Plaintiff v Respondents

3 The point that has now arisen is whether those affidavits comply with the orders of Mandie J. In particular, it is said by the Deputy Commissioner of Taxation ("DCT") that the directors of AES Services (Aust) Pty Ltd ("AES"), George Haritos and Alex Kyritsis, specify, on oath, the ultimate source of the funds used to purchase a number of the properties now held by third parties, being persons or companies associated with the two directors.

4 I have concluded that to permit the DCT to obtain such orders would not only exceed the scope of the original orders made by Mandie J, but also result in an interrogation of the two directors, inconsistent with the purpose of ancillary orders. However, the affidavits provided by the respondents, Effie Haritos and Betty Kyritsis, are inadequate in detail and further affidavits should be provided within the next 14 days.

5 In addition to the freezing orders, Mandie J made the following orders relating to disclosure by George Haritos and Alex Kyritsis:

9. Subject to paragraph 10 you must -

(a) within seven working days after being served with this order, swear and serve on the applicant an affidavit identifying to the best of your ability all your assets worldwide, giving their value, location and details (including any mortgages, charges or other encumbrances to which they are subject) and the extent of your interest in the assets.

6 Separate orders ("the third party orders") were made in relation to a number of individuals associated with George Haritos, Alex Kyritsis and companies controlled by Mr Haritos and Mr Kyritsis and their respective spouses.

7 The relevant paragraphs of the third party orders read as follows:

1. 16. Subject to paragraph 17, the following respondents must within seven (7) working days after being served with this order, swear and serve on the applicant an affidavit setting out all relevant facts, circumstances and matters relating to the transfer to, and or acquisition by, them of their interest/s in the properties identified below, including but not limited to the source of the funds used by them to acquire their interest in such properties:

(a) the fourth respondent, Effie Haritos - 51 Lansell Road, Toorak;

(b) the fifth respondent, Betty Kyritsis - 4 Grattan Street, Prahran;

(c) the sixth respondent, Stella Melas (formerly known as Stella Haritos) - 3 Yarradale Road and 5 Grattan Street, Prahran;

(d) the seventh respondent, Steven Kyritsis - 17 High Road, Prahran;

(e) the eighth respondent, Anastasios Haritos - 5 Grattan Street, Prahran;

(f) the ninth respondent, Grattan Heights Pty Ltd - 6 and 7 Grattan Street, Prahran;

(g) the tenth respondent, Kyritsis Nominees Pty Ltd - 91 Hawthorn Road, Caulfield North and 153 and 151 Toorak Road, South Yarra;

(h) the eleventh respondent, Diamond Sun Pty Ltd - 153 and 151 Toorak Road, South Yarra.

1. (a) This paragraph 17 applies if you are not a corporation and you wish to object compliance with paragraph 16 may tend to incriminate you or make you liable to a civil penalty.

(b) This paragraph 17 also applies if you are a corporation and all persons who are able to comply with paragraph 16 on your behalf and with whom you have been able to communicate, wish to object that compliance may tend to incriminate them respectively or make them respectively liable to a civil penalty.

(c) You must at or before the further hearing on the return date (or within such further time as the Court may allow) notify the applicant in writing that you or all the persons referred to in sub-paragraph (b) wish to take such objection and identify the extent of the objection.

(d) If you give such notice, you need comply with paragraph 16 only to the extent, if any, that it is possible without disclosure of the material in respect of which the objection is taken.

(e) If you give such notice and the applicant wishes, the Court may give directions as to the filing and service of affidavits setting out such matters as you or the persons referred to in sub-paragraph (b) wish to place before the Court in support of the objection.[2] (Emphasis added.)

The affidavits provided pursuant to the orders of the Court

8 In his affidavit of 25 September 2009, Alex Kyritsis deposed as to his assets and liabilities. In a subsequent affidavit sworn on 9 October 2009, he deposed as to matters relevant to the Toorak Road and Hawthorn Road properties on the basis that he was the director of Kyritsis Nominees. A further affidavit filed shortly prior to the hearing corrected this assertion. His wife, Betty Kyritsis, is in fact the sole director.

9 In an affidavit sworn 25 September 2009, George Haritos deposed as to his assets and liabilities. Subsequently, on 9 October 2009, he swore an affidavit in his capacity as a director of Grattan Heights Pty Ltd and Diamond Sun Pty Ltd. In an affidavit filed shortly prior to this hearing, he corrected his affidavit of 9 October 2009, stating that his wife, Effie Haritos, was the sole director of Diamond Sun Pty Ltd.

10 Each of the individual respondents to the third party orders, Betty Kyritsis, Effie Haritos, Stella Melas, Steven Kyritsis and Anastasios Haritos have filed affidavits purportedly in compliance with the third party orders.

11 In a summons filed on 29 October 2009, the DCT sought orders that George Haritos swear a further affidavit relating to the properties at Lansell Road, Toorak Road, High Road and Yarradale Road. It also sought orders that Alex Kyritsis swear a further affidavit relating to the properties at Hawthorn Road, Toorak Road and High Road.

12 The summons also seeks orders that Effie Haritos swear a further affidavit in relation to the properties at Lansell Road and Toorak Road, and Betty Kyritsis swear a further affidavit in relation to the properties at Hawthorn Road, Toorak Road and High Road.

13 I pause here to note that in terms of compliance with the orders of Mandie J, George Haritos and Alex Kyritsis were only required to specify their assets, by reference to their value, location, identification and extent of their interest.[3] No other order has been made by the Court requiring either of them to swear an affidavit identifying the source of funds utilised to purchase properties now owned by the third parties.[4]

14 The DCT argues that the affidavits provided do not comply with the orders of Mandie J. Its primary contention is that George Haritos and Alex Kyritsis should now provide further affidavits relating to properties owned by a number of the third parties. It is said that Mandie J's requirement for identification of the source of the funds is not met by merely referring to a bank or bank account. Consequently, Messrs Haritos and Kyritsis and their spouses, Effie Haritos and Betty Kyritsis, should be obliged to depose as to the ultimate source of the funds. The DCT also contends that there are specific omissions in the affidavits filed by Effie Haritos and Betty Kyritsis.

15 Counsel for the respondents contends that for the purpose of the ancillary order, the third party respondents only need identify the immediate source, either by reference to a particular bank or bank account from which the funds emanated. It is said, on behalf of George Haritos and Alex Kyritsis, that the orders of Mandie J have been complied with and the making of the orders sought by DCT is, effectively for an ulterior purpose, namely, a form of interrogation or specific discovery. In any event, the respondents say that much of the information is available to the DCT by reason of the material the DCT obtained by warrant or subpoena.

16 It is now well settled that a Court has the power to make ancillary disclosure orders in conjunction with the imposition of freezing orders.[5]

17 The Court has the power to make orders that will achieve the objective of the freezing order. In Hospital Products Ltd v Ballabil Holdings Pty Ltd, Rogers J said:

...Mareva injunctions are granted to preclude the disposal of assets designed to render a defendant judgment proof. An affidavit of discovery of assets may be ordered in every case where the information in such affidavit will further the court's purpose in defeating such a stratagem... The object must remain throughout to prevent disposal of assets in furtherance of the illegitimate aim of making oneself judgment proof and of stultifying the order of the court. Whatever needs to be done to achieve that objective, the court has power to order as part of its inherent jurisdiction.[6] (Emphasis added.)

18 In Bax Global(Australia) Pty Ltd v Evans,[7] Austin J said:

Since the source of the jurisdiction to make Mareva orders is the Court's inherent power to prevent abuse of its processes and stultification of the administration of justice by the removal of assets from the plaintiff's reach, the Court must also have the power to order disclosure of the nature and location of particular assets or assets of a class so that the Mareva relief is effective and not oppressive. As Robert Goff J pointed out in A v C (at 351), if the plaintiff does not know the number and location of (say) the defendant's bank accounts, a Mareva order in respect of bank accounts generally could be oppressive both to the defendant and to the bankers who are required to act in accordance with it, especially where there is more than one account or several defendants. Without information about the nature and location of the defendant's assets, the plaintiff may be unable to make the risk assessment which is necessary in order to give the undertaking as to damages, or if the undertaking is given, it may lead to an unexpected exposure. Robert Goff J concluded, as do I, that considerations such as these point to the conclusion that in the special cases where the court decides to make Mareva orders, it may make such disclosure orders as are necessary to ensure that the Mareva jurisdiction is properly and effectively exercised.

19 It follows that any disclosure order should be made for the purpose of rendering the freezing order effective. In Turner v Universal Home Loans,[8] for example, Austin J found that it was inappropriate for the plaintiffs to seek an affidavit of assets and income, when it was plain that the purpose of requiring the affidavit would be related to the allegation of breach of the asset preservation orders, rather than to make the asset preservation orders effective.[9] His Honour concluded that such disclosure would go "outside the jurisdictional basis for ancillary disclosure orders".[10]

20 In Universal Music Australia Pty Ltd v Sharman License Holdings Ltd,[11] Moore J said:

Ancillary orders can be made to make the Mareva order more efficacious. One such order involves directing the party bound by the Mareva order to file an affidavit disclosing assets on which the Mareva order operates: see generally the judgment of Conti J in Kuan Han Pty Ltd v Oceanview Group Holdings Pty Ltd [2003] FCA 1063 at [45] and following. The reasons why such an affidavit can render the Mareva order more efficacious are helpfully described by Peter Biscoe QC in Mareva and Anton Pillar Orders: Freezing and Search Orders, LexisNexis Butterworths, Sydney, 2005, at [3.3]:

There are several reasons why an assets disclosure order is important to the efficacy the other freezing order. First, disclosure of the assets upon which the freezing order operates makes it more difficult for a respondent surreptitiously to disobey the freezing order. Secondly, disclosure identifies third parties such as banks who have custody of the assets and enables notice of the order to be given to them so as to bind them to the order, for third parties will be guilty of contempt of court if they knowingly assist a respondent to breach the order. Thirdly, disclosure may enable the freezing order to be framed by reference to specific assets rather than as a maximum some [sic] order, thereby minimising oppression to the respondent, and unnecessary exposure of the applicant to risk under its undertaking as to damages. Fourthly, disclosure assists an applicant to make a rational decision whether to continue its undertaking as to damages.[12]

21 Courts have been careful to ensure that disclosure does not exceed what is necessary to make the freezing order effective. In Iraqi Ministry of Defence v Arcepey Shipping Co SA, [13] for example, Goff J said that the Mareva jurisdiction should not "improve the position of claimants". Rather, it should prevent the injustice of a defendant removing his assets from the jurisdiction which may have otherwise been available to satisfy a judgment. In Australia and New Zealand Banking Group Ltd v Bank of Melbourne Ltd, [14] Ashley J said:

It is no doubt very important that the intention of a Mareva injunction be not frustrated by a concealment or an inadequate disclosure of assets. As against that, a defendant is not to be treated as a "debtor in advance"; and the court should not sanction what appears to be a fishing expedition.

22 In keeping with these principles, in Macquarie Bank v Riley Street Nominees,[15] Campbell J ordered that the contents of an asset disclosure affidavit should not be disclosed except to the applicant's legal advisers His Honour's intent being to ensure that information went no further than was needed for the purpose of the freezing order.[16]

23 There are cases in which an ancillary order may be utilised, for example where there is a prima facie case of deprivation of property, to trace funds "with a view to recovering them".[17] Indeed, in this case, when making my initial orders, I concluded:[18]

Here, there is a strong prima facie case that ATO has been deprived of many millions of dollars by the conduct of AES and the directors. It is appropriate that orders be made in relation to both the directors and, as subsequently considered, the third parties, so that AES's funds can be traced and, if it becomes necessary, recovered.

24 It is with these statements of principle in mind that I turn to the primary dispute between the DCT and the respondents, namely, the disclosure by George Haritos and Alex Kyritsis of the source of the funds used to purchase the properties held in the names of the third parties.

25 A number of the respondents' affidavits deposed (either directly or indirectly) the identity of the banks or bank accounts from which funds used for the purchase of the particular properties were obtained. As I have said, the DCT argues this does not constitute compliance with the orders, as the source must be the ultimate source of the funds - which in this case may be AES funds or, for that matter, funds of particular individuals. The DCT submits that if the true source can be shown to be funds other than those of AES, then the freezing order and the consequential undertaking in relation to that property can be lifted.

26 The DCT, not surprisingly, relied upon a taxation case to support its contention that "source" should be given a broad interpretation. In Nathan v Federal Commissioner of Taxation,[19] a provision of the Income Tax Assessment Act 1915-1916 entitled the levying of an income tax "derived directly or indirectly by every taxpayer from sources within Australia". The High Court held that the word "source" did not refer to a legal concept but something which a "practical man" would regard as a real source of income.

27 The use of the word "source" in the context of an order requiring a party to provide an ancillary affidavit in conjunction with a freezing order is considerably different to its use in the application of the Income Tax Assessment Act. The provision of an ancillary affidavit is solely facilitative of the freezing order and therefore is limited in its purpose. Where the Court invokes a compulsory process, it must, I think, exercise caution as to the extent to which it requires persons to divulge essentially private information. This is particularly so considering the affidavit is provided to ensure there is compliance with the freezing orders in identifying the assets of the prospective defendants, and permitting persons affected by those orders (be they plaintiff, respondent or third party) to have a clear understanding of their responsibilities and the consequences of the orders. It is true that on occasions the Court will permit an ancillary order to have greater scope, but those cases are few and far between.

28 I made the observation set out in [23] in the context of permitting the DCT to obtain sufficient information to enable it to identify the immediate source of the funds. I did not intend to convey that there could be an open-ended inquiry forcing the third parties to provide information as to the ultimate source of the funds. That is not the purpose of the ancillary orders as the authorities I have referred to demonstrate. Rather, the tracing element, I think, comes into play in the context of establishing with some precision the immediate source of the funds. That should then enable the DCT to determine what, if any, further steps it wishes to take in respect of the subject properties or other assets identified by that exercise.

29 Applying these principles, I think there is no basis upon which to order further affidavits from either George Haritos or Alex Kyritsis in relation to properties which are the subject of the freezing orders against the third parties. To adopt this course, as urged by the DCT, would involve two errors. Firstly, the task of the Court is to ensure compliance with the orders of Mandie J, as modified, and no more. These orders do not define the source in the expansive fashion suggested by the DCT. Rather, "source" in the context of these orders is to be regarded as the immediate source of the funds. As I have said, this is consistent with the purpose of the ancillary orders. Secondly, such orders would constitute interrogation or specific discovery and not be truly facilitative of the freezing orders against the third parties.

30 I am also not persuaded that Effie Haritos or Betty Kyritsis are required to provide any further information in respect of the particular properties identified in the summons, other than identifying with precision the immediate source of the funds used to acquire those properties. Indeed, to make orders requiring them to depose as to the ultimate source of the funds would, in all likelihood, require statements of opinion or guesswork, founded upon hearsay.

Adequacy of the affidavits filed by the respondents Effie Haritos and Betty Kyritsis

31 The DCT also seeks further affidavits from Effie Haritos and Betty Kyritsis in relation to the properties at Lansell Road, High Road, Hawthorn Road and Toorak Road. Whilst I have rejected the contention that each should be required to identify the ultimate source of the funds, in my view there are real deficiencies in the affidavit material provided by each of the deponents.

32 The property was purchased for $3,850,000 on 6 September 2008. Effie Haritos is the registered proprietor. She has deposed -[20]

(a) the deposit of $385,000 was paid by way of a cheque drawn upon George Haritos, Commonwealth Bank Streamline Account;

(b) two bank cheques from the Commonwealth Bank were obtained for the sums of $1,762,760.26 and $5,405.65. These bank cheques were obtained by her husband;

(c) a loan was obtained from the ANZ Bank in the amount of $1,700,000;

(d) the balance was withdrawn from her daughter's, Krystina's, bank account with the ANZ, being funds which had been deposited into Christina's account by George Haritos.

33 I am of the opinion that the detail provided in the affidavit of Effie Haritos is inadequate. It does not provide any particulars as to the loan (either by way of identifying the borrowers or by providing an account number). It does not identify the account or accounts from which the Bank cheques were drawn. It does not identify with any precision the bank account from which Krystina's contribution was made. Neither the branch nor the account number are identified. It is, in my view, deficient in those respects. In Ausbro Forex Pty Ltd v Mare (1986) 4 NSWLR 419, 425, Young J said:

Whatever the exact form of an order it is incumbent upon a defendant when such an order for discovery is made requiring him to specify bank accounts over which he has control to specify

(a) the name of the bank with which the account is held,

(b) the name of the branch,

(c) the number of the account,

(d) the name or names of the persons in whose name the account is and

(e) the balance of the account as at the date of the service of the order for discovery.

In future there will be no excuse for any affidavit of discovery which is defective in any of these matters.

34 Whilst this observation was made in the context of discovery, I see no reason not to apply it, at least in respect of matters (a) to (d), in the provision of affidavits made as a consequence of ancillary orders. By doing so, the Court can be satisfied that there is disclosure by adequate and specific identification of the source of the funds used to purchase the properties consistent with the purpose of the original orders of Mandie J. It may also provide the DCT with sufficient certainty to determine whether to continue with its undertaking as to damages. Finally, although it is not the case here, it assists in clarifying any obligation a bank or financial institution may have as a result of the freezing order.

35 I propose to order that a further affidavit be sworn by Effie Haritos to remedy these deficiencies.

36 I should add that I do not accept the submission made on behalf of the respondent that the DCT is in possession of material that provides information as to these matters. In my view, that is irrelevant. My task is to ensure that there has been compliance with the orders made by the Court, not to determine the level of knowledge of the DCT.

37 Finally, I do not accept that Effie Haritos should depose as to the source of deposits made between November 2008 to June 2009. These payments are said to have been made in reduction of the loan arranged through the ANZ. Mandie J's orders are limited to the transfer and acquisition of the properties, not repayments of loan amounts.

High Road - provision of funds by Kyritsis Nominees

38 This property was purchased on 13 September 2008 and is owned by Steven Kyritsis, one of Alex Kyritsis' sons. In an affidavit of 9 October 2009, he deposed to the following matters -

(a) the deposit of $117,000 was paid from a cheque account of Kyritsis Nominees Pty Ltd on the day of the sale;

(b) payment of the settlement price was pursuant to bank cheques from the Commonwealth Bank in the amounts of $600,000, $451,649.60, $2012.50 and $650.28. The $600,000 emanated from George Haritos' Commonwealth Bank account and the remainder is said to have been provided by his parents from their own funds.

39 The property is registered in the name of Steven Kyritsis and the order of Mandie J related solely to the provision of information concerning the acquisition of that property by Steven Kyritsis. For the reasons I have set out, the obligation imposed by the orders of Mandie J was for Steven Kyritsis, as the registered proprietor, to identify the source of the funds. Accordingly, it is not necessary for Kyritsis Nominees to provide any further information. Such a requirement is not within the scope of the original orders.

Hawthorn Road - Betty Kyritsis as sole director of Kyritsis Nominees Pty Ltd

40 This property was purchased by Kyritsis Nominees Pty Ltd of which the sole director is Betty Kyritsis. On 28 October 2009, she swore an affidavit in which she purported to adopt what had been said by her husband, Alex Kyritsis, in his affidavit of 9 October 2009. In that affidavit, he deposed as follows:

I do not have any records in my possession that relate to the purchase of the property. To the best of my information and belief I believe that the deposit was paid by way of a cheque drawn on the account of Kyritsis Nominees Pty Ltd. At settlement a loan of $400,000 was obtained from Laiki Bank and the balance of funds to settle the purchase was drawn from the cheque account of Kyritsis Nominees Pty Ltd.

41 In my view, it is not adequate for Betty Kyritsis to simply endorse a vague assertion by her husband as to the bank accounts which form the source of the funds used by Kyritsis Nominees to purchase the Hawthorn Road property. Indeed, it may well be said to be a dereliction of her responsibilities as the sole director of Kyritsis Nominees.

42 Mrs Kyritsis is required to make appropriate inquiries and searches of the company's records so that the sources of the funds used to acquire the property can be properly identified, in accordance with the principles I have set out. In her capacity as the sole director of Kyritsis Nominees, she will be required to swear a further affidavit in relation to the source of the funds for the acquisition of the property at Hawthorn Road.

Toorak Road - Effie Haritos as sole director of Diamond Sun Pty Ltd and Betty Kyritsis as sole director of Kyritsis Nominees Pty Ltd

43 These properties were purchased on 9 June 2006 for the sum of $3,920,000. The registered proprietors are Kyritsis Nominees Pty Ltd and Diamond Sun Pty Ltd. The sole director of Kyritsis Nominees Pty Ltd is, as has been noted, Betty Kyritsis. The sole director of Diamond Sun Pty Ltd is Effie Haritos.

44 Both Effie Haritos and Betty Kyritsis have, in their affidavits, purported to adopt the affidavit of Alex Kyritsis in which he deposes as to the circumstances surrounding the acquisition of the Toorak Road properties as follows:

(a) the deposit of $392,000 was paid by a cheque drawn on his personal account with the Laiki Bank;

(b) the sum of $2,200,000 was obtained from Challenger Managed Investments Ltd by a loan to Kyritsis Nominees Pty Ltd and Diamond Sun Pty Ltd;

(c) the balance of approximately $1,561,477 was paid by way of a bank cheque drawn on his account at the Laiki Bank and a bank cheque provided by George Haritos in the sum of $461,477 obtained from a joint loan facility operated by Haritos with the Westpac Bank.

45 In my view, the affidavits of Effie Haritos and Betty Kyritsis are inadequate in the following respects:

(a) As I mentioned previously, in an application such as this, it is inappropriate for a director of a company to simply adopt what is said in another affidavit. The obligation in terms of the order, was for the company (presumably by a proper officer) to provide the information , not for the information to be deposed to by a person who, at least on the face of the company's records, has no relationship to it. In those circumstances, each of the directors should swear as to her own knowledge and belief as to the requisite matters.

(b) In any event, the affidavit of Alex Kyritsis is deficient in that it fails to identify particular accounts from which the funds were drawn at the Laiki Bank and Westpac. No details of the Challenger loan are provided.

46 Accepting that Effie Haritos and Betty Kyritsis are the responsible officers of Diamond Sun and Kyritsis Nominees respectively, each should swear a further affidavit consistent with the matters I have identified.

47 Compliance with the orders of Mandie J requires the deponents of the relevant affidavits to set out the relevant facts and circumstances relating to the transfer and acquisition of the particular properties. That exercise requires the proper identification of the institutions and the accounts from which the moneys used to purchase the properties was procured. As I have endeavoured to set out, the affidavits of Effie Haritos and Betty Kyritsis are defective in terms of the detail and further affidavits must be sworn.

48 However, there is no obligation, either by the terms of the orders of Mandie J or to give efficacy to his Honour's order, for George Haritos or Alex Kyritsis to swear any further affidavit.

49 I propose to make orders requiring Effie Haritos and Betty Kyritsis to file further affidavits consistent with these reasons.

[1] Deputy Commissioner of Taxation v AES Services (Aust) Pty Ltd [2009] VSC 418.

[2] Paragraph 16 and 17 Orders "Attachment B".

[4] In their capacity as directors of a company (the only relevant entity being Grattan Heights Pty Ltd), they may, of course, be required to comply with the ancillary orders.

[5] See, eg, A v C (1980) 2 All ER 347, Hospital Products Limited v Ballabil Holdings Pty Ltd (1984) 2 NSWLR 662, 669.

[6] (1984) 2 NSWLR 662, 669.

[7] (1999) NSWSC 815 [23].

[8] [2004] NSWSC 200.

[11] [2005] FCA 1587.

[13] [1981] QB 65.

[14] Unreported, Victorian Supreme Court, 26 June 2005.

[15] [2005] NSWSC 162.

[17] Royal Australian College of Physicians Ltd v Yadam [2006] NSWSC 1463.

[18] [2009] VSC 418 [47].

[19] [1918] HCA 45; (1918) 25 CLR 183.