Polis v Zombor

Introduction 1 Since 26 February 2018, the prospective applicant, Mr Henry Polis, has been doggedly seeking preliminary discovery from the first prospective respondent, Mr Luke Zombor. Mr Polis believes that he may have a cause of action against Mr Zombor. The origins of the cause of action relate to a loan made in 2007, although the more proximate source of Mr Polis' legal complaint relates to Mr Zombor's bankruptcy in 2013. The amount in issue is not large in comparison to the likely legal costs being expended by Mr Polis in his pursuit of Mr Zombor. 2 The history of Mr Polis' efforts to obtain preliminary discovery from Mr Zombor is set out in a series of interlocutory decisions of the Court: Polis v Zombor [2019] FCA 69; Polis v Zombor (No 2) [2019] FCA 856; and Polis v Zombor (No 3) [2019] FCA 1477. Relevant aspects of that history are outlined below. 3 Mr Zombor has not taken any steps in the proceeding. The evidence indicates that Mr Zombor has been residing outside of Australia for the last 3 or 4 years, although he returns to Australia from time to time. While the Court has ordered that substituted service be effected by leaving documents with Mr Zombor's parents who reside at Carrum Downs in Victoria, Mr Zombor's parents have given evidence that they have not passed on the served documents to Mr Zombor largely because Mr Zombor has made it clear to them that he does not want to receive the documents. 4 The present application represents a further step by Mr Polis in seeking to achieve his goal of obtaining preliminary discovery from Mr Zombor. Mr Polis seeks a warrant for the arrest of Mr Zombor so that he can be brought before the Court to answer a charge of contempt. The order is sought pursuant to rule 42.14 of the Federal Court Rules 2011 (Cth) (Rules). 5 While I have doubts about the overall utility of these proceedings, the evidence establishes that Mr Zombor is aware of these proceedings and has actively sought to avoid the processes of the Court. In those circumstances, and for the reasons given below, I consider that a warrant should be issued for Mr Zombor's arrest.

Background 6 Mr Polis considers that he may have causes of action based in deceit, misleading or deceptive conduct and/or unconscionable conduct against the prospective respondents, including Mr Zombor, but he requires further information to assist him in deciding whether to commence such a proceeding. The potential causes of action arise out of the following events, as set out by Murphy J in Polis v Zombor [2019] FCA 69: (a) In about November 2007, Mr Polis says that he provided a $70,000 loan to Mr Zombor and his son, Mr Benjamin Polis, to assist them in starting a new business. The loan was interest-free, repayable at call and Mr Zombor and Benjamin Polis were jointly and severally liable to repay the loan. Mr Polis transferred $70,000 to a bank account set up in the name of Polis Australia Pty Ltd (now deregistered) (at [6(a)]. (b) In February 2009, Mr Zombor and Benjamin Polis incorporated Energy Watch Pty Ltd (Energy Watch), and the new business was operated through that entity (at [6(b)]). (c) In about June 2012, Energy Watch went into liquidation. Mr Polis did not lodge a proof of debt as the loan agreement was with Mr Zombor and Benjamin Polis personally (at [6(e)]). (d) On or about 12 April 2013, Mr Zombor executed a personal insolvency agreement under Part X of the Bankruptcy Act 1966 (Cth) (at [6(f)]). (e) The Report by Controlling Trustee prepared by the controlling trustee under the personal insolvency agreement provided that Mr Zombor had creditors of $9,694,182, and assets of only $13,000 (at [6(h)]). (f) Under the personal insolvency agreement, Mr Zombor agreed to pay a total of $95,000 in 2 instalments. The first, being $10,000, was to be paid on or before 31 May 2013, while the second, being $85,000, was to be paid on or before 1 December 2013. The personal insolvency agreement was accepted by creditors (excluding Mr Polis) and complied with by Mr Zombor (at [6(i)]). (g) Mr Polis believes that creditors who voted in favour of the personal insolvency agreement may have been misled by Mr Zombor as to his true financial capacity. That belief arises from the following matters: (i) Mr Polis believes that, at some time in around April 2012, the assets of Energy Watch were sold by Mr Zombor to General Brokerage Services Pty Ltd (GBS), that Mr Zombor was contracted to that business and was promised 20% of the proceeds of the sale of that business (at [7(b)]). (ii) Mr Zombor agreed to pay Benjamin Polis one half of the amount Mr Zombor would receive on the sale of GBS (at [7(d)]). (iii) On 30 May 2014, it was announced that iSelect Ltd had agreed to purchase GBS for $10 million (at [7(e)]). (iv) Mr Polis believes that Mr Zombor received an amount of $1.93 million from the sale of GBS, indirectly (at [7(f)]). 7 Through these proceedings, Mr Polis has sought preliminary discovery from Mr Zombor to assist him in deciding whether to commence a proceeding. To date, Mr Polis' efforts have been in vain. Mr Polis has been unable to locate Mr Zombor, who has taken no step in the proceeding. I summarised the history of Mr Polis' application for preliminary discovery in Polis v Zombor (No 3) [2019] FCA 1477 at [3] - [6]: 3. By originating process filed on 27 February 2018, Mr Polis sought orders for preliminary discovery from Mr Zombor under r 7.23 of the Federal Court Rules 2011 (Cth). 4. Mr Polis was unable to locate Mr Zombor and applied for orders for substituted service of the originating process on Mr Zombor. On 26 April 2018, Murphy J made those orders pursuant to r 10.24. One of the methods of substituted service was leaving the documents marked to the attention of Mr Zombor with a person who is apparently over the age of 16 and residing at the address 19 Zebrafinch Court, Carrum Downs in Victoria. The evidence showed that Mr Zombor's parents resided at that address. 5. On 5 February 2019, Murphy J made the orders for preliminary discovery from Mr Zombor that had been sought by Mr Polis. His Honour also ordered that the orders for discovery be served on Mr Zombor by methods that included service at the Carrum Downs address. The orders contained an endorsement pursuant to r 41.06 informing Mr Zombor, as the first prospective respondent, that he will be liable to imprisonment, sequestration of property or punishment for contempt if he neglects or refuses to do what was required by the order. The background to, and reasons for, those orders are set out in the judgment of Murphy J in Polis v Zombor [2019] FCA 69. 6. The evidence before me establishes that the orders for discovery made on 5 February 2019 were served by Mr Polis on Mr Zombor by the methods of substituted service specified in the orders, including by service at the Carrum Downs address. The evidence also establishes that Mr Zombor has not complied with the orders for discovery.

The contempt and arrest applications 8 On 22 May 2019, Mr Polis filed an interlocutory application and statement of charge seeking, as the primary relief, a declaration that Mr Zombor is guilty of contempt by failing to comply with orders 2(a) to (c) (inclusive) of the orders of Justice Murphy made on 5 February 2019 and an order that Mr Zombor be fined in respect of the contempt, pursuant to rule 42.11 of the Rules. By the same application, Mr Polis also sought, as a supplementary form of relief, a warrant for Mr Zombor's arrest and detention in custody until he is brought before the Court to answer the charge of contempt, pursuant to rule 42.14. 9 Those applications were heard before me on 5 September 2019. Mr Zombor did not appear. Mr Polis had served subpoenas on Mr Zombor's parents to attend the hearing and give evidence. Prior to the hearing, Mr Zombor's mother, Mrs Janet Zombor, filed an affidavit and the subpoena was not called upon due to illness. Mr Zombor's father, Mr Bela Zombor, attended in response to the subpoena and gave evidence. 10 After Mr Bela Zombor gave evidence, counsel for Mr Polis applied for an order under rule 14.11 for the preservation of property, being the data and information on the mobile phones of Mr Zombor's parents recording their communications with Mr Zombor and his phone number. The application was sought for the purpose of preserving that data and information pending the filing of a further application under rule 14.01, on notice to Mr Zombor's parents, to inspect their mobile phones and to make a copy of the data and information preserved. I made that order on 5 September 2019. 11 Ultimately, Mr Polis did not press the application for contempt and that application was adjourned to be heard at a later date. Mr Polis pressed the application for a warrant for the arrest of Mr Zombor under rule 42.14. At the conclusion of that hearing on 5 September 2019, I reserved my decision on whether to issue a warrant for Mr Zombor's arrest. I also reserved my decision on an application made on behalf of Mr Zombor's parents for costs incurred in connection with the subpoenas issued to them. 12 My factual findings from the hearing on 5 September 2019 were set out in Polis v Zombor (No 3) [2019] FCA 1477 at [7] - [13] (which I published in connection with the making of the preservation orders under rule 14.11): 7. By an interlocutory application filed 22 May 2019 pursuant to r 42.11, Mr Polis seeks a declaration that Mr Zombor is guilty of contempt for failing to comply with the orders for preliminary discovery made on 5 February 2019 and that a fine be imposed for the contempt. Mr Polis also seeks an order that a warrant be issued for Mr Zombor's arrest and detention in custody until he is brought before the Court. The interlocutory application was accompanied by a statement of charge. As a first step, Mr Polis sought orders for substituted service of the interlocutory application, statement of charge and supporting affidavits on Mr Zombor at his parents' Carrum Downs address. That application stated that it would be heard at 9.30am on 5 June 2019. 8. By an affidavit of attempted service and an affidavit of service both sworn 3 June 2019, Clarrie Swan, a process server, deposed that on 27 May 2019 he attended the Carrum Downs address to attempt to effect service of the interlocutory application, statement of charge and supporting affidavits on Mr Zombor. Mr Swan spoke to a woman whom he identified as Luke Zombor's mother, Janet Zombor. Mrs Zombor advised that her son had not resided at the Carrum Downs address for the past twenty years. Mr Swan was unable to obtain a forwarding address or contact number for Mr Zombor. Mr Swan gave the documents to Mrs Zombor in a sealed envelope addressed to Luke Michael Zombor and asked that the documents be passed on to Mr Zombor as a matter of urgency. 9. Mr Zombor did not appear at the interlocutory hearing before me on 5 June 2019. I heard the application by Mr Polis for substituted service ex parte and made orders for the substituted service of that application: Polis v Zombor (No 2) [2019] FCA 856. 10. By an affidavit of service sworn 18 June 2019, Mr Swan deposed that on 11 June 2019 he again attended the Carrum Downs address to effect service of the documents previously sought to be served on Luke Zombor on 27 May 2019 as well as a copy of the orders for substituted service I made on 5 June 2019. When Mr Swan attended the Carrum Downs address, he spoke to a male person whom he identified as Bela Zombor and who confirmed that he resided at that address. Mr Swan attempted to hand an envelope containing the documents sought to be served to Mr Bela Zombor and said "I'm serving you with these documents for Luke Michael Zombor as per an order from Justice O'Bryan. Would you please hand them on to him." Mr Swan explained the contents of the documents and when Mr Bela Zombor refused to accept service of the documents, Mr Swan left them at his feet. 11. To date, Mr Zombor has not taken any steps in the proceeding and the prospective applicant does not know his whereabouts. 12. Mr Polis subsequently served subpoenas on each of Mr Zombor's parents to give evidence at Court on 5 September 2019. Ultimately, the subpoena to Mrs Janet Zombor was not called upon due to her illness. However, Mrs Zombor filed an affidavit affirmed 3 September 2019 in which she gave evidence that, although she had received A4 envelopes marked to the attention of her son from a process server who had visited the Carrum Downs address on several occasions, Mrs Zombor had not seen her son since the delivery of those envelopes and so had been unable to pass the documents on to her son. Mrs Zombor also gave evidence that she usually communicates with her son using the mobile phone application "WhatsApp" and that she last communicated with her son on 4 July 2019. 13. At the hearing on 5 September 2019, Mr Bela Zombor attended Court to give evidence in compliance with the subpoena served on him. Mr Bela Zombor's evidence was relevantly as follows: (a) After the process server attended the Carrum Downs address in May 2018, Mr Bela Zombor found three calling cards from Mario Appleton which had been left in his letterbox. The calling cards were addressed to Luke Zombor and stated "Please contact me re an urgent matter" and included a mobile phone number. When Mr Bela Zombor later asked his son about the calling cards, his son told him to throw them out and did not want to discuss the matter. (b) Whenever Mr Bela Zombor had raised matters relating to his son's previous businesses, his son would get upset, refuse to discuss those matters and would not make contact again with his father for a while. (c) As a consequence of the foregoing, Mr Bela Zombor did not forward any of the documents served at the Carrum Downs address to his son. (d) When Mr Bela Zombor was asked how he communicated with his son, he said that they communicated using the "WhatsApp" application on his mobile phone and that he had last communicated with his son via WhatsApp on Father's Day on 1 September 2019. When asked if he knew his son's mobile number, Mr Bela Zombor said that he could not recall. When asked if he still had the same mobile phone he had used on that date, Mr Bela Zombor replied that he did. When asked whether he had that mobile phone in his possession, Mr Bela Zombor replied that he did not and that it was currently in his barrister's chambers. Mr Bela Zombor confirmed that the mobile phone number that he used to contact his son on WhatsApp is stored on his mobile phone. (e) When Mr Bela Zombor was asked where his son currently lived, he said he did not know. He said that his son moved around a lot. Mr Bela Zombor said that he did not know whether his son currently lived in Australia and that the last time his son had told him where he was moving, which he estimated was three to four months ago, he had told him that he was moving to Vietnam. However, Mr Bela Zombor explained that when his son called him on 1 September 2019 via WhatsApp, he was in Sydney at the time. 13 I also concluded (at [15]) that the evidence before the Court supported a finding that Mr Zombor has actively avoided being served with the Court's processes and his parents have assisted him by not forwarding to him documents that have been served at their residential address. 14 Subsequent to the hearing, the Court was informed that Mr Polis and Mr Zombor's parents had reached a compromise by which: (a) Mr Zombor's parents had agreed to provide to Mr Polis the data and information on their mobile phones recording their communications with Mr Zombor and his phone number; and (b) Mr Polis agreed to pay the costs of Mr Zombor's parents of the 5 September hearing, fixed at $2,200 (including GST), and accordingly it was not necessary for the Court to determine the question of costs. 15 Other information was communicated to the Court by Mr Polis' solicitors by way of correspondence, but as the information was not received as evidence by the Court, it has not been considered on the application for the issue of a warrant. 16 The question for determination is whether the Court should issue a warrant for Mr Zombor's arrest and detention in custody until he is brought before the Court, pursuant to rule 42.14 of the Rules. 17 Rule 42.14 provides as follows: Arrest (1) If an application for punishment of a contempt has been filed, or a proceeding has been started for punishment of a contempt, a party making the charge may apply to the Court for: (a) an order that the person charged give security for the person's appearance to answer the charge; or (b) a warrant for the person's arrest and detention in custody until the person is brought before the Court. (2) The party making the charge under subrule (1) must satisfy the Court that the person charged is likely to abscond or otherwise withdraw from the jurisdiction of the Court. (3) If the person charged does not comply with an order to give security, the Court may issue a warrant, in accordance with Form 90, for the arrest of the person and for the person's detention in custody until the person is brought before the Court to answer the charge. 18 Rule 42.14 requires that the following conditions must be satisfied to enliven the Court's discretion to issue a warrant: (a) an application for punishment of a contempt must have been filed; and (b) the Court must be satisfied that it is likely that Mr Zombor will abscond or otherwise withdraw from the jurisdiction of the Court. 19 The first condition is satisfied, as an application for punishment of a contempt has been filed by Mr Polis. It is not necessary for the party making the application or charge to prove a prima facie case; nor is the strength or weakness of the case a relevant consideration: Mensink v Parbery [2018] FCAFC 101; 358 ALR 209 (Mensink) at [84] per Wigney J, citing Schnabel v Lui (2002) 56 NSWLR 119; [2002] NSWSC 1184 (Schnabel) at [14] per Hamilton J. 20 As to the second condition, "abscond" generally implies fleeing the jurisdiction in order to avoid the punishment which might follow from a proved contempt and "withdraw" implies leaving the jurisdiction for reasons other than avoiding legal process or the likely results of it: Mensink at [93] per Wigney J and at [185] per Bromwich J, referring to Registrar, Court of Appeal v Ritter (1985) 34 NSWLR 641 at 644 and Schnabel at [10], [17]. In Schnabel, Hamilton J considered that the word likely (in the equivalent NSW Supreme Court rule) should be construed as requiring the fact to be established on the balance of probabilities (at [16]). 21 A key question that arises is whether Mr Zombor can be said to be "likely to abscond or otherwise withdraw from the jurisdiction of the Court" in circumstances where he is already absent the jurisdiction, and was possibly absent the jurisdiction when these proceedings were commenced. In Mensink, Wigney J observed (at [94]): While at first blush the terms of r 42.14(2) would appear to be mainly directed at the question whether the person charged will abscond or withdraw from the jurisdiction at some time in the near future, it should nonetheless be construed beneficially so as to permit the issue of a warrant in circumstances where the person has already left the jurisdiction and has evinced an intention not to return in the near future. It could be said, in those circumstances, that the person charged is "likely to … withdraw from the jurisdiction", in the sense that the person is likely to continue to stay away and remain out of the jurisdiction." The word "withdraw", more so than "abscond", implies or connotes an ongoing state of affairs, such that a person who has already left the jurisdiction may be said to be likely to "withdraw" if they evince an ongoing intention not to return to the jurisdiction either indefinitely or for some considerable length of time. There is no sound reason why a warrant under r 42.14(2) should not be issued in such circumstances. 22 Similarly, Bromwich J observed that it would make a nonsense of rule 42.14(2) if it could not be shown that someone was likely to withdraw from the jurisdiction because he had already done so (at [189]). 23 The evidence establishes, on the balance of probabilities, that Mr Zombor left the jurisdiction 3 or 4 years ago before this proceeding was commenced. While Mr Zombor has returned to Australia from time to time in the intervening period, most recently he was in Sydney on 1 September 2019 when he called his parents on Father's Day, the most recent contact between Mr Zombor and his parents indicates that he moved to Vietnam to reside earlier this year. The evidence also establishes that, despite knowing of these proceedings, he has consciously and actively avoided service of process. The evidence establishes the following: (a) A mobile number previously known to be Mr Zombor's (0419 119 737), which was still in service on 16 March 2018, has been disconnected since the commencement of this proceeding. (b) The Facebook page of "Luke Zee", being the Facebook page of Mr Zombor, was shut down after he was sent, over that platform, the originating application in this proceeding and supporting documents. (c) A process server left calling cards addressed to Mr Zombor at the home of his parents in May 2018 asking Mr Zombor to contact the process server. When Mr Bela Zombor later asked his son about the calling cards, his son told him to throw them out and did not want to discuss the matter. (d) Whenever Mr Bela Zombor raised matters relating to his son's previous businesses, his son would get upset, refuse to discuss those matters and would not make contact again with his father for a while. (e) As a consequence of Mr Zombor's reactions referred to in paragraphs (c) and (d), his parents have not attempted to forward to him the documents that have been served at their home. 24 Having regard to the totality of the evidence, I infer that Mr Zombor is likely to continue to stay away and remain out of the jurisdiction either indefinitely or for some considerable length of time. I am therefore satisfied of the requirement in rule 42.14(2). 25 As the power to issue a warrant is enlivened, it falls to consider whether the power should be exercised in this case. For the following reasons, I consider that a warrant should be issued. 26 The starting point is the recognition that a failure to obey court orders, in this case orders for preliminary discovery, undermines the integrity of judicial proceedings. Recently, in Kazal v Thunder Studios Inc (California) (2017) 256 FCR 90, the Full Court of this Court, after referring to the statement of principle by Hayne J in Re Colina; Ex parte Torney (1999) 200 CLR 386 at [12] that the "cardinal feature of the power to punish for contempt" was as an exercise of judicial power to "protect the due administration of justice", observed (at [97]): Viewed in that way, contempt proceedings are essentially protective in nature as to the judicial function and the role of the courts, even if they also serve to vindicate private interests and rights. Contempt proceedings are therefore to be viewed as essential in facilitating courts being able to function properly. That includes being, and being seen to be, effectual in adjudicating upon and resolving disputes, and in particular making orders that will ordinarily be obeyed. This means that individual contempt cases have an importance transcending the instant case by supporting and enhancing the integrity of judicial proceedings, both in respect of orders made, and more generally. That view of contempt proceedings can be seen to permeate longstanding sentencing authority in this area. 27 In my view, the evidence establishes, on the balance of probabilities, that Mr Zombor is aware of these proceedings. In particular, as noted above, Mr Zombor was served with the originating application and supporting documents via his Facebook page, and he subsequently closed the account. The evidence also establishes that Mr Zombor has been in Australia recently. Despite knowing that process servers have attended his parents' house, he has not made any enquiries about documents left for him. He has avoided informing himself of the proceedings or taking any steps in the proceedings, notwithstanding the many efforts that have been made by Mr Polis to provide the relevant documents to him. 28 Contempt proceedings are a serious matter. As the Full Court observed, they are essentially protective in nature as to the judicial function and the role of the courts, even if they also serve to vindicate private interests and rights. In this matter, the protection of the judicial function justifies the issue of a warrant for Mr Zombor's arrest to bring him before the Court to answer the charge of contempt.

Conclusion 29 Accordingly, I consider it appropriate to make an order for the issue of a warrant for Mr Zombor's arrest to bring him before the Court to answer the charge of contempt. I certify that the preceding twenty-nine (29) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice O'Bryan.