New South Wales Court of Appeal CITATION: S v State of New South Wales (No 5) [2009] NSWCA 308 HEARING DATE(S): 21 September 2009 JUDGMENT DATE: 25 September 2009 JUDGMENT OF: Macfarlan JA DECISION: See paragraph [18] of the Judgment. CATCHWORDS: PROCEDURE - stay of judgment pending application to High Court for special leave to appeal - risk of judgment creditor not being able to give restitution in the event of payment of judgment and the applicant succeeding in the High Court LEGISLATION CITED: Uniform Civil Procedure Rules 2005 (NSW) CATEGORY: Procedural and other rulings CASES CITED: Adeels Palace Pty Ltd v Moubarak; Adeels Palace Pty Ltd v Najem (No 2) [2009] NSWCA 130 State of New South Wales v Fahy [2006] HCA Trans 472 PARTIES: "S" (Appellant) State of New South Wales (Respondent) FILE NUMBER(S): CA 40396/08 COUNSEL: R J Burbidge QC/D Price (Appellant) P Menzies QC/P D A Mallon (Respondent) SOLICITORS: Edwards Michael Lawyers (Appellant) Crown Solicitor's Office (Respondent) LOWER COURT JURISDICTION: Supreme Court - Common Law Division LOWER COURT FILE NUMBER(S): SC 20125/06 LOWER COURT JUDICIAL OFFICER: Harrison J LOWER COURT DATE OF DECISION: 9 September 2008 and 24 October 2008 LOWER COURT MEDIUM NEUTRAL CITATION: "S" v State of New South Wales [2008] NSWSC 933; "S" v State of New South Wales (No 2) NSWSC 1116 IN THE SUPREME COURT OF NEW SOUTH WALES COURT OF APPEAL CA 40396/08 MACFARLAN JA FRIDAY 25 SEPTEMBER 2009 "S" v STATE OF NEW SOUTH WALES (NO 5) Judgment 1 HIS HONOUR: The appeal in this matter was determined on 17 July 2009 ([2009] NSWCA 164). The judgment given at first instance in favour of the respondent to the appeal was set aside and judgment for the appellant was given in the amount of $1,679,936.71, together with such amount, if any, as may be assessed by the primary judge in respect of domestic assistance. An order confirming this judgment for the appellant and orders as to costs at first instance and on appeal were made in favour of the appellant on 5 August 2009 ([2009] NSWCA 236). 2 On 14 August 2009, the respondent filed in the High Court of Australia an Application for Special Leave to Appeal. It filed its Applicant's Summary of Argument in the High Court on 11 September 2009. Evidence before me indicates that although no date for a hearing in the High Court can be confirmed until all documents relating to the Application for Special Leave to Appeal are filed, 3 November and 11 December 2009 are available for the hearing of the Application. The only further documents remaining to be filed in the High Court would appear to be the Respondent's Summary of Argument and the Applicant's Reply. 3 On 11 September 2009, the respondent in this Court filed a Notice of Motion for Stay of Judgment to preserve the status quo pending resolution of its Application for Special Leave to Appeal to the High Court. The substantive orders sought in the Notice of Motion were as follows: "1. Upon performance by the Respondent of Order 2, orders made on 5 August 2009 be stayed, pending the resolution of the Respondent's Application for Special Leave to Appeal to the High Court of Australia and any consequent appeal. 2. Upon undertakings to the Court in the terms set out in 3, the respondent forthwith pay $500,000.00 to the Appellant, upon the Appellant's undertaking to the Court to disburse the said sum as follows: a. $50,000.00 to the Appellant's mother b. $200,000.00 to R C Burbidge QC and D M Shoebridge, in such proportion as they may direct; c. $80,727.01 to Edwards Michael Lawyers; and d. $69,272.99 to Taylor & Scott. 3. All such persons or entities to whom such funds are disbursed, undertake to repay, on demand, to the State of New South Wales, with interest at Supreme Court rates, any payment made to them by the Appellant, from the said sum, in the event that the Respondent's appeal to the High Court is successful". 4 After judgment was given on the appeal and both before and after the Notice of Motion for Stay of Judgment was filed, correspondence was exchanged between the parties seeking to reach agreement as to a stay of the judgment. It is unnecessary to recount the detail of this correspondence except to note the following: (a) By letter of 28 August 2009, the appellant's solicitors indicated that a preliminary assessment of their client's legal expenses for the hearing at first instance and on appeal suggested that those expenses would exceed $1,330,634.01. They indicated, that the appellant sought payment of $500,000 of the judgment debt immediately and that the appellant proposed to disburse that sum substantially as set out in the respondent's Notice of Motion which was subsequently filed (see [3] above). (b) The respondent agreed that it will pay the appellant's costs of the respondent's Application for Special Leave to Appeal to the High Court and, if the respondent is successful on that application, the appellant's costs of the respondent's appeal to the High Court. (c) By their letter of 4 September 2009, the appellant's solicitors indicated that the appellant would agree to a stay upon the basis that the respondent undertook to pursue its application, and any subsequent appeal, expeditiously and to pay to the appellant the sum of $850,000 "on account of the [appellant's] costs in the Court of First Instance and the Court of Appeal". The increase in the sum sought by the appellant from $500,000 to $850,000 was based upon the appellant's reliance upon the point referred to in [16] below. At the hearing before me of the Notice of Motion for Stay of Judgment the sum sought by the appellant remained $850,000. As described in written submissions lodged by the appellant the payment is sought "on account of costs incurred and to be incurred". 5 Evidence before me of the appellant's financial position reveals that she has assets of an estimated value of $826,000 and estimated liabilities of $899,965. The family income (comprising principally the appellant's Police Pension and her husband's Workers' Compensation payments) amounts to $8,610 per month, as against estimated expenses of $10,341 per month. As to her legal expenses, the appellant said the following in her affidavit of 22 July 2009: "In order to obtain the services of Senior Counsel I agreed to meet 50 percent of his fees in respect of the first instance proceedings personally, the other 50 percent was the subject of a contingency agreement. I was unable to meet my obligations in respect of the 50 percent, even after borrowing a sum of $50,000.00 from my mother. Accordingly, in addition to the fees due under the contingency agreement I owe Senior Counsel a sum of approximately $80,000.00 and I owe my mother $50,000.00. Although neither is pressing for payment, both sums carry interest." 6 The appellant's List of Liabilities, contained in her affidavit, includes "Legal Expenses due (approx) $100,000.00". This is presumably the amount of $80,000 due to Senior Counsel, together, perhaps, with an amount in respect of interest. 7 The principles applicable to the grant of a stay pending an Application for Leave to Appeal to the High Court were referred to by Hodgson JA in Adeels Palace Pty Ltd v Moubarak; Adeels Palace Pty Ltd v Najem (No 2) [2009] NSWCA 130 as follows: "2 Adeels Palace has now applied for special leave to appeal to the High Court of Australia, and seeks a stay of execution of the judgments. The principles on which a stay may be granted are set out in Alexander v Cambridge Credit Corporation (1985) 2 NSWLR 685. Prima facie the successful party is entitled to the benefit of a judgment, but a stay may be granted where an applicant demonstrates an appropriate case to warrant the exercise of discretion in its favour. Very often this appropriate case is demonstrated by showing there are arguable grounds of appeal, and that there is a significant risk that, if money is paid to the judgment creditor, this money or a substantial part of it will be irrecoverable if the appeal succeeds. 3 In cases where the application for stay is made to the Court of Appeal in connection with an application for special leave to appeal to the High Court, the first question is really whether there is a reasonable basis for the application for special leave; and this is not a high threshold, because the stay is initially for the relatively short period until the High Court deals with the application for special leave. If that application is refused, the stay comes to an end; while if the application is granted, that itself clearly establishes there are arguable grounds of appeal. (See Jennings Construction Limited v Burgundy Royale Investments Pty Ltd (1986) 161 CLR 681; John Fairfax & Sons Limited v Kelly (No. 2) (1987) 8 NSWLR 510) In my opinion, there is a reasonable basis in this case for an application to be made for special leave to appeal. 4 The second usual requirement of showing a significant risk that, if money is paid to the judgment creditor, this money or a substantial part will be irrecoverable, is in my opinion also satisfied in this case. … . " 8 His Honour went on to emphasise that "[a]s stated in Alexander at 694, the onus is on an applicant to demonstrate a proper basis for a stay that will be fair to all parties" and that that might require the applicant for a stay to give security for payment of the judgment debt. 9 The first question to address is whether the respondent's Application for Special Leave to Appeal to the High Court is reasonably arguable. As Hodgson JA pointed out in Adeels Palace, the threshold is not a high one because the stay is initially for a relatively short period until the High Court deals with the Application for Special Leave. In the present case, the period in question would appear to be a very short one, namely, one of less than three months. It is not appropriate, particularly in light of the shortness of this period, to descend to a detailed consideration of the merits of the Application. It is sufficient to say that whilst it seems to me that the Application may be a difficult one because the points sought to be raised by the respondent are to a significant extent factual questions, the Application cannot in my view be regarded as not reasonably arguable. 10 I then turn to consider the balance of convenience, recognising that the appellant should not, without good reason, be deprived of the fruits of her victory in this Court and that the onus is on the respondent to demonstrate a proper basis for a stay that is fair to both parties. 11 As the respondent is the State Government, there is not in the present case, as there is in some, any question of the ability to pay of the party liable to pay the judgment. There is no need therefore to consider requiring the provision of security as a condition of the grant of a stay. I also note that the judgment bears interest at the not ungenerous rates provided for by the Uniform Civil Procedure Rules. 12 On the other hand, it is apparent from the description I have given above of the appellant's financial position and from the fact that she intends to utilise a substantial portion of any sum paid to her to pay legal expenses, that, in the event that the respondent succeeds on an appeal to the High Court, the appellant may not be able to repay to the respondent such of the judgment debt as is paid to her at this stage. 13 It has been indicated on behalf of the appellant that the undertakings from creditors of the appellant sought by the respondent as a condition of a payment being made to the appellant (see [3] above) are not proposed to be given. As a result, unless some arrangement is made by the appellant with those creditors at the time of payment, it is unlikely that the funds paid will be able to be recovered by the appellant in the event that the respondent succeeds on an appeal in the High Court. It has not been suggested that any such arrangement is proposed. 14 In light of the substantial risk of the appellant not being able to give restitution, the respondent's undoubted ability to pay the judgment sum and the continuing accrual of interest on the judgment sum, I do not consider it appropriate that the respondent be required to pay the bulk of the judgment sum to the appellant at this stage. Of the amount of $500,000 sought by the appellant in her solicitor's letter of 28 August 2009, it was indicated that $400,000 was proposed to be used in payment of legal expenses. Because, as I pointed out above, this amount would probably not be able to be recovered by the appellant from the persons to whom it was paid, it is not in my view appropriate that the respondent be required to pay that part of the judgment sum. The position is otherwise if undertakings to repay are given by the creditors in the manner contemplated in the respondent's Notice of Motion. The orders I make will provide for the possibility that such undertakings might be forthcoming. 15 On the other hand, I do not consider it unfair to the respondent, and I consider it fair to the appellant, that the respondent should be required to now pay the sum of $100,000, being the balance of the $500,000 referred to in the appellant's solicitors' letter of 28 August 2009. Whilst the respondent has agreed to pay the appellant's costs of the High Court proceedings (see [4(b)] above), it is reasonable that the appellant have the means of funding her legal expenses in the High Court prior to the disposition of proceedings there. Further, in light of her parlous financial position it would in my view be unfair to deprive her completely of the fruits of her victory in this Court, particularly when the availability to the respondent of a further appeal is dependent upon the High Court exercising its discretion in the respondent's favour. I note that the risk of the respondent not being able to recover this sum in the event that it is successful in the High Court is a limited one because the respondent will be able to set off its claim for restitution against its liability to pay the appellant's High Court legal expenses, presumably leaving a much smaller balance than $100,000 to be recovered by the respondent from the appellant. 16 The appellant further submitted that it was likely that, on the hearing of the Special Leave Application, the High Court would, as it did in State of New South Wales v Fahy [2006] HCA Trans 472, require from the applicant for Special Leave to Appeal an undertaking not only to pay the costs of a High Court appeal in any event (which the respondent in the present case has already agreed to do) but also not to seek to disturb the orders for costs made in the courts below. I do not consider it appropriate to attempt to predict whether the High Court will treat the present case as one involving important questions of public interest and will require the same undertaking as was required in Fahy. Particularly as the hearing of the Special Leave Application is likely to occur within a matter of months, I do not consider it appropriate to take into account the possibility of such an undertaking being sought. If Special Leave to Appeal is granted and such an undertaking is sought and provided, the terms of the stay which I propose to order may be reviewed. I will grant liberty to apply to facilitate that occurring. 17 I propose to order the respondent to pay the appellant's costs of this Notice of Motion because it is appropriate that the costs of the Notice of Motion be paid in the same manner as the costs of the respondent's Application for Special Leave to Appeal to the High Court. As the respondent has agreed to pay those costs (see [4] above), it is appropriate that it pay the costs of this Notice of Motion also. 18 For these reasons, I make the following orders: (1) Upon performance by the respondent of the conditions in order (2) and upon the respondent's undertaking to the Court to proceed expeditiously with its Application for Special Leave to Appeal to the High Court and any appeal which may follow that application, stay the orders made by this Court on 5 August 2009 ([2009] NSWCA 236) up to and including the date upon which the respondent's Application for Special Leave to Appeal to the High Court is dismissed or, if it is granted, the date upon which the consequent appeal is determined by the High Court. (2) The conditions to which Order (1) refer are that: (a) The respondent forthwith pay the sum of $100,000 to the appellant. (b) Upon any of the persons listed in paragraph 2 of the respondent's Notice of Motion filed on 11 September 2009 giving an undertaking to the Court in the terms referred to in Order (3) for the amount shown in the Notice of Motion in relation to him or her, the respondent pay such amount to the appellant upon the appellant's undertaking to the Court to disburse the sum to that person. (3) The undertaking referred to in (2) above is an undertaking to the Court to repay, on demand, to the State of New South Wales, with interest at Supreme Court rates, in the event that an appeal by the respondent to the High Court is successful, the amount of the payment made to the person by the appellant. (4) Any undertaking to be given to the Court in pursuance of these orders may be given by filing a signed form of undertaking in the Registry. (5) Grant leave to the parties to apply for variation of the above orders, after determination by the High Court of the respondent's Application for Special Leave to Appeal. (6) Order the respondent to pay the appellant's costs of the Notice of Motion filed on 11 September 2009. ********** 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.