The sheriff is knocking; but the appeal has not been heard

Posted on October 25th, 2017

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In the Australian Court system, unsuccessful litigants generally have some right appeal. It is not well understood that the mere fact of lodging an appeal does not automatically prevent enforcement of the underlying judgment. So, what happens if a judgment is entered against you and you lodge an appeal but in the interim, the successful litigant tries to enforce the debt? 

In NB2 Pty Ltd v PT Limited [2017] NSWCA 257, just such a situation was considered. The case related to the lease of a “fruit and veggie” shop in a Westfield complex. The tenant, NB2, claimed it had been misled into entering a lease (which it could not pay rent competing business also set up in the shopping centre). That argument had failed and judgment had been entered both against NB2 and its director/guarantor for just less than $4,000,000.00. An appeal was lodged but in the interim, the successful litigant issued winding up notices against NB2, and bankruptcy notices against the guarantors. 

They then approached the Court of Appeal for a stay of enforcement.

NB2’s primary argument was that without a stay, it would be wound up and its guarantor would be made bankrupt. They would lose control over the appeal (which would only continue if the liquidator/bankruptcy trustee elected to continue it). There was, they said, a real risk that the appeal would be rendered useless without a stay. They also said their financial circumstances were such that they could not satisfy the judgment. The creditor criticised the application because the guarantors had failed to disclose they had disposed of assets after the primary judgment and before putting evidence of financial circumstances before the Court of Appeal. Whilst noting that criticism, the Court was satisfied that even if the “disposal” had not occurred, the guarantors could still not have satisfied the debt. On balance and despite the fact that the creditor may have suffered some prejudice, a stay of enforcement was granted.

Whether or not a stay of enforcement is granted will vary from case to case. However, as NB2 shows, if there is a real suggestion that an appeal would be made nugatory without a stay, and provided the Court formed the view the appeal was not hopeless, an application for a stay may well be successful.

Tony Cavanagh Director at Mullane & Lindsay Solicitors, NewcastleTony Cavanagh is a Director at Mullane & Lindsay Solicitors and practises extensively in Commercial dispute resolution and litigationand employment lawIf you require any assistance in these areas please contact Tony Cavanagh to arrange a consultation or contact our Newcastle or Sydney office. 

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