A husband and wife entered into three loans – one to enable the purchase of the family home and the second and third to finance the husband’s business. All the loans were secured over the family home. The court rejected that the wife had an arguable defence based on the wife’s equity principle in relation to the first loan because the wife had a joint interest in the family home and was not a volunteer. The court gave judgment for the bank on the first loan but ordered that the balance of the proceeds after deducting the first loan and costs of sale be paid into court. The wife appealed and sought a stay on the basis that the court should have found that there was a triable issue as to whether she was a volunteer, whether the husband exercised undue influence, and whether the wife was under a special disability.
The central issue was whether a stay was necessary to preserve the subject matter of the litigation which is the wife’s defence to the bank’s claim under the first loan agreement.
If a stay were not granted, the bank would be entitled to sell the home. If this court were ultimately on appeal to allow the appeal, and find that the bank did not have an entitlement to sell the home without the wife first having a determination of her alleged defences on the merits, a stay would preserve the subject matter of the litigation.
The court found that the grounds of appeal were not strong but the court could not find that the appeal had no prospect of success. The court found that the balance of convenience was in favour of the stay because there was ample equity in the home to cover the amount due under the first loan and exceeded the total amount due under all loans.
The court granted the stay and refused to order that the amount due under the first loan be paid into court as a condition of the stay since that would undermine the purpose of the stay.