STONE vy FARROW MORTGAGE SERVICES PTY LID (IN LIQUIDATION) SUPREME COURT OF NEW SOUTH WALES COURT OF APPEAL MASON P, SHELLER and POWELL JJA 27 April 1998, 27 April 1998 [1998] NSWCA 218 JUDICIAL REVIEW — no error of principle shown in refusal of application for stay of judgment Sheller JA Mr George Barry Everett Stone filed a notice of appeal with appointment in September 1997 from a decision of Bainton J which had been given on 23 May 1997. Mr Stone applied to this Court for a stay of judgment and of Bainton J's orders. His Honour had given judgment for the respondent, Farrow Mortgage Services Pty Ltd, in liquidation for an amount in excess of $1.7 million. The application for stay came on for Beazley JA who gave judgment on 23 February 1998 refusing Mr Stone's application for costs. This is an application by Mr Stone to the Court to review Beazley JA's decision. It appears that the application is brought by way of a notice of motion which was filed on 23 March 1998 and on its face asks an extension of time. However, that point is of no significance. In order to succeed, Mr Stone has to persuade the Court that there was some error of principle to be found in the decision of Beazley JA. In order to support the application, Mr Stone filed this morning a document which was made apparently today and runs to twenty pages and is called an affidavit. He has also referred to three affidavits filed in the Federal Court and sworn on 24 March 1998, 20 April 1998 and 22 April 1998 respectively. There is an additional affidavit referred to which was apparently filed in the Federal Court and sworn on 19 February 1998. We have been referred to a decision of Emmett J of the Federal Court and his Honour's reasons for judgment of 24 March 1998. All these documents I have read in addition to the notice of appeal to which I have referred. Mr Stone has filed a supplementary notice of appeal and an extension to the supplementary notice of appeal, the last document running to some forty pages. Mr Stone informed the Court that gathered together and set out in this last document are the arguments that he would wish to raise on this appeal and on which he relies in support of this application for review. The matter upon which Mr Stone relies on the appeal is an allegation that the sale by the mortgagee, the respondent in the appeal, of a property which was owned by Mr Stone and mortgaged by him to the respondent was made at an undervalue and that the power of sale exercised by the respondent was not exercised in good faith. A principal matter for consideration in the hearing before Bainton J was whether the sale of this property which is at 2A Duke Place, East Balmain, was a sale at an undervalue. On this question valuation evidence was called by both parties. In Bainton J's reasons for judgment, this evidence was carefully reviewed. His Honour accepted the valuation evidence of the respondent and did not accept the valuation evidence led on behalf of Mr Stone. In the course of the review by Bainton J he explained his reasons for this 2 UNREPORTED JUDGMENTS conclusion. However, in considering the defence of want of good faith in the sale his Honour also referred to the appellant's evidence and said for reasons that he gave that he was unable to place any reliance on it on any matter in which there was controversy. Bainton J, having reviewed the evidence from the valuers, said that he was not satisfied that the power of sale was not exercised in good faith and, accordingly, there should be judgement for the respondent. Other defences were raised by Mr Stone which his Honour dealt with and rejected, but it is the defence of a failure to exercise the power of sale in good faith which is at the centre of the appeal as it is now put before the Court and of the material relied upon in support of this application. Beazley JA referred to Bainton J's preference for the evidence of the respondent's witnesses including their expert witnesses over the evidence of Mr Stone himself and the evidence of his expert witnesses. Beazley JA then expressed the view in the light of the principles enunciated in the High Court in Abalos v The Australian Postal Commission (1990) 171 CLR 167 and later confirmed in Devries v Australian National Railway Commission (1993) 177 CLR 472 that Mr Stone would face some difficulty in being able to prove that the trial Judge erred in his preference of those witnesses unless he was able to demonstrate that the trial Judge palpably misused the advantage which he had in preferring the evidence of the Farrow witnesses. Beazley JA went on to say, "There is nothing in the material which Mr Stone has presented to the Court today nor on the face of the judgment which demonstrates that he is likely to be able to do that. It is difficult to see therefore that the appeal has much prospect of success and that is a very telling reason why a stay ought not be granted." Against that Beazley JA balanced the fact that the respondent had put in train the processes which would eventually lead to Mr Stone's bankruptcy. Her Honour observed that if Mr Stone was made bankrupt the decision as to whether the appeal would proceed would be in the hands of the trustee rather than the hands of Mr Stone. She observed it is well known that it is a relevant consideration for the trustee's decision in that case whether there is any means of funding the litigation. It seems no doubt that in this case Mr Stone would not be able to fund the litigation and the Court must assume therefore that there is a real likelihood that if Mr Stone is made bankrupt that the appeal will thereby come to an end. Notwithstanding that consideration, Beazley JA was of the view having regard to the matters to which she had referred in respect of the prospects for success, that it was not an appropriate matter for a stay and in those circumstances she refused the application. Mr Stone has put before this Court additional material which as I say I have read. He has also put before the Court his oral submissions in support of the application. For my part, I have not seen or heard any part of that material or any part of the oral submissions which in any way suggest that there was any error in principle in the way in which Beazley JA dealt with the application before her. l agree with her Honour when she said that the prospects of success in this appeal do not appear to be great. Altogether, apart from the valuation material which Bainton J gave careful attention, his Honour also observed that the context of the mortgagee's endeavours to attract a buyer for the premises was that no later than April 1990 the property was auctioned unsuccessfully by Richardson and Wrench on Mr UFSTONE v FARROW MORTGAGE SERVICES PTY LTD (IN LIQUIDATION) (Mason P) 3 Stone's instructions, after that auction the property was listed by Mr Stone with other agents, again it did not sell. It was not suggested that these efforts were kept hidden from Farrow. No later than July 1990, after Farrow had commenced proceedings to obtain possession, Farrow was persuaded by Mr Stone to let him remain in the property for at least six weeks from 23 August 1990 so as to keep the property in good condition and allow him to continue his endeavours to sell. The position was to be reviewed at the end of that period. Mr Stone was unable to find a buyer, at least at the price he was asserting the property was worth. He did not reduce his asking price though advised by two local agents to reduce his asking price below $700,000. Having afforded Mr Stone that latitude, Farrow obviously concluded Mr Stone either could not or was not really trying to sell the property. Farrow then took over the handling of the realisation. It took advice from a local agent and from a valuer. It obtained a valuation from a competent valuer. The market was depressed with no indication of any likely recovery in the short term. Indeed, Balmain values were falling. During the period between the decision to proceed and the date fixed for the auction there was extensive advertising in publications with state wide circulation and in local papers. Notwithstanding that Christmas was but two weeks away, that advertising attracted inspection by some fifty-eight groups. Four of them sought a copy of the proposed contract. Had Farrow put off the auction until after Christmas 1990, it probably would have been delaying it until the end of January or thereabouts because so many people take holidays in January. In fact, though the property was not sold at the auction, Farrow did not execute a sale contract until mid February 1991, a little over two months after the auction date. During that period Mr Stone was unable to obtain a better offer. In my opinion, for the reasons that Beazley JA gave, I think that the application for a stay was rightly refused. More importantly, there is no sign of any error in her Honour's judgment. Accordingly, this application should be refused with costs. Mason P IJ agree. Powell JA I also agree. Mason P The order of the Court is as proposed by Mr Justice Sheller. Application refused with costs. The appellant appeared in person. Counsel for the respondent: J Bartrop Solicitors for the respondent: Abbott Tout