Rafeletos v Great Wall Resources Pty Limited

REASONS FOR JUDGMENT 1 On 17 November 2009, the Court ordered the first defendant, Great Wall Resources Pty Ltd (Great Wall Resources) pay to the plaintiff, Mr George Rafeletos, the sum of $2,557,076 and directed that judgment be entered accordingly. The Court also ordered that Great Wall Resources pay Mr Rafeletos' costs of the proceeding. Those orders were stayed up to and including 11 December 2009. On various occasions thereafter, until 26 March 2010, the stays of the first order were extended. On 26 March 2010 the stay of the first order was ordered up to and including 30 April 2010. The stay in relation to the order for costs expired sometime before that. On 5 March 2010 and again on 26 March 2010, Mr Rafeletos was granted leave to have writs of enforcement issued, with such writs to lie in the Registry until further order. 2 The reason for making those orders was that Great Wall Resources sought leave to re-open, so as to adduce further evidence in relation to the quantum of the judgment. There have been numerous directions hearings in relation to that question in an endeavour to resolve what was developing into an impasse. Directions have been given for experts on both sides to produce reports as to the quantum of damages, in the light of my reasons of 19 June 2009. The experts were also directed to meet together to endeavour to resolve any differences and to isolate their precise differences if they could not be resolved. A second joint report was produced by the two experts on 18 August 2010. The schedule to that joint report indicates that there are still several matters of difference between the parties as to the appropriate quantum of damages. 3 The outstanding differences relate to a number of matters. First, there is a question as to the value that should be placed upon part of the Yallah Property, which is the subject of a contract for sale. That contract for sale is the subject of litigation in the Supreme Court of New South Wales. There is a further issue as to interest in connection with the sale of another part of the Yallah Property, which is also the subject of proceedings in the Supreme Court of New South Wales. There is also a question as to whether some allowance should be made by Great Wall Resources in relation to the occupation of part of the Yallah Property by the daughter of Mr Capocchiano, the principal of Great Wall Resources. There is a further question as to any allowance that should be made in favour of Great Wall Resources for professional fees in connection with litigation arising out of the sale of parcels of the Yallah Property. Finally, there is a question of the extent to which Great Wall Resources should be given an allowance in respect of remuneration to directors. 4 Assuming resolution of all of those issues in favour of Great Wall Resources, it is common ground that there would be an entitlement on the part of Mr Rafeletos to a sum of $688,602 representing a one-fifth share of the net profit on the subdivision of the Yallah Property after tax. In addition, Mr Rafeletos would be entitled to his outstanding liability in respect of the St George Loan Account, in the sum of $172,990, to which I referred in my reasons of 19 June 2009. That would give a total figure of $861,592 conceded by Great Wall Resources, to which Mr Rafeletos would be entitled. In addition, interest on that amount in the sum of $95,359 from the date of judgment would be allowable. 5 On that basis, Mr Rafeletos now seeks leave for the issue of writs of enforcement against Great Wall Resources for the recovery of $956,951. In the circumstances, it would be appropriate to give leave for writs of enforcement to be issued for that amount, since it is not disputed, on the basis of the reasons that I have given, that that sum is the amount that, as a minimum, would be recoverable from Great Wall Resources. Nevertheless, the application has been resisted for reasons which appear to me, on the basis of the material before me, to have no substance. 6 In my reasons of 19 June 2009, I referred to a proposal whereby National Australia Bank (the Bank) was to provide facilities to DG Empire Pty Ltd (DG Empire), as trustee for the DG Empire Family Trust, in connection with the proposed development of another parcel of land. In my reasons, I indicated that it appeared that neither of the facilities proposed had been taken up. The basis upon which enforcement is now sought to be resisted is that, notwithstanding that the matter has not previously been raised, it is now suggested that the facilities were in fact granted by the Bank and that a guarantee was given by Great Wall Resources in respect of the liabilities of DG Empire under the facilities. It is asserted that the Bank has now entered into possession of the relevant parcel of land, following default under the facilities. 7 Under the guarantee given by Great Wall Resources, Great Wall Resources will have a liability to the Bank, to the extent that the value of the land is less than the total liability under its guarantee. However, to the extent that the value of the land, which is now in the possession of the Bank, exceeds the liability of Great Wall Resources under the guarantee, there would be no such liability. That is not to say that Great Wall Resources may not be out of pocket, in the sense that, if the Bank enforces the guarantee against Great Wall Resources, Great Wall Resources would have to resort to its right of subrogation and indemnity in respect of the principal debtor, DG Empire. Great Wall Resources would be subrogated to the rights of the Bank under its mortgage over the other parcel of land. 8 Exercising the Bank's power of sale as mortgagee would, if the value of the land exceeds the amount of the liability, enable Great Wall Resources to be reimbursed for the amount that it may have to pay to the Bank. While there is evidence now brought to Court, at the very last moment, to suggest that there is a contingent liability on the part of Great Wall Resources, there is no evidence at all as to the value of the land that is the subject of the mortgage to the Bank. Counsel for Great Wall Resources was not able to say that he was instructed that the value of the land was less than the amount of the liability of Great Wall Resources under the guarantee. 9 Had there been evidence to suggest that there was a significant shortfall, that may have been a basis for the exercise of discretion to defer enforcement of the judgment. However, apart from the lack of evidence as to any shortfall, there is also a question as to whether or not there is any right of set-off, since the liability of Great Wall Resources is in respect of DG Empire. DG Empire is the trustee of the DG Empire Trust. While Mr Rafeletos is a beneficiary under that trust, as is Mr Capocchiano's daughter, that does not necessarily create any right of set-off as between Mr Rafeletos and Great Wall Resources. Where the merits would lie in relation to such a set-off is unclear, but there does not appear to be any strict right of set-off since there is no personal liability on the part of Mr Rafeletos. In any event, that would not necessarily be a reason why I would not, in the exercise of discretion, stay the judgment if there were in fact a shortfall. 10 In all of the circumstances, there appears to me to be no reason presently before the Court as to why the writs of enforcement for which leave to issue has been given should not now be activated. However, at this stage, the writs should only be allowed to be enforced to the extent of $956,000. I certify that the preceding ten (10) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Emmett.