The first plaintiff in these proceedings is Mr Michael Rolfe. The second plaintiff is M-H Engineering Solutions Pty Ltd (MHE), which the evidence establishes operates an earthmoving business.
The current director and shareholder of MHE is Mr Rolfe's son Stephen. The evidence is that Stephen is presently working away from home where he is not able to make an affidavit, and that Stephen has authorised Mr Rolfe to make the application on behalf of MHE.
Mr Rolfe's evidence is that he was formerly a director and shareholder of MHE. The evidence does not establish when the transfer to Stephen occurred.
These proceedings arise out of the circumstance that, on the morning of 1 April 2020, at approximately 6:30 AM, two men presented themselves at Mr Rolfe's residential address and, against his protest, loaded and took away a substantial amount of plant and equipment, most of which was used in the earthmoving business. Mr Rolfe said that the property is owned either by him, or by Stephen, or by MHE. The evidence does not disclose which of the property was owned by which person.
It has transpired that the men seized the property on the basis of a claimed entitlement to do so under registered personal property security interests in the name of the defendant, George Zakharia Group Pty Ltd (GZG), which had been registered under the Personal Property Securities Act 2009 (Cth). The right to seize the property was apparently claimed under s 123 of that Act.
This action prompted Mr Rolfe to commence these proceedings on behalf of himself and MHE, which he did with my leave in the Duty List on 2 April 2020, when the summons commencing these proceedings was filed in court. On the same day, I gave the plaintiffs leave to file an amended summons to correct several deficiencies in the original summons that had occurred through the haste with which it had been necessary to commence the proceedings.
The seized property, which is defined as the Chattels in the amended summons, consists of 42 items listed in Schedule A to the amended summons.
On 2 April 2020, I made orders for short service, and, upon the plaintiffs giving to the Court the usual undertaking as to damages, I made an order that GZG be restrained from encumbering, selling or otherwise disposing of the Chattels pending further order. I also made an order that GZG keep proper accounts in respect of the sale of any of the Chattels that had occurred, that any proceeds of sale be kept in a separate bank account, and that GZG permit the plaintiffs' solicitors to inspect statements in respect of the separate bank account.
I declined to make an ex parte order sought by the plaintiffs that a director of GZG provide the plaintiff with an affidavit setting out matters such as the value, location and details of any encumbrances in respect of each Chattel, as well as details of the sale or disposal of any of the Chattels.
Further, I declined to make an order that, upon a certain undertaking proffered by the plaintiffs, GZG deliver the Chattels to the plaintiffs within 48 hours.
On 3 April 2020, the return date of the amended summons, I made an order, upon the undertaking to the Court by the plaintiffs that they would not encumber, sell or otherwise dispose of Item 22 in the Schedule to the amended summons, and that they would not use the vehicle otherwise than in the ordinary course of their business and daily affairs, that GZG deliver the vehicle to the plaintiffs within 48 hours of the order being made.
The reason for the making of that order was that the evidence satisfied me that Mr Rolfe and his wife were otherwise without transport, which was necessary for their daily needs, and Item 22 was a suitable motor vehicle for that purpose.
Ultimately, GZG did not contest the plaintiffs' application for the order that a director of GZG make an affidavit in respect of the whereabouts of the Chattels and how they had been dealt with. On 6 April 2020, I made that order.
That left the remaining question of whether the Court should order that any of the other Chattels should be redelivered to the plaintiffs pending the determination of these proceedings.
The plaintiffs' application for that relief was heard in the Duty List on 6 and 7 April 2020. These reasons for judgment deal with that application.
By an affidavit sworn on 3 April 2020, Mr Rolfe identified the Chattels that the plaintiffs wanted to be the subject of the order for their return by GZG.
Paragraph 6 of the affidavit identified Items 20, 21 and 22. As I have said, the Court has already made an order in respect of Item 22. That was described as the normal motor vehicle that Mr Rolfe and his wife use to drive around the local township and to reach essential services.
Item 20 is a caravan that is used by the plaintiffs to rest and stay in when they undertake earthmoving work remotely from their homes, where facilities and amenities are not usually available.
Item 21 is a work utility vehicle that is able to tow the caravan.
It thus appears that Items 20 and 21 are necessary to enable the plaintiffs to carry on their earthmoving business.
In par 7 of the affidavit, Mr Rolfe identified Items 1, 2, 3, 4, 6, 8, 9, 10, 11, 12, 13, 14, 15, 16, 17, 18, 23, 24, 25, 30, 36, 38, 41 and 42.
Mr Rolfe has explained in his evidence that these Chattels are necessary to enable the plaintiffs to perform the work required for their earthmoving business.
A review of Schedule A suggests, on its face, that the relevant Chattels only have utility for the purposes of the earthmoving business. As examples, Item 2 is a 30 ton excavator, Item 4 is a grader, and Item 8 is an articulated dump truck.
Some of the Chattels are not required for the operation of the earthmoving business, and the plaintiffs do not seek their immediate return. For example, Item 28 is a half cab boat and Item 29 is a boat trailer.
The plaintiffs tendered into evidence recent invoices that show that, before the seizure of all of the Chattels, the plaintiffs' earthmoving business was operational.
Mr Rolfe explained that, without the return of the Chattels, the plaintiffs would not be able to perform four days' work that they had this week, and that it would be necessary to cancel forward work to be undertaken on various sites over the course of the following couple of weeks.
The effect would be that the plaintiffs would not be able to meet their day-to-day trading expenses, including the renewal of insurance premiums that were due on Monday 6 April 2020, and are payable from month-to-month, in the approximate amount of $1,800.
Furthermore, if the plaintiffs cannot carry on their business, it will not be possible for Mr Rolfe to meet the day-to-day living expenses of himself and his wife.
At one point in the short course of these proceedings to date, Mr Rolfe gave evidence that he would need to place MHE into voluntary liquidation. That outcome has been averted for the moment, but I accept Mr Rolfe's evidence, because of its inherent probability, that, if the plaintiffs are not able to carry on their earthmoving business, it will be necessary for MHE to take steps to avoid it trading whilst insolvent.
Mr Rolfe explained, in his first affidavit, that he and his wife are elderly and have poor health. They ordinarily are required to travel on a weekly basis to visit doctors and health professionals. They are located approximately 20 km from any essential services including food, medical, pharmacy, and hospitals.
Mr Rolfe explained that some of the Chattels are subject to pre-existing security interests, registered over them by ANZ Bank and Pepper Finance. Mr Rolfe is concerned that, if those lenders are notified of the repossession of the Chattels by GZG, the loan facilities may go into default.
Mr Rolfe said that, if the Chattels are not available to the plaintiffs to use in their wet or dry hire business, MHE will suffer a daily loss of revenue of approximately $4000 to $5000.
Finally, Mr Rolfe explained that, if the chattels remain idle for too long, and are not used and properly serviced, they will deteriorate over time, and the insurances covering the Chattels will be placed in jeopardy.
It will now be appropriate for the Court to consider the evidence concerning the nature of GZG's claim to be entitled to have seized the Chattels.
First, however, the Court should refer to the evidence in Mr Rolfe's 2 April 2020 affidavit, of the circumstances in which he first became involved with a person representing GZG. Mr Rolfe said that he dealt with a person called Clinton Gebert, in relation to the recovery of stolen property of MHE. Mr Rolfe was informed by Mr Gebert, in about March 2019, that certain property that had been stolen from the plaintiffs, which Mr Gebert had agreed to recover for a fee, had been recovered. Mr Gebert said that the property would be delivered to the plaintiffs upon payment of $30,000. Mr Rolfe caused the $30,000 to be paid, but the property was never returned to the plaintiffs.
Mr Rolfe said in his affidavit that the payments had been made to GZG, and he annexed a tax invoice in the name of GZG, that acknowledged payment of $20,000, and claimed an outstanding amount of $13,000 (the additional $3,000 being GST).
Mr Rolfe said that he had been introduced by Mr Gebert to a person called Paul Bradley, who Mr Rolfe understood to be a solicitor. Mr Bradley offered, on behalf of GZG, to assist MHE in the procurement of financial facilities. Mr Rolfe said that he never physically met with Mr Bradley, and all of their dealings were over the telephone.
Mr Rolfe acknowledged that, in or around mid-2019, GZG registered personal property security interests over the Chattels, which Mr Rolfe understood was to secure "the prospective provision of advice or finance".
Mr Rolfe and his wife made a decision not to pursue further the provision of advice or finance from Mr Bradley, and on 15 July 2019, Mr Rolfe sent an email to Mr Bradley that said:
Please see attached.
The PPSR's have not been supplied to us and there for, I can only ascertain from the above document, they had not been attended to.
Also, when needed, how do we remove the current PPSR's??
We require the screen back as per invoice or our money back.
The attachment referred to by Mr Rolfe was not included in the evidence.
Mr Rolfe stated, in his 2 April 2020 affidavit, that MHE is not indebted to GZG at all, and that neither plaintiff has ever received any money or professional services from GZG, other than the work associated with the return of the stolen property, which, in fact, had not been returned.
There is some evidence before the Court that Mr Gebert was, at some time from just before the middle of 2019, jailed for 4 1/2 years for defrauding the ANZ Bank.
The basis of GZG's claim came to light as an annexure to an affidavit of its solicitor, sworn on 6 April 2020.
The evidence took the form of screenshots of a letter from GZG to Mr Rolfe dated 10 April 2019, and an agreement between GZG, Stephen Rolfe, MHE and Mr Rolfe. The letter is not readily legible.
In so far as Stephen Rolfe was a party, he was expressed to be a party by reason of a power of attorney granted to Mr Rolfe.
The agreement is a typed document, but it does not appear to be very professional in its preparation. The document contains a number of typographical errors. The stated purpose of the agreement, in clause 1, is the development of an asset protection strategy to shield the assets of MHE and Stephen Rolfe from theft by Stephen's de facto partner, shielding the assets from the partner, and ensuring Mr Rolfe's financial protection in the event of a divorce.
The scope of work is provided for in clause 3, as follows:
The George Zakharia Group has been instructed to and agrees to undertake the following,
3a: Lodgement of PPSR on plant and equipment listed on the attached document titled "PPSR". The George Zakharia Group will be the registered interest, and will remain so until the matter is settled and all fees and disbursements paid to the GZG (see fee structure).
3b: GZG will facilitate a Caveat on the property located at [redacted] Forbes, the registered interest will be in the name of Michael Rolfe.
3c: GZG will work in a cohesive manner with your finance broker (s) and advisors.
3d: Management of all telephone calls, emails, meetings and correspondence relating to your financial shield, strategy, asset procurement and protection.
3d: All legal work to ensure that the strategy meets all regulatory guidelines.
3f: Forensic Investigation for all associated entities and bank accounts as instructed.
3g: All reasonable travel and associated investigative costs.
3h: A preliminary Equipment list has been provided and attached, and any other equipment that is listed will incur a charge as per the fee schedule.
3i: A preliminary valuation, which should only be viewed as an estimate has been provided by Michael Rolfe, his valuation for the equipment listed is $2,136,000.00.
The scope of the services to be provided by GZG is self-evidently strange and uncommercial.
GZG was required to lodge a security in respect of plant and equipment listed in an attached document. The copy of the agreement that is in evidence does not include the attachment. GZG was also required to lodge a caveat. Those two obligations did not provide any services to the plaintiffs or Stephen Rolfe, but only created a benefit for GZG.
GZG was then required to work in a cohesive manner with finance brokers and advisers, manage communications concerning "your financial shield, strategy, asset procurement and protection", and do all legal work and forensic investigations.
The agreement, thus, did not actually require GZG to provide any clearly defined services, or to achieve any particular outcome for the benefit of the other parties to the agreement.
By clause 4a, a fee for service was payable to GZG that was to be no less than 50% plus GST of the valuation of the plant and equipment of $2,136,000.
In the circumstances of this case, there can be no possible argument in support of a proposition that the indefinite services described in clause 3 could justify a fee of at least $1,068,000 plus GST.
Moreover, clause 4b provided that the fee would be due and payable 30 days from the lodgement of the final registered interest in plant, equipment or property. Thus, the obligation to pay the fee was not linked to the provision of the services, such as they were described. The full fee was payable 30 days after the final lodgement of the security for the payment of the fee.
The agreement was purported to have been signed on 6 April 2019. Mr Gebert signed on behalf of GZG. Mr Rolfe signed on his own behalf and as attorney for Stephen Rolfe and on behalf of MHE.
The witness for each of the signatures was Mr Anthony Riordan, who gave an address in Brighton, Victoria.
GZG's solicitor annexed tax invoices issued by GZG addressed to MHE dated 12 January 2019 and 1 December 2019. Both invoices were for the amount of $1,174,800, constituted by the fee of $1,068,000 plus GST of $106,800.
The due date for payment of the first invoice was 27 November 2019, and the second was also 27 November 2019. Consequently, given that the agreement was made on 6 April 2019, the first invoice pre-dated the agreement by some 2 1/2 months, and the second invoice was issued four days after the due date for payment.
GZG's solicitor annexed copies of two personal properties securities register verification statements dated 29 April 2019. They related to a Mercedes-Benz truck and a boat trailer respectively.
Mr Rolfe responded to this evidence by an affidavit made on 7 April 2020, in which he included evidence of his mobile phone records that indicated that he was in Parkes, New South Wales, on 6 April 2019, and not in Melbourne when the alleged agreement was executed.
Mr Rolfe swore that the first time he saw the letter and the agreement annexed to GZG's solicitor's affidavit was on 6 April 2020. He said that neither he nor MHE used the address on the letter as a postal address.
Further, Mr Rolfe specifically swore that he did not sign the agreement, he did not meet Mr Gebert on 6 April 2019, and nor did he meet the apparent witness, Mr Riordan, on that date.
Further, Mr Rolfe swore that his ordinary practice when signing commercial documents is to sign "MJ Rolfe", even though he had signed his affidavits with his full name. The apparent signature of Mr Rolfe on the agreement is his full name.
GZG, in turn, responded to Mr Rolfe's evidence, by affidavits of George Zakharia and Anthony Riordan made on 7 April 2020. The affidavits provided to the Court were in the form of largely illegible screenshots. Subsequently, GZG has provided unexecuted copies of each of the affidavits in Word format. These documents are legible and will be placed on the Court's file with the illegible original screenshots.
The thrust of George Zakharia's affidavit is that, through Mr Gebert, GZG agreed to take security over the plaintiffs' property for a fee of 50%, in order to shield Mr Rolfe's interest in the property from Mr Rolfe's wife, his son and his son's girlfriend. The price was to be a "set price of 50% of the total project valuation".
Mr Zakharia said, in relation to a conversation that he claimed he had with Mr Rolfe: "Michael understood and was happy with the PPSRs being placed on his equipment as he took the view that he was better off paying GZG 50% rather than losing 100%".
That statement was not explained at the hearing, but it may be that Mr Zakharia meant that he understood that Mr Rolfe had agreed that the securities would be registered over all of the Chattels for the purpose of GZG exercising its security virtually immediately, retaining 50% of the value after realisation of the Chattels, and then providing the remainder of the 50% of the value to Mr Rolfe, so to speak, on the sly. The supposed agreement would otherwise be commercially senseless, and would involve the plaintiffs giving away 50% of the value of the Chattels for nothing.
If this was the purpose of the agreement, then there is a strong apparent argument that the purpose of the agreement was entirely artificial, and was to defraud Stephen Rolfe, in so far as he had any direct interest in the Chattels, or an entitlement by reason of having an interest in MHE.
Mr Zakharia gave specific evidence that Mr Rolfe had driven to Melbourne, in order to sign the agreement, because he had a fear of flying, and, accordingly, made a 17 hours return trip to Melbourne. He said Mr Rolfe arrived at 7 PM driving a white ute, and that he signed the agreement at a restaurant in Melbourne, and left after 45 minutes, in order to drive back to his home in New South Wales.
It is of some relevance that the two utility vehicles listed in Schedule are grey (Item 21) and red (Item 23).
Mr Riordan, in substance, corroborated the evidence in Mr Zakharia's affidavit.
At this point, it is convenient to recall that Mr Rolfe's telephone records do appear on their face to establish that, between 5 and 8 April 2019, Mr Rolfe made calls on his mobile phone that originated in Forbes or Parkes or their environs.
In his final affidavit, Mr Rolfe gave estimates of value for all of the Chattels, save for Items 36, and 39 to 42, which he described as smaller personal items. The total value of the items referred to in par 6 of his affidavit was $175,000. The total value of the items referred to in par 7, for which values were given, was $1,597,500.
If the value of the equipment stated in the agreement of $2,136,000 is correct, then the value of the Chattels for which the plaintiffs do not seek the immediate return would be $363,500.
It will now be appropriate for the Court to consider whether the plaintiffs have established a right to the mandatory interlocutory injunction they seek, in respect of the return of a substantial proportion of the Chattels to the plaintiffs.
It is necessary for the plaintiffs to establish, as observed by Gummow and Hayne JJ in Australian Broadcasting Corporation v O'Neill (2006) 227 CLR 57; [2006] HCA 46 at [65], that they have a sufficient likelihood of success to justify, in the circumstances, the granting of the injunction sought, and that the balance of convenience favours the injunction being made.
For the following reasons, I am comfortably satisfied in this case that the plaintiffs have established a proper basis for the Court to grant the injunction that they seek.
While the Court is not required to make a forecast as to which parties are most likely to succeed at a final hearing in these proceedings, and should not do so given the stark contradictions in the evidence given as to the basic facts, which will require findings as to the witnesses' credibility, I am satisfied that the plaintiffs have established that they have sufficient prospects of success to justify the Court in proceeding to consider the next issue, being the balance of convenience in granting, or not granting, the interlocutory relief sought. My reasons are as follows.
Mr Rolfe has denied that he signed the agreement that is the basis of GZG's claim to be entitled to seize and sell the Chattels. While the evidence of Mr Zakharia and Mr Riordan directly contradicts that given by Mr Rolfe, I consider that there are reasonable prospects that the evidence of Mr Rolfe will prevail at a final hearing.
The evidence of Mr Zakharia and Mr Riordan is contradicted by the evidence of Mr Rolfe's mobile phone records, although to make good that proposition, Mr Rolfe may have to establish that he did not leave his mobile phone with anybody else while he travelled to Melbourne.
While it may be possible that, in fact, Mr Rolfe formed an intention to defraud the other members of his family, in order to prevent Stephen's girlfriend getting access to the family's property, the arrangement reflected in the agreement is at least improbable. At least as the evidence stands, there is no basis for the Court to think that it is likely that the evidence at the final hearing will establish that there was a sufficient risk that Stephen's girlfriend would succeed in obtaining a substantial part of the family assets to make it rational for Mr Rolfe to give half of those assets to GZG, in order to retain the other half in a manner secret from the balance of his family.
I consider that the plaintiffs have reasonable prospects of establishing that, if the agreement was in fact made, its purpose was to perpetrate a fraud on other members of Mr Rolfe's family, with a direct or indirect interest in the Chattels, so that the agreement will be void as being against public policy. A contract to do an act that is an offence against the common law or statute may be illegal and unenforceable; for example, a contract to defraud a third party: see J D Heydon, Heydon on Contract (2019, Thomson Reuters) at [20.540].
Additionally, I consider that Mr Rolfe would have reasonable prospects of succeeding in obtaining an order under s 7 of the Contracts Review Act 1980 (NSW), declaring the agreement to be void. If commenced shortly, that claim would be within the 2 years limitation period provided for in s 16 of that Act, and the agreement does not appear to have been made for the purpose of a trade, business or profession, so the claim would not be excluded by s 6.
I also accept the plaintiffs' submission that they may have viable causes of action for misleading or deceptive conduct or unconscionable conduct in respect of the circumstances in which the agreement was made.
Finally, it appears that, if the agreement is genuine, Mr Rolfe signed it on behalf of Stephen Rolfe and MHE in the exercise of a power of attorney granted to him by Stephen. Given the purpose of the agreement, as stated by Mr Zakharia in his evidence, there is a substantial likelihood that the Court, in the exercise of its equitable jurisdiction, would set aside the agreement at the suit of Stephen or MHE, on the basis that its execution was a fraud on the power granted by Stephen to Mr Rolfe.
In all of the circumstances, the present evidence is sufficient to establish that there is a serious question to be tried, as to whether the agreement was made as alleged by GZG, and if it was made, whether it is enforceable or voidable.
The question then becomes whether the balance of convenience favours the making of the interlocutory order sought by the plaintiffs.
The Plaintiffs have offered the following undertaking to the Court: That the plaintiffs:
1. will not encumber, sell or otherwise dispose of the Chattels the subject of the order; and
2. will not use the Chattels the subject of the order, otherwise than in the ordinary course of business.
The plaintiffs have also offered an undertaking to the Court that they will conduct the present proceedings expeditiously, if the interlocutory order sought is granted.
The Court would also require the plaintiffs to support the interlocutory order by giving to the Court the usual undertaking as to damages.
For the following reasons, I am satisfied that the balance of convenience clearly favours the making by the Court of the interlocutory order sought by the plaintiffs.
However, I will give GZG a brief opportunity to propose a more expansive undertaking to be given by the plaintiffs. I am inclined to think that the plaintiffs should be required to undertake to the Court that they will keep the Chattels properly insured and serviced, and that they will ensure that all reasonable steps are taken to preserve the Chattels from theft or damage.
I am also inclined to think that, in addition to giving a general undertaking that they will pursue their claim expeditiously, the plaintiffs should be required to seek expedition of the proceedings in the Expedition List. It would entirely be a matter for the Expedition List Judge as to whether or not expedition is granted for these proceedings.
In favour of making the interlocutory order sought by the plaintiffs is the fact that the evidence strongly establishes that, if the plaintiffs are deprived of the Chattels that are necessary for the conduct of the plaintiffs' earthmoving business, then that business will be destroyed, MHE will be placed into administration, likely leading to its winding up, and the source of income of Mr Rolfe and his wife, and probably also Stephen Rolfe, will be lost.
There is also some evidence that suggests that, if the Chattels remain unused until the final determination of these proceedings, they may deteriorate and their insurance may be jeopardised.
Against that, if the interlocutory order is made, the Chattels, whose purpose it is to enable an income earning business to be conducted, will earn income.
So far as GZG is concerned, pending the final determination of these proceedings, the existing interlocutory injunction will prevent it from selling or otherwise disposing or encumbering the Chattels. If the Chattels remain in GZG's possession or control, it will be at risk if the Chattels deteriorate, or any loss is suffered by reason of theft or damage or loss of insurance cover.
GZG will also have the benefit of the plaintiffs' usual undertaking as to damages to the Court, and, if it succeeds in the proceedings, its claim is only slightly more than half of the apparent value of the Chattels. Given the undertakings that the Plaintiffs will be required to give concerning the use and preservation of the Chattels, there should be little risk that the value of the Chattels will diminish to such an amount that the making of the interlocutory order will create a risk that GZG will not be able to recover the full amount claimed by it.
Furthermore, although the evidence of the value of the Chattels is not extensive, GZG entered into the purported agreement on the basis that the apparent total value of the plant and equipment the subject of the agreement was $2,136,000.
On the basis of the calculation that I have made above at par 74, the value of the Chattels retained by GZG would be about $363,500.
The parties should confer quickly about the precise form of the orders to be made, to give effect to these reasons for judgment. That should be done on the day that these reasons are delivered. If there is any delay by GZG, I may make orders in terms of draft short minutes of order provided to my associate by the plaintiffs alone.
I will hear the parties on the issue of the costs of the application. The conventional approach is probably that the costs of the interlocutory application should be the parties' costs in the cause.
[3]
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Decision last updated: 09 April 2020