Alstom Limited ACN 000 038 237 v George Sirakas

Supreme Court of NSW|2012-09-04|Before: Lindsay J

INTRODUCTION 1Each of the three Plaintiff companies is a subsidiary of Alstom SA, a company incorporated in France. The First Plaintiff is incorporated in Australia. The Second, in Romania. The Third, Romania. 2At all material times the Defendant was a senior officer of one or another of the Plaintiffs, and was a director of the Second and Third Plaintiffs. 3The Defendant's employment history can be traced back to 1992. In that year he entered into an "Employment Contract" dated 4 December 1992 that (through corporate acquisitions and mergers) had been, by 30 September 2003, taken over by the First Plaintiff. 4That Contract subsisted throughout the Defendant's employment with the Alstom Group of Companies, supplemented by Agreements made on or about 1 April 2004, 15 April 2004 and 21 December 2006. 5By a written agreement (styled "Detachment Agreement") dated 1 April 2004 the First Plaintiff and the Defendant agreed that, from 1 October 2003, the Defendant would take up the position of Managing Director of the Second Plaintiff for a period of two years, with a possibility of extension for a further year. 6By another written agreement (styled "Secondment Agreement"), dated 15 April 2004, between the First Plaintiff, the Second Plaintiff and the Defendant, the First Plaintiff seconded the Defendant's services to the Second Plaintiff for 12 months, with a possibility of annual renewals. 7A further written agreement (styled "International Mobility Agreement"), dated 21 December 2006, was entered into between the First and Second Plaintiffs and the Defendant. It was expressed to replace the Detachment Agreement and the Secondment Agreement. 8Pursuant to the Detachment Agreement, the Secondment Agreement and the International Mobility Agreement, the Defendant served the interests of the Plaintiffs at a senior management level in Romania. 9As an employee and senior officer of the Plaintiffs, he owed to all three duties of fidelity and good faith. 10His services were summarily terminated on 24 April 2009 after discovery by the Plaintiffs that he had discharged his duties to them in a dishonest manner. 11Subsequent investigations have revealed a course of conduct by the Defendant involving fabrication of documents, the taking of secret commissions, and the diversion of property and opportunities of the Plaintiffs' group of companies for his personal benefit.

THE COURSE OF THE PROCEEDINGS 12The principal proceedings were commenced by the filing of a Statement of Claim on 8 December 2009, at which time the Plaintiffs obtained Freezing Orders against the Defendant on an ex-parte basis. Those orders, subsequently amended, have been continued until further order. 13The Defendant has, on more than one occasion, resisted the jurisdiction of the Court to entertain the proceedings. On 23 June 2010 Palmer J dismissed his motion for a stay of the proceedings: Alstom Limited v Sirakas [2010] NSWSC 669. When the Plaintiffs filed an Amended Statement of Claim on 1 April 2011, he filed a further motion for a stay. It was dismissed by White J on 15 February 2012: Alstom Limited v Sirakas (No 2) [2011] NSW SC 64. He applied to the Court of Appeal for leave to appeal against White J's judgment. 14Pending the determination of that application he filed a Defence on 27 April 2012 (replaced with a freshly verified version of the same document filed on 22 May 2012) and made two unsuccessful applications for the proceedings to be stayed on an interlocutory basis. The first of those stay applications was dismissed by Ward J on 12 June 2012. The second, by Campbell JA, on 25 July 2012: Sirakis v Alstom Limited [2012] NSWCA 203. 15On 11 July 2012 the Defendant consented to dismissal of his application to the Court of Appeal for leave to appeal. At about the same time he effectively withdrew from participation in the proceedings. 16On 12 July 2012 the solicitor then on the record for the Defendant excused himself from attendance at a directions hearing on the basis that, as he understood his instructions, the Defendant did not wish to take any further part in the proceedings and, having served on the Defendant a Notice of Intention of Ceasing to Act on 4 July 2012, he expected soon to file and serve a Notice of Ceasing to Act. 17The Defendant's solicitor confirmed his oral advice to the Plaintiffs' solicitors to that effect via a letter, dated 12 July 2012, in which he confirmed that his firm's instructions had been withdrawn and that his understanding was that the Defendant did not intend to instruct other solicitors. 18The foreshadowed Notice of Ceasing to Act was filed on 16 July 2012, and served on the Plaintiffs' solicitors the following day. 19The conversation between solicitors on 12 July 2012 prompted the Plaintiffs to file and serve, on that date, the Notice of Motion presently before the Court.

THE PLAINTIFF'S MOTION 20The Motion seeks the following relief: (a) an order, pursuant to rule 12.7(2) of the Uniform Civil Procedure Rules 2005 (NSW), that the Defendant's Defence to the Amended Statement of Claim be struck out (for a failure on the part of the Defendant to conduct his defence with due despatch). (b) an order, pursuant to UCPR rule 13.1, that summary judgment be entered in favour of the Plaintiffs on their Amended Statement of Claim. 21The Motion does not, in terms, seek a default judgment against the Defendant consequentially upon any order for his Defence to be struck out. However, if the Defence were to be struck out, such relief would be available to the Plaintiffs under UCPR rule 16.3(1)(a), read with rule 16.2(1)(c). 22In any event, the Court is authorised by both s 90(1) of the Civil Procedure Act 2005 (NSW) and UCPR rule 36.1 to give such judgment, or make such orders, as the nature of the case may require and, although the operation of these provisions is not dependent upon any reliance upon them being foreshadowed in a motion, the Plaintiffs' motion genuflects in their direction by inclusion of a claim for "any other order(s) the Court deems appropriate". 23The Notice of Motion, and a supporting Affidavit, were served on the Defendant care of the solicitors still then on the record on 12 July 2012. One copy was physically delivered to their offices. Another was sent to the solicitor for the Defendant via email. 24There is no evidence that the Motion was, by those means, in fact specifically drawn to the attention of the Defendant. However, the solicitor for the Defendant was plainly aware of his professional obligations and, at the time of service, he remained the solicitor on the record for the Defendant. 25As a precaution against misadventure, the solicitors for the Plaintiffs subsequently served a copy of the Notice of Motion and supporting Affidavit upon solicitors known by them to be acting for the Defendant in matrimonial proceedings pending in the Federal Magistrates Court. 26That was done under cover of a letter dated 30 August 2012. Although it elicited a denial of any retainer referable to the Supreme Court proceedings, that denial was expressed in terms that indicate that the documentation served had been given close attention by its recipients. If any comfort be needed in support of a conclusion that the Motion has come to the attention of the Defendant, that correspondence is capable of providing it in some measure. 27The fact remains, though, that the Motion was served on the Defendant at his address for service (in accordance with UCPR rule 10.5(1)(c)(i)) on the day upon which it was filed, 12 July 2012. 28The Defendant's solicitor having ceased to act for him on 17 July 2012, the Defendant has made no alternative arrangements for the service of documentation upon him or for representation in the proceedings.

THE PLAINTIFFS' "WANT OF PROSECUTION" APPLICATION 29At the commencement of the hearing of the motion, the Defendant was called outside Court. There was no appearance by him or on his behalf. 30A fair inference to be drawn from the circumstances in which the Defendant contested the jurisdiction of the Court to entertain the principal proceedings, sought a stay of the proceedings on four occasions, applied to the Court of Appeal for leave to challenge refusal of a stay, and then withdrew not only that application but also his solicitor's instructions generally, is that the Defendant made a deliberate decision in or about July 2012 to abandon his defence of the proceedings. 31That inference is supported by a refusal, or failure, on the part of the Defendant to comply with orders of the Court that he file and serve a verified list of documents by way of discovery. Leaving aside earlier orders, one of those orders was made with the consent of the Defendant on 16 March 2012. Another was made, by Ward J, on 13 June 2012 following upon her Honour's refusal to stay the order that had been made with the Defendant's consent on 16 March 2012. 32An inference of abandonment might also be supported by the fact that, despite directions from time to time for the Defendant to serve affidavits in opposition to those served by the Plaintiffs, no such affidavits have been filed or served. 33This is not for want of due notice to the Defendant of the case sought to be made against him by the Plaintiffs. That case is set out, principally, in the Amended Statement of Claim (filed 1 April 2011) and four affidavits sworn in August 2011 and served on the Defendant's solicitor on 19 March 2012. 34There is, in my opinion, a factual foundation for a finding (referable to UCPR rule 12.7(2)) that the Defendant has not conducted his defence with "due despatch" and, moreover, that he has no intention of conducting it at all hereafter. 35Accordingly, the discretion the Court has under UCPR rule 12.7(2) to strike out the Defendant's defence has been enlivened. 36In my opinion, the appropriate course is to grant the order sought by the Plaintiffs for the Defence to be struck out.

THE PLAINTIFFS' SUMMARY JUDGMENT APPLICATION 37Although the Plaintiffs might, in consequence of that order, be entitled to apply for a default judgment - supported by detailed allegations pleaded and particularised in the Amended Statement of Claim - they have taken it upon themselves to satisfy the requirements of UCPR rule 13.1 for entry of a summary judgment. 38The foundation for such a judgment is, in my opinion, established by the Affidavits served on the Defendant on 19 March 2012; namely, an Affidavit of Jacques Pierre Andre Chevrier sworn 10 August 2011, an Affidavit of Jacques-Olivier Dezombre sworn 4 August 2011, an Affidavit of Romain Marie sworn 31 August 2011 and an Affidavit of Sterland Leonard Greenhalgh sworn 25 August 2011. All four affidavits refer to a bundle of documents ("Exhibit PF1") admitted into evidence on the hearing of the Plaintiffs' Motion as Exhibit PX1. 39The Plaintiffs seek judgment, by way of an award of damages, referable to eight of the nine "transactions" pleaded in the Amended Statement of Claim as having been entered into by the Defendant in breach of his duties to the Plaintiffs and, indeed, fraudulently. The Plaintiffs do not press their claim for relief in relation to the ninth transaction, pleaded and particularised in paragraphs 83-89 (inclusive) of the Statement of Claim. 40On the hearing of the Motion, senior counsel for the Plaintiffs took the Court through Exhibit PX 1, the affidavits to which that bundle of documents was exhibited, and ancillary affidavits, at length. 41I am satisfied that the allegations of breach of duty, and fraudulent conduct, pleaded and particularised in the Amended Statement of Claim are supported by that evidence. 42A convenient summary of the eight transactions the subject of the relief claimed by the Plaintiffs, by reference to the Amended Statement of Claim, is found in the Affidavit of Mr Chevrier. In that Affidavit can be found a summary of each of the transactions, coupled with a detailed elaboration of each transaction cross referenced to the exhibited bundle of documents. 43I accept as accurate the summaries of the Defendant's misconduct set out in Mr Chevrier's Affidavit. 44The first of the eight transactions, relating to the purchase by the Second Plaintiff of land at Glina for the construction of a factory, is the subject of paragraphs 12-22 of the Amended Statement of Claim and is explained in paragraph 27 of the Affidavit. The Defendant dishonestly interposed, between the Second Plaintiff and the Vendors, an entity associated with himself, and arranged for himself to receive, from that entity, a commission not disclosed to the Plaintiffs. The Second Plaintiff lost €711,000 on this transaction on or about 8 November 2008. 45The second transaction, relating to payment of a false invoice, is pleaded in paragraphs 22A to 22G of the Statement of Claim, and is explained in paragraph 29 of the Affidavit. The Defendant arranged for the Second Plaintiff to issue a purchase order for the supply of electrodes, and to pay the putative supplier, without any electrodes ever being supplied. On this transaction, the Second Plaintiff lost €182,793 on or about 8 August 2008. 46The third transaction, relating to a dishonest scheme for the Plaintiffs to re-purchase property at a price substantially greater than they had sold it for, is the subject of paragraphs 23-33 of the Statement of Claim, and is explained in paragraph 32 of the Affidavit. In September 2008 the Defendant arranged for the Second Plaintiff to sell equipment for €200,000, and for the Third Plaintiff to purchase it for €700,000. The Third Plaintiff lost €500,000 on this transaction on or about 29 September 2008. 47The fourth transaction, relating to the payment of a false invoice, is pleaded in paragraph 34-40 of the Statement of Claim, and explained in paragraph 34 of the Affidavit. The Defendant arranged for the Second Plaintiff to pay to an entity associated with himself €136,080 for a "market study" never supplied. The Second Plaintiff's loss of that sum occurred when it made payments of €88,200 on or about 31 October 2007 and €47,880 on or about 19 January 2009. 48The fifth transaction, which relates to the dishonest interposition by the Defendant of an entity associated with him between the Second Plaintiff and a buyer of equipment from the Second Plaintiff, is pleaded in paragraphs 41-48 of the Statement of Claim, and explained in paragraph 36 of the Affidavit. This transaction was effected through sales of equipment on three occasions in October-November 2008. The Second Plaintiff lost €1,386,396 on it. 49The sixth transaction, which relates to the payment of moneys for work not done, is pleaded in paragraphs 53-66 of the Statement of Claim, and explained in paragraph 41 of the Affidavit. The Defendant arranged for the Second Plaintiff to pay (in Romanian currency) the equivalent of approximately €210,000 as "advance payments" for work never done on upgrading a machine which the Defendant subsequently arranged for the Second Plaintiff to buy. The Second Plaintiff's loss, assessed at €215,261, occurred when it made the "advance payments" on or about 22 June 2006 and 29 August 2008. 50The seventh transaction, which relates to misuse of entitlements the Defendant had to a rental subsidy for his accommodation as part of his employment terms, is pleaded in paragraphs 67-76 of the Statement of Claim, and explained in paragraph 49 of the Affidavit. The Defendant arranged for the Second Plaintiff to make "rental payments", between November 2006 and March 2009 or thereabouts, for his accommodation. However, an entity associated with him had purchased the house and, in those circumstances, he had no entitlement to the subsidy. The Second Plaintiff's loss is assessed at €163,862. 51The eighth transaction, which relates to misuse of entitlements the Defendant had to a leased motor vehicle as part of his employment package, is pleaded in paragraphs 77-82 of the Statement of Claim, and explained in paragraph 52 of the Affidavit. At the end of the lease of car leased by the Second Plaintiff for the Defendant, the Defendant arranged for the car to be purchased (for the "residual payment" referred to in the lease) by an entity associated with himself, instead of the Second Plaintiff, and for the Second Plaintiff to continue making rental payments to his associated entity. The Second Plaintiff's loss is assessed at €42,000, incurred between February 2007 and February 2008 or thereabouts. 52Each of these transactions warrants characterisation as fraudulent conduct on the part of the Defendant. Each transaction was, moreover, a dishonest breach of the obligations of good faith that the Defendant owed to the Plaintiffs as an employee and senior officer. 53On the evidence adduced in support of the Plaintiffs' Motion, the possibility that there is an innocent explanation available to the Defendant for what appears, clearly, to have been misconduct on his part must be taken to have been excluded. Certainly, the Defendant appears never to have offered any such explanation. 54When confronted by the Plaintiffs with evidence of his misconduct on 24 April 2009, the Defendant complied with the Plaintiffs' demand that he resign forthwith. He appears, deliberately, to have refrained from making any admissions. But, equally, he appears deliberately to have refrained from objecting to the Plaintiffs' demand or protesting his innocence. 55Having regard to the evidence adduced in support of the Plaintiff's Motion, and fortified by the Defendant's apparent abandonment of his defence of the proceedings, I am satisfied that the Defendant has no defence to the Plaintiffs' claims and, accordingly, judgment should be entered for the Plaintiffs in the terms sought.

QUANTIFICATION OF JUDGMENT 56Although the Defendant acted in breach of his duties to the Plaintiffs generally, such damage as was suffered by them was suffered, more particularly, by the Second and Third Plaintiffs. 57On the evidence adduced on the Motion: (a) the Second Plaintiff is entitled to an award of damages in the sum of €2,837,392 to compensate it for losses incurred in respect of the eight transactions (other than the third, addressed in the Amended Statement of Claim, paragraphs 12-82 inclusive), which should be accompanied by an award of pre-judgment interest (under s 100 of the Civil Procedure Act 2005) on each component of its loss from the date that loss was suffered until the date of judgment; and (b) the Third Plaintiff is entitled to an award of damages in the sum of €500,000 (to compensate it for the loss incurred in respect of the third transaction addressed in the Amended Statement of Claim), which should be accompanied by an award of pre-judgment interest (under CPA s 100) from 15 September 2008 to date. 58Pre-Judgment interest awarded under CPA s 100 is to be calculated in accordance with the Court's Practice Note SC Gen 16. On that basis, the Second Plaintiff should be granted pre-judgment interest of €869,975 and the Third Plaintiff should be granted interest of €175,000. 59Accordingly, judgment should be ordered in favour of the Second Plaintiff in the total sum of €3,707,367, and for the Third Plaintiff in the total sum of €675,000. 60These judgments can, and should, be expressed in Euro rather than the Australian dollar, because the Euro is, generally, the currency in which the Plaintiffs suffered their losses, and it is the currency best calculated to compensate them for those losses: Brown Boveri (Australia) Pty Ltd v Baltic Shipping Co (1989) 15 NSWLR 448 at 463G-464B and 471G-472.

COSTS 61Having succeeded on their motion, and, consequentially, in the principal proceedings, the Plaintiffs are entitled to an order that the Defendant pay their costs of the proceedings, including their costs on the motion. 62I do not regard the fact that no award of damages is to be made in favour of the First Plaintiff as a ground for depriving it of the benefit of a costs order in favour of the Plaintiffs generally, or for distinguishing between the Plaintiffs. It was a necessary party to the proceedings because it was, as the Defendant's principal employer, a party to each of the contracts of service to which the Defendant was a party, and from which his obligations of fidelity to all three Plaintiffs were ultimately derived.

CONCLUDING OBSERVATIONS 63Absent an appeal instituted pursuant to s 101 of the Supreme Court Act 1970 (NSW), the judgment to be entered pursuant to these Reasons for Judgment will bring the principal proceedings to an end, subject to two qualifications. 64The first qualification is that, in circumstances in which the Plaintiffs have the benefit of ongoing Freezing Orders against the Defendant and (I am informed by senior counsel for the Plaintiffs) moneys have been paid into Court as a consequence of the operation of those orders, it will be necessary for attention to be given in due course to what orders should be made (on notice to all potentially interested parties) to work through the consequences of the judgment entered against the Defendant. 65The second qualification is noted in fairness to the Defendant. Judgment having been entered against him in his absence, it may be open to him to apply to the Court (under UCPR rule 36.15 or rule 36.16) for an order that the judgment be set aside. 66I am not to be taken, at all, to be encouraging the Defendant to make such an application. My object is to do no more than to take a step towards ensuring that he is apprised of such, if any, rights he might have to challenge the judgment entered against him. 67In pursuing that object, I note that, if an application were to be made by the Defendant to set the judgment aside, it would have to be considered on its merits. However, if he does turn his mind to the possibility of making an application he should, prudently, contemplate that, if such an application were to be successful, he might be required: (a) to adduce evidence in explanation of his decision to withdraw his solicitor's instructions in or about July 2012 and his failure then, or thereafter, to make alternative arrangements for his ongoing representation, or indeed his participation, in the proceedings; (b) to adduce evidence demonstrating that he has an arguable defence on the merits to the case pleaded against him in the Amended Statement of Claim and, in the absence of any evidence from him, established by the evidence relied upon by the Plaintiffs to secure judgment (vide Vacuum Oil Pty Co Ltd v Stockdale (1942) 42 SR (NSW) 239 at 243-244; 59 WN (NSW) 188 at 190-191) ; and (c) possibly, to adduce evidence of substantial compliance with the discovery obligations imposed upon him by orders of the Court for him to give discovery, which orders have not been complied with to date. 68If the Defendant is not willing or able to comply with outstanding discovery orders he might, possibly, find himself confronted, on any application to set aside the judgment, with a contention that he should not be heard on that application unless and until he is prepared either to comply with his discovery obligations or, at least, to move the Court for an order that the outstanding discovery orders, as well as the judgment, be set aside: Young v Jackman (1986) 7 NSWLR 97.

ORDERS 69The Court makes the following orders: (a) ORDER (pursuant to UCPR rule 12.7(2)) that the Defendant's Defence to the Amended Statement of Claim be struck out. (b) ORDER (pursuant to UCPR rule 13.1) that: (i) judgment be entered for the Second Plaintiff against the Defendant in the sum of €3,707,367, inclusive of an award of interest under CPA s 100; and (ii) judgment be entered for the Third Plaintiff against the Defendant in the sum of €675,000, inclusive of an award of interest under CPA s 100. (c) ORDER that the Defendant pay the Plaintiffs' costs of these proceedings, including the costs of the Plaintiffs' Notice of Motion filed 12 July 2012. (d) RESERVE liberty to apply in relation to: (i) the continuing operation of the Freezing Orders made against the Defendant; and (ii) disposition of moneys paid into Court during the course of these proceedings.

Amendments 20 September 2012 - Changed country name from France to Romania. Amended paragraphs: 1. 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: 20 September 2012

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