New South Wales Supreme Court CITATION : Paino v Paino [2007] NSWSC 468 HEARING DATE(S) : 11/04/07 JUDGMENT DATE : 11 May 2007 JURISDICTION : Equity Division JUDGMENT OF : Barrett J DECISION : Stay of order for payment of money pending appeal CATCHWORDS : PROCEDURE - application for stay - order for payment of money by defendant to plaintiff - appeal by plaintiff and cross-appeal by defendant - money claimed under lien by plaintiff's lawyers - whether stay warranted pending appeal LEGISLATION CITED : Property Relationships Act 1984 Paino v Paino [2006] NSWSC 218 CASES CITED : Paino v Paino [2006] NSWSC 886 Penrith Whitewater Stadium Ltd v Lesvos Pty Ltd [2007] NSWCA 103 PARTIES : Angela Paino - Plaintiff Salvatore Paino - Defendant FILE NUMBER(S) : SC 5612/01 COUNSEL : Mr N.J. Owens - Plaintiff Mr P. Hallen SC/Mr J.J. Millar - Defendant SOLICITORS : Meyer Pigdon - Defendant IN THE SUPREME COURT OF NEW SOUTH WALES EQUITY DIVISION BARRETT J FRIDAY, 11 MAY 2007 5612/01 ANGELA PAINO v SALVATORE PAINO JUDGMENT 1 I am dealing with a notice of motion filed by the defendant on 23 February 2007 and heard on 11 April 2007. By that notice of motion, the defendant seeks an order as follows: "That the time for payment of the sum of AU$1,262,280.62 referred to in Order 5(ii) of the orders made 6 December 2006 ("the 2006 Court Orders") be extended until seven days after orders are made concluding the proceedings commenced by the Notice of Appeal filed by the Plaintiff against the 2006 Court Orders." 2 There is an alternative claim for the following order: "That Order 5(ii) of the Orders made 6 December 2006 ("the 2006 Court Orders") be stayed until seven days after orders are made concluding the proceedings commenced by the Notice of Appeal filed by the Plaintiff against the 2006 Court Orders." 3 It was accepted by Mr Hallen SC and Mr Owens of counsel that the effect of each proposed order is essentially the same. In the course of argument, the matter was approached as an application for a stay pending appeal. I shall deal with it accordingly. 4 The orders made on 6 December 2006 (and entered on 8 December 2006) were made in consequence of findings recorded in reasons for judgment published on 5 April 2006 (Paino v Paino [2006] NSWSC 218) and 5 September 2006 (Paino v Paino [2006] NSWSC 886) in proceedings under the Property Relationships Act 1984. Relevant for present purposes is order 5: "Order that the balance remaining after the aggregate of the sum referred to in Orders 2(i), 2(iv), 2(v), 4(i) and 4(ii) (that aggregate being $501,295.28) has been deducted from and offset against the sum of $2,046,575.90 referred to in Order 1 (being a balance of $1,545,280.62) be paid by the Defendant: (i) as to $283,000 into a controlled moneys account with an Australian bank in the name of the Plaintiff's solicitor and the Defendant's solicitor; and (ii) as to the remainder, being $1,262,280.62, to the Plaintiff, each such payment to be made within 28 days." 5 The payment of $1,262,280.62 required by order 5(ii) to be made within 28 days from 6 December 2006 has not been made. It is the contention of the defendant that the requirement to pay that sum to the plaintiff should be suspended until the resolution of appeal proceedings and that, for that reason, one of the two orders set out above should be made. 6 It will be observed from the form of each order that the relevant appeal is an appeal by the plaintiff, not the defendant. The object of the appeal is to see an increase in the amount awarded to the plaintiff. The desire of the defendant to have his payment obligation under order 5(ii) suspended pending resolution of the appeal is accordingly not the product of any apprehension that the Court of Appeal may eliminate that obligation or reduce the sum to be paid by the defendant. Rather, the defendant's concern stems in large measure from a cross-appeal and, to some extent, from possible remoter consequences of the appeal itself. 7 The cross-appeal was initiated by notice filed on 5 April 2007. The defendant thereby seeks variation of certain of the orders made on 6 December 2007, being orders with respect to costs. Without going into details, he contends that he should be awarded, in addition to certain specific costs items referred to in the existing orders, the full amount of his costs (not, as at present, costs only for the period 29 July 2005 to 14 December 2005). To that end, according to the notice of cross-appeal, existing order 5 should be varied so that order 5(i) refers to a sum of $883,000 (not $283,000) and order 5(ii) refers to a sum of $662,280.62 (not $1,662,280.62). 8 If the cross-appeal were wholly successful, there would be a reduction of $600,000 in the amount to be paid by the defendant under order 5(ii). It might also be expected that the defendant would be awarded costs of the cross-appeal. And if, in addition, the plaintiff's appeal were unsuccessful, one would expect the defendant to be awarded also the costs of the appeal; while, if the plaintiff's appeal were successful, one possible outcome (and an outcome quite likely if my decision to proceed on a zero valuation of the Filicudi land were overturned) is a new trial which, depending on the outcome, might result in an order for costs in favour of the defendant. The defendant's solicitors estimate that his costs in the Court of Appeal will be about $70,000, that his costs of the present motion are about $20,000 and that his costs upon a retrial "would greatly exceed $100,000". 9 The possibility that outcomes of the kind the defendant apprehends will emerge is, in my view, plausible. 10 With these several possible outcomes in mind (and having regard to further possibilities I am about to mention), the defendant contends that steps should now be taken to forestall the risk that, if he pays the sum of $1,262,280.62 as required by order 5(ii), he will face a situation where he cannot obtain, in whole or in substantial part, the benefit of the moneys that will accrue to him if the various outcomes leading to ultimate recoveries by him emerge in, or as a result of, the appeal and cross-appeal. He wishes to ensure that the opportunity to set-off is preserved. 11 I turn now to the further possibilities just mentioned. The solicitors who acted for the plaintiff throughout the hearing before me are Kells. They are no longer retained. On 4 December 2006, Kells sent to the defendant's solicitors (Meyer Pigdon) a document of the same date signed by the plaintiff and reading: "To: Salvatore Paino c/- Meyer Pigdon Level 14, 59 Goulburn Street Sydney NSW 2000 I, ANGELA PAINO, hereby irrevocably authorise and direct you, SALVATORE PAINO AND MEYER PIGDON to pay all moneys due to me arising out of the proceedings in the Supreme Court between us to my solicitors, Kells Lawyers." 12 By letter dated 16 January 2007, Kells made it clear to Meyer Pigdon that they considered themselves to have a "fruits of the action" lien in respect of proceeds accruing to the plaintiff under the orders of 6 December 2006, such lien extending to protect not only costs and disbursements of Kells themselves but also "the fees owed by our client to her senior and junior counsel and … fees owed by our client to her previous lawyers, Messrs Orr & Co, Messrs Jenny Bull and Company and Messrs Barkus Edwards Doolan". 13 By reply of the same date, Meyer Pigdon questioned the right and ability of Kells to assert the lien on behalf of third parties, that is, counsel and the three other firms of solicitors. This led to notification of lien claims direct to Meyer Pigdon by each of Jenny Bull & Co, Orr & Co, Barkus Edwards Doolan and Mrs Bridger of counsel. Two of these notifications mentioned figures. The other two did not. Nor did Kells nominate any figure. The two amounts mentioned (referable to solicitors whose retainer ended before the trial) add up to some $182,000. It could be expected that the costs of Kells (and of the two counsel who appeared during the 20 day hearing) are very substantial. There is no evidence of their quantum, and it is noteworthy that the plaintiff has not seen fit to adduce evidence indicating that there will be any balance to be enjoyed by her. There is evidence that the full amount paid out by the defendant to the end of hearing in December 2006 was $1,349,807.10. It would be reasonable to think that, although Kells were retained for a somewhat shorter time, their costs and disbursements (including counsel's fees) would have been of the order of $1 million or more. 14 This evidence about the plaintiff's direction to pay, the assertion of liens by several lawyers and the likely quantum of the costs and disbursements which may be secured by such liens led to a submission on behalf of the defendant that, if he paid the $1,262,280.62 in conformity with order 5(ii), the whole amount (or at least, most of it) would go to the various lawyers in satisfaction of debts due by the plaintiff to them; and that no amount (or, perhaps, only a very small amount) would remain within the ownership and disposition of the plaintiff so as to be potentially recoverable from her should the appeal and cross-appeal result in or lead on to the various monetary orders in favour of the defendant. That reality co-exists with the conclusion emerging from the trial itself that the plaintiff has very few assets. 15 Although the application now before me is framed in terms of alternatives, it was, as I have said, treated essentially as an application for a stay of order 5(ii) pending the outcome in the Court of Appeal. It should therefore be approached in accordance with recent observations of McColl JA in Penrith Whitewater Stadium Ltd v Lesvos Pty Ltd [2007] NSWCA 103: "The overriding principle in an application for a stay is to ask what the interests of justice require: New South Wales Bar Association v Stevens [2003] NSWCA 95 at [83] per Spigelman CJ (Meagher JA and Sheller JA agreeing). The detailed principles concerning the grant of a stay are set out in Alexander v Cambridge Credit Corporation Limited (1985) 2 NSWLR 685 at 694: a. Where there is a risk that an appeal will prove abortive if the appellant succeeds and a stay is not granted, the Court will normally exercise its discretion in favour of granting a stay; b. the onus is upon the applicant to demonstrate a proper basis for a stay; c. it is a matter of discretion whether the Court grants a stay and if so as to the terms which would be fair as part of the granting of a stay; d. what is important in considering whether or not a stay ought be granted is the balance of convenience and the competing rights of the parties before it; e. it is not necessary that special or exceptional circumstances should be made out; it is sufficient for the applicant to demonstrate a reason or an appropriate case to warrant the exercise of discretion in its favour. Since a stay will prevent the judgments being enforced while the appeal is pending, the Court should endeavour to preserve the status quo by protecting the judgment creditor from the risk of loss: McLean Tecnic v Digi-Tech; Kalifair v Digi-Tech [2002] NSWCA 383; (2002) 55 NSWLR 737 at [28]." 16 Having regard to the last part of this extract, it is relevant to refer to a matter not so far mentioned. A sum of $1,278,737.14 is being held on the defendant's behalf in an account with the ANZ Bank at Bondi Junction. His affidavit of 10 April 2007 contains an undertaking that he will not utilise the funds in that account otherwise than for the purpose of obtaining a better rate of interest, pending final disposition of the appeal and the cross-appeal (or further order of the court), without prior notice of at least 21 days to the plaintiff of his intention to do so. That, plus the defendant's undoubted financial capacity, as demonstrated by the reasons of 5 April 2006, shows that the plaintiff, as judgment creditor, will be suitably protected against the risk of loss if the stay is granted. 17 Given the plaintiff's lack of means and the demonstrated likelihood that the sum of $1,262,280.62 would be absorbed in satisfaction of the various liens, if now paid, there is substance in the defendant's assertion that his cross-appeal could be rendered abortive unless steps are taken to preserve that sum. Against that must be weighed contentions advanced on behalf of the plaintiff, namely, that grant of the relief the defendant seeks would be tantamount to an order for security for costs or the subjecting of the plaintiff's undoubted judgment debt to a form of security in favour of the defendant. In other words, it is said, the grant of a stay would produce effects that ought only be produced by means of direct application for security for costs and would not be permissible upon an application for relief of a Mareva kind. 18 I do not accept these submissions. A stay of execution of a money judgment may, in case of pending appeal, be granted when required in the interests of justice and consistent with the balance of convenience. In the present case, there is a cogent possibility that the appeal and cross-appeal will produce a result such that the defendant is entitled to recover a substantial sum of money from the plaintiff. The defendant is entitled to expect set-off in that event. A stay may be granted in aid of set-off. The defendant's potential recovery and set-off would be seriously jeopardised if the sum of $1,262,280.62 had been paid to the plaintiff in advance and was immediately absorbed wholly or very substantially so as no longer to be available for set-off. 19 The court therefore: (a) notes the undertaking of the defendant contained in paragraph 8 of the defendant's affidavit sworn on 10 April 2007 and filed on 11 April 2007; and (b) orders that order 5(ii) of the orders made herein on 6 December 2006 and entered on 8 December 2006 be stayed until (i) seven days after orders are made concluding proceedings 40007/07 in the Court of Appeal; or (ii) earlier order of the court. ********** DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. 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