Anthony Magafas & Anor v Peter Carantinos & Ors

Anthony Magafas & Anor v Peter Carantinos & Ors - [2010] NSWSC 30 - NSWSC 2010 case summary — Zoe

[24]

iv. The effect of the deletion of order 9 in which payments out to Mr Magafas and Pac-Com had been made and the making of order (8), in which no payment be made to either of those parties without leave of the Court is not only to protect the status quo while the remaining issues are resolved but also to ensure that no moneys are paid out to the parties to the fraudulent scheme or at their direction which enable them to obtain a benefit from their unlawful conduct and, in particular, that any unpaid taxation, penalties or interest has been paid after full disclosure of the fraudulent scheme has been made to the Australian Taxation Office: See [2008] NSWCA 304 [63] per Hodgson JA. The extensive submissions 13 Very extensive submissions were put by each of the parties. These submissions traversed in particular the orders made by the Court of Appeal and to an extent, included reference to a statement by French CJ on the occasion when a special leave was refused with costs. That statement was that the clean hands defence in the proceedings had been met by conditions imposed upon the relief granted to Mr Magafas. Further that the account remedy as framed, adequately protected Mrs Carantinos interests. A précis of the submissions addressed to the court on the Isle of Mrs Carantinos 14 These submissions included the following: a. The taking of accounts before Associate Justice Macready was not the occasion on which any of the matters reserved for further consideration by the Court of Appeal were to be determined. No order has ever been made referring any of those matters to an Associate Justice; Hodgson JA made it plain that he expected the partnership accounting to take place before any matter reserved for further consideration was agitated, both at CA [86] where his Honour said, "Until the accounting makes it clear how money was dealt with and where it went, I do not think the total scope of the relief granted should be narrowly circumscribed" and at CA [114], where his Honour said, " … it is to be hoped that will be no application to have any of (those matters) determined by the Court before the accounting has proceeded as far as possible"; there was no such application before the partnership accounts were taken; Senior Counsel for Mr Magafas said at transcript page 11 line 20 before Macready AJ on 23 September 2009 that "… we agree that Mrs Carantinos has no role in the accounting between the partners", which is the accounting to which the Court of Appeal limited the task by its variation of order 8(d) on 14 November 2008; and Macready AJ identified that accounting as the subject matter of his consideration at [4] of his judgment dated 11 November 2009.

[26]

c. The Court of Appeal ordered that no payment be made to either respondent or at the direction of either respondent of any part of the entitlement of either respondent arising from or in relation to the partnership assets without leave of the Court . Lest there be any doubt, the reference to "either respondent" means either of Mr Magafas or Pac-Com. Consistently with the unchallenged findings of the Court at first instance and declaration 5 made on 30 August 2007, which is that "the first defendant holds the two ordinary shares in the third defendant upon trust for the second plaintiff", Mr Carantinos holds the shares in Artesian in trust for Pac-Com, not Mr Magafas. It is irrelevant to the application presently before the Court that Macready AJ declared that, as between Mr Magafas and Mr Carantinos, Mr Magafas is entitled to be paid a total of $3,038,532: that is the balance due on the taking of the partnership account and would support a proof of debt by Mr Magafas in the bankruptcy of Mr Carantinos but it does not derogate from the declaration that has already been made by the Court that the shares in Artesian are beneficially owned by Pac-Com, not Magafas. Moreover, the order that there be no payment out of the fund on deposit was an order made in order to give effect to the principles discussed and applied in Nelson v Nelson (1995) 185 CLR 538 and, pursuant to those principles, any order that is made must "reflect the unavailability of equity to obtain (for a party to a fraudulent scheme) the actual fruits of (his or her) unlawful conduct". Pac-Com was the vehicle used by the parties to the fraudulent scheme and it is the beneficial owner of the ultimate fruits of the scheme through its beneficial ownership of the Artesian shares, subject to the resolution of the question whether Pac-Com held its interest in its own right or as trustee for the Karafas Trust (which Hodgson JA preferred, without deciding, at CA [99]. At CA [96], his Honour made it plain that: "Since

[30]

Indeed, as Justice Hodgson makes it clear at paragraph 88 of the judgment, application book 176 and 177, Mrs Carantinos should be a party to the accounting, that does not oblige her of course to participate if she does not want to, but she should be a party to the accounting if she wants to but not an accounting party. To the extent that her beneficial interest in the subject property is in issue, one would have thought that she would embrace the opportunity to maintain a position that says she owned both the legal interest and the beneficial interest in half of the property. iii. No explanation for delay is called for because there is no delay which needs to be explained . The Court of Appeal made its order for further consideration of the matter "generally" on 14 November 2008. The High Court heard the application for Special Leave on 1 May 2009. The taking of accounts between Mr Magafas and Mr Carantinos took place on 11 November 2009. The suggestion that Mrs Carantinos should articulate her remaining claims by way of a Cross Claim was made by Senior Counsel for Mr Magafas when the matter was re-listed before the Court in November 2009 and the motion in support of leave to file that cross claim was filed in on 7 December 2009 in conformity with the Court's directions. No relevant "delay" took place before 14 November 2008 because it was on that date the Court of Appeal made the orders reserving further consideration of the matter generally. No relevant delay took place while the special leave application was on foot; had delay been the death knell for the rights of Mrs Carantinos, the High Court would not have been able to say that her rights were adequately protected by a process that was yet to take place. No relevant delay took place while the partnership account took place because the Court of Appeal expressed the view that matter reserved for further consideration should not be brought on before the accounts were taken: CA [114]. No delay occurred after Associate Justice Macready handed down his judgment; the proceedings were re-listed very promptly; directions were made; and the application was filed in accordance with the directions. Turning next to a précis of certain of the submissions put by the plaintiff 16 The submissions included the following matters

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Judgment (55 paragraphs)

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Cases Cited (7)