This is an application by a judgment debtor, George Dimitriou, for the enforcement of two judgments given against him in this Court to be stayed, and for related interlocutory relief.
Rubino v Pineview Properties Pty Ltd [2018] NSWSC 340 | Case summary | Zoe
The judgments were given following a lengthy hearing before White J which took place over fourteen days in April, May and June 2016. His Honour's decision (published as [2016] NSWSC 904) was delivered on 30 June 2016 ("Decision 1").
Two of the defendants in the proceedings, Pineview Property Holdings Pty Ltd ("Pineview") and Susan Elizabeth Huybers, had brought a cross-claim against Mr Dimitriou, Wyse & Young International Pty Ltd ("Wyse & Young") and Wyse Accounting Pty Ltd ("Wyse Accounting"). Wyse & Young and Wyse Accounting were, and are, companies controlled by Mr Dimitriou. The cross-claim was successful. Judgment was entered against each of Mr Dimitriou, Wyse & Young and Wyse Accounting in favour of Pineview in the sum of approximately $121,276,000 plus interest and in favour of Ms Huybers in the sum of approximately $535,000 plus interest: Decision 1 at [376].
There was some further debate before White J about consequential orders which resulted in further unpublished decisions delivered on 19 July ("Decision 2") and 3 August ("Decision 3"). Relevantly, White J ordered that Mr Dimitriou, Wyse & Young and Wyse Accounting pay the cross-claimants' costs of the cross-claim: Decision 3 at [8]. His Honour also made freezing orders in aid of enforcement of the judgments: Decision 3 at [17].
An application was made by Mr Dimitriou, Wyse & Young and Wyse Accounting for a stay of enforcement of the judgments given in favour of Pineview and Ms Huybers. The application came before Brereton J who delivered his decision on 9 December 2016 ("Decision 4"). That decision has been published: [2016] NSWSC 1780. His Honour made an order that upon Wyse & Young and Wyse Accounting delivering a fixed and floating charge over their assets and undertaking as security for the judgments in question, execution on the judgments be stayed. But no such fixed and floating charges were delivered and accordingly no stay became effective.
There is a subsequent decision of Brereton J ("Decision 5") (published [2018] NSWSC 121), but it is of no relevance to the present application.
The application before me was commenced by way of notice of motion filed in August 2017. The application is made by Mr Dimitriou alone; no application is made by Wyse & Young or Wyse Accounting. Mr Dimitriou sought both a stay of enforcement of the judgments, and a stay of the costs orders and freezing orders subsequently made.
In October 2017, Mr Dimitriou notified some proposed amendments to his notice of motion. Those amendments do not make any material difference and were not opposed. At the hearing of the application I gave Mr Dimitriou leave to amend his notice of motion accordingly. But shortly before the hearing, Mr Dimitriou sought to make further amendments to the notice of motion so as to seek additional relief. This was opposed and I indicated that I would deal with the stay applications and with the application to amend the notice of motion in this judgment.
[2]
Stay of enforcement of judgments
In an application for a stay of execution on a judgment pending appeal, the maintainability of the proposed appeal is a critical issue. The judgment under appeal is presumptively correct and the applicant for a stay must, at the minimum, demonstrate a realistic possibility that the appeal will succeed.
Notice of an intention to appeal was filed on 28 July 2016 by the solicitors then acting for Mr Dimitriou, Wyse & Young and Wyse Accounting. A Notice of Appeal was filed on 31 October (which must have been at, or close to, the last possible date).
In dealing with the stay application made in December 2016, Brereton J thought that there was no realistic prospect of a successful appeal against the judgment against Ms Huybers (Decision 4 at [16]-[18]) but that there were not unarguable potential grounds of appeal against the judgment in favour of Pineview (Decision 4 at [19]-[22]). But since then, there have been further developments in the Court of Appeal.
It appears that the Notice of Appeal was amended, but that further amendments were foreshadowed and written submissions for the appellants were not filed in accordance with the Rules. On 5 June 2017, Beazley P ordered that the appellants' written submissions, and any further amended notice of appeal, be filed by 3 July, failing which the appeal was to stand dismissed. No such documents were filed and accordingly the effect of her Honour's orders was to dismiss the appeal proceedings on that date.
The appellants then applied to have the dismissal vacated and the time for compliance with the orders made by Beazley P extended. That application came before Meagher JA who refused it: Dimitriou v Huybers [2017] NSWCA 252. His Honour's decision was delivered on 10 October 2017. His Honour observed that the delay in complying with the orders made by Beazley P had not been adequately explained. The principal ground of his Honour's decision, however, was that on the material before him the appeal against the orders in favour of Ms Huybers and Pineview had no realistic prospects of success. He said (at [56]):
As is apparent, I have assessed the prospects of the proposed appeal by reference to the grounds currently pressed and the written submissions made in support of them, rather than by reference to arguments which are not made but which might possibly be made. The written submissions are less than satisfactory because they do not separately address all of the grounds and, in relation to grounds that are addressed, do not contain argument which seeks to expose error in any relevant reasoning or fact finding of the primary judge. This has made that task of assessment more difficult, particularly in a case which is factually complex. However, on the material relied on before me, I am satisfied that the appeal against the orders in favour of Ms Huybers, Pineview and Mr Russo has no realistic prospects of success.
His Honour added (at [57]):
I accept that the refusal of this application does not finally determine the applicants' rights to prosecute an appeal from the judgment of the primary judge. It is still open to them to seek to commence fresh appeal proceedings, albeit out of time, and to apply for an extension of the time in which to commence those proceedings. On any such application, they would have to demonstrate a sufficiently arguable case of error to justify such an extension of time, as well as deal with the other considerations relevant to such an application. However, the existence of the opportunity to make such an application is not a consideration to be weighed in favour of the granting of the present application even if the Court, while satisfied that the appeal as currently formulated is devoid of merit, cannot exclude the possibility of error being later identified.
The appellants applied for review of his Honour's decision. The hearing of that application is scheduled to take place later this month.
In these circumstances, the task facing Mr Dimitriou in obtaining a stay application has become appreciably harder since the decision of Brereton J. It is no longer a question of whether it might be possible to formulate grounds of appeal against the judgment of White J which are not unarguable. Grounds have been formulated and the appeal based on those grounds dismissed. Although Meagher JA referred to the possibility of a fresh reformulated appeal being brought, that has not happened.
It therefore remains essential to demonstrate that an appeal, formulated in accordance with the orders made by Beazley P, would have realistic prospects of success. But that is not enough. It is necessary to show, in addition, that there is a realistic prospect of overturning the decision of Meagher JA. For the purpose, the focus is on the grounds of appeal and submissions put before Meagher JA, and the matters argued before him. It would not be enough to show that some other arguable ground of appeal, not articulated before his Honour, could now be propounded; it is necessary to show some arguable error on his Honour's part in dealing with the application as presented before him. It is also necessary to overcome the potential discretionary obstacles flowing from the failure to provide a full explanation for why the orders of Beazley P were not complied with in the first place.
The judgments against Mr Dimitriou, Wyse & Young and Wyse Accounting arise out of transactions involving two properties at Galston, originally owned by Alfio Rubino and Biagina Rubino, who were the original plaintiffs in these proceedings (Mr Rubino had died before the trial and his executrix, Ms Lee Rubino, was substituted as first plaintiff).
Mr and Mrs Rubino were indebted to the ANZ Bank and wished to refinance that debt so as to retain possession of the properties. Mr Dimitriou and his companies became involved in the refinancing efforts. Initially, Ms Huybers was brought in as a short term lender. The properties were then put into the name of Pineview (of which Ms Huybers was made a director and shareholder) and moneys were raised by way of mortgage finance from ANZ in Pineview's name on the security of the properties. Ms Huybers and a company controlled by her, Green Global Pty Limited, gave personal guarantees of Pineview's liabilities. The moneys advanced by ANZ were received by Wyse & Young, some of them being reinvested in other ventures. As summarised by White J in Decision 1 at [12], the effect of what was done was that using the personal covenant of Pineview and personal guarantees of Ms Huybers and Green Global, and using the lands of the Rubinos, Mr Dimitriou obtained for himself almost $1.3 million. The judgments in favour of Pineview and Ms Huybers reflect the loss of these moneys (the judgment in favour of Ms Huybers in effect overlaps with that of Pineview in that Pineview would be obliged to give credit for any moneys paid to Ms Huybers in satisfaction of her judgment).
The submissions made by Mr Dimitriou in support of his application before me were not easy to follow. One complaint he made was that the ANZ moneys had not been received by him personally but had gone to Wyse & Young or Wyse Accounting. But of itself that does not mean that the judgment against him personally was unjustified. White J concluded that Mr Dimitriou personally owed fiduciary obligations to Pineview and Ms Huybers: Decision 1 at [258]. That finding would support an order for equitable compensation against Mr Dimitriou personally, even if he did not receive the benefit of the money. Depending on the facts, there might also be accessorial liability on the basis of knowing participation in a dishonest and fraudulent design (see Farah Constructions Pty Ltd v Say-Dee Pty Ltd (2007) 230 CLR 89 at [111], [160] and [163]) which again would not necessarily depend upon receipt of the funds. His Honour also concluded that Mr Dimitriou had been guilty of deceit (at [264]) and of contravention of the Competition and Consumer Act 2010 (Cth), Sch 2, s 20 (at [265]), and those conclusions would support awards of damages which again would not depend upon receipt of the funds by Mr Dimitriou personally.
Mr Dimitriou also tendered some bank authority documents which, so he argued, showed that Ms Huybers had authorised Wyse & Young to apply the moneys in the way that it did. I do not believe the documents establish that: at most, they show that Ms Huybers authorised Wyse & Young to receive from the net proceeds of the ANZ loans on her behalf. So far as I can see, that only reinforces the conclusion of White J that fiduciary duties were owed to Pineview and Ms Huybers. The bank authorities did not permit the disbursement of the moneys so received for other purposes.
Mr Dimitriou also asserted that there were liabilities on the part of Ms Huybers or Pineview which should be set off against the judgment liabilities. In determining the quantum of the judgments, White J considered a number of items of set-off or allowance. Some he accepted and some he did not. It was not clear to me from Mr Dimitriou's submissions whether the liabilities to which he referred in the application before me were ones which had been considered by White J and rejected, or whether they arose separately. It was not even clear which judgments they should allegedly have been set off against. Either way, I do not think these submissions advance Mr Dimitriou's position. To the extent that the claimed set-offs had been rejected by White J, Mr Dimitriou needed to identify, as a first step, arguable grounds of appeal against his Honour's decision, and then to identify relevant grounds of appeal and submissions which it could be said had been erroneously discounted by Meagher JA. Mr Dimitriou did not do this. To the extent that the alleged liabilities arose separately from the matters considered by White J, they fall outside the scope of these proceedings and the appeal. The proper approach would have been for Mr Dimitriou to commence substantive proceedings in an appropriate court with a view to obtaining a judgment which could be used as a basis for set off (see Civil Procedure Act 2005 (NSW), ss 21 and 22) or at least a stay of execution pending determination of the proceedings. No such independent proceedings appear to have been brought.
The fundamental difficulty with the application is that Mr Dimitriou did not, in any intelligible way, identify specific aspects of the reasoning of White J which he challenged, and link those aspects up with material which would show an arguable basis for identifying error in that reasoning. Still less did he do so in the case of the judgment of Meagher JA. In an application such as this, it is not the Court's responsibility to conduct its own detailed review of the judgment in question with a view to identifying potentially arguable errors. It is the applicant's responsibility to present submissions which do that. Mr Dimitriou's submissions in the present case fell far short of what was required.
Even if I considered that arguable error had been demonstrated, there would be other obstacles to the success of Mr Dimitriou's application for a stay. It is necessary for Mr Dimitriou to establish prejudice from allowing the judgment to be executed. Sometimes that can be done by showing that if a stay is not granted the right of appeal will be rendered nugatory. At the time the application was made to Brereton J, his Honour was satisfied that this was so. There was apparently evidence before his Honour of efforts to appoint liquidators to Wyse & Young and Wyse Accounting and to bankrupt Mr Dimitriou personally. His Honour considered that it was likely that should winding up and bankruptcy orders be made, an appeal would not be pursued. But again events have moved on. There are apparently now bankruptcy proceedings pending in the Federal Circuit Court against Mr Dimitriou. But the evidence does not identify in any detail the nature of those proceedings or where they have reached. On the material before me it is unclear whether the grant of a stay at this point would make any difference to the bankruptcy proceedings and accordingly it is not clear that the refusal of a stay at this point would have any practical impact on the prosecution of the appeal proceedings. In fact, there is not even any evidence before me that Mr Dimitriou is unable to meet the judgments. Although the amount involved is large, I simply have no evidence as to Mr Dimitriou's financial position.
Furthermore, the Court may impose appropriate terms on the grant of a stay in order to protect the position of the judgment creditors. Brereton J imposed such conditions on the orders which he made in December 2016 and they were not satisfied. I see no reason why Mr Dimitriou, having failed to procure his companies to provide security for the judgment debts, should now be entitled to obtain a stay order without any conditions. Mr Dimitriou has not even undertaken to provide any security for the interest which is accruing on the judgment debts.
[3]
Costs and freezing orders
Should Mr Dimitriou be successful in overturning the judgments against him, then in the ordinary course the consequential costs orders made against him by White J would also be reversed. But in the context of a stay application the costs orders differ in an important respect from the orders for judgment made by White J. The costs orders cannot be enforced until the costs in question have been quantified. There would be no reason to prevent the judgment creditors from taking steps to quantify the costs orders; the question of a stay could only arise, at the earliest, once a costs assessor's certificate had been issued. There is no evidence before the Court that assessment proceedings have even begun.
The freezing order was made in aid of execution of the judgments in question. The order is not itself an order for execution and a stay is therefore inappropriate. If Mr Dimitriou is seeking to have the operation of the order suspended or discharged, it is sufficient to say that no basis has been shown for doing so. White J made the freezing order because he was satisfied that there was a sufficient basis for concern that otherwise Mr Dimitriou might seek to move assets beyond the reach of the judgment creditors. Nothing was put before me to challenge that conclusion. If the appeal were to succeed, and the judgments were to be set aside the freezing orders would fall away; but so long as the judgments remain in force, there is no justification whatever for orders detracting from the effect of the freezing order.
In my opinion, the application so far as it concerns the costs and freezing orders is misconceived.
[4]
Application to amend notice of motion
The contentious amendments proposed to Mr Dimitriou's notice of motion involve the insertion of additional orders which include the following:
10. An order the Applicant is not indebted to Susan Elizabeth Huybers and Pineview Property Holdings P/L the Judgment debt amount.
…
12. An order that the 9 January 2012 Costs Agreement executed by Susan Huybers on 9 January 2012 is enforceable at law.
13. An order that the First respondent, Pineview Property Holdings P/L pays compensation to the applicant in the amount of no less than $2,100,000 as a result of her breach as trustee of Pineview Property Holdings, and breach of trust as the trustee of Biagina Rubino of the breach of fiducial duty to the applicant and the companies associated with him.
14. An order that the Second respondent, Susan Elizabeth Huybers pays
compensation to the applicant in the amount of no less than $2,100,000 as a result of her breach as trustee of Pineview Property Holdings, and breach of trust as the trustee of Biagina Rubino of the breach of fiducial duty to the applicant and the companies associated with him.
15. Leave be granted to the Applicant to engage a forensic accounting expert to quantify the applicants and the applicants companies as the loss incurred and the compensation claimed as a result of the breach as the trustee of Pineview Property Holdings P/L, and breach of trust as the trustee of Biagina Rubino of the breach of fiducial duty to the applicant and the companies associated with him.
16. The first and second respondent as the judgment creditor be restrained from enforcing the judgment against the Applicant, be stayed pending the final determination by the forensic accounting expert to quantify the loss incurred and compensation claim as a result of the breach as the trustee of Pineview Property Holdings P/L, the breach of fiducial duty to the applicant and the companies associated with the applicant.
In my view, these proposed amendments to the notice of motion are misconceived. To the extent the relief sought is directed towards establishing the existence of off-setting debts, it is substantive not procedural. Accordingly, I decline to permit the amendment sought by Mr Dimitriou.
[5]
Conclusion and orders
For these reasons I have concluded that:
(1) No ground has been shown to stay enforcement of the judgments in favour of Pineview and Ms Huybers.
(2) The application to stay the costs and freezing orders is misconceived.
(3) So too is the application to seek substantive relief by way of further amendment of the notice of motion.
The orders of the Court on the motion filed on 12 August 2017 are:
Refuse the application for leave to further amend the notice of motion in terms of the "Second Amended Notice of Motion" dated 5 March 2018.
Order that the motion be dismissed.
Order that the applicant pay the respondents' costs of the motion.
[6]
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Decision last updated: 19 March 2018