Alstom Limited & Ors v Sirakas

Alstom Limited & Ors v Sirakas - [2010] NSWSC 669 - NSWSC 2010 case summary — Zoe

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9 On 25 February 2008 Mr Sirakas, as Managing Director of Alstom Power, procured Alstom Power to enter into a contract for the purchase of land at Glina, near Bucharest, from United Media Management SRL (UMM) for €2,886,000. The land was required for construction of a new factory for Alstom Power. 10 The Glina land comprised four separate parcels owned by different proprietors. UMM entered into contracts to purchase the Glina land from those registered proprietors by agreements dated between 18 April 2008 and 16 October 2008. The total purchase price payable by UMM for the land was €1,875,000. 11 On the day before UMM entered into the first of the contracts for the purchase of the Glina land, Mr Sirakas entered into a loan agreement with Ms Elena Coca, who is the "administrator" or controller of UMM, whereby Mr Sirakas lent Ms Coca €135,000, interest free for four months. On the same day, SC Sirakuze Co NRL entered into a loan agreement with UMM for a loan of €50,000, interest free for four months. Mr Sirakas executed the agreement on behalf of Sirakuze and Ms Coca executed on behalf of UMM. On 18 and 21 April 2008 a total of €50,000 was paid to UMM out of the bank account of Eleda Ltd, a company incorporated in Dubai. Eleda Ltd has the same address as Eleda Trading FZE, which is also incorporated in Dubai. The sole shareholder of Eleda Trading FZE is Mr Sirakas. 12 Mr Sirakas procured Alstom Power to pay UMM part of the purchase price of the Glina land, €866,000, on 21 May 2008. 13 On 7 November 2008, Mr Sirakas procured Alstom Power to pay to UMM the balance of the purchase price for the Glina land, €1,720,000. 14 The difference between the price paid by Alstom power to UMM for the purchase of the Glina land and the price paid by UMM to the vendors of that land is €711,000. 15 On 24 November 2008, UMM Paid to Eleda Trading FZE an amount of €400,000 described as "commission fees as per contract" in an invoice sent to UMM. 16 The profit or commission alleged in the Statement of Claim to have been derived by Mr Sirakas, indirectly through Eleda Trading FZE, from the transaction between Alstom Power and UMM was never disclosed to, or authorised by, Alstom or Alstom Power. 17 The Statement of Claim alleges that the part played by Mr Sirakas in these transactions, and the taking of a secret commission by him, was in breach of his duties of good faith, loyalty and honesty to Alstom Power and to Alstom, both contractual and fiduciary. The second alleged breach

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24 The act of Mr Sirakas in taking a secret payment or commission for procuring a profit to UMM on the sale of the Glina land to Alstom Power, if proved at trial, would be a breach of the express terms of clause 3.1 of the International Mobility Agreement and the implied duty of fidelity arising under that agreement. It would be a fair inference that that breach had occurred in April 2008, at the latest, when Mr Sirakas and his company made interest free loans to UMM, apparently to assist it in purchasing the Glina land for on-sale to Alstom Power. Although the loss to Alstom Power arose after expiry of the International Mobility Agreement, it flowed from breach by Mr Sirakas of that agreement during its term. 25 Likewise, if it were proved at trial that the sale of the System by Alstom Power and the purchase of the same System from Exxon by Alstom General was procured by Mr Sirakas in breach of contractual and implied duties of fidelity and honesty, then it would be a fair inference that the sale of the System by Alstom Power to General Oltemia in September 2008 was the first step in the planned dishonest transaction. Alstom Power suffered loss when the System was sold at an undervalue and that loss was suffered before the International Mobility Agreement expired. The secret commission, although received in January 2009, was the fruit of the breach of duty committed by Mr Sirakas in September 2008, during the currency of the Mobility Agreement. 26 I conclude that, in so far as concerns contractual claims, the subject matter of these proceedings is the Employment Contract, as extended by the International Mobility Agreement, and that contract was made in New South Wales and is governed by New South Wales law. I find that Mr Sirakas has agreed to submit to the jurisdiction of the Court in respect of such claims. 27 If Mr Sirakas had not been in New South Wales at the time of substituted service, the Court would have had jurisdiction to order service outside Australia under UCPR 11.2(1) and Schedule 6 of proceedings founded upon the Employment Contract. The question of jurisdiction as to non-contractual claims does not arise because of my conclusion that substituted service should not be set aside, for the reasons which follow. Whether prima facie case shown

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31 On 8 December 2009, the Plaintiffs applied ex parte to Bergin CJ in Eq for orders directing substituted service of the Statement of Claim on Mr Sirakas by serving it on Mr Tim Horsley, the solicitor who was then acting for Mr Sirakas in Family Court proceedings, and by leaving a copy of the Statement of Claim on any person over the age of eighteen at a residential property owned by Mr Sirakas in Newtown. Her Honour made those orders and service was effected accordingly. 32 Her Honour was, of course, able to make an order for substituted service because Mr Sirakas happened to be within the jurisdiction at the time and was, therefore, amenable to personal service, if it could be effected: Laurie v Carroll (1958) 98 CLR 310, at 323-324. 33 Mr Sirakas now applies, pursuant to UCPR 12.11(1)(b), for an order setting aside the service of the Statement of Claim on the ground that the evidence adduced in the application to Bergin CJ in Eq "could not possibly establish", according to Dr Bell, that the Statement of Claim "cannot practicably be served" on Mr Sirakas, as required by UCPR 10.14(1)(a). 34 An application for an order for substituted service of originating process is, of its very nature, made in the absence of the defendant to be served. If the defendant complains that the order should not have been made, the defendant can, without being obliged to file an appearance, apply under UCPR 12.11. The application is heard by a single judge, not by way of an appeal from the original order for substituted service. 35 The grounds upon which an order for substituted service may be set aside under UCPR 12.11(1)(b) are not defined and the power to make such an order is discretionary although, of course, the discretion is exercised in accordance with established principle: see e.g. Global Partners Fund Ltd v Babcock & Brown Ltd (in liq) [2010] NSWSC 270, at [140] per Hammerschlag J. The nature of the original order for substituted service being ex parte and interlocutory, a defendant applying under UCPR 12.11(1)(b) can always adduce evidence to found a submission that, as the evidence now stands, the Court should discharge its earlier order. Alternatively, the defendant may adduce no evidence and may confine himself to a submission that, on the evidence presented to the Court by the plaintiff on the ex parte application for substituted service, the Court should not have made the order. That is what Mr Sirakas has done in this case. Although he has adduced evidence in the form of affidavits from his solicitors, that evidence does not go to the question whether, on 8 December 2009, personal service of the Statement of Claim on him was practicable. 36 As I have said, an application by a defendant under UCPR 12.11(1)(b) is not an appeal from the original decision. Nevertheless, when the defendant adduces no evidence in support of such an application and the sole ground for setting aside the original order is that, on the evidence presented to the Court at the time that the original order was made, that order should not have been made, then as a matter of practicality the Court must be governed by the same considerations which apply to appeals from interlocutory orders regulating practice and procedure. If it were not so, such orders would be subject to frustration by endless applications to different Judges to exercise discretion differently on the same facts: see e.g. In re Will of Gilbert (decd) (1946) 46 SR (NSW) 318, at 323; White v Grogan [1972] 2 NSWLR 347. Thus, in such an application a defendant would have to show that the Judge who made the original order made an error of principle, or a material error of fact, or took into account irrelevant matter, or failed to take into account, or failed to give sufficient weight to, relevant matter or arrived at a result so unreasonable that one or other of such errors must have occurred: see e.g. Micallef v ICI Australia Operations Pty Ltd [2001] NSWCA 274 at [45]. 37 In the present case, there is no transcript of the application made to Bergin CJ in Eq on 8 December 2009 and, as is usual in ex parte applications in the Duty List, her Honour did not give reasons for the orders made. However, it is clear from the Court file what evidence was placed before her Honour. In the light of that evidence, I am far from persuaded that her Honour's discretion miscarried in making the order which she did. To the contrary, I have no doubt, with respect, that her Honour's decision was correct. 38 The evidence presented to the Court on 8 December 2009 showed that:

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the requirement to do justice to a defendant who is entitled to receive proper and efficacious notice of proceedings commenced against him or her. 41 One factor, out of an infinite variety of possible factors which may affect the question whether personal service is practicable is whether the evidence in support of an application for substituted service satisfies the Court there is a real possibility - not a remote or fanciful possibility - that an attempt at personal service of originating process will result in the defeat or frustration of the plaintiff's proceedings. Just as freezing orders are often made ex parte for fear that a forewarned dishonest defendant will remove assets before the Court's orders fasten upon them, so also may substituted service be ordered if there is a real possibility that the defendant, forewarned by an attempt at personal service, will take measures to ensure that further attempts are unsuccessful. Another factor may be that the time taken in effecting personal service may result in a delay which will completely frustrate the plaintiff's proceedings: see e.g. Re Conan Doyle's Will Trusts (supra). 42 In all cases, the practicality or impracticality of personal service will be coloured by the degree to which the Court can be assured that substituted services will efficaciously bring the proceedings to the proper notice of the defendant. The more likely it is that substituted service will not be efficacious, the more difficult it will be to persuade the Court to dispense with personal service. 43 As I have said, in view of the evidence presented to Bergin CJ in Eq and summarised at [38], I am far from persuaded that her Honour's discretion miscarried in making the orders sought. The evidence as to Mr Sirakas' activities in the questioned transactions strongly suggested a real possibility that, if he was forewarned of attempts to serve him personally, he would quickly leave the jurisdiction to avoid service, as he obviously had means to do. 44 Dr Bell forcefully argues that the Court should find that personal service was practicable because the investigator who carried out surveillance on Mr Sirakas' property at Newtown could easily have knocked at the door, served Mr Sirakas personally if he had answered the door and, if he did not, the investigator could then have enquired of the occupants where Mr Sirakas could be found. I do not accept that submission. 45 It must be borne in mind that Mr Sirakas has not given evidence that he was, in fact, living at the Newtown property in December 2009. He has not given evidence as to where he was living at the time. For the reasons I have given, I am of the view that the Plaintiffs could reasonably have believed that, if the investigator had knocked at the door of the Newtown property, not chanced to find Mr Sirakas there and had made an enquiry as to his whereabouts, Mr Sirakas would have been forewarned of the Plaintiffs' attempt to serve him and would have left the country immediately. On the other hand, the Plaintiffs could reasonably have believed that surveillance of the property might ascertain whether Mr Sirakas was in the habit of coming to and from the property at certain times so that successful personal service could be planned in advance. 46 To the extent that they may be relied upon, Mr Sirakas' actions after substituted service confirm the impression that he would have evaded personal service if forewarned. 47 Mr Horsley obviously informed Mr Sirakas that he had received the Statement of Claim by way of substituted service. Mr Horsley was at pains to insist to the Plaintiffs' solicitors that he had no instructions to accept such service. It is a fair inference that he took that position on instructions. Further, the Plaintiffs' solicitor, Mr Harkin, having read in the Law List that Mr Sirakas' matrimonial proceedings were listed in the Family Court on 22 December 2009, attended at the Court that day and approached Mr Sirakas in the street outside. When Mr Harkin identified himself and attempted to find out whether Mr Sirakas had engaged lawyers to act in these proceedings, Mr Sirakas did not respond and hurried away. These are not the actions of a man willing to face his accusers. 48 In the result, therefore, I decline to set aside the orders for substituted service. The consequence is that, because Mr Sirakas was within the jurisdiction at the time when the orders were made and at the time when substituted service was effected, this Court is properly seized of jurisdiction in the proceedings. Whether permanent or temporary stay

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