Plaintiffs v Defendant

Plaintiffs v Defendant - [2009] VSC 533 - VSC 2009 case summary — Zoe

[52]

(a) that they would act in unison and together to procure restitution of the Properties;

(b) that each would take such action as he or she could on behalf of the siblings to procure the restitution of the Properties;

(c) that any interest in the Properties, or income from the Properties, or proceeds from the sale of the Properties, recovered or obtained by any one or more of the siblings would be held by the relevant sibling for the benefit of himself or herself and the others in equal shares, provided that, if any of the siblings were to die, that sibling's share was to be held for the benefit of his or her children;

(d) that any of the Properties which were recovered by any one or more of the siblings would be divided between the siblings in equal shares, provided that, if any of the siblings were to die prior to such division, that sibling's share was to go to his or her children;

(e) further or alternatively, that any interest in the Properties, or income from the Properties, or proceeds from the sale of the Properties, recovered or obtained by any one or more of the siblings would be divided between the siblings in equal shares, provided that, if any of the siblings were to die prior to such division, that sibling's share was to go to his or her children;

(f) further, or alternatively, that:

(i) the defendant and Peter would make claims for restitution in respect of the Properties on behalf of themselves and Helena, due to Helena's ill health;

(ii) the defendant would make claims for restitution in respect of the Czech Properties under the restitution laws on behalf of himself and Peter as well as Helena if Peter failed to obtain permanent residency in the Czech Republic prior to the expiry of the time limitations under the restitution laws;

(iii) Peter would make claims for restitution in respect of the Czech Properties under the restitution laws on behalf of himself and the defendant as well as Helena if the defendant failed to obtain permanent residency in the Czech Republic prior to the expiry of the time limitations under the restitution laws;

(g) that the costs of obtaining restitution of the Properties or any of them and other related expenditure would be borne equally by the siblings, provided that, if any of the siblings were to die, the obligation to meet that sibling's share of such costs or expenditure was to be borne by his or her estate.

[56]

(a) that the siblings would act in unison and together to procure restitution of the Properties;

(b) that each of the siblings would take such action as he or she could on behalf of the siblings to procure the restitution of the Properties;

(c) that any interest in the Properties, or income from the Properties, or proceeds from the sale of the Properties, recovered or obtained by any one or more of the siblings would be held by the relevant sibling for the benefit of himself or herself and the others in equal shares, provided that, if any of the siblings were to die, that sibling's share was to be held for the benefit of his or her children;

(d) that any of the Properties which were recovered by any one or more of the siblings would be divided between the siblings in equal shares, provided that, if any of the siblings were to die prior to such division, that sibling's share was to go to his or her children;

(e) further or alternatively, that any interest in the Properties, or income from the Properties, or proceeds from the sale of the Properties, recovered or obtained by any one or more of the siblings would be divided between the siblings in equal shares, provided that, if any of the siblings were to die prior to such division, that sibling's share was to go to his or her children;

(f) further, or alternatively, that:

(i) the defendant and Peter would make claims for restitution in respect of the Properties on behalf of themselves and Helena, due to Helena's ill health;

(ii) the defendant would make claims for restitution in respect of the Czech Properties under the restitution laws on behalf of himself and Peter as well as Helena if Peter failed to obtain permanent residency in the Czech Republic prior to the expiry of the time limitations under the restitution laws;

(iii) Peter would make claims for restitution in respect of the Czech Properties under the restitution laws on behalf of himself and the defendant as well as Helena if the defendant failed to obtain permanent residency in the Czech Republic prior to the expiry of the time limitations under the restitution laws;

(g) that the costs of obtaining restitution of the Properties or any of them and other related expenditure would be borne equally by the siblings, provided that, if any of the siblings were to die, the obligation to meet that sibling's share of such costs or expenditure was to be borne by his or her children;

(h) that any of the siblings who recovered any of the Properties would effect a transfer of the Properties or such interests in the Properties to the other or others as would be necessary to give effect to the foregoing terms of the Agreement.

[60]

(a) Peter travelled to Prague in about March or April 1991 in order to ascertain whether the first restitution law applied to any of the Czech Properties, and to progress generally the claims of the siblings in relation to restitution of the Properties, for which purpose he, inter alia:

(i) engaged a solicitor, Dr Buresova, to pursue on behalf of the siblings restitution of the Czech Properties situated in Prague under the restitution laws, and paid her a retainer of KC3000;

(ii) engaged another solicitor, Dr Elbrs, to pursue on behalf of the siblings restitution of the Czech Properties situated in Repy under the restitution laws, and paid him a retainer of KC5000;

(b) at some time after March or April 1991, Peter made an application for permanent residency in the Czech Republic;

(c) the siblings met on Peter's return from Prague in about May 1991, at which meeting Peter reported to the siblings the things he had done while in the Czech Republic, as set out in sub-paragraph (a), and the siblings decided that the defendant would travel to the Czech Republic next in order to further the siblings' claims for restitution in relation to the Czech Properties;

(d) on about 10 July 1991, Peter paid to the defendant A$5,000 in order to help meet the expenses of pursuing the siblings' claims for restitution in relation to the Properties;

(e) the defendant travelled to Prague in July 1991 and was joined there in September 1991 by Peter;

(f) in about September 1991, the defendant and Peter established a joint bank account at the Zivnotencka Bank in Prague, to which they were both signatories and into which they each deposited US$500, for use in pursuing the siblings' claims for restitution in relation to the Czech Properties;

(g) in about September 1991, the defendant and Peter established a bank account at the Ceska Sporitelna Savings Bank in Prague in the name of the defendant, to which they were both signatories and into which they each deposited KC200 for use in pursuing the siblings' claims for restitution in relation to the Czech Properties;

(h) in about September 1991, while Peter was in Prague, he assisted the defendant in preparing applications for restitution in respect of the Czech Properties on behalf of the siblings, it having been agreed between Peter and the defendant (pursuant to the Agreement, on behalf of themselves and Helena) that such applications would be made in the name of the defendant only, since he was the only one of the siblings who had, at that stage, obtained permanent residency of the Czech Republic;

(i) on about 28 January 1992, Peter paid to the defendant A$5,000 in order to help meet the expenses of pursuing the siblings' claims for restitution in relation to the Properties;

(j) on some date after April 1991, the defendant instructed the solicitor Buresova to pursue a formal application in the name of, and on behalf of, all three of the siblings for restitution of the German Properties (the "German application");

(k) [f]rom February 1994 until his death, Peter paid all solicitors' fees and like charges relating to the German application;

(l) pursuant to the German application:

(i) on about 27 June 1995, the German land titles register was amended to record that the property at Kiefernstrasse 19, Dresden, was owned by Peter, Helena and the defendant;

(ii) on about 3 May 1996, the restitution office at Dresden decreed that the property at Kiefernstrasse 19b, Dresden, was to be returned to the beneficiaries of the estates of Anna and Alois, namely, the siblings.

(m) Peter and Helena have, since restitution of the German Properties, paid their share of all land taxes and other charges, including Ablosebetrag, with respect to the German Properties.

[66]

(a) the Agreement;

(b) his fiduciary duty to the other siblings, and, following the death of Peter, to Helena and to Alexandra, Martin and Rowena, as children of Peter;

(c) trust,

the defendant:

(i) did not act honestly and fairly towards the plaintiffs or in their interests;

(ii) acted for his benefit alone, to the detriment of the plaintiffs;

(iii) acted capriciously and unreasonably towards the plaintiffs;

(iv) maintained, and continues to maintain, that he is the sole beneficial owner of the Properties and that none of the plaintiffs has any interest therein;

(v) failed and refused to divide the Properties recovered by him under the restitution laws between the siblings in equal shares, and, following the death of Peter, to divide the Properties so recovered by him between himself (as to a one third share), Helena (as to a one third share) and Alexandra, Martin and Rowena (as to a one ninth share each);

(vi) further or alternatively, failed and refused to divide any interest in the Properties, or income from the Properties, or proceeds from the sale of the Properties, recovered or obtained by him between the siblings in equal shares, and, following the death of Peter, to divide any such interest, income or proceeds between himself (as to a one third share), Helena (as to a one third share) and Alexandra, Martin and Rowena (as to a one ninth share each);

(vii) further, or alternatively, [failed and refused] to make claims under the restitution laws on behalf of himself and Helena, on account of her ill health, and Peter, on account of the fact that he did not obtain permanent residency in the Czech Republic prior to 30 September 1991;

(viii) failed and refused, upon recovering the Properties (or any of them) or any interest in the Properties (or any of them), to effect a transfer of the relevant Properties or interests such that the Properties or interests would be shared equally by the siblings and, following the death of Peter, shared between the defendant (as to a one third share), Helena (as to a one third share) and Alexandra, Martin and Rowena (as to a one ninth share each);

(ix) failed and refused to account to Helena and Peter and, following the death of Peter, the plaintiffs, for:

(A) their respective shares of any net income from the Properties;

(B) their respective shares of the net proceeds of any sale of the Properties or any interest in them;

(x) failed and refused to pay over to Helena and Peter and, following the death of Peter, to the plaintiffs:

(A) their respective shares of any net income from the Properties;

(B) their respective shares of the net proceeds of any sale of the Properties of any interest in them;

(xi) failed and refused to keep ... Helena and Peter and, following the death of Peter, the plaintiffs, informed of details relating to the Properties or interests in the Properties of which he had obtained restitution, and when such restitution was obtained;

(xii) otherwise failed and refused to act in a manner consistent with his obligations under the Agreement, and as a fiduciary and trustee.

Particulars

...

(3) On 8 November 1992, Helena sent a letter by certified mail to the defendant seeking the following information in relation to recovery of the Properties:

(a) the Properties already recovered from the Czech and German governments as well as those which the defendant was still endeavouring to obtain, and the details of any expenses to be offset against each of those Properties;

(b) the name and addresses of banks at which the defendant had accounts pertaining to the Properties, and the balances in these accounts;

(c) the whereabouts (and return of) the declarations and bequests signed by Helena, and referred to in paragraph 18 above;

(d) the approximate expenses incurred by the defendant during his visits to Prague for the purposes of recovering the Czech Properties under the restitution laws;

(e) financial remuneration which the defendant considered appropriate for his efforts in relation to recovering the Properties.

(4) By letter dated 14 November 1992, in reply to Helena's letter of 8 November 1992, the defendant:

(a) denied that he was a trustee of the Properties for the siblings;

(b) alleged that he was pursuing restitution of the Properties in his own right, on behalf and for the benefit of himself and his immediate family, and not on behalf and for the benefit of the siblings or, following their death, their children;

(c) refused to provide the information sought in Helena's letter dated 8 November 1992.

...

[90]

To give effect to paragraph 1, the defendant will sign all necessary documents and give all necessary documents and attend at any place as required by law in respect of the signing of such documents.
If by reason of applicable law, or some other cause, paragraph 1, or any part thereof, cannot be given effect to within 12 months of the date of these terms in respect of a particular property or properties the defendant shall at the direction of the plaintiffs and at their cost, take all reasonable steps to sell such property or properties at best market value and shall pay the net proceeds of such sale, after the deduction of all expenses, to the plaintiffs or at their direction.
The plaintiffs to be responsible for and pay in the first instance all transfer costs, expenses, taxes, duties, levies and charges in any way payable in respect of the transfer or sale of the properties.
The defendant to pay to the solicitor for the plaintiffs the sum of $150,000 in part payment of the plaintiffs' costs on or before 23 June 2001.
In the event that the Defendant breaches any term, condition or warranty in this agreement, then the Plaintiffs shall be entitled to enter judgment for an order that the defendant pay equitable compensation for breach of fiduciary duty in respect of each of the Properties and interests in the Properties (as defined in the amended statement of claim) recovered or obtained by him, together with the costs of entering such judgment, and the production of these terms of settlement shall be conclusive evidence of the defendant's irrevocable consent to the entry of such judgment.
The parties shall forthwith consent to orders of the Court that the proceeding be struck out with no order as to costs, together with a right of reinstatement for the purpose of enforcing these terms.
The parties agree to release each other from all actions, suits, demands, liabilities and costs arising out of or in any way related to the subject matter of the proceeding.
The defendant warrants that:

[181]

Despite being a requirement of the court order (paragraph 9) the defendant and his representative have failed to provide us with a substantial amount of information. Of the five required main pieces of information, we have only been provided with copies of reports on title for the Czech and Slovak properties (we have not been provided with details of the Dresden property). We have also been provided with some information relating to income and expenditure, however the information is incomplete and the figures provided are not capable of any meaningful analysis.

This lack of information has had a significant negative impact on the quality and accuracy of our valuation report. The most significant information that has been omitted are the copies of current leases of the properties. The leases will contain details of passing rentals, and this information is critical in enabling us to ascertain the Estimated Rental Value (ERV) of the property, which in turn can then be capitalised to provide the final valuation figure. The 'Direct Capitalisation' method, as it is known, is an established and accurate method of valuation for freehold investment properties, but without accurate rental records we have been unable to utilise this method and have had to rely on the 'Sales Comparison' approach. Whilst this method is an established and reasonably accurate one, it does have its limitations, particularly and obviously when there is limited comparable evidence available.

We were belatedly provided with some photographic evidence relating to the Prague One properties (information received on the 16th of September). From this limited information we have been able to ascertain that all of the Prague One properties, when restituted, were in a poor state of repair. We have therefore based our valuations on this assumption.

...

In addition to the missing information, the defendant and his representative have been generally obstructive which has prevented us from compiling a detailed and accurate report. In particular, we have been prevented from gaining access to the majority of the properties. This has meant that we have had to undertake 'roadside' inspections only and subsequently have been unable to view the majority of the property, such as the rear external elevations and all of the interiors. As a result we have had to make numerous assumptions regarding the condition of the property, which again affects the quality and accuracy of the valuation.

The court order requires us to provide details of all capital and non capital expenses for each property/site and for each financial year of ownership. In order to do this would need to have accurate records for each property or site for each year of ownership. All we have been provided with are some tax returns, however some years are missing and the returns only provide a basic total income and expenditure figure, and there is no itemised information for each properties or sites. We have also been provided with some internal accounting information in the form [of] income and expenditure figures belonging to the Defendant. However, again the information is incomplete, with a number of years missing. Furthermore, much of the information relating to individual properties has been deleted with the use of a black marker pen making any analysis impossible.

To summarise, the Defendants unwillingness to provide us with the required information and allow us access to the properties, has required us to make numerous assumptions which has adversely affected the quality and accuracy of our valuation report. In particular we have been unable to provide any detailed information on the Defendants income and expenditure details on the properties/sites since they were restituted, which was a major requirement for our report. This is particularly pertinent as it is evident that the Defendant has invested a significant amount of capital on some of the properties over the years.[23]

[319]

[Melantrichova 11] The subject property is of considerable age and is a listed historical building. We are aware that in 1992, when the property was restituted, it was in an extremely poor state of repair and partially utilised as a shelter and partly for storage purposes. From 1993 the property was gradually refurbished with the assistance of a number of state grants. In approximately 1990 a service tunnel, which runs beneath the property and was being constructed by the State Government is said to have caused minor structural damage to the property. In addition some heavy machinery utilised by a tenant on the first floor caused additional minor structural damage. The property has continued to be upgraded up to the present day, so we have assumed that these structural issues have been resolved.

[Haštalská 12] The subject property is said to date back to the mid 19th century and was extensively refurbished in 1992 after many years of apparent neglect. Since then there has been an on going maintenance programme.

[Haštalská 15] The subject property is said to date back to the mid 19th century and was refurbished in 1985. In 1995 the façade was refurbished and in 2004 the roof was replaced along with further modernisation works.

[Rybná 29] The subject property is said to date back to the mid 18th century and has been in its present basic format since the 1860's. The building was fully reconstructed in 1984 and in 1995 the original workshops on the upper floors were converted to residential apartments. In 1999 the ground floor retail units were reconstructed and in 2004 the roof was replaced along with further modernisation works.

[Rámová 8] The subject property is said to date back to the 15th century and is a listed historical building. In 1843 the property was rebuilt into its present basic format. In the year 2000 the property was extensively refurbished and in 2002 the roof was replaced. Since then there have been a series of on going property improvements.

[386]

If [a sum payable for a breach of an agreement] is not a genuine pre-estimate of damage it is unenforceable as being a penalty - meaning a penalty imposed merely to induce or compel compliance with the obligation which has not been fulfilled and intended therefore to secure for the innocent party a benefit or advantage which is altogether collateral to the purpose of the main agreement (because ex hypothesi it goes beyond mere compensation for the breach). In this instance the sum of $8.4m was not agreed as a genuine pre-estimate of damage should the defendant fail to comply with cl 2 in one respect or another; but neither was it a penalty imposed to induce or compel compliance by the defendant with cl 2, and thus to secure some collateral benefit or advantage to the plaintiff. The sum of $8.4m was the sum due and allegedly owing under the Swiss judgment; neither more nor less.

That is the key to this appeal. Although the defendant was wont in argument to approach this case as if the deed was simply an agreement for the payment by the defendant to the plaintiff of $1m, that is not what it was; it was a bargain about the enforcement of the Swiss judgment. The sum of $8.4m for which judgment in Victoria was to be obtained by consent under cl 3 was the sum for which judgment had already been recovered in Switzerland, the judgment which the plaintiff was seeking to enforce in this proceeding as successor to the Swiss Bank in the Swiss proceeding. That sum was quantified before the terms of settlement were entered into; the dispute was only over the plaintiff's right to enforce the Swiss judgment in Victoria, a right asserted in the statement of claim in this proceeding and denied by the defendant in his defence. By the terms of settlement the defendant secured to himself one last opportunity to pay a much lesser sum in full and final satisfaction of what the plaintiff was claiming in Victoria in reliance upon the Swiss judgment. For the opportunity to pay that lesser sum the defendant bargained away any defence he had to enforcement of the judgment in Victoria, consenting to judgment here if he made default in payment of the lesser sum modo et forma. That makes this case quite different from those in which the Courts have refused to lend assistance to the enforcement of a penalty. It is more akin to those cases described by Gibbs CJ in O'Dea where the sum payable upon default is already due and owing and the chance to pay a lesser sum or on terms is being afforded as a privilege or indulgence ...

In my opinion, when read fairly these terms of settlement did contain, by implication, an acknowledgment by the defendant of his liability for the $8.4m should there be default, and thus an acknowledgment of liability which, though conditional, was effective when the terms of settlement were agreed. Immediately before the terms of settlement there was a dispute about the enforceability of the Swiss judgment and so about the amount owing by the defendant under it; but, as I see it that dispute was finally resolved by the terms themselves and the deed. From that point onwards, the defendant was acknowledging his liability in respect of the Swiss judgment subject only to this: that if he paid a lesser sum according to cl 2 he could have a release from the larger sum. In those circumstances, ... the provision in cl 3 for consent to judgment is not a penalty.[136]

[390]

The appellant sought to equate his position when he entered into the deed made on 17 December 1998 with that of a person free from any obligation to the respondent, so that the consent to judgment in the sum equivalent to A$8.4m could be characterised as a punishment imposed for breach of the promise to pay $1m by instalments on specified dates. By maintaining his denial of any liability in respect of the judgment entered in the Swiss court, so the appellant said, he remained free from any obligation until he agreed to suffer judgment upon default. In my view the picture so painted was misleading. The substance of the transaction was that a claim based on a foreign judgment was compromised by the appellant agreeing to judgment for the amount of the claim, but obtaining an opportunity to satisfy the claim by paying [a] lesser sum by instalments.

It was conceded by the appellant that if the deed had taken the form of an acknowledgment of the obligation to pay the amount of the Swiss judgment followed by a promise to pay a lesser sum and thereby satisfy the first obligation, no question of penalty would have arisen. In my view that was the effect of the deed when looked at as a whole. The substance of the matter was not affected by the manner of its drafting. A penalty did not arise because, instead of an acknowledgment of debt in the amount of the claim followed by a provision enabling that obligation to be satisfied by payment of a lesser sum in a specified manner, the deed provided for payment of a lesser sum than the claim followed by an agreement to suffer judgment for the amount of the claim if the lesser sum was not paid.

The obligation to pay $8.4m was not one which sprang from the deed unheralded. Its genesis lay in the past dealings between the appellant and the respondent's predecessor. In my opinion the case is to be equated with those in which a creditor agrees to accept payment of part of his debt in full discharge if certain conditions are met but stipulates that if the conditions are not met, he will be entitled to recover the original debt. At one end of the spectrum covered by those cases is an undisputed judgment debt. Further towards the middle of the range is a sum ascertained in a suit in Chancery before a final decree has been made. At the other end of the spectrum, but still within it in my view, is the present case where the debt is the subject matter of a claim which is disputed but is not suggested to be a colourable device.[138]

[460]

The defence contends that even if breach of the terms is established, clause 6 of the terms is so uncertain as to its meaning or effect as to be void for [un]certainty.

I do not accept this submission. There is in my view no uncertainty that the breach which I have found with respect to the transfer documentation relating to the Dresden property falls within the trigger description of "breaches any term, condition or warranty of this agreement". Further, it is apparent that such breach was not a trivial breach but a substantial and continuing one.

It seems to me that the terms of clause 6 are plain save for the phrase "for breach of fiduciary duty in respect of each of the Properties and Interests in the Properties (as defined in the amended statement of claim) recovered or otherwise obtained by him."

This phrase is in turn to be understood by reference to the amended statement of claim served on 19 May 2000. This statement of claim advanced claims based in part upon alleged breaches of fiduciary duty and sought inter alia equitable compensation.

Clause 6 is to be understood as requiring the payment of equitable compensation for the breaches of fiduciary duty alleged in the amended statement of claim in respect of each of the properties and interests in the properties referred to in that statement of claim and recovered or obtained by the defendant.

...

The final ascertainment of the relevant property recovered or obtained by the defendant as envisaged by clause 6 of the terms can and should be undertaken upon the trial of the further issues in the matter. The plaintiffs' claim is based upon lists of property prepared by the defendant and given to his brother Peter in or about 1990. The further and better particulars delivered on behalf of the defendant make clear that he does not contend that the descriptions of property in issue cannot be given any meaning. Rather, he contends that they are susceptible of alternative meanings. The question of what precise meaning should be adopted, should be left to the further hearing of the matter. The dispute may prove to be confined upon further particularisations of the claim for equitable compensation.

Likewise, the matters properly to be taken into account in the assessment of equitable compensation for breach of fiduciary duty are also in my view matters to be ascertained upon the further hearing of the matter and cannot without further investigation be regarded as inherently incapable of proper ascertainment.

In summary, the clause will require application to the facts of the matter and its consequences will require ascertainment. It is not itself in terms, however, which prevent either sensible application to the facts or the ascertainment of its consequences. It has not been demonstrated to be void for uncertainty.

The true principle is that it is "only if the court is unable to put any definite meaning on the contract that it can be said to be uncertain".

The defendant has not been able to demonstrate that this is such a case, but I will reserve to him the right to reagitate the question of uncertainty (if he so desires) upon the completion of the hearing of the further evidence in the matter.[158]

[474]

My participation in the amicable settlement was forced as the Plaintiffs threatened they would apply for the seizure of my wife's family house in Australia. At that time, my wife was staying in the house taking care of her sick mother and I was exposed to heavy psychological pressure from the Plaintiffs. I consider my signature on the Terms of Settlement invalid, for it was attached to the document under obviously disadvantageous conditions. At that time, I was in very bad mental and physical shape. ...

...

... I am confident that the settlement is also invalid because it was not inserted into any resolution of the [Supreme Court of Victoria]. Since the settlement fails to provide any enforcement title in Australia, it can not be compliant with the concept of Czech law. In the Czech Republic, I would never agree to an out-of-court settlement with respect to rights which have been statute barred (even if they existed).

... I admit I signed the Terms of Settlement on 23 February 2001. I consider the Terms of Settlement invalid as they were forced upon me. I signed them under distress and under obviously disadvantageous conditions.

During the day-long negotiation, at the end of which I was compelled to sign the terms of settlement, I had neither a Czech legal counsel nor the possibility to access one.

I wanted the purposeless proceedings to be terminated knowing that under international laws an Australian court may not decide on real estate in the Czech Republic. For the same reason, the Australian judge was not willing to make such a decision and did not mention the "so-called settlement" in the official minutes. Despite ... that, as a demonstration of my good faith, I paid the Plaintiffs all of their expenses in the amount of AUD 150,000.

What is more, under Article 6, if I breach the conditions of the settlement, the Plaintiffs cannot but seek compensation from an Australian court, not the transfer of the property.

Such compensation cannot exceed the value of the real estate in my possession (as specified in section 1) under the Terms of Settlement minus expenses. Requiring two thirds of all of the real estate would be invalid under the laws of Victoria. The options on page 10 of the complaint[160] have been fabricated and contradict the original text of the Terms of Settlement dated 23 February 2001.

[484]

First, the Victorian proceedings were validly instituted and had substantially progressed prior to the institution of the Czech proceedings. Since reinstatement following the initial settlement a substantial hearing has been conducted resulting in the determination of issues of liability. On the face of it that determination entitled the plaintiffs to judgement for equitable compensation in this Court unless for reasons I have left open, the terms of settlement can be avoided. If one or other proceeding is to be regarded as vexatious it appears to me that it is not the Victorian proceeding.

Secondly, I am not satisfied that the institution of the Czech proceedings is to be regarded as prima facie constituting an abuse of process, because of the doubt that I have identified with respect to potential differences in the remedies available.

Thirdly, I am satisfied the Czech proceedings were not issued vexatiously in the strict sense of proceedings issued with the intention of harming or annoying the defendant.

Fourthly, if the undertakings proposed are given, the Czech proceedings will not unfairly interfere with or have a tendency to interfere with the Victorian proceedings.

It appears that the consent of both participants is required to suspend the Czech court proceedings. Nevertheless, the evidence of the plaintiffs' Czech attorney is that until the City Court of Prague as a court of appeal decides on the defendant's appeal against the preliminary injunctions which have been granted, the District Court of Prague 1 will not proceed with the case. Further, if the undertakings proposed by the plaintiffs are given then the matter will not proceed further in respect of the preliminary injunction unless the defendant desires it to and with the leave of this Court.

Fifthly, insofar as the Czech proceedings have resulted in interlocutory orders, those orders can be balanced by the requiring of undertakings which this Court would have required if it had restrained the defendant from disposing of his assets prior to the completion of the Victorian litigation.

Sixthly, if the Czech proceeding is prosecuted after the completion of this proceeding, it should not be assumed that the Czech court will fail to have proper regard to the outcome of this proceeding.

Seventh, having regard to the above matters the defendant has not discharged the burden upon him to demonstrate the proceedings in the Czech Republic evidence an abuse of the process of this Court.[164]

[490]

In his second further amended defence, the [defendant] alleges that the initiation and prosecution of the ... Czech proceeding is conduct of the [plaintiffs] which is contrary to the terms of settlement and which:

(1) constituted an irrevocable election by the [plaintiffs] to pursue the rights asserted by them in the ... Czech proceeding, and in their defence of the appeal against the interlocutory order in that proceeding, to the exclusion of any rights which the [plaintiffs] may have to seek relief in the equitable jurisdiction of this Court pursuant to clause 6 of the terms of settlement;

(2) thereby disentitled the [plaintiffs] from seeking equitable compensation in this Court in relation to any of the properties which are the subject of the ... Czech proceeding; and

(3) further or alternatively, constituted a repudiation of the terms of settlement by them, such repudiation being accepted by the [defendant] in June 2008 following the discharge of the interlocutory order by the Czech court.

For present purposes, it is unnecessary to determine whether there is any merit in the allegation that the institution and prosecution of the ... Czech proceeding may have disentitled the [plaintiffs] to enforce clause 6 of the terms of settlement, at least in relation to the properties which are the subject of [the] ... Czech proceeding. This is because it remains open and arguable that the whole of clause 6 may be void or unenforceable on grounds of uncertainty or penalty. So much was recognised by the trial judge. The issue is whether the institution and prosecution of the ... Czech proceeding arguably constituted a repudiation by the [plaintiffs] of the terms of settlement as a whole, thus disentitling the [plaintiffs] to seek damages for breach of clause 1. For the following reasons, I am of the opinion that this allegation of repudiation is manifestly hopeless and cannot succeed. Accordingly, the position remains that, even if clause 6 of the terms of settlement is void or unenforceable, the decision of the trial judge on the preliminary issues means that the [plaintiffs] have established an entitlement to an order for damages for breach of the terms of settlement of some real substance.

The [defendant]'s repudiation case is based upon the allegation that the commencement and maintenance by the [plaintiffs] of the ... Czech proceeding is 'contrary' to the mutual releases contained in clause 8 of the terms of settlement, and that the only rights which the [plaintiffs] have is to enforce the terms of settlement in this Court by claiming equitable compensation under clause 6, or damages for breach of clause 1 if clause 6 is unenforceable for any reason.

As the trial judge noted when considering other issues of repudiation raised by the [defendant] in the course of the trial of the preliminary issues, in order to determine whether a party has repudiated a contract it is necessary to ascertain whether the conduct relied upon as constituting the repudiation conveys, objectively, an inability to perform the contract or a renunciation of it. This approach by the trial judge was correct. ...

...

In this case, the evidence discloses that the ... Czech proceeding was commenced in the following circumstances. First, the [plaintiffs]' attempts to enforce the terms of settlement in this Court were being vigorously defended by the [defendant]. The defences included an allegation that the [plaintiffs] had repudiated the terms of settlement, that the repudiation had been accepted and that the [defendant] was thereby discharged from any obligations imposed upon him by the terms of settlement. Second, the trial judge had reserved his decision on the preliminary issues, including the repudiation defence, and was yet to deliver his decision. Third, the [plaintiffs] had received legal advice that if their application to enforce the terms of settlement failed, and they wished to enforce their legal rights against the [defendant] in the Czech Republic, some of their legal rights would become unenforceable after February 2008 by reason of the operation of statutory time limitations in the Czech Republic. Fourth, the [plaintiffs] had objectively reasonable concerns that the [defendant] may act to dispose of or encumber the properties which are the subject of the ... Czech proceeding. These concerns arose in circumstances where they were unaware of any other property owned by the [defendant] in the Czech Republic and the [defendant] had transferred his interest in valuable real estate in Victoria to his wife, for no consideration, shortly after the original proceeding against him was commenced by the [plaintiffs]. Accordingly, the ... Czech proceeding includes a claim for interlocutory relief restraining the [defendant] from dealing with the subject properties.

Further, in determining whether the Court should find or infer that the commencement and maintenance of the Czech proceedings constituted a repudiation of the terms of settlement, it is necessary to consider the conduct of the [plaintiffs] when objection was taken by the [defendant] to the continued prosecution of both the application in this Court and the ... Czech proceeding. In this regard, the evidence discloses that the [plaintiffs] immediately offered undertakings to the [defendant], to the effect that they would not prosecute the ... Czech proceedings pending the final resolution of proceedings in this Court. The [defendant] refused to accept the undertakings and maintained the position that the [plaintiffs] were obliged to elect between proceeding in this Court or in the Czech Republic. When the [plaintiffs] refused to so elect, the [defendant] applied to stay or dismiss the proceeding in this Court as an abuse of process. As appears above, the trial judge rejected this application. Based upon revised undertakings, the trial judge held that the continued maintenance of the proceedings in both this Court and the Czech Republic was not vexatious or an abuse of process. The [defendant] did not seek leave to appeal against this decision.

In the circumstances established by the objective facts, the allegation that the [plaintiffs] repudiated the terms of settlement by commencing the ... Czech proceeding, and maintaining that proceeding in the circumstances of the undertakings which have been given, has no prospect of success. The Court could not, on any view of the objective facts, form the view that the [plaintiffs] have renounced the terms of settlement or have refused to perform their obligations thereunder. The continued maintenance of the ... Czech proceeding, subject to the undertakings accepted and imposed by the trial judge, stands merely to protect the [plaintiffs] in case their application to enforce the terms of settlement in this Court fails for any reason, including on appeal. On the question of any appeal, which unfortunately appears likely rather than possible given the intense antipathy between the parties, the [defendant] will have a right of appeal on all issues once all issues in the proceeding have been determined. This will include the right, if so advised, to appeal against the trial judge's decision in his determination of the preliminary issues that the [plaintiffs] did not repudiate the terms of settlement by the alleged repudiatory conduct which was then in issue. Accordingly, until all rights of appeal are exhausted, the [plaintiffs] remain at risk that they may fail altogether in their application to enforce the terms of settlement, because it is possible that an appeal Court will determine that the terms of settlement were validly terminated following acceptance of a repudiation by the [plaintiffs]. If that situation was to occur, the [plaintiffs] will be entitled to choose the forum in which they litigate their residual claims arising otherwise than under the terms of settlement.[166]

At a glance

Court

Decision date

Before

Source

Judgment (624 paragraphs)

Parties

Legislation Cited (1)

Cases Cited (2)