New South Wales Court of Appeal CITATION : Yavuz & Anor v Noaman [2001] NSWCA 190 FILE NUMBER(S) : CA 40229/01 HEARING DATE(S) : 18 June 2001 JUDGMENT DATE : 18 June 2001 Salim Uyan Yavuz - First Appellant PARTIES : Hatem Yavus - Second Appellant Mohanad Noaman - Respondent JUDGMENT OF : Giles JA LOWER COURT JURISDICTION : District Court LOWER COURT 5054/98 FILE NUMBER(S) : LOWER COURT Knight DCJ JUDICIAL OFFICER : COUNSEL : D L Williams - Appellants M Sahade - Respondent SOLICITORS : Dickson Fisher Macansh - Appellants Comino Prassas, Bondi Junction - Respondent CATCHWORDS : STAY OF PROCEEDINGS - respondent in need but risk that could not repay if appeal succeeded - part payment plus security for balance - no question of principle. ND CASES CITED: House v The King (1936) 55 CLR 499 DECISION : Stay granted on conditions that $35,000 be paid and that security by way of bank guarantee of $225,000 be provided. Stay effective immediately but to lapse if one or more of the conditions has not been fulfilled at the expiry of 21 days from today. Guarantee to be in favour of the Registrar of the Court. Costs costs in the appeal. IN THE SUPREME COURT OF NEW SOUTH WALES COURT OF APPEAL CA 40229/01 DC 5054/98 GILES JA Monday 18 June 2001 YAVUZ & ANOR v NOAMAN JUDGMENT 1 HIS HONOUR: This is an application for a stay of proceedings. I am grateful to those appearing for the parties for the way in which the application has been conducted with brevity and frankness, as it is an application which has considerations both for and against a stay and is not easy of resolution. I have in the course of debate indicated a tentative view and received further submissions in the light of that view, and in the circumstances I will try to be brief in explaining why I make the orders I propose to make. 2 The claimants were the proprietors and the opponent was the builder under a building contract. The contract came to an end, a description which is deliberately vague because just what occurred and who was responsible was in issue, and the builder brought proceedings for money allegedly due to him. The proprietors cross-claimed, alleging defective and incomplete work. The proceedings went to a referee, who delivered a report in which he found an amount of approximately $251,000 payable to the builder and approximately $135,000 payable by the builder. The report came before Judge Knight. A calculation error was corrected, but otherwise his Honour adopted the report. After interest, the net result was an amount of approximately $163,000 payable to the builder. The proprietors were ordered to pay the builder's costs. 3 The proceedings were heard, both in the reference and before Judge Knight, together with other proceedings concerning a different building dispute between the builder and the proprietors and their company. The proprietors' company was successful in its claims in those proceedings, and obtained an order for costs. There was and is no challenge to the outcome of the second proceedings. After allowing for the proprietors' success in the claims, at a practical level approximately a little under $110,000 should be paid to the builder; the working-out of the costs will be additional to that. 4 The proprietors have appealed in relation to Judge Knight's adoption of the referee's report so far as involving the first proceedings. Judge Knight's reasons are not available. I have been helpfully informed as to some elements of the dispute before his Honour concerning adoption of the report. On appeal the question will be whether his Honour's discretion in relation to adoption of the report miscarried. That itself will involve a little more than the normal discretionary considerations arising in accordance with the well-known principles in House v The King (1936) 55 CLR 499, because an element of error of law rather than fact commonly emerges when adoption of a report is in question, and it seems that that could arise here. I proceed on the basis that the appeal will throw up arguable matters, and I am not in a position to do more. The proprietors will have the normal difficulties associated with appealing in relation to the exercise of discretionary judgment, but may have more to say in the appeal in relation to errors of law. It is enough, I think, for present purposes to treat the appeal as arguable but not necessarily strong. 5 The practical problem is this. 6 On the one hand, the builder has not in the past been in a happy financial position, and is not in a happy financial position at present. He has assets in the form of his home and another parcel of land, both mortgaged but with a total equity of approximately $390,000. He is no longer working as a builder, but still owes some contractors and suppliers for work performed on the job out of which the proceedings the subject of the appeal arose. I have no detail of those amounts. They include approximately $35,000 for which the builder was being pressed prior to the hearing before Judge Knight. The builder was made bankrupt in July 1999, but his bankruptcy was annulled in October of that year. The statement of affairs filed at that time does not disclose the $35,000, but does disclose some other apparently building-related debts totalling approximately $86,000. Something must have been done to pay off at least some of those amounts in order that the bankruptcy be annulled. The builder says that he owes approximately $200,000 to his solicitors, barrister and expert witness as costs and expenses of the proceedings to date. He was able to obtain the agreement of the creditor for the $35,000 to hold its hand by expressing confidence in the result of the proceedings, but says that he wants to have at least $35,000 so that he can pay that creditor. 7 On the other hand, the proprietors are concerned that payment of the approximately $110,000 to the builder would be against their interests, because if the appeal succeeds they may well not be able to recover it. Their concern is the same as to the lesser amount of $35,000, and as to any amount of costs which they might pay to the builder pursuant to the order in favour of the builder, albeit costs have yet to be assessed. 8 This is a not unusual practical problem. Prima facie the builder is entitled to the benefit of the judgment flowing from Judge Knight's decision, and to the benefit of the order for costs. On the other hand, appeals are a recognised step in the legal process. It is recognised that errors are made, and appellants have an entitlement to seek to be protected by applications whereby they do not have to give effect to the judgment against them until the appeal has been heard. 9 There are a number of practical solutions, and the difference between the parties in the present case was narrowed by the approaches they have taken. The builder asked only for $35,000 in ready money, being content to be secured for the balance of his prima facie entitlement. The proprietors have substantial assets, and were willing to provide security in the form of a bank guarantee. The differences between the parties were three. First, whether the $35,000 should be paid over or should only be the subject of security by the bank guarantee. Secondly, if the $35,000 was paid over, whether the builder should give security so that if the outcome of the appeal so required the proprietors would have some assurance that they would get it back. Thirdly, what was the total amount, either including or on top of the $35,000, for which the security by way of bank guarantee should be given. 10 As to the first of these matters, it seems to me that the $35,000 should be paid over. That, it seems to me, recognises the builder's prima facie entitlement, and in the circumstances he should have that amount so that he can get the pressing creditor off his back. 11 So concluding is of course linked with the second matter, and I do not think that the builder should be required to provide security for repayment of the $35,000 should that come to pass. No doubt a requirement of security could be imposed, and there is equity from which security could be provided, but it would involve not inconsiderable expense, it would be subject to the consent of the existing encumbrancees or one of them, and the $35,000 is relatively (and I stress the word "relatively") small as an element in the financial conflict between the parties. Undoubtedly the $35,000 will pass from the builder's hands, and if he has to repay that amount it will probably have to come from sale of his properties. There will be other calls upon the proceeds of sale, namely, the approximately $200,000 and whatever further amount may be payable to contractors and suppliers, and there is also a claim against the builder in relation to the hire of a motor vehicle for a sum getting towards $30,000. Nonetheless, it seems to me that the best holding of a just line between the parties requires there not be security and that the proprietors run the risk, and I accept that there is a risk, that at the end of the day they might not get back the $35,000. 12 Then as to the amount, on the materials before me it is almost impossible to make a proper estimate of the likely costs burden assuming the present orders stay as they are. The proprietors must pay the costs of the proceedings the subject of the appeal, but they have a favourable costs order in the other proceedings and as a practical matter, the amounts can no doubt be set off. The costs have not yet been assessed, and strictly speaking there is currently no enforceable liability, but the parties have sensibly proceeded on the basis that costs should be taken into account in considering the terms on which a stay might be granted. Appreciating that it is an estimate, perhaps little more than a guess, it seems to me that security by way of bank guarantee referable to costs in an amount of $150,000 would be appropriate. Taking account of the approximately $110,000 less $35,000, security of $225,000 should be provided by the proprietors as a condition of the grant of a stay, which stay will be of the substantive judgment and of enforcement of the order for costs. 13 I note that the proprietors have undertaken that they will not until the conclusion of the appeal enforce the order for costs in their favour, which undertaking extends also to the judgment in their favour to which I have earlier referred. 14 In the result, therefore, a stay should be granted on condition that the $35,000 be paid and the security by way of bank guarantee of $225,000 be provided. I order that there be a stay on those conditions, the stay to be effective immediately but to lapse if one or more of the conditions has not been fulfilled at the expiration of twenty-one days from today. 15 I note that the bank guarantee will be in favour of the Registrar of the Court in the normal way, and I decline the request from the builder that it be in favour of the builder's solicitor. 16 Costs of the present application will be costs in the appeal. ______________ DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated.