Karl Suleman Enterprizes v George [2002] NSWSC 1092 | Case summary

1446/02 KARL SULEMAN ENTERPRIZES PTY LIMITED (IN LIQUIDATION) v JESSIE GEORGE & ORS JUDGMENT - (Ex tempore) On application of Third Defendant to vary Mareva orders 1 HIS HONOUR: On 11 February 2002 some Mareva orders were made against David Varda. Those orders were varied on 11 March 2002. Today Mr Varda makes application to vary the Mareva orders. 2 The first application that is made is to vary the Mareva order by deleting a reference, in paragraph 5(a) to certain real estate listed in schedule 1 to the order. It is conceded that that amendment should be made. 3 The second amendment which is sought is an increase in the living expenses allowable for himself and his wife to an amount of $1,000 per week. Previously, the living expenses have been for himself alone. It is also sought to include in the living expenses the monthly payments on Visa and American Express cards. 4 There is no real evidence before me of what the current living expenses of Mr Varda and his wife are. There is evidence that he is out of work, that she has bought a cafe and that he assists her in the cafe but it is not a very prosperous enterprise. 5 The repayments on Visa and American Express cards are for debts which appear to have been run up since the Mareva orders were originally made. To the extent that they have been so run up, it is likely that they have been run up in breach of the previous orders. 6 So far as this application for change is concerned, I am prepared to increase the living expenses of himself and his wife which are permissible to an amount of $1,000 per week. While it is in no way satisfactory that the monthly repayments of Visa and American Express cards were incurred in what appears to be a breach of the earlier orders, it seems to me that to the extent to which there might be anything left over from current living expenses of $1,000 per week, that adopting a commercially realistic approach to what the attitude of Visa and American Express is likely to be, it will be necessary for some small payments to be made to them. I, therefore, would be the prepared to make the amendment which is sought to para (e) of the order. 7 The next amendment which is sought is permission to make mortgage payments and payment of other expenses for rates and services and for the maintenance of certain real estate which is listed in schedule 1. In principle, a payment of this type would be permissible, however, the drafting needs to be tightened up. I propose to amend order (e)(ii) so it reads: " Making mortgage payments on mortgage debts already incurred and paying other expenses or rates of the real estate listed in schedule 1." 8 The next amendment that he sought is one which relates to legal expenses. Initially, the legal expenses were permitted to be incurred relating to these proceedings alone and in an amount of $10,000. The solicitor Mr Varda had has retained $20 thousand on account of expenses which he has run up. A further amount of the order of $17,500 has been incurred for costs and disbursements to Mr Varda's current solicitors. It is apparent that an increase in the amount should be allowed. 9 Counsel for the liquidator suggests $50,000. While the evidence about the expenses that are likely to be incurred in these proceedings is very slight indeed, and consists more of descriptions of the type of work to be done rather than any quantification of likely costs, it seems to me that increasing the allowance for legal expenses to $50,000 would not give enough room for manoeuvre. 10 I shall amend the existing order for legal costs so as to permit the payment of costs reasonably incurred in these proceedings up to an amount of $85,000. As I have said, in connection with other applications for similar orders in this matter, this has the effect of imposing on the legal representatives some requirement to ensure that it is only costs reasonably incurred which actually get paid. 11 There is also sought permission to incur legal expenses for purposes other than the conduct of these proceedings. It is sought in a broad brush fashion, seeking permission for costs reasonably incurred in other proceedings regarding the affairs of the first applicant. I am not prepared to grant it in those terms. I am not satisfied that there are any other litigious expenses, which have a sufficient likelihood of being brought, to warrant, today, the making of a variation to the order. I shall, however, also order that the reasonable legal expenses of effecting a sale of real estate may be paid from the assets of Mr Varda. 12 Permission is sought as well from Mr Varda to draw on certain loan accounts with St George Bank. The occasion for doing that is that there is no income coming into the household of any substance and they need to get money to live from somewhere. It appears that St George Bank has frozen the account. The accounts are ones which are secured on real estate and any drawings which are made on them are ones which would erode the value of any equity in the real estate of Mr Varda. 13 It seems to me, that it is necessary to grant that permission, so that he has some way of using his own assets for legitimate purposes. I am not prepared, however, to make an order in the unlimited terms sought. 14 The variation which I shall make is to vary the order so that the order shall not prevent him from -- and here I am modifying the words of paragraph 5 -- using or drawing down on portfolio loan accounts with St George Bank, Nos 141918544 and 137418352 having credit limits of $125,000 and $55,000 respectively, provided that any such use or drawing down on the accounts is for a purpose permitted by the foregoing paragraphs of the order. 15 Next, permission is sought for the selling of certain real estate assets upon prior written notice to the applicants in an arms length sale, provided that the proceeds of sale are paid into an interest bearing account controlled by Mr Varda's own solicitor and not used otherwise than in accordance with these orders. 16 There is no dispute in principle that the real estate will need to be sold. It is simply a question of who will have control of the proceeds. The existing order is one which permits there to be a sale of the property, provided it is paid into an account controlled by, in effect, the liquidators. 17 It seems to me that it is appropriate for the solicitor for the third respondent to be the person who has control of the proceeds of the account. The Court can rely upon and must rely upon solicitors to abide by the orders of the Court and to not permit any circumvention of the orders of the Court. 18 I shall make a variation in terms of para (vi) as sought by Mr Varda. 19 Application is also made for an order that the order shall not prevent any bank from exercising any rights of set-off which it might have in respect of the facilities afforded to it by Mr Varda to the date of this order. The only bank concerning which any evidence has been given is St George Bank. There is a practical likelihood that if this order was not made that St George Bank could still keep the loan accounts which Mr Varda has previously had access to frozen. 20 I shall also make an order in terms of para (f) of the short minutes of order propounded by Mr Varda save that the words "St George Bank" be substituted for the words "any bank". 21 I shall also make an order in accordance with para 2 of those short minutes. 22 Counsel are to bring in short minutes of order to give effect to these reasons for judgment. ********** THURSDAY 7 NOVEMBER 2002 JUDGMENT - (Ex tempore) On costs in relation to application to vary Mareva orders.

23 Mr Varda seeks the costs of the present application. Mr Raffell, counsel for Mr Varda, contends that Mr Varda has been substantially successful. Mr Varda has indeed been substantially successful, although not completely successful, in the application which he has made. 24 Mr Wood, counsel for the liquidators and the company, opposes that. He points to the fact that Mr Varda was at the time of the application clearly in breach of the existing orders. Mr Wood says that Mr Varda is being granted an indulgence by the Court in having the Mareva orders modified. 25 I do not accept the description of the Court's action modifying the Mareva orders as "granting an indulgence". Rather, it is ensuring that Mr Varda has access to his own property for proper purposes, to the extent that is consistent with ensuring that any judgment which is ultimately recovered against him is not one which proves fruitless. When it is his own proprietary right which underlies the application, it is hardly an indulgence. 26 However, it is of significance that Mr Varda is in breach of the existing order. While in no way seeking to excuse or countenance the breaches which I set out in the judgment I delivered yesterday, the significance of those breaches, however, lies elsewhere than in the decision about what costs orders should be made. Costs orders are not made to punish people for misbehaving. 27 Mr Wood also says that, in any event, Mr Varda would have needed to have brought the application, to have the existing orders modified, as he was simply incapable of living with them. I accept that submission. 28 The extent to which that is a factor which can be taken into account concerning costs, is that the application of Mr Varda was made somewhat more expensive than it otherwise might have been by the fact that the liquidator opposed it rather than consented to orders of the type I ultimately made. 29 It could not be said, on Mr Varda's behalf, however, that the liquidator should simply have consented to the orders as originally sought. Thus, we are in the situation where some argument before the Court is necessary, given that there was never any indication on Mr Varda's part that he would accept any less than was originally claimed in the application to vary the Mareva orders. 30 In all these circumstances, the proper order is that the costs of the application be costs in the cause and I so order.

Karl Suleman Enterprizes v George

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Judgment (9 paragraphs)

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