Judgment - EX TEMPORE
Revised from transcript; issued 17 August 2021
Before the Court are applications in two separate proceedings to which I will refer as the 2013 proceedings and the 2019 proceedings. The first is an application to stay the enforcement of judgments given in the 2013 proceedings. The second is an application to file an amended statement of claim in the 2019 proceedings in place of the earlier statement of claim which has been struck out.
Initially, the stay application in the 2013 proceedings was made by three parties who were judgment debtors. Those same three parties were also the plaintiffs in the 2019 proceedings. The parties in question were Wyse Accounting Pty Limited ("Wyse Accounting"), Wyse & Young International Pty Limited ("Wyse & Young") and Mr George Dimitriou. Wyse Accounting and Wyse & Young were, at the time the underlying transactions took place, controlled by Mr Dimitriou. I will refer to them collectively as the "Wyse parties".
Mr Dimitriou is now bankrupt and Wyse & Young is in liquidation. Their applications in the 2013 proceedings, and their claims in the 2019 proceedings, have been dismissed. The remaining applicant and plaintiff is Wyse Accounting.
The judgment creditors are Pineview Property Holdings Pty Limited ("Pineview") and Susan Huybers. Ms Huybers is the sole shareholder and director of Pineview, although at the time of the underlying transactions it was under the exclusive de facto control of Mr Dimitriou. Pineview is the fourth defendant in the 2019 proceedings, and by its proposed amended statement of claim Wyse Accounting seeks to make Ms Huybers the fifth defendant. I will refer to these parties collectively as the "Huybers parties".
The first, second and third defendants in the 2019 proceedings also form a group. The first defendant is Lee Rubino, who is sued as executor of her father, Alfio Rubino. The second defendant was Biagina Rubino, who was the wife of Alfio Rubino, but she has since died and her son, Francesco Rubino, is her executor. It is proposed in the amended statement of claim to substitute him as the second defendant. He is already in his own right the third defendant. I will refer to these parties collectively as the "Rubino parties".
The proceedings arise out of transactions orchestrated by Mr Dimitriou involving the Australia and New Zealand Banking Group Limited ("ANZ"), the Rubino parties and the Huybers parties. Through Wyse Accounting and Wyse & Young, Mr Dimitriou conducted a business of providing financial and accounting advice, although it is unclear whether he was ever licensed to do so. Mr Dimitriou seems to have specialised in distressed customers. The Rubino parents at the time fell into that category. They had borrowed heavily from ANZ and were having trouble repaying their debt.
Mr Dimitriou conceived a plan whereby properties owned by the Rubino parents and mortgaged to ANZ would be transferred to Pineview and the transaction refinanced as loans to Pineview, guaranteed by Ms Huybers, who was another client of Mr Dimitriou's. It seems that, in effect, Pineview was to act as trustee for the Rubino interests so that the properties could ultimately be returned to them.
The refinancing, which was for a total of about $2 million, went ahead. But ultimately, about $1.3 million was appropriated by the Wyse parties, acting under Mr Dimitriou's direction. ANZ took enforcement action and obtained judgments both against the Rubino parties and the Huybers parties.
In the 2013 proceedings the Rubino parents sued ANZ, Pineview, the Registrar-General (seeking compensation for loss of their properties) and their former solicitor, Mr Salvatore Russo. A cross-claim was brought by Ms Huybers (apparently no point was taken about her bringing a cross-claim without being joined as a defendant) and Pineview against, among others, the Wyse parties. The Rubinos eventually settled their claim against ANZ and their claims against the other parties were dismissed.
The Huybers parties' cross-claim against the Wyse parties succeeded: Rubino v Pineview Property Holdings Pty Ltd [2016] NSWSC 904. White J (as his Honour then was) found that Pineview was entitled to recover substantially all of the misappropriated sum of $1.3 million. Some of those moneys had been the subject of a loan by Ms Huybers for approximately $580,000 and his Honour also held that Ms Huybers was entitled to judgment for most of that sum (he allowed deductions for certain amounts of which Ms Huybers had received the benefit).
Relevantly, his Honour made the following orders on the Huybers parties' cross-claim:
(b) give judgment for the first cross-claimant (Huybers) against the third, fourth and fifth cross-defendants [Mr Dimitriou, Wyse Accounting and Wyse & Young] in the sum of $535,151.62 plus interest pursuant to s 100 of the Civil Procedure Act 2005 (NSW) from 9 March 2012;
(c) declare that the third, fourth and fifth cross-defendants are liable to indemnify the first cross-claimant against her liability to the first defendant (the ANZ Bank) in respect of her guarantees of the moneys borrowed by the second cross-claimant (Pineview) from the ANZ Bank;
(d) give judgment for the second cross-claimant (Pineview) against the third, fourth and fifth cross-defendants in the sum of $1,276,389.29, plus interest in accordance with s 100 of the Civil Procedure Act from 9 March 2012;
(e) declare that the third, fourth and fifth cross-defendants are liable to indemnify the second cross-claimant against its liability to the ANZ Bank in connection with the mortgages given by it to the ANZ Bank on or about 9 March 2012 and in respect of any liability the second cross-claimant might have to the first and second cross-defendants in respect of payments made or liabilities incurred by the second cross-claimant otherwise than in the proper performance of the trusts on which the second cross-claimant holds the properties at Calderwood Road and Pine Valley Road, Galston for the first and second cross-defendants;
(f) reserve the proceedings for further consideration and give the cross-claimants liberty to apply in respect of the working out of the declarations in para 3(c) and (e), or in respect of any application for proprietary relief or an account of profits in respect of the use of moneys of the cross-claimants misappropriated by the third and fifth cross-defendants.
Following the judgment, the Wyse parties launched an appeal. They then applied for a stay pending the hearing of the appeal. The application came before Brereton J (as his Honour then was): Rubino v Pineview Property Holdings Pty Ltd [2016] NSWSC 1780.
His Honour found that the Wyse parties had no arguable appeal against the judgment in favour of Ms Huybers, but they did have a "not unarguable" appeal against the Pineview judgment. His Honour decided that a stay would be granted, but this was made subject to Wyse Accounting and Wyse & Young giving security for the judgments in favour of the Huybers parties. That security was never given and, as a result, no formal stay ever came into effect. It seems, however, that no enforcement action was taken at that time.
Meanwhile, the Wyse parties had failed to comply with directions for the filing of their submissions in support of the appeal. On 5 June 2017, an order was made that the submissions be filed by 3 July or else the appeal would stand dismissed. Submissions were not filed in accordance with the timetable and, as a result, the appeal stood dismissed.
The Wyse parties then made an application to have the dismissal set aside and the time for providing their submissions extended. This application came before Meagher JA in October 2017 who refused it.
The Wyse parties then made an application to appeal against the judgment of Meagher JA. While that application was pending, they made another application at first instance for a stay of enforcement of the judgments. That application came before me in March 2018 and I refused it: Rubino v Pineview Properties Pty Ltd (No 6) [2018] NSWSC 340. The application for leave to appeal from the judgment of Meagher JA was unsuccessful and, as a result, the appeal proceedings came to an end.
The present stay application in the 2013 proceedings was made by way of notice of motion filed on behalf of all of the Wyse parties in December 2018. The hearing of the motion was delayed. There is a judgment of Henry J dealing with the costs of an adjournment which was obtained by the Wyse parties: Rubino v Pineview Properties Pty Ltd (No 7) [2019] NSWSC 1031.
Before the motion had been determined or, it appears, fixed for hearing, the 2019 proceedings were then commenced. This was done by statement of claim filed in June of that year. As I have mentioned, the plaintiffs were the Wyse parties. The first three defendants were the Rubino parties and the fourth defendant was Pineview.
By early 2021 Mr Dimitriou was bankrupt and Wyse & Young was in liquidation. This resulted in orders by the Chief Judge dismissing the stay motion in the 2013 proceedings, and the claims in the 2019 proceedings, to the extent that they were made by Mr Dimitriou and Wyse & Young.
In March this year Pineview applied for summary judgment in its favour in the 2019 proceedings against the remaining plaintiff, Wyse Accounting. The contention was that the proceedings had no reasonable basis for success. The application was referred to me out of the Applications List.
At the hearing counsel for Wyse Accounting, who had recently come into the case, conceded that the existing statement of claim was inadequate and did not properly disclose a cause of action. I ordered that the statement of claim be struck out, but granted leave to Wyse Accounting to make an application to file an amended statement of claim. There were some delays in the preparation of the further proposed amended statement of claim, but eventually the application came before me for hearing today.
The proposed amended statement of claim seeks declaratory relief to the effect that the judgment in favour of Pineview is held on trust for the estates of the Rubino parents, and consequential orders. The statement of claim also seeks orders that the enforcement of the judgments in favour of Ms Huybers and Pineview, which are orders 3(b) and (d) made by White J in the 2013 proceedings, and are set out above, be permanently stayed.
When the matter came before me today, the stay application in the 2013 proceedings was listed, but only for directions. The amendment application in the 2019 proceedings was listed for hearing. It seemed to me that the procedural approach being adopted was questionable. A stay, even a permanent stay, is an order of a procedural nature, not an order which determines substantive rights. Ordinarily, such an order would be sought by way of notice of motion rather than as final relief in a pleaded statement of claim.
I put this to counsel for Wyse Accounting who agreed, in effect, to proceed with the hearing of the stay application in the 2013 proceedings. I will deal first with that application and will return to the other pleaded relief in the 2019 proceedings in due course.
[2]
Stay application
In essence, the argument for Wyse Accounting is that orders 3(b) and (d) in favour of Ms Huybers and Pineview have become unenforceable by them as the combined result of four settlements. I will briefly summarise those settlements below.
The first settlement was between ANZ and the Rubino parents. I will refer to this as the "ANZ-Rubino settlement". This settlement was in fact entered into in November 2015 before the hearing of the proceedings before White J. It provided for a sum of moneys to be paid by the Rubino parties to ANZ, in return for which the bank would discharge its mortgages over certain properties owned by the Rubinos and would release the Rubinos from further claims. This payment was eventually made, and the settlement effected, after White J had delivered his judgment.
The second settlement was between ANZ and the Huybers parties. Similarly, it provided for a sum of moneys to be paid by the Huybers parties to ANZ in exchange for a release from further claims.
The third settlement I will refer to as the "Rubino-Huybers settlement". This was a settlement between the Rubino parties and a number of other parties, including Mr Russo and the Huybers parties. Relevantly, it provided for the Huybers parties to transfer certain properties to the Rubino parties and, in return, for releases to be granted.
The final settlement was between the Rubino parties and the Wyse parties. I will refer to it as the "Rubino-Wyse settlement". This settlement provided for the Rubino parties to substitute themselves as the judgment creditor in place of Pineview and then to release the Wyse parties from any liability under the judgment.
Pursuant to the Rubino-Huybers settlement and the Rubino-Wyse settlement, the solicitor for the Rubino parties, Mr Essey, wrote to the Huybers parties demanding that the benefit of the judgment in favour of Pineview in the 2013 proceedings be assigned to the Rubino parties. The Huybers parties dispute that they have any obligation to assign the benefit of the judgment and have declined to do so.
In April 2021, the Rubino parties began fresh proceedings against the Huybers parties in this Court. In those proceedings they seek orders along the lines sought in Mr Essey's letter.
The application for a stay was made under s 67 of the Civil Procedure Act 2005 (NSW) which provides:
Subject to rules of court, the court may at any time and from time to time, by order, stay any proceedings before it, either permanently or until a specified day.
Counsel submitted, and I accept, that s 67 confers a broad power on the court to restrain enforcement of a judgment when it would be unjust to do so. Counsel also relied on s 135, but I do not think for present purposes that it adds anything to the power under s 67.
So far as the judgment in favour of Pineview is concerned, the contention for Wyse Accounting is encapsulated in paragraph 22 of the proposed amended statement of claim:
By reason of the matters pleaded above:
(a) The Fourth Defendant has no liability to the ANZ Bank and has made no payments to the ANZ Bank in respect of its borrowings from the ANZ Bank;
(b) The Fourth Defendant holds the benefit of the judgment against the Plaintiff (Wyse Accounting) as a bare trustee on trust for the First and Second Defendants or Rubino Investments Pty Limited;
(c) Were the Fourth Defendant to receive payment of the judgment sum from the Plaintiff it would amount to unjust enrichment.
As counsel developed the submission, there were two limbs to Wyse Accounting's contention, corresponding with subparagraphs (a) and (b).
The contention in paragraph (a) parallels an argument which was recently made in an appeal to the Full Court of the Federal Court: Dimitriou v Pineview Property Holdings Pty Ltd [2020] FCAFC 218. This was Mr Dimitriou's appeal against a sequestration order that had been made against him in reliance on the judgment of White J. It was argued for Mr Dimitriou that the effect of the settlements to which I have referred was that Pineview no longer had any liability to ANZ, and, as a result, the judgment in Pineview's favour against him was unenforceable.
This argument was rejected by the Full Court. Their Honours said at [56]-[57]:
Mr Dimitriou's submissions concerning the effect of the Deed of Release are founded … on a false premise. His submissions impliedly equate his position to that of a surety under a guarantee. The surety is liable to the creditor contingent upon default by the principal debtor. It follows in such a case that the surety is no longer liable once the principal debt has been discharged, or the obligation as between the creditor and principal debtor has been satisfied by some compromise by which the debt is discharged between the creditor and principal debtor.
But that is not this case. As the reasons given by White J in the Liability Judgment make clear, Mr Dimitriou was the principal wrongdoer and found liable as such. By Order 3(d) (referred to at [20] above), judgment was entered against Mr Dimitriou and his entities in the sum of $1,276,389.29 plus interest. This judgment debt was not contingent upon any obligation to indemnify Pineview against its liability to the ANZ. The indemnity was the subject of a separate declaration contained in order 3(e) referred to above (at [20]). ...
Counsel submitted that for the purpose of the application before me the facts are relevantly different (or at least arguably so), but I find it hard to see how. I am concerned in this application with the same reasons for judgment, the same order made pursuant to those reasons, and the same settlement terms. Even without the benefit of the Federal Court decision, I would have concluded that the judgment in favour of Pineview unarguably does not depend on whether or not Pineview has a liability to ANZ. That conclusion has been explicitly confirmed by the Full Court.
As to the argument that Pineview holds the benefit of the judgment on trust for the Rubino parties, counsel for the Huybers parties submitted by reference to the Rubino-Huybers settlement deed that this was clearly not the case. I do not, however, find it necessary to decide whether that is so.
The judgment in question is a legal chose in action. One thing which is not said on behalf of Wyse Accounting is that there has been a legal assignment of that judgment pursuant to s 12 of the Conveyancing Act 1919 (NSW). Unless there is, Pineview remains legally entitled as the judgment creditor to enforce the judgment against the judgment debtor.
If it is correct that the benefit of the judgment is held on trust for the Rubino interests, it is conceivable that the Rubino parties could seek, in equity, orders compelling Pineview to assign the judgment to them, but that might not be straightforward. The Rubino parties' obligation to do equity would require them, as a condition of obtaining any such assignment, to ensure that Pineview was first exonerated from any liabilities which it had incurred as trustee. In his judgment, White J expressly stated that such liabilities would include a liability to repay the amount borrowed from Ms Huybers: [2016] NSWSC 904 at [302]. It would also be necessary to indemnify Pineview against all of its reasonable costs in acting as trustee, including, it would seem, the costs of the proceedings so far taken to enforce the judgment. All of this just underlines that the existence of an equitable interest in the judgment in favour of the third party is no answer to enforcement against the judgment debtor at law.
As to the judgment in favour of Ms Huybers, the contention for Wyse Accounting is set out in paragraph 23 of the proposed amended statement of claim:
By reason of the matters pleaded above:
(a) The Fifth Defendant has no liability to the ANZ Bank nor has she made any payments to the ANZ Bank in respect of her liability as a guarantor, being the basis on which she obtained judgment against the Plaintiff;
(b) Were the Fifth Defendant to receive payment of the judgment sum from the Plaintiff it would amount to unjust enrichment.
Although the judgment in favour of Ms Huybers is a different judgment from the judgment in favour of Pineview which was the subject of the Full Federal Court decision, there is no relevant distinction. In my view, the same conclusions follow. It is clear from the judgment of White J that Ms Huybers' entitlement to enforce the judgment was not in any way dependent upon her having an ongoing liability to the ANZ: [2016] NSWSC 904 at [307] and [311].
There is apparently no contention that Ms Huybers holds her judgment on trust for the Rubino interests, but, in any event, for reasons which I have given, that would not be an answer to the enforcement of the judgment against Wyse Accounting as judgment debtor.
[3]
2019 proceedings
Unlike the proposed order for a stay, the declarations and other orders sought in the 2019 proceedings are substantive orders determining the parties' rights. But for the reasons which I have given, Wyse Accounting has no interest in the substantive equitable rights and obligations as between Pineview and the Rubino parties. Those rights and obligations are the subject of properly constituted separate proceedings, as I have mentioned.
In these circumstances, continuation of the 2019 proceedings for the purpose of seeking those orders is an abuse of process, and the proceedings should be dismissed.
[4]
Orders
The orders of the Court in proceedings 2013/301976 are:
1. The motion be dismissed.
2. Wyse Accounting pay the respondents' costs of the motion.
The orders of the Court in proceedings 2019/173683 are:
1. The proceedings be dismissed.
2. Wyse Accounting pay the defendants' costs of the proceedings.
[5]
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Decision last updated: 17 August 2021