Faeeh v Repaja & Anor; Repaja v Faeeh

Judgment 1There is a number of applications in these proceedings. On 9 October 2014 the District Court made a freezing order against both defendants in the District Court proceedings, Mrs Divna Repaja and Mr Milorad Repaja. The freezing orders were made ex parte. They were expressed to be made until further order, save for one which in terms was a final order. There is an issue as to whether the freezing orders should be extended. Secondly, in connection with the freezing order application, there is an application for the defendants in the District Court proceedings to give disclosure of assets. Thirdly, Mr Repaja seeks orders for the withdrawal of two caveats lodged by the plaintiff in the District Court proceedings, Mr Faeeh. Fourthly, there is a notice of motion by Mr Faeeh seeking summary judgment against both defendants. That is not sought to be proceeded with today, but Mr Repaja seeks, by way of oral application, to strike out the statement of claim against him. 2I will deal first with the issues in relation to the extension of the freezing orders. 3Mr Faeeh's claim in the proceedings that were originally commenced in the District Court, but have since been transferred to this Court, is for judgment against Mr and Mrs Repaja for $750,000 for moneys lent. He contends that by an agreement or agreements made between him and the first defendant, Mrs Divna Repaja, he agreed to lend moneys to Mr and Mrs Repaja for particular purposes, namely the investment in a dental surgery practice, in an internet business, and in a hotel. The agreements are said to have been made by Mrs Repaja on behalf of both defendants. Mr Faeeh pleads that it is a term of the agreements, in effect, that the money would be repaid within a year of each advance. He pleads that the moneys have not been repaid. He points to an admission made by Mrs Repaja that he had invested $150,000 into the dental surgery and a forthcoming internet venture and an admission about the outstanding debt. 4The statement of claim was filed in the District Court on 12 September 2014. On 9 October 2014 Mr Faeeh filed a notice of motion in the District Court that was heard instanter. In that notice of motion he sought orders for substituted service on the defendants. He also applied ex parte for an order restraining the defendants from disposing of, encumbering or otherwise dealing in their interest in properties situated at Arunta Avenue, Green Valley and Oliveri Crescent, Green Valley, a further order to the same effect to be made "pending further order" and an order pending further order that both defendants be restrained from dealing with any funds borrowed from Prime Capital Securities Pty Ltd. 5The application was supported by an affidavit from Mr Faeeh in which he deposed to having been informed by the NSW Police Service that criminal proceedings had been commenced against Mrs Repaja concerning in part what he described as the wrongful use of moneys that were the subject of the statement of claim. He deposed to having been informed that Mrs Repaja had been detained after attempting to leave Australia. No other details of the criminal proceedings appear to have been provided to the District Court and none was available at the hearing before me. 6Mr Faeeh deposed that Mr Repaja was the registered owner of the two properties in Green Valley. He said that he believed that they were unencumbered, although it is not clear to me how he could have been of that belief as there was a registered mortgage over each of them. He expressed concern that Mr Repaja would encumber the properties. He said he knew of no other assets of the defendants and said that he would seek leave to adduce evidence concerning the disposition of the funds that were the subject of his claim by seeking to show that the moneys borrowed had been applied in reduction of loans secured by mortgage over the properties. 7The District Court made the orders sought in Mr Faeeh's notice of motion, including, it would seem, both a final and interlocutory order restraining the defendants from dealing with their interest in the two properties. The orders entered make no reference to Mr Faeeh's having given the usual undertaking as to damages. The orders were made without notice to or attendance by the affected defendants. 8Matters have been debated before me today on the basis that the orders were made until further order. I think the reference to the making of a final order must have been a mistake. In any event, that order is liable to be set aside either under the slip rule or as having been made in the absence of the defendants. 9In Ross v Internet Wines Pty Ltd [2004] NSWCA 195; (2004) 60 NSWLR 436 Giles JA said (at [109]) that, "It is generally undesirable that ex parte relief be granted until further order". Because the freezing orders were made until further order, Mr and Mrs Repaja have had to apply to discharge the orders. However, the onus of showing that the orders should continue lies on Mr Faeeh. 10There is evidence of the making of the advances and there is, it seems to me, at least a prima facie case that Mrs Repaja is liable to repay the moneys advanced. It is conceded that there may be an arguable defence on the part of Mr Repaja, but counsel for Mr Faeeh points to the fact that there is no evidence from Mr Repaja to the effect that his wife did not have his authority to borrow the moneys on behalf of both of them and there is evidence that the moneys have been paid into a joint bank account for them. There is a serious question to be tried that Mr Repaja is liable for the debt claimed. 11The moneys were advanced without security. I think the highest the plaintiff's case can be put is that the moneys, or a substantial part of them, appear, prima facie, not to have been applied for the purposes for which Mr Faeeh says they were borrowed. 12That having been said, I do not think that the evidence indicates any likelihood that the defendants will deal with their assets with the purpose, or in a way which would have the effect, of frustrating Mr Faeeh from enforcing a judgment. 13There is evidence that Mr Repaja seeks to grant a further mortgage over the properties in question to secure a loan proposed to be made by Prime Capital Securities Pty Ltd to a company called Rep'Hair Pty Ltd to assist it with working capital. Mr Repaja holds the majority of the shares in that company and has agreed to guarantee the loan and to provide a second mortgage over the properties. There is already a mortgage in place to Pepper Finance Corporation which secures an amount in excess of $870,000. There is no evidence to suggest that there is anything untoward about the proposed loan. There is no evidence that the proposed lender is not a genuine lender or that the company Rep'Hair Pty Ltd does not carry on, or propose to carry on, a genuine business. To the contrary, it has entered into a lease of shop premises in Surfers Paradise. The loan is proposed to be used for the purposes of that business. 14There is evidence that suggests that moneys borrowed from Mr Faeeh were paid into the joint bank account, and that moneys were paid out of that account in reduction of an existing first mortgage. That evidence does not indicate any intention on the part of Mr Repaja to defeat any judgment that might be made against him. Nor would such repayments have any such effect. The use of the moneys to reduce secured debt would increase the value of Mr Repaja's equity in the subject properties. 15The evidence that was before the District Court and was before me that some criminal proceeding of an uncertain nature has been commenced against Mrs Repaja takes the matter no further. 16Complaint was made about the absence of any notation by the District Court that Mr Faeeh gave to the court the usual undertaking as to damages. It is clear that he offered the usual undertaking as to damages. He did so in his affidavit that was before the District Court. On the following day when the matter was brought to this Court, he confirmed the undertaking as to damages given the previous day. I would not have discharged the orders on the ground of an absence of an undertaking as to damages. Nonetheless, I am satisfied that the freezing orders ought to be discharged. 17A further matter which is relevant to that conclusion is that there is no satisfactory evidence as to Mr Faeeh's ability to satisfy an undertaking as to damages. The prospect of some damage being suffered as a result of the freezing orders is real because the orders would preclude Mr Repaja from giving the second mortgage required for the advance to be made by Prime Capital Securities to Rep'Hair. 18Accordingly, I will discharge the existing freezing orders. 19Mr Repaja also seeks orders for the withdrawal of caveats that have been lodged by Mr Faeeh on the two properties in Green Valley. The caveats are defective, or at least partly defective, in form. The caveatable interest claimed is "equitable interest in the land" and "equitable mortgage over the title to the land". The description of the claimed caveatable interest as an "equitable interest" is deficient. The facts referred to in the caveat and the facts as established in evidence on this hearing do not amount to the grant of an equitable mortgage. The claim to an equitable interest in the land is said to be made on the basis that, as I understand the caveat, the caveator (misnamed in the caveat as a "guarantor") made payments of money to the bank account of the registered proprietor, Mr Repaja, from which he made loan payments in reduction of the mortgage and in payment of council rates, water and utility charges in respect of the lands. 20Those facts do not demonstrate the existence of any proprietary interest of the caveator in the lands. On the evidence before me the person or persons who borrowed the money from Mr Faeeh would have become beneficially entitled to the moneys received. There is no evidence, and no allegation, of any intention to create a trust. On the matters alleged, I see no basis for the caveator's being entitled to claim by way of subrogation to the interest of the mortgagee whose debt was reduced or discharged. In any event, no such claim was made. Accordingly the caveats will have to be removed. 21Because the freezing orders will be discharged, it would not be appropriate to make any order for disclosure of assets in support of the freezing order. 22The remaining questions concern Mr Faeeh's notice of motion seeking summary judgment and Mr Repaja's application to strike out the statement of claim. An order for substituted service was made on 9 October 2014 and it is common ground that service on the defendants was effected on the same day in accordance with the order for substituted service. The time for filing the defence has not yet expired. The plaintiff, that is to say, Mr Faeeh, does not press his claim for summary judgment today. There has been no application brought by notice of motion by Mr Repaja for summary judgment in his favour on the statement of claim, or to strike out any part of the statement of claim. The statement of claim pleads that the alleged agreement was made by Mrs Repaja on behalf of both defendants. I would not have been minded to strike out the statement of claim, even had there been a formal application to that effect. The statement of claim appears to me to plead that the alleged loan agreement was made by Mrs Repaja on behalf of herself and her husband which is another way of saying that Mr Faeeh contends that Mrs Repaja was her husband's agent to borrow the money. I think there is no prejudice to either defendant in pleading to the statement of claim. 23Subject to any submissions that counsel may have, I propose the following orders: 1.Order that in proceedings 269439 of 2014 the order made by McLoughlin SC DCJ on 9 October 2014 that "I make orders in accordance with prayers 3, 5, 6, 7 and 8 of ... motion [dated 9/10/14]" be discharged. 2.Order that by 22 October 2014 the defendant in proceeding 2014/296028 withdraw caveats AI918109G lodged in relation to the land situated at [xxx] Oliveri Crescent, Green Valley, NSW 2168, contained in certificate of title folio identifier 1/1073423 and caveat AI918118F lodged in relation to the land situated at [yyy] Arunta Avenue, Green Valley, NSW 2168 contained in certificate of title folio identifier 2/1073423. 3.Order that the claim for relief in para 2 of the defendant's notice of motion filed 13 October 2014 in proceeding 2014/296028 be dismissed. 24The plaintiff in proceeding 2014/296028, Mr Repaja, does not press the claim for damages in para 4 of the amended summons. He is entitled to the costs of the amended summons. 25Costs are sought on the indemnity basis. I do not think that the matters raised warrant an order for costs on the indemnity basis. Although there was criticism of the way the application for a freezing order was conducted before the District Court, I do not think it can be said that Mr Faeeh or his legal representatives were relevantly delinquent in the conduct of that litigation. It must be borne in mind that they persuaded the learned District Court judge that the claim had sufficient substance to warrant the making of the freezing order. It cannot be said that such a claim was so obviously hopeless that it ought not to have been brought. The plaintiff in those proceedings is entitled to have the costs of those proceedings assessed forthwith because the proceedings will be brought to an end by the orders that I will make. 26Some costs were incurred in the application today in relation to issues raised in proceeding 269439 of 2014, in particular in relation to whether there should be summary judgment and on the challenge to the adequacy of the pleading of the statement of claim. Moreover, the freezing order itself was made in those proceedings. I propose to make no further order in relation to the costs in proceedings 269439 of 2014. They will be costs in the cause, but I will give this indication for a costs assessor, namely that insofar as any assessment of costs in proceedings 269439 of 2014 relates to the work done in connection with the continuation or discharge of the freezing order, such costs are to be assessed in the proceeding 296028 of 2014. Secondly, in my view, the bulk of the time spent on today's hearing has been spent in relation to the issues arising in proceedings 296028 of 2014. I would assess 85 per cent of the time that has been spent in today's hearing as relating to that proceeding. 27I make the orders that I previously proposed. I certify that this and the 9 preceding pages is a true copy of the reasons for judgment herein of the Honourable Justice R W White. Date: 7 November 2014 Associate 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: 07 November 2014