By Stuart Eustice, Partner and Lidia Martinez Chavez, Lawyer
Mr Pathik (the Respondent) engaged Mr Bata (the Applicant) under a domestic building contract to construct two residential units located at 1 Kananook Avenue Seaford (the Seaford property). The Respondent sought relief with respect to the termination of the building contract and damages, being the difference between the amount he obtained from the sale of the Seaford property and the amount he would have obtained for that property if the works had been performed in accordance with the building contract.
The breaches consisted of significant delays and serious defects, including one unit being built three metres closer to the eastern boundary than permitted under the planning permit. Rectification required substantial demolition. The Respondent sold the Seaford property “as is” at a reduced price.
The Applicant denied liability for the defective works, alleging that another builder, Mr Dimitriou, and his company ReThink Pty Ltd, had carried out the constructions. The Applicant counterclaimed for $258,811, alleging the Respondent had wrongfully paid this sum to Mr Dimitriou.
At first instance, the County Court found the Applicant liable for breach of the building contract, accepting that the Respondent had validly terminated the contract. The Court ordered the Applicant pay the Respondent the sum of $1,910,596.47 inclusive of interest, plus costs which were assessed on an indemnity basis.
The Applicant applied to the Court of Appeal for a stay of the judgment pending appeal. The Respondent opposed the stay and otherwise sought security for costs of $80,000.
Accordingly, the Court was asked to consider:
In support of his stay application, the Applicant relied on his personal health and financial situation. He claimed to suffer from serious medical conditions, including prostate cancer, near blindness in one eye, limited vision in the other, diabetes, chronic pain, and other co-morbidities.
He deposed that he was reliant on his primary residence at 1/13 Nerissa Grove, Oak Park, as a place of convalescence. He also submitted that he owned two other properties (an investment property in Oak Park and a development property in Brighton East) which he argued formed part of his retirement plan. The Applicant submitted that satisfying the judgment would require selling these properties, including the family home, which he argued would render any successful appeal nugatory.
Central to the Applicant’s argument was the existence of a Binding Financial Agreement (BFA) executed with his estranged wife, Ms Mona Ismail, in 2020. He submitted the BFA created caveatable interests for Ms Ismail in all three properties. He argued that the uncertainty created by the BFA, compounded by recent family law proceedings initiated by Ms Ismail, complicated the execution process and warranted a stay. He further suggested that the potential for bankruptcy, if forced to pay the judgment, could stifle his appeal.
The Court of Appeal refused the application for a stay. It reaffirmed that, under r 64.39 of the Supreme Court (General Civil Procedure) Rules 2015) a stay may only be granted in special or exceptional circumstances. Whilst an arguable ground of appeal is a threshold requirement, the Court found that such a ground existed only in respect of whether the notice of termination complied with the building contract. However, this alone did not amount to special circumstances.
The Court noted the Applicant had failed to provide current and sufficient financial evidence to support his claims. The only balance sheet produced was from October 2024, and there was no up-to-date information regarding his income, liabilities, or capacity to satisfy the judgment.
The Court was especially critical of the Applicant’s lack of candour and transparency. It found that his evidence regarding his financial affairs and the BFA was incomplete and potentially misleading. Despite being aware of the Respondent’s challenge to his financial credibility, the Applicant did not provide a supplementary affidavit with the necessary details.
Furthermore, the Court found the Applicant’s reliance on the BFA problematic, particularly given that neither he nor his wife had mentioned it during earlier proceedings, despite its apparent relevance to their interests in the properties
In determining whether a stay was necessary to avoid rendering the appeal nugatory, the Court held that the potential sale of real property (even a family home) does not, amount to special circumstances unless the property is itself the subject of the litigation. It distinguished cases like Ozden v the Commonwealth Bank [1] and Sandri v O’Driscoll,[2] where the property at risk was central to the dispute. In this case, the Court held that the properties were not the subject of the litigation, and the evidence did not establish that sale of the home would irreparably damage the Applicant’s interests.
Regarding his medical condition, the Court accepted that the Applicant’s health was compromised, however, found no evidence that selling the family home would materially hinder his recovery.
In the cross-application, the Court granted the respondent’s request for security for costs under rule 64.38(4) of the Supreme Court (General Civil Procedure) Rules 2015.
The Court found the Applicant’s financial position was “problematic” and gave rise to an unacceptable risk that any costs order would go unsatisfied. His failure to provide updated and complete financial information contributed significantly to this finding. The Court was also unconvinced that an order for security would stifle the appeal. Noting Applicant’s prior access to funds through unexplained third-party support, the Court was satisfied that he could raise funds if necessary.
The proposed amount of $80,000 was considered reasonable given the estimated costs and complexity of the proceedings.
[1] [2013] VSCA 195.
[2] [2013] VSCA 281.
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