Court of Appeal Supreme Court New South Wales Medium Neutral Citation: Woodlawn Capital Pty Limited v Motor Vehicles Insurance Limited [2015] NSWCA 227 Hearing dates: 3 August 2015 Decision date: 07 August 2015 Before: Beazley P Decision: 1. Order that, subject to order 2, execution of the judgment dated 21 April 2015 of the Supreme Court of New South Wales in proceedings 2012/83573 be stayed pending the determination of the appeal listed for hearing on 29 October 2015 upon condition that, within 14 days of the date of these orders, the appellant pay into Court the sum of $1,850,114.71 made the subject of the respondent's statutory demand dated 11 June 2015, which payment in shall then abide the further order of the Court; 2. Order that the stay in order 1 be effective immediately on compliance with the condition for payment into court specified in order 1; 3. Order that the application for leave in proceedings 2015/214801 and, if leave be granted, any appeal in those proceedings be heard together with the appeal in the present proceedings on 29 October 2015; 4. Order that the costs of the application for a stay be costs in the appeal in these proceedings. Catchwords: APPLICATION FOR STAY – stay pending appeal – where judgment debtor may be at risk of liquidation – stay ordered with conditions Legislation Cited: Companies Act 1997 (PNG) Independent Public Business Corporation of Papua New Guinea Act 2002 (PNG) Reciprocal Enforcement of Judgements Act 1976 (PNG) Cases Cited: Alexander v Cambridge Credit Corporation Ltd (1985) 2 NSWLR 685 Cook's Construction P/L v Stork Food Systems Aust P/L [2008] QCA 322; [2008] 2 Qd R 453 Texts Cited: M J Beazley et al, Appeal and Appellate Courts in Australia 2014, LexisNexis at 8.5-8.14 Category: Procedural and other rulings Parties: Woodlawn Capital Pty Limited (Appellant) Motor Vehicles Insurance Limited (Respondent) Representation: Counsel: P Kelly SC (Appellant) J Giles; H Mann (Respondent) Solicitors: Uther Webster & Evans (Appellant) Gadens (Respondent) File Number(s): 2015/124297 Decision under appeal Court or tribunal: Supreme Court Citation: Motor Vehicles Insurance Ltd v Woodlawn Capital Pty Ltd [2015] NSWSC 401 Date of Decision: 10, 21 April 2015 Before: Stevenson J File Number(s): 2012/83573 [Note: The Uniform Civil Procedure Rules 2005 provide (Rule 36.11) that unless the Court otherwise orders, a judgment or order is taken to be entered when it is recorded in the Court's computerised court record system. Setting aside and variation of judgments or orders is dealt with by Rules 36.15, 36.16, 36.17 and 36.18. Parties should in particular note the time limit of fourteen days in Rule 36.16.] Judgment 1. HER HONOUR: The applicant, Woodlawn Capital Pty Limited (Woodlawn), has appealed against orders made by Stevenson J on 21 April 2015 whereby judgment was entered for the respondent Motor Vehicles Insurance Limited (MVIL) against Woodlawn in the sum of $4,893,115.11. That sum represented, principally, pre-judgment interest payable pursuant to the Civil Procedure Act 2005 (NSW) in respect of sums Stevenson J found were owed by Woodlawn to MVIL. 2. Woodlawn is a funds manager and, at all times relevant to the issues between the parties, MVIL was its sole client. 3. MVIL is a company incorporated in Papua New Guinea under the Companies Act 1997 (PNG). It is a "Majority State-Owned Enterprise" for the purposes of the Independent Public Business Corporation of Papua New Guinea Act 2002 (PNG). The sole shareholder of MVIL is the Independent Public Business Corporation of PNG which is a statutory corporation wholly owned by the government of PNG. MVIL is responsible for compulsory third party motor vehicle insurance in that country. 4. MVIL has filed a notice of contention and has cross-appealed against his Honour's judgment on the basis that it is entitled to rescind various agreements, including an Investment Management Agreement and an Asset Management Agreement entered into by the parties on 6 May 2010. 5. MVIL brought proceedings against Woodlawn claiming, inter alia, that Woodlawn was responsible for a reduction in the value of the investment funds it held on trust for MVIL. Stated generally and non-exhaustively, there were allegations of breach of contract and issues concerning the terms upon which the relationship between the parties had been terminated, including the proper construction of cl 5 of the Investment Management Agreement. At the time of the proceedings before the Court, Woodlawn held funds of approximately AUD$26.3 million, but claimed it was owed fees in the sum of approximately $23 million. 6. The principal issue on the appeal is the proper construction of a cl 5 of the Investment Management Agreement. The question of construction is whether, by cl 5 of the Investment Management Agreement, MVIL released Woodlawn from liability for payment of pre-judgment interest. Principles governing applications for a stay of execution 1. The applicant must demonstrate that there is a reason for the grant of a stay, or that the matter is an appropriate case, in the exercise of the Court's discretion: Alexander v Cambridge Credit Corporation Ltd (1985) 2 NSWLR 685 at 694. It is not necessary for the applicant for the stay to establish special or exceptional circumstances: Alexander v Cambridge Credit Corporation at 694. 2. The Court in Alexander v Cambridge Credit Corporation, at 694-695, indicated various factors that may, in a particular case, be relevant to the grant or refusal of a stay. Reasons for refusing a stay include that if a stay is granted, there is a risk the applicant will dispose of assets. A stay is likely to be granted if the appeal would otherwise be rendered nugatory. The court considering the grant of a stay is not required to determine the merits of the appeal but usually considers whether the applicant has at least an arguable case. The court may impose conditions on the grant of a stay including that the applicant pay a sum of money into court or otherwise secure the payment of the disputed sum. 3. The central determinant as to whether a stay will be granted and if so upon what terms, if any, is the court's assessment as to what is a fair balance of the rights of the parties, given that an appeal does not of itself operate as a stay and the party who succeeded at trial is entitled to the fruits of its victory. The court's concern at all times to ensure that its ultimate orders will be effective: Cook's Construction P/L v Stork Food Systems Aust P/L [2008] QCA 322; [2008] 2 Qd R 453 at [15]. See also Appeal and Appellate Courts in Australia 2014, LexisNexis at 8.5-8.14. Circumstances in which stay is sought 1. MVIL has served Woodlawn with a creditor's statutory demand, dated 11 June 2015, claiming that Woodlawn is indebted to it in the sum of $1,850,114.71. The explanation for the claimed indebtedness being less than the judgment sum is that MVIL is in receipt of an undertaking from Woodlawn in respect of the balance of the judgment sum. 2. As Woodlawn had not paid any monies to satisfy the statutory demand, MVIL commenced winding up proceedings against Woodlawn. Those proceedings are listed for hearing in the Equity Division of the Supreme Court on Monday, 10 August 2015. 3. Woodlawn, in support of its application for a stay, proposes orders in the following terms: "1. Order that execution of the Judgment dated 21 April 2015 of the Supreme Court of New South Wales in proceedings 2012/8357 be stayed pending the determination of the appeal listed for hearing on 29 October 2015 upon condition that, within 14 days of the dates of these orders, the Appellant pay into Court the sum of $1,850,114.71 made the subject of the Respondent's statutory demand dated 11 June 2015, which payment in shall then abide the further order of the Court. 2. Order that the stay in Order 1 be effective immediately but shall lapse if the condition has not been fulfilled at the expiry of 14 days from the date of these orders." 1. MVIL opposes the stay, relying upon its entitlement to the fruits of its victory at trial. It submitted, however, that if the Court was to exercise its discretion to order a stay, Woodlawn should be required to pay into Court the whole of the judgment sum and the stay ought not to become operative until that sum had been so paid. It has undertaken to the Court that if a stay was to be ordered so as to only to become operative once the monies had been paid into Court it would: "… do all things necessary to obtain an adjournment of the hearing of Proceedings No. 2015/193736 to the first date convenient to the Corporations List Judge after the date by which payment into Court is required as a condition of the stay …". 1. Woodlawn submitted that it had a clearly arguable case, as Stevenson J had failed to deal with its case that it had been released from all claims and demands by the terms of cl 5 of the Investment Management Agreement. It submitted that if it is required to pay the judgment sum, on threat of otherwise being wound up, "the right to the release and the appeal seeking to vindicate the right to release would be rendered nugatory". Woodlawn submitted that this case, therefore, fell into that category where it was fair and necessary for the purpose of preserving the subject matter of the appeal to grant a stay. 2. MVIL did not contend that Woodlawn's appeal was unarguable. However, it filed affidavit evidence of its ability to comply with any order for restitution, should Woodlawn ultimately be successful on the appeal. MVIL pointed out that it is a government owned institution and has substantial assets in excess of $500 million. MVIL also pointed out that PNG has reciprocal arrangements with Australia for the enforcement of foreign judgments, so that, assuming no stay was in force and Woodlawn was successful on its appeal, Woodlawn would be able to enforce any order made for restitution of the judgment sum (or any lesser amount paid) should MVIL not make the repayment. 3. Woodlawn submitted that it should not be subjected to the risk of seeking enforcement of any order for restitution in PNG. It relied, in particular, upon s 5(1)(v) of the Reciprocal Enforcement of Judgements Act 1976 (PNG) which provides: "(1) On an application duly made by any party against whom a registered judgement may be enforced, the registration of the judgement - (a) shall be set aside if the registering court is satisfied that - … (v) the enforcement of the judgement would be contrary to public policy in the country of the registering court …" 1. MVIL responded to this submission pointing out that it is a government owned corporation and the likelihood of Woodlawn not being able to enforce its judgment in PNG was effectively non-existent. 2. In my opinion, the possibility that Woodlawn may be forced into liquidation should it not pay the judgment sum, or at least the amount claimed in the statutory demand, is such that a stay should be ordered. Although an order winding up the company would not operate as a stay of the appeal proceedings, the matter would pass into the hands of a liquidator, whose obligations are different from those of a solvent company seeking to enforce its claimed rights. The forensic decisions made by a liquidator in respect of these appeal proceedings could be different from those Woodlawn may make and may, therefore, impact upon Woodlawn's maintenance of the proceedings. 3. The stay should, however, be subject to conditions, as Woodlawn recognised was reasonable. Having regard to the undertaking given by MVIL in relation to the winding up proceedings, I consider it appropriate that the stay come into operation when the monies are in fact paid into Court. 4. That raises the question as to the amount that should be paid as a condition of the stay. As matters presently stand, MVIL has chosen only to pursue Woodlawn for the payment of $1,850,114.71. It is that amount in respect of which Woodlawn is immediately at risk. In those circumstances, I consider that that is the amount upon which an order for a stay ought to be conditioned. 5. In addition to the application for a stay, Woodlawn sought that associated proceedings be heard at the same time as the hearing of the appeal and cross appeal in this matter. MVIL consents to that course and I will make an order as agreed between the parties in that regard. 6. Accordingly, I make the following orders: 1. Order that, subject to order 2, execution of the judgment dated 21 April 2015 of the Supreme Court of New South Wales in proceedings 2012/83573 be stayed pending the determination of the appeal listed for hearing on 29 October 2015 upon condition that, within 14 days of the date of these orders, the appellant pay into Court the sum of $1,850,114.71 made the subject of the respondent's statutory demand dated 11 June 2015, which payment in shall then abide the further order of the Court; 2. Order that the stay in order 1 be effective immediately on compliance with the condition for payment into court specified in order 1; 3. Order that the application for leave in proceedings 2015/214801 and, if leave be granted, any appeal in those proceedings be heard together with the appeal in the present proceedings on 29 October 2015; 4. Order that the costs of the application for a stay be costs in the appeal in these proceedings. ********** 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: 07 August 2015