Large v Djamirze

Costs of enforcement

1. As the claims of the plaintiffs overlap and rely upon the same facts to be established by the same evidence, it appears likely that if a costs order is made in favour of Mr Djamirze, it will be one for which Mr Large is jointly and severally liable.
2. Mr Large resides in California but recognition of a judgment of this Court can be obtained in California under the "Uniform Foreign-Country Money Judgments Recognition Act" in the California Civil Procedure Code: see ss 1715(a) and 1718.
3. There is before me evidence of a Californian attorney, Mr Douglas Emhoff, a partner of DLA Piper (US), to the effect that the likely fees of obtaining recognition of an order of this Court in the California Superior Court would be in the range of USD7,500 to USD15,000.
4. Mr Emhoff stated: "This of course is subject to change depending on whether the other side will attempt to vigorously challenge the recognition filing, although, our initial research indicates such a challenge would be without merit, as judgments for attorneys' fees fall within the scope of the statute."
5. I have been taken to an unreported decision of the Court of Appeal for the Second District in California where a decision of the Supreme Court of Western Australia was enforced in California without difficulty: Mercator Property Consultants Pty Ltd v Sumampow (2nd D Cal Ct App, B236491, 5 March 2012).
6. Further, in Carrey v ACP Publishing Pty Ltd (Supreme Court (Vic), 11 December 1997, 6 February 1998, unrep) Hedigan J said, in a case involving another perhaps more famous movie actor: "Although there may be some doubt whether there is a quick and inexpensive registration procedure, by which one simply files a foreign judgment and obtains the money, so to speak, there is in force a legal regime in California, either by way of common law comity or the [Californian Uniform Foreign Money-Judgments Recognition Act], whereby a defendant, at moderate expense can enforce a foreign money judgment. See [Connop] v [Varena] Pty Ltd [1984] 1 NSWLR 71; [Barton] v Minister [for] Foreign Affairs (1984) 2 FCR 463. On the material before me, I form the view that there is no reason why there would be any particular difficulty or delay in the defendant obtaining enforcement of a judgment for costs, if one were obtained."
7. As I have mentioned the second and third plaintiffs are companies incorporated in British Columbia. Enforcement of NSW judgments in British Columbia is relatively straight forward because it is a jurisdiction with which Australian judgments have reciprocity of treatment: s 5 of the Foreign Judgments Act 1991 (Cth); reg 4 and item 3 of the Schedule to the Foreign Judgments Regulations 1992 (Cth).
8. There is evidence before me from Mr Jeffrey Horswill, a partner of DLA Piper (Canada) based in Vancouver, that the cost of enforcing a NSW judgment in British Columbia is likely to be less than CAD10,000 and that recognition of a NSW judgment "can be accomplished via a simple application brought without notice."
9. Usually, when an application for security for costs is based upon the fact that the plaintiff resides outside NSW, the quantum of costs that should be ordered is the "additional costs of realising the costs order in a foreign country as opposed to Australia": Dense Medium Separation Powders Pty Ltd v Gondwana Chemicals Pty Ltd [2011] NSWCA 84 at [32] (Young JA with whom Campbell and Whealy JJA agreed); see also In the matter of SCW (Express Detailing) Pty Ltd [2011] NSWSC 688 at [32] (White J); Daya v CX Reinsurance Company Ltd [2012] NSWSC 1213 at [27] (Brereton J).
10. I see no reason why a different approach should be taken in this case.
11. Mr Djamirze already has $60,000 security. It is not likely that the costs of enforcing any costs order in California and British Columbia will exceed that sum.
12. That alone is a reason to refuse Mr Djamirze's application.

The timing of the application

1. The application is also brought late in the day.
2. The proceedings were commenced in February 2018.
3. The security ordered by consent on 11 July 2018 was expressed to be for the costs of Mr Djamirze up to and including the close of evidence in chief and including a mediation.
4. A mediation took place on 14 November 2018.
5. The mediation was unsuccessful and on 30 November 2018 the matter was set down for hearing for 10 days in July 2019. On 12 December 2018 the hearing date was changed to 12 August 2019.
6. The application for further security was made on 12 April 2019, and very shortly after service by the plaintiffs on Mr Djamirze of their proposed Amended Commercial List Statement in which the allegations of fraudulent conduct by Mr Djamirze against the plaintiffs was first raised.
7. The explanation for the delay in bringing this application was given by Mr Djamirze's solicitor, Mr Michael Heffernan, in his affidavit of 6 June 2019, as follows: "The bringing of the application [for further security] was delayed initially because the plaintiffs, through their solicitors, had indicated from around October 2018 that they intended to amend their Commercial List Statement. It was not known whether the intended amendment would expand the case against the defendant, and if so to what extent, indeed whether it would involve the abandonment of any claims against him. As such, the provision of the form of Amended Commercial List Statement was critical to any meaningful assessment of the likely future costs to the defendant in defending the claims against him."
8. I do not find this a convincing reason for this application only being brought on 12 April 2019.
9. From the time the mediation failed on 14 November 2018, it must have been obvious to Mr Djamirze that this case would have to proceed to a hearing.
10. The matter had been allocated a 10 day hearing date since 30 November 2018.
11. Whether or not, as has happened, the plaintiffs' chose to expand the ambit of their claims, Mr Djamirze has known since 30 November 2018 that a 10 day hearing lay ahead and must have been in a position to know, whether or not the plaintiffs amended their claim, the likely costs that would be incurred.
12. I find this factor weighing against the provision of further security.

Prospects of success

1. The plaintiffs contend that their prospects of success in the proceedings are substantial.
2. Uniform Civil Procedure Rules 2005 (NSW) r 42.21(1A)(a) provides that a matter to which the Court may have regard in considering a security for costs application is "the prospects of success or merits of the proceedings".
3. The Court of Appeal has recently emphasised that when looking at the merits of the proceedings it may be necessary to go further than concluding that the proceedings are not frivolous and that there are real issues to be tried.
4. Thus, in Live Board Holdings Ltd v Cody Live Pty Ltd [2017] NSWCA 302 at [98], Bathurst CJ, Leeming JA, Barrett AJA said "That constrained approach does not reflect the broad discretion conferred by the rules. UCPR r 42.21(1A)(a) entitles the court in terms to have regard to 'the prospects of success or merits of the proceedings'. It is true that in many cases it will not be possible to form a meaningful view as to the strength or weakness of a plaintiff's claim for the purposes of an application for security for costs. Such applications are ordinarily brought before pleadings are closed and evidence filed. But that does not mean that, for example, there may never be a case in which a court can be satisfied that an impecunious corporate plaintiff has prima facie a very strong case, such as to inform the exercise of discretion on an application for security for costs. The starting point in the exercise of discretion is the legislation conferring the power, not some gloss upon it." (Emphasis in original.)
5. Mr Livingston, who appeared for the plaintiffs, submitted that there are two features of the plaintiffs' claims which point to a high likelihood that the plaintiffs will have some success against Mr Djamirze, sufficient to prevent any order for costs being made in Mr Djamirze's favour.
6. I shall deal with each in turn.

Misleading or deceptive conduct - the absence of risk in foreign exchange trading

1. Mr Djamirze sent Mr Large a number of WhatsApp messages which were to the effect that it was "easy" and "risk free" to engage in foreign exchange trading.
2. Thus, on 9 January 2016, prior to the plaintiffs advancing any money to Mr Djamirze, Mr Djamirze messaged Mr Large "$1 mill will give us $200k per month easy".
3. On 27 January 2016, again before any funds were advanced, Mr Djamirze messaged Mr Large: "With $1 mill, we can make $5 mill a year easy and safely No stress That's being very, very conservative trader".
4. On 4 February 2016 after Mr Large had advanced USD100,000, he messaged Mr Djamirze "[j]ust need to see one month first". Mr Djamirze replied: "[w]ith $2 mill, being very very conservative, we can stop working and just trade".
5. On 24 February 2016 Mr Djamirze messaged Mr Large "[w]ith $10 mill we will make $1 mill a month easy".
6. On 1 March 2016 Mr Djamirze messaged Mr Large: "We won't lose it Eventually we will pull out all the money we invest and just use house money So we are totally risk free The more money you have the safer it is also".
7. On 4 April 2016 Mr Large messaged Mr Djamirze "I'm taking a risk here if we lost that" to which Mr Djamirze replied: "I have risk management. Not risking all the money at any time. We risk parts of it. So we have a losing streak, we can stop and evaluate. I will try and win some and win some".
8. Mr Large asked: "Any chance we could lose $$ This I need to understand".
9. Mr Djamirze replied: "… Short answer, yes we can lose $ but it would be gradual, ie not all at once. If we had two or three more losing months, then somethings not working and we can evaluate it, keep going or stop. That's the risk."
10. No doubt, at the trial, these optimistic statements will be seen in a wider context which may well include: 1. what Mr Djamirze contends in his Commercial List Response to be the "casual nature [of communications] between brothers in law"; 2. Mr Djamirze's assertion that "he informed the first plaintiff that trading in foreign exchange was a hobby" and he was "an unlicensed amateur"; and 3. Mr Djamirze's contention that Mr Large should have known "that trading in foreign exchange was not without risk" and that Mr Large brought about the loss now complained of by insisting on closing out foreign currency exposures on short notice.
11. However, the unqualified nature of the statements made by Mr Djamirze suggests the plaintiffs have serious prospects of making out their case of misleading or deceptive conduct.

Misleading or deceptive conduct - the "fabricated" screenshots

1. Mr Livingston pointed to evidence suggesting that the plaintiffs have strong prospects of establishing that, on three occasions Mr Djamirze sent Mr Large what purported to be screenshots of Mr Large's "ledger balance" which were fabricated.
2. On 29 March 2016 Mr Large messaged Mr Djamirze: "Can you send me the chart that shows 290,000".
3. On the same day Mr Djamirze sent Mr Large what purports to be a screenshot of Mr Large's "Previous Ledger Balance" showing a balance of $293,016.61.
4. Mr Djamirze now admits in his Commercial List Response that the screenshot was not from Mr Large's trading account, but rather from the trading accounts of a Mr Bursch.
5. Mr Altan, who appeared for Mr Djamirze, accepted that this screenshot was of "the wrong account".
6. On 3 January 2017 Mr Djamirze sent Mr Large a screenshot that purported to show a balance of $809,594.
7. The plaintiffs' solicitor, Mr Jonathan Ellis, has conducted a search of the relevant documents and concluded that there are no "matching trades" to justify such a balance.
8. The plaintiffs' forensic accountant, Mr Alex Bell, has determined that, in fact, Mr Large's opening balance on 3 January 2017 was $658,338 and the closing balance of $260,740.
9. Finally, on 29 March 2017 Mr Djamirze sent Mr Large a screenshot which showed that Mr Large's balance was $1,043,384.38.
10. Again, Mr Ellis has done searches of the relevant documents which, he contends, show that the trades which occurred do not match this figure.
11. Mr Livingston submitted that the plaintiffs' case at trial will be that the most likely explanation, on the whole of the evidence, is that Mr Djamirze falsely created a "demonstration account" and operated that demonstration account so as to fabricate a record of trades that did not occur and sent a screenshot of that record to Mr Large.
12. Mr Djamirze has given no explanation for these matters and, in his Commercial List Response has simply "not admitted" them.
13. This was not a satisfactory response to these allegations. Practice Note SC Eq 3 at [11] requires a defendant to "admit or deny the allegations the plaintiff makes" and does not permit a "non-admission".

Misappropriation

1. Leaving aside monies lost in foreign exchange trading, Mr Livingston pointed to material suggesting the plaintiffs have good prospects of showing that Mr Djamirze has actually misappropriated some of the money advanced to him for trading purposes.

USD39,772

1. Mr Bell has identified that USD39,772 sent by the plaintiffs to Mr Djamirze which was not ever transferred from Mr Djamirze's USD Currency Account to the plaintiffs' Forex Trading Accounts.
2. Mr Djamirze gave no explanation for this transaction in an affidavit his swore on 23 October 2018.
3. In an affidavit sworn on 6 June 2019 Mr Heffernan foreshadowed that Mr Djamirze's explanation for this transaction will be that the USD39,772 was an amount to which Mr Djamirze was entitled by reason of an agreement with Mr Large concerning the division of profits from foreign exchange trading.
4. Mr Altan submitted that Mr Djamirze's case would be that Mr Djamirze agreed with Mr Large that profits would be distributed 40:40:20 between Mr Djamirze, Mr Large and an outside investor.
5. In that regard Mr Altan pointed to WhatsApp messages between Mr Djamirze and Mr Large on 9 January 2016 as follows: "[Mr Large]: Let's say first 20% goes to investor plus capital. When wants out. Then 50/50 split So if it was 100 and we made 100 My side gets 120 And 40 You get 40 [Mr Djamirze]: Sounds great!"
6. It is hard to see how this exchange could justify Mr Djamirze appropriating the USD39,772 on account of profits.
7. The WhatsApp exchange suggests that profit would only be distributed after the time when the investor "wants out".
8. That appears to be consistent with an email exchange between Mr Djamirze and Mr Large on 22 September 2015 in which it was agreed: "First 120% return and then 50/50 split".

USD23,652.90

1. Mr Livingston submitted that analysis of the trading statements establishes that from time to time Mr Djamirze transferred money out of the plaintiffs' Forex Trading Account into that of Mr Bursch. In his Commercial List Response, Mr Djamirze admits that these transfers were made.
2. There is no evidence in the WhatsApp exchanges between Mr Large and Mr Djamirze to which I have been taken to suggest that the Mr Large consented to these transfers.
3. Mr Djamirze has given no explanation for them.

USD116,050.60

1. The plaintiffs claim that USD116,050.60 was withdrawn from the plaintiffs' Forex Trading Accounts but not returned to the plaintiffs.
2. Mr Livingston submitted that the statements from those trading accounts, read with Mr Djamirze's bank statements, showed this money was deposited into Mr Djamirze's USD account and then transferred either to his personal AUD accounts or to unidentified sources.
3. Mr Bell's expert report suggested the figure is higher. Mr Bell opined: "Transfers totalling [USD]126,984 to [Mr Djamirze's] account occur 26 times and are matched based on the date and amount. The transfers are spread over the period March 2016 to July 2017 and occur almost every month, mostly twice in the month and for around $5000…the funds in this account appear to have been used for general living expenses…".
4. In his Commercial List Response, Mr Djamirze has once again and contrary to the Practice Note, "not admitted" these allegations.
5. These matters suggest that the plaintiffs have substantial prospects of showing that Mr Djamirze has misappropriated something in the order of USD180,000 in total.

Generally on prospects

1. Of course, it will be a matter for the trial judge to make a final determination about this, and all other matters concerning the plaintiffs' claim.
2. However the matters justify the submission advanced by Mr Livingston that the prospects of Mr Djamirze's obtaining a costs order in his favour are low and do not themselves justify an order for security.

Conclusion

1. For these reasons, I decline to order further security.
2. Mr Djamirze's Notice of Motion filed 12 April 2019 should be dismissed with costs.

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