Sayer v Tomanovic

The Notice to Produce

The Defendants pointed to the provisions of r 25.14 UCPR to justify the issue of the Notice to Produce. The Defendants submitted that there was an onus on the Plaintiffs to show that there was a danger that the judgment would be unsatisfied because the assets of the judgment debtor are disposed of or diminished in value. The Defendants submitted that there was at least a prospect that the documents sought to be produced would demonstrate that, in other dealings and transactions between the Plaintiffs' interests and the Defendants' interests, the Plaintiffs hold monies which would be found to be due to the Defendants. If that was so, the Defendants submitted, there could be no danger that the judgment will be unsatisfied. The Defendants pointed, as an example of this, to what Mr Tomanovic had set out in paragraph 8 of his affidavit of 7 July 2015: In 2011 or 2012 the properties at [xx] Argyle Street and [yy] Argyle Street, Parramatta, were owned by Argyle HQ Pty Limited as trustee for the Argyle Street Unit Trust in which Australian Financial Services Corporation Pty Limited ("AFSC") held 50% of the units. These properties were sold for (I estimate) $5 - $7 million dollars. AFSC received nothing as its share of the proceeds of the sale. I need the documents referred to in paragraphs 3-10 of the notice to produce to determine to what sum AFSC is entitled consequent on the sales of those properties.
What is said to be shown from that evidence is that there is a prospect that Australian Financial Services Corporation Pty Ltd has never been paid what is owing to it from the sale of the properties in Argyle Street, Parramatta and that those monies are now held by Argyle HQ Pty Ltd as trustee for the Argyle Street Unit Trust, that company and trust being controlled by Mr Sayer.
That submission can be seen to relate to paragraphs 4-10 in the Notice to Produce. In a similar fashion, the material set out in paragraphs 4-25 of Mr Tomanovic's affidavit of 19 June 2015 can be seen to relate to the other items identified in the Notice to Produce. In substance, the Defendants were suggesting that interests on their side of the record were entitled to accounting from the Plaintiffs' interests in respect of a large number of transactions, contracts and properties.
This justification for the Notice to Produce must be rejected on a number of grounds. First, there has never been a determination or agreement about the amounts that the Defendants now claim might be owing to them by legal entities associated with the Plaintiffs. Given the intensity with which the litigation has been conducted over the last seven years it is clear that the mere provision of documents would not be likely to give any clear indication of the ultimate financial position that would exist between the Defendants and their interests and the Plaintiffs and their interests.
Secondly, and more fundamentally, the judgment debt under consideration is owed by the two Defendants to the two Plaintiffs. The fact that there may be other companies under the control of Mr Sayer that owe money to companies associated with Mr Tomanovic cannot throw any light on the question of whether there is a danger that the judgment obtained by the Plaintiffs against the Defendants might be unsatisfied. The fact that there are other companies or trusts under the control of the Plaintiffs does not mean that the Plaintiffs have any right to appropriate that money to satisfy the judgment that they have obtained against the Defendants. Even if it is assumed that the Defendants would be successful in any claim for the moneys identified, that says nothing about the ability of the Defendants to meet the judgment already obtained and the danger that such judgment might be unsatisfied.
Thirdly, the only documents that may be specified in a notice issued pursuant to r 21.10 are the documents referred to in sub-r 1(a) or (b). Sub-rule (1)(a) has no application in the present matter because none of the documents referred to is contained in any document filed or served by the Plaintiffs. Accordingly, the only documents that can be included in the Notice to Produce are specific documents clearly identified which are relevant to a fact in issue. The fact in issue for the present purposes must be regarded as being whether there is a danger that the judgment will be unsatisfied by some act on the part of the Defendants to deal with their assets. The documents are not relevant because they concern legal entities other than the Plaintiffs and the Defendants. They are not relevant to the issue of whether there is a danger that the judgment the Plaintiffs have against the Defendants will be unsatisfied.
Accordingly, the Notice to Produce should be set aside.

The freezing order

The Plaintiffs submitted that the "danger" of the judgment being unsatisfied within the meaning of r 25.14 UCPR was that the property at Dural had been put on the market and that the indications were, from the selling agent, that it was to be a 'fire sale' and that it was to avoid the proceeds being frozen.
The Defendants submitted that although the form of the order sought only to freeze the net proceeds of the sale of the properties, those properties were the extent of the Defendants' assets as Tobias JA had found in an earlier judgment. Moreover, the freezing order was totally impractical because it assumed that the First Defendant would be able to discharge the liability of the caveator from some other source of funds. The Defendants submitted that the form of the proposed order did not, as the standard form required, make provision for the Defendants' legal costs.
The Defendants drew attention to what was said in a number of authorities such as Trad Financial Services Pty Ltd & Anor v Trad & Anor (No. 2) [2013] NSWSC 1751 and Samimi v Seyedabadi; Seyedabadi v Samimi [2013] NSWCA 279 that there must be some evidence of conduct that can reasonably be interpreted as showing a danger that the judgment will not be satisfied.
Rule 25.14 relevantly provides: 25.14 Order against judgment debtor or prospective judgment debtor or third party (cf Federal Court Rules Order 25A, rule 5) (1) This rule applies if: (a) judgment has been given in favour of an applicant by: (i) the court, or (ii) in the case of a judgment to which subrule (2) applies - another court, or (b) an applicant has a good arguable case on an accrued or prospective cause of action that is justiciable in: (i) the court, or (ii) in the case of a cause of action to which subrule (3) applies - another court. … (4) The court may make a freezing order or an ancillary order or both against a judgment debtor or prospective judgment debtor if the court is satisfied, having regard to all the circumstances, that there is a danger that a judgment or prospective judgment will be wholly or partly unsatisfied because any of the following might occur: (a) the judgment debtor, prospective judgment debtor or another person absconds, (b) the assets of the judgment debtor, prospective judgment debtor or another person are: (i) removed from Australia or from a place inside or outside Australia, or (ii) disposed of, dealt with or diminished in value. … (6) Nothing in this rule affects the power of the court to make a freezing order or ancillary order if the court considers it is in the interests of justice to do so.
In Trad Financial Services White J said at [15]: [15] In the last case [In the matter of C & L Cameron Pty Ltd - GB Gazzana v Nadalan Enterprises Pty Ltd; AF Gazzana v Nadalan Enterprises Pty Ltd [2012] NSWSC 676], Ward J (as her Honour then was) cited with approval the following passage from the judgment of Barrett J (as his Honour then was) in TZ Limited v ZMS Investments Pty Limited [2010] NSWSC 196 at [26], where his Honour said: "A general law freezing order is warranted only if ... there has been 'conduct on the part of the defendants which can reasonably be interpreted as potentially having the effect of frustrating the ordinary processes of the court and the enforcement of its judgments or of being intended to do so or of being in any way evasive indicating dishonesty or otherwise indicating actually or potentially that the assets of the company have been or will be dealt with in an irregular way'."
In Samimi v Seyedabadi McColl JA said: [67] A freezing order "is a drastic remedy which should not be granted lightly ... Its purpose is to preserve the status quo, not to change it in favour of the [applicant]": Frigo v Culhaci [1998] NSWCA 88 (at p 6) per Mason P, Sheller JA, Sheppard AJA); approved Cardile v LED Builders Pty Ltd [1999] HCA 18; (1999) 198 CLR 380 (at [51]) per Gaudron, McHugh, Gummow and Callinan JJ. … [72] The question whether there is a danger that any judgment obtained by the builder against the owner, or that already obtained, will be wholly or partly unsatisfied because the owner's assets might be disposed of, dealt with or diminished in value (UCPR 25.11; 25.14(4)(b)) reflects the general law concepts again developed in accordance with Mareva injunctions, that the applicant must demonstrate "a danger that by reason of the defendant's ... assets being ... disposed of within the jurisdiction or otherwise dealt with in some fashion, the plaintiff, if he succeeds, will not be able to have his judgment satisfied": Patterson v BTR Engineering (Aust) Ltd (1989) 18 NSWLR 319 (at 321 - 322) per Gleeson CJ. [73] In Ninemia Maritime (at 406), in a passage effectively approved in Frigo v Culhaci (at p 8), Mustill J discussed the nature of the evidence the applicant for a freezing order should adduce as follows: "It is not enough for the plaintiff to assert a risk that the assets will be dissipated. He must demonstrate this by solid evidence. This evidence may take a number of different forms. It may consist of direct evidence that the defendant has previously acted in a way which shows that his probity is not to be relied on. ... Or ... the plaintiff may be able to found his case on the fact that inquiries about the characteristics of the defendant have led to a blank wall. Precisely what form the evidence may take will depend on the particular circumstances of the case. But the evidence must always be there..." (Emphasis added) [74] It is not necessary for an applicant to show that the respondent has a positive intention of evading a judgment, and it is sufficient to show that the course on which the respondent proposes to embark is, objectively speaking, calculated to have that effect: Finn v Carelli (at [4]). As Brereton J added: "[5] It is important to bear in mind that the jurisdiction to make orders of this type was never intended simply to enable a plaintiff or judgment debtor to obtain security for its judgment in advance of execution, but was firmly founded on the jurisdiction of the Court to prevent abuses of its process by preventing a defendant or judgment debtor from embarking on a course of conduct which would have the effect of defeating the Court's jurisdiction. It also needs to be borne in mind that the mere fact that a judgment may not be satisfied for reasons of impecuniosity does not mean that there is an abuse of process. Indeed, it has been pointed out on several occasions that the prospect of impending insolvency is not a reason to grant a Mareva injunction [Hortico (Australia) Pty Ltd v Energy Equipment Co (Australia) Pty Ltd (1985) 1 NSWLR 545, 558]." (Emphasis added).
In Bhushan Steel Ltd v Severstal Export GmbH [2012] NSWSC 583 Sackar J said: [155] In Patterson v BTR Engineering (Aust) Ltd [1989] 18 NSWLR 319 at 325, Gleeson CJ said, again in the context of a mareva order: It is not difficult to imagine situations in which justice and equity would require the granting of an injunction to prevent dissipation of assets pending the hearing of an action even though the risk of such dissipation may be assessed as being somewhat less probably than not. [156] Bare assertions that a defendant is likely to put any asset beyond the reach of the plaintiff is not enough in itself. Ninemia Maritime Corp v Trave Schiffahrts GmbH & Co KG (The Niedersachsen) [1984] 1 All ER 413 at 417 per Kerr LJ. [157] As Meagher JA however said in Patterson at 326 - 327: Mr Heydon QC for the appellant submitted, and Mr Bainton QC for the respondent agreed, that the vast majority of defendants in litigation behave with propriety: in the "usual" case, therefore, the risk of improper dissipation of assets must be close to nil. In these circumstances, it cannot be the law that a plaintiff who seeks the extraordinary relief of a Mareva injunction need do no more than demonstrate a risk slightly higher than nil. What degree of proof is, then, required? Different judges have decided it in different ways. Without wishing to drown in a sea of semantics, I should have thought that the plaintiff is required to prove, on a balance of probabilities, that there is a real risk of the dissipation of assets. Unhappily for the appellant, in the present case the respondent proved just that.
The evidence which was adduced at the hearing on 15 July 2015 was not such as to demonstrate that there was a danger that the judgment would not be satisfied. There was no evidence that the funds from the sale of the Dural property were likely to be removed from Australia, disposed of, dealt with or diminished in value. The danger was simply said to be that Mr Tomanovic had put one of his properties on the market and, according to the selling agent, it was to be a fire sale before the proceeds could be frozen.
The Plaintiff bears the onus of proof in showing that there is such a danger that the judgment will be unsatisfied. I do not consider that the mere evidence of an intention to sell one of three properties, even taken with what the selling agent said to the Plaintiffs' solicitor, is solid evidence (Samimi at [73]) that the assets will be dissipated. There was no challenge to Mr Tomanovic's evidence that there was no fire sale and that some offers had been rejected.
However, the evidence adduced on 22 July 2015 put a different perspective on the matter.
On 16 July 2015 the solicitors for the Defendants wrote to the Plaintiffs' solicitors saying: Contracts for the sale of [xx] Harris Road Dural NSW 2158 for $2,620,000.00 have been exchanged. A copy of the front page of the contract is attached. The contracts were signed on 15 July 2015 and provide for a cooling off period of 5 days (to 20 July 2015) and a 4-week settlement period, i.e. the contract completion date is 12 August 2015. As you know, title to the property is encumbered and arrangements will have to be made with encumbrancers to enable settlement to occur.
Attached to the letter was the front page of a Contract for Sale. It was undated despite what the covering letter said. There was also attached an Authority to Exchange signed by the purchasers on 13 July 2015 and by the Vendors on 15 July 2015, noting payment of a deposit of 0.25% of the purchase price and the cooling-off rights available to the purchasers.
The Defendants tendered a Notice of Motion and supporting affidavit and sought leave for that to be filed and made returnable the following week. The Motion sought that Mrs Tomanovic and Gallande be added as defendants, that Gallande withdraw its caveat and that the First Defendant be at liberty to pay from his share of the proceeds of sale the sum of $10,000 each to Bobi Damcevski (his solicitor) and to Gallande.
The affidavit in support by the First Defendant set out how the proceeds of sale were intended to be dealt with. After payment to the NAB, the registered first mortgagee, there would be $658,000 remaining. Of that sum it was proposed to pay $620,000 to Mrs Tomanovic. The explanation was this: The reason why my former wife is to receive $620,000 more than me is because in 2009 I increased the mortgage debt by refinancing the original $1,280,000 to $1,900,000 over the property. Increased amount was used to fund my litigation against Kenneth Sayer and others in proceedings 282201/2008 and 282203/2008. The fund from the increase were (sic) applied in payment of than (sic) outstanding and future ERA legal fees and expenses in Trial and Appeal.
The $10,000 to be paid to Bobi Damcevski was for legal fees and expenses in litigation against Mr Sayer including these proceedings.
This evidence was significant for three reasons. First, the Defendants effectively misled the Court about the position concerning the sale of the Dural property. They were content to read paragraphs 31 and 32 of the First Defendant's affidavit of 19 June 2015 ([13] above) which could only have left the impression that although the Dural property was on the market there was no rush about the sale and there was nothing further to report about the sale.
Mr Tomanovic must have known when the matter was before the Court on 15 July that the purchasers had paid the 0.25% holding deposit and signed the Authority. If the purchasers did not exercise their cooling-off rights the vendors were contracted to sell the property. I infer that Mr Tomanovic had that knowledge. He adduced no evidence that he did not and the documentary evidence called for a denial if the inference was not to be drawn.
Secondly, the completion date for the sale was four weeks against the usual conveyancing period of a six week minimum without any explanation. That is consistent with an urgent attempt to dispose of this significant asset.
Thirdly, Mr Tomanovic is to receive scarcely any of the proceeds, and only a brief and entirely unsatisfactory explanation is put forward. In those circumstances, and where the recipient of the bulk of the money is Mrs Tomanovic suspicion is heightened.
I can accept that these matters of concern might have perfectly legitimate explanations. However, none is offered in circumstances where a degree of frankness with the Court and even the Plaintiffs might have been expected.
Bearing in mind the care with which freezing orders ought to be approached as the authorities to which I have made reference make clear, I am satisfied by reason of the further evidence that a freezing order should be made in the manner, and for the amount, sought.
A matter which has exercised my mind in relation to the discretionary aspect of the making of a freezing order is the fact that the Plaintiffs have been free to execute on the judgment obtained since 14 February 2014. However, there seem to me to have been a number of sound reasons why that should not tell against the Plaintiffs.
First, the Court of Appeal did not determine the appeal against Black J's judgment until 16 February 2015. Secondly, the Defendants therafter sought Special Leave from the High Court. That is due to be heard on 7 August 2015. Thirdly, the Plaintiffs were awaiting the result of the review lodged by the Defendants in respect of the costs assessment. The Defendants and the Court were only informed at the hearing on 15 July 2015 that the review had been entirely unsuccessful.
The Plaintiffs said that they were waiting on the outcome of the assessment review and the High Court to have one attempt at execution instead of dealing with it in piecemeal fashion. That seems to me to be a perfectly reasonable approach. I do not consider that the discretion should be exercised against a freezing order in those circumstances.
It does not seem to me that either Mrs Tomanovic nor Gallande Pty Ltd has any interest to protect in relation to the present application. The order is simply to freeze the net proceeds after payment of the first registered mortgagee. Who is entitled to those proceeds and in what amounts will need to be determined, whether on the motion the Defendants now wish to file or otherwise.
Whether settlement of the Contract for Sale occurs will not be determined by any freezing order made but by whether the caveator agrees to lift its caveat over this property, noting that it has caveats over the other two properties as well. The disbursement proposed by the First Defendant only provides $9,500 for the caveat debt. That amount appears to be only a fraction of what the caveator claims is owing. In that way, the making of the freezing order is unlikely to be a determining factor in the settlement of the sale. The Plaintiffs have expressly eschewed any attempt to prevent the sale or its completion.
If the Defendants wish to file the further Notice of Motion tendered at the hearing (referred to at [35]) they are free to do so. Until such time as orders are made on the basis of that motion I do not consider that either Mrs Tomanovic or Gallande Pty Ltd should be considered to be parties to the application for the freezing order.
The Plaintiffs are entitled to a freezing order in the amount of $273,448.04 on giving the usual undertaking as to damages.
Since preparing these reasons, my Associate was informed by email dated 29 July 2015 by counsel for the Plaintiffs at the request of Counsel for the Defendants that the purchasers of the Dural property have exercised their rights to rescind the contract on 28 July. The property is therefore unsold and remains on the market for sale.
I do not consider that this development impacts on the view to which I had come. It was the circumstances surrounding the entry into that contract and the proposed allocation of the proceeds that resulted in my view that the Plaintiffs had established that there was a danger that the judgment would be unsatisfied. The rescission of the contract does not alter those matters.
The parties should bring in Short Minutes to reflect these reasons.

At a glance

Court

Decision date

Before

Catchwords

Source

Catchwords

Judgment (6 paragraphs)

Parties

Legislation Cited (2)

Cases Cited (18)

Cited By (1)