Supreme Court New South Wales Medium Neutral Citation: Hawes v Dean [2013] NSWSC 2041 Hearing dates: 18 December 2013 Decision date: 18 December 2013 Jurisdiction: Equity Division Before: Brereton J Decision: Application for stay dismissed with costs Catchwords: PRACTICE AND PROCEDURE - application for stay pending appeal - where one ground of appeal is plainly arguable but if successful would not improve applicant's position - where other grounds of appeal marginal - where balance of convenience does not favour the granting of a stay - stay refused Cases Cited: Hawes & anor v Dean & ors (Costs) [2013] NSWSC 1246 Category: Interlocutory applications Parties: David Richard Hawes (first plaintiff/ first cross defendant) Hawes Investments Pty Ltd (second plaintiff) Trevor Laurence Dean (first defendant/ first cross-claimant) T&B Dean Investments Pty Ltd (second defendant/ second cross-claimant) Hawden Property Group Pty Ltd (third defendant) Hawden Constructions Pty Ltd (fourth defendant) Gallwey Pty Ltd (fifth defendant) Glenside Group Pty Ltd (second cross-defendant) Warr Pty Limited (third cross-defendant) Representation: Counsel: G McGrath (plaintiffs) J Lazarus (defendants) Solicitors: Staunton &Thompson (plaintiffs) JT Law (defendants) File Number(s): 2009/290891 Judgment - EX TEMPORE 1HIS HONOUR: On 3 September 2013 I gave judgment inter alia that the first cross-defendant David Richard Hawes and the second cross-defendant Glenside Group Pty Ltd pay the second cross-claimant Hawden Property Group Pty Ltd the sum of $534,187.23; and also that the first cross-defendant Mr Hawes and the second cross-defendant Glenside Group pay the first cross-claimant Trevor Laurence Dean the sum of $32,801.99 [see Hawes & anor v Dean & ors (Costs) [2013] NSWSC 1246]. Mr Hawes and Glenside Group have appealed against those judgments, and by motion apply for a stay of execution pending the hearing of their appeal. By consent of Mr Hawes and Glenside Group on the one hand and the liquidator of Hawden Property Group Pty Ltd on the other, the first of those orders has been stayed. The balance of the motion which remains to be determined is Mr Hawes and Glenside's application for a stay of the second judgment, in respect of the sum of $32,801.99 payable to Mr Dean. That sum, which will have accrued interest since 14 August 2013, was the result of my acceptance in the judgment of 3 September 2013 that the liability of Mr Hawes and Glenside to Mr Dean in respect of the Clydesdale fee should be set off against the liability of Dean Investments to Hawes Investments under the Galway deed. 2On an application such as the present for a stay pending appeal, the starting point is that the successful party is entitled to the fruits of the judgment. Nonetheless, the existence of arguable grounds of appeal is an important consideration, at least in the sense that, absent arguable grounds of appeal, there is no utility in granting a stay; and also that the stronger the grounds of appeal, the stronger the case for a stay. 3It was not seriously disputed that the fourth ground of appeal - which concerns the decision to set off the judgment in favour of Hawes Investments against Dean Investments in respect of the Galway deed against the judgment in favour of Mr Dean against Mr Hawes and Glenside, was arguable, and I accept that it is a well arguable ground. However, success on that ground would not reduce Mr Hawes' personal indebtedness under the judgment; to the contrary, it would result in his personal indebtedness to Mr Dean being substantially greater than it is under the present judgment. 4While it was not submitted that the other grounds of appeal were unarguable, they do not impress as particularly strong. In any event, I turn to the balance of convenience. 5Mr Hawes says that neither he nor Glenside has any means of meeting the judgment, and that if forced into bankruptcy, the appeal is unlikely to proceed. As Mr Lazarus submits, this argumnt involves two propositions: first, that even if Mr Hawes and Glenside themselves do not have the resources, no-one else will come forward to pay the judgment of $32,000 on his behalf; and secondly, that a trustee in bankruptcy would not likely pursue the appeal. 6As to the first proposition, Mr Hawes' evidence, which has not been challenged in this respect, is that he has assets of $201,000 (excluding a superannuation interest) comprising $1,000 in the bank, and a fifty percent share in Hawden Property Group Pty Ltd; and liabilities totalling $34,551,000, resulting in a net deficiency of funds of $34,350,000. Needless to say, that is an enormous deficiency, and prima facie establishes that Mr Hawes is insolvent to a very high degree. He says, however, that most of those liabilities arise out of guarantees to LM Investment Management Limited, in respect of developments at Alexandria and Belrose undertaken in about 2006 by Hawes related entities; and that the mortgagee has permitted him as sole director of the developer entities to continue managing ongoing sales and lettings in those developments, and has not commenced Court action against him pursuant to his personal guarantees, but adding, "I am not aware of any reason why they could not do so". Mr Hawes deposes that he has been a participant in the property development industry for three years, has many contacts in the industry, is the chairman of the residential committee of the New South Wales division of the Property Council of Australia, and is currently able to earn some income from project management work. His affidavit attaches a summary of Glenside Group's assets and liabilities, which indicates total assets of $181,000, liabilities of $292,000, and a net deficiency of $111,000. 7Also in evidence is a financial report of the Hawes Family Trust for the year ended 30 June 2012. Mr Hawes is one of several discretionary beneficiaries of that trust. Evidence adduced on this application - but not in the trial - appears to establish that he is not the trustee, having been replaced as trustee by his wife in 2012, and having also been replaced by her as appointor. As at 30 June 2012, the Hawes Family Trust had assets of $1.678 million, of which $1.405 million were current assets; and liabilities of $944,000, of which $691,000 were current; leaving net assets of $733,000. During that year, Mr Hawes' wife drew about $450,000 from the trust. The trust has contributed to the funding of the litigation. 8I accept the submission that, given the trust's role in the litigation, and given what I found in the judgment of 3 September to be Mr Hawes' practical control of the trust - based not least on Mr Hawes' own evidence set out at paragraph 17 of that judgment - there is every reason to expect that if it is seriously desired to avoid the adverse consequences of bankruptcy in respect of this litigation, the trust would advance sufficient funds to enable Mr Hawes to satisfy a judgment of $33,000. 9If it does not do so, then it seems to me the position is that, given the manifest insolvency of Mr Hawes, it is entirely appropriate that any decision as to whether the appeal should be pursued or not should be made not by him but by the representative of his creditors, that is to say his trustee in bankruptcy, if one be appointed. 10In those circumstances, in my view, the balance of convenience does not favour the grant of a stay. 11The Court orders that the balance of the notice of motion be dismissed with costs. ********** 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. Decision last updated: 11 July 2014