. One was the strength of the appeal. The other was the financial position of the first opponent. As to the first, although it was argued at some length by Mr Akbarian that the claimant's appeal was not a strong one (indeed he has filed a notice of motion that it be struck out) I consider I should proceed on the basis that the claimant has an arguable appeal, without seeking to assess its likelihood of success. I do so for two reasons. First, except for possibly the first ground of appeal, there is insufficient evidence to enable me to do so. On the other hand, counsel for the claimant conceded that it was possible that even if successful on the appeal, the claimant may not succeed in having the judgment sum reduced. The real issue and the principal one relied upon by the claimant, was the financial position of the first opponent. I have set out the competing evidence in respect of that. None of that evidence has been tested and the evidence as to the first opponent's credit situation is very general and not supported by any financial or other documentation. However, the Notice of Motion for a stay and the affidavit in support was only filed and served on Friday 11 September 1998, an order for short service having been made by the Court of Appeal Registrar on Thursday 10 September 1998. It might be argued that the opponents should have anticipated that another application would be made. However, this application was brought on with less than JOBNAME: No Job Name PAGE: 4 SESS: 1 OUTPUT: Mon Feb 25 18:25:00 2008 /reports/caseml]/case/urj/9807986 UNREPORTED JUDGMENTS onebusiness day's notice, so that the failure of the first opponent to provide documentary evidence to support its financial position is, to that extent, explicable. Having said that, it is very important to keep in mind that it is for the claimant to satisfy the Court that the matter is one where a stay ought to be granted. I am not satisfied on the evidence adduced that the first opponent has debts of $900,000, nor am I satisfied that it would not be able to repay the judgment sum (or any amended judgment sum) if the appeal was successful. At the most I am satisfied that the first opponent has cash flow problems. However, I do not consider that is sufficient to order a stay. For the record, I will deal with one final matter, and that is the objection to the affidavit of Mr Akbarian's sworn 14 September 1998. I reject paragraphs 2 and 3 (to the extent of the objection), 4 (to the extent of the objection), 5 and 8 (to the extent of my ruling on 14 September 1998), 9, 11, 12, 13, 15, 16 and 17. The notice of motion (in so far as it seeks a stay) is dismissed with costs. The claimant also sought expedition of the appeal. If that order is still sought, it should be referred to the expedition judge to be dealt with in the normal course. 25 Orders accordingly.